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): January 1, 1997
Regency Health Services, Inc.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Delaware 33-0210226
Regency Health Services, Inc.
2742 Dow Avenue
Tustin, California 92780
714-544-4443
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Item 2. Acquisition or Disposition of Assets
Effective January 1, 1997, Regency Health Services, Inc., (the
"Company"), acquired four acute rehabilitation hospitals, eleven outpatient
rehabilitation clinics and six neurological treatment centers from Horizon/CMS
Healthcare Corporation ("CMS") pursuant to Purchase and Sale Agreements dated
November 19, 1996, between the Company and CMS. Two of the acute rehabilitation
hospitals have joint venture partners.
The purchase price for the acquisitions totaled $43,000,000, made up of a cash
payment of $36,300,000 and notes payable issued by Regency for working capital
totalling $6,700,000, of which, $3,100,000 is considered short term. The notes
bear interest at Prime plus 1/2%. The purchase price was based on the fair
market value of the assets and liabilities acquired and was funded by borrowings
against the Company's Amended and Restated Credit Agreement with Nationsbanc
Capital Markets, Inc., dated as of December 20, 1996.
The assets acquired were previously used in acute healthcare operations and the
Company will continue to use them for this purpose.
Item 7. Financial Statements and Exhibits
The following exhibits are filed as exhibits to this current report on Form 8-K,
and none have been incorporated by reference to any other registration
statement, report or other document.
Exhibit
Number Description
2.01 Purchase and Sale Agreement - Fresno, dated as of November 19, 1996,
between Regency Rehab Hospitals, Inc., a wholly-owned subsidiary of
the Registrant and Continental Medical Systems, Inc.
2.02 Purchase and Sale Agreement - Kentfield, dated as of November 19,
1996, between Regency Rehab Hospitals, Inc., a wholly-owned
subsidiary of the Registrant and Kentfield Hospital Corporation.
2.03 Stock Purchase and Sale Agreement - Rehabworks of California, dated
as of November 19, 1996, between Regency Rehab Hospitals, Inc., a
wholly-owned subsidiary of the Registrant and CMS Therapies, Inc.
2.04 Purchase and Sale Agreement - San Bernardino, dated as of November
19, 1996, between Regency Rehab Hospitals, Inc., a wholly-owned
subsidiary of the Registrant and Continental Medical Systems, Inc.
2.05 Purchase and Sale Agreement - San Bernardino Real Estate, dated as
of November 19, 1996, between Regency Rehab Properties, Inc., a
wholly-owned subsidiary of the Registrant and Rehab Concepts Corp.
2.06 Purchase and Sale Agreement - San Diego, dated as of November 19,
1996, between Regency Rehab Hospitals, Inc., a wholly-owned
subsidiary of the Registrant and San Diego Rehab Limited
Partnership.
2.07 Purchase and Sale Agreement - San Diego Real Estate, dated as of
November 19, 1996, between Regency Rehab Properties, Inc., a
wholly-owned subsidiary of the Registrant and San Diego Health
Associates Limited Partnership.
2.08 Purchase and Sale Agreement - Western Neurologic Residential
Centers, dated as of November 19, 1996, between Regency Rehab
Hospitals, Inc., a wholly-owned subsidiary of the Registrant and
Western Neurologic Residential Centers.
2.09 First Amendment to Purchase and Sale Agreement - Western Neurologic
Residential Centers, dated as of November 19, 1996, between Regency
Rehab Hospitals, Inc., a wholly-owned subsidiary of the Registrant
and Western Neurologic Residential Centers.
2.10 Regional Office Agreement, dated November 19, 1996, between Regency
Rehab Hospitals, Inc., a wholly-owned subsidiary of the Registrant
and Continental Medical Systems, Inc.
2.11 Amended and Restated Credit Agreement dated as of December 20, 1996
among Regency Health Services, Inc., as borrower, the Lenders
listed, Nationsbanc Capital Markets, Inc., as arranger, and
Nationsbank of Texas, N.A., as agent.
2.12 Amendment and Confirmation of Collateral Account Agreement, Company
Pledge Agreement and Company Security Agreement.
2.13 Amendment and Confirmation of Subsidiary Guaranty, Subsidiary Pledge
Agreement and Subsidiary Security Agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Regency Health Services, Inc.
February 15, 1996 By:_/s/ RICHARD K. MATROS________ ____________
Richard K. Matros, President and Chief Executive Officer
February 15, 1996 By:_/s/ BRUCE D. BROUSSARD___________________
Bruce D. Broussard, Executive Vice President and Chief
Financial Officer
Exhibit 2.01
PURCHASE AND SALE AGREEMENT
FRESNO
This Agreement is made and entered into this 19th day of November, 1996
by and between Continental Medical Systems, Inc., a Delaware corporation
("Seller") and Regency Rehab Hospitals, Inc., a California corporation
("Purchaser").
RECITALS
A. Seller is the sole shareholder of Orange
Rehabilitation Hospital, Inc., a Delaware corporation (the "Corporation").
B. The Corporation is the sole general partner of San Joaquin
Valley Rehabilitation Hospital, a Delaware limited partnership (the
"Partnership").
C. The Partnership is the licensed operator of that 62 bed free
standing rehabilitation hospital commonly known as San Joaquin Valley
Rehabilitation Hospital and located at 7173 N. Sharon Avenue, Fresno, CA
93720 (the "Hospital").
D. In order to satisfy the requirements of certain financing documents
by which Purchaser and its parent corporation are bound, Seller and the
Corporation have agreed to restructure the operations of the Partnership in
order to permit the Corporation to assume direct operational and financial
responsibility for certain aspects of the Hospital subject to the obligation of
the Partnership to pay the Corporation therefor under the terms of the Amended
Management Agreement (as defined below) (the "Operations Restructuring"). To
that end, Seller and the Corporation intend, subject to obtaining the consent of
the limited partner in the Partnership and the Landlord (as defined below) to
take certain actions immediately prior to Closing which are more fully described
in the following recitals.
E. Seller has been providing management services to the Partnership
under the terms of an Agreement to Provide Management Services dated as of
January 23, 1991 (the "Existing Management Agreement"). In furtherance of the
Operations Restructuring, Seller intends to assign the Existing Management
Agreement to the Corporation and the Corporation intends to enter into an
Amended and Restated Management Agreement with the Partnership (the "Amended
Management Agreement").
F. In furtherance of the Operations Restructuring, the Seller and the
Corporation further intend to cause the Partnership to assign to the
Corporation, all of its right, title and interest in and to and obligations
under that Lease Agreement dated September 30, 1988 (as amended, the "Hospital
Lease") between the Partnership, as Tenant, and San Joaquin Health Care
Associates Limited Partnership, a Delaware limited partnership, as Landlord, and
concurrently therewith to sublease the Hospital back from the Corporation under
the terms of a Sublease Agreement (the "Hospital Sublease") and all of its
right, title and interest in and to and obligations under the Clinic Leases (as
defined below) and concurrently therewith to sublease the Clinics (as defined
below) back from the Corporation under the terms of two separate Sublease
Agreements (the "Clinic Subleases").
G. In furtherance of the Operations Restructuring, Seller, anticipates
that as of the Closing Date it will hold a promissory note from the Partnership
in the principal amount equal to all of the Intercompany Debt (as defined below)
owing from the Partnership to the Seller (the "Partnership Note") and that it
will sell, assign, transfer and convey to the Corporation, all of its right,
title and interest in and to the Partnership Note and the Corporation will
deliver to the Seller in consideration therefor its Promissory Note (the
"Corporation Note") in the principal amount equal to the principal amount of the
Partnership Note and containing all such other terms and conditions as are
reflected in the Partnership Note.
H. Upon completion of the Operations Restructuring and immediately
prior to Closing, the assets and liabilities of the Corporation shall consist of
those assets and liabilities described in Paragraphs 6.06 and 6.07 below.
I. Purchaser is interested in acquiring all of the Seller's
right, title and interest in and to the issued and outstanding common stock
of the Corporation and in and to the Corporation Note upon completion of the
Operations Restructuring.
J. Purchaser and Seller are interested in documenting the terms
and conditions under which said Operations Restructuring and purchase and
sale shall occur.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to all of
the issued and outstanding common stock of the Corporation (the "Stock"). In
addition, after consummation of the purchase of the Stock, Seller does hereby
agree to sell to Purchaser and Purchaser does hereby agree to acquire from
Seller, all of Seller's right, title and interest in and to the Corporation
Note.
Hereinafter the Stock and the Corporation Note will be collectively
referred to as the Seller's Assets.
ARTICLE II
PURCHASE PRICE/REFINANCING OF DEBT
2.01. Except as otherwise provided below, the purchase price for
the Stock shall be One Dollar.
2.02. Purchaser and Seller acknowledge and agree that the face amount
of the Corporation Note at Closing shall be equal to the Intercompany Debt (as
hereinafter defined). For purposes hereof, the Intercompany Debt shall be in an
amount equal to all of the funds loaned by CMS or Orange to the Partnership
which have not been repaid as of the Closing Date. Seller and Purchaser shall
agree on the amount of the Intercompany Debt as of the Closing Date based on the
Partnership's financial statements as of December 26, 1996. Purchaser shall
purchase the Corporation Note in the following manner:
(a) Purchaser shall deliver to Seller its promissory note in the face
amount equal to the working capital of the Partnership (the "Working Capital"),
which promissory note shall be in substantially the same form as that attached
hereto as Exhibit 2.02(b). As used herein Working Capital shall be defined as
the current assets of the Partnership, minus the current liabilities of the
Partnership, minus the value of the inventory owned by the Partnership, all as
determined in accordance with generally accepted accounting principles.
(b) Purchaser shall draw on the proceeds of its Subordinated Debt (as
hereinafter defined) and shall use the proceeds thereof to refinance an amount
equal to the difference between the Intercompany Debt and the Working Capital
and shall pay the same in cash at Closing (the "Cash Amount");
2.03. In the event the Intercompany Debt at Closing equals the sum of
the Working Capital at Closing plus $2,347,160, there shall be no adjustment to
the purchase price for the Stock.
2.04. If the amount of the Intercompany Debt at Closing exceeds the sum
of the Working Capital at Closing plus $2,347,160, then, unless the parties
agree to a different arrangement, the Cash Amount due and payable by Purchaser
at Closing will be reduced on a dollar for dollar basis by the amount of such
difference.
2.05. In the event the Intercompany Debt at Closing is less than the
sum of the Working Capital at Closing and $2,237,160, then, unless the parties
agree to a different arrangement, the purchase price for the Stock shall be
increased by the amount of such difference.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall be effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
cause the transactions provided for herein to be effective as of the Outside
Closing Date. The actual date of Closing is referred to herein as the "Closing
Date."
3.02. At Closing, Seller shall deliver title to the Seller's Assets
free and clear of all liens and encumbrances.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser
at Closing by Seller's delivery of the following documents:
(a) Seller shall deliver an Assignment Separate From Certificate in the
form and substance substantially the same as that attached hereto as Exhibit
3.03(a) pursuant to which Seller shall convey to Purchaser Seller's right, title
and interest in and to the Stock (the "Stock Assignment Agreement").
(b) Seller shall deliver an Assignment Agreement in form and substance
substantially the same as that attached hereto as Exhibit 3.03(b) pursuant to
which Seller shall convey to Purchaser Seller's right, title and interest in and
to the Corporation Note (the "Note Assignment Agreement").
(c) Such other documents or instruments as may be necessary to convey
title to the Seller's Assets to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
of the Seller's Assets shall be allocated between Seller and Purchaser as
follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of the Seller's Assets to
Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of the
Seller's Assets to Purchaser.
4.03. Seller shall pay the base premium for a standard ALTA leasehold
title insurance policy, in an amount equal to $5,300,000 insuring title to the
Hospital as of Closing and Purchaser shall pay the cost of any premiums for
extended coverage which Purchaser may elect to secure, including the cost of the
ALTA survey required to obtain the same, any lender's coverage which it elects
or is required to secure in connection with its acquisition of the Seller's
Assets or financing thereof and any title endorsements which it elects to obtain
or is required to obtain to satisfy the requirements of its lender.
4.04. Purchaser shall pay the cost of any environmental Phase I
assessment of the Hospital which Purchaser elects to secure prior to Closing.
4.05. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.06. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Seller's Assets and to the Corporation's
Assets (as defined below) in accordance with the terms of this Agreement.
4.07. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Hospital Lease and
the Partnership Agreement as a condition to the sale of the Seller's Assets to
Purchaser in accordance with the terms hereof and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Hospital Lease and the Partnership Agreement as
a condition to securing consent to the Operations Restructuring.
4.08. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.08 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.09. Seller shall pay 70% of the cost of any repairs or renovations or
other work to the physical plant of the Hospital required to be undertaken by
the State of California in connection with any change of ownership survey which
it may elect to conduct as a condition to its review and, if applicable,
approval of the transaction which is the subject of this Agreement; provided,
however, that in the event the cost thereof, along with the cost of any repairs
or renovations or other work to the physical plant of the facilities which are
the subject of the Other Agreements, exceeds $250,000 (the "Licensure Cost Cap")
Seller shall have the right to terminate this Agreement in lieu of incurring
such costs in excess of the Licensure Cost Cap; and provided, further, that
Purchaser shall have the right to pay such costs in excess of the Licensure Cost
Cap in lieu of permitting Seller to terminate this Agreement.
4.10. Purchaser shall pay any filing or licensure fees due in
connection with the submission of any licensure or Medicare or Medi-Cal
certification applications which it is required to file in order to secure the
approval of the State of California of the transaction which is the subject of
this Agreement under applicable licensure and/or certification laws governing
the operation of the Facilities, as well as the fees and expenses of Davis
Wright Tremaine or any other legal counsel retained or utilized by Purchaser to
assist it with such matters.
4.11. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Stock and Purchaser shall pay any reasonable
attorneys' fees, processing fees and other fees and expenses contemplated by the
terms of the Credit Agreement dated December 29, 1995 between Regency Health
Services, Inc. and NationsBank of Texas, N.A.
4.12. The management fee due to the Corporation under the Amended
Management Agreement shall be prorated as of the Closing Date, with the Seller
entitled to any fees which relate to services rendered by it prior to the
Closing Date and with Purchaser entitled to any fees which relate to services to
be rendered by it from and after the Closing Date.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller, the Corporation, the Partnership and the
Guarantor. Seller is a duly organized, validly existing Delaware corporation and
is in good standing under the laws thereof. The Corporation is a duly organized,
validly existing Delaware corporation and is in good standing under the laws
thereof. The Partnership is a duly organized, validly existing Delaware limited
partnership and is in good standing as a foreign limited partnership under the
laws of the State of California. Horizon/CMS Healthcare Corporation ("Horizon")
is a duly organized, validly existing Delaware corporation and is in good
standing under the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof, including, but not limited to the consummation prior to Closing of
the Operations Restructure, will not result in a breach of the terms and
conditions of nor constitute a default under or violation of Seller's Articles
of Incorporation or Bylaws or any law, regulation, court order, mortgage, note,
bond, indenture, agreement, license or other instrument or obligation to which
Seller is now a party or by which any of Seller's Assets, the Hospital, the
Clinics (as defined below), the Corporation's Assets or the Partnership may be
bound or affected or any agreement, option, understanding or commitment or any
privilege granted by Seller, the Corporation or the Partnership to any other
party to purchase or otherwise acquire the Seller's Assets, the Corporation's or
the Partnership's Assets (as defined below) or result in the acceleration of or
an increase in the interest rate payable under any indebtedness to which Seller,
the Corporation or the Partnership is a party other than indebtedness of Seller
which does not relate to the Hospital or the Clinics or indebtedness which is to
be discharged by Seller or the Corporation as of the Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own the Seller's Assets and (ii) to conduct its business as the same is now
being conducted. Seller further represents and warrants that (A) the Corporation
has full power and authority (i) to own the Corporation's Assets and (ii) to
lease the Hospital and the Clinics, to manage the operations thereof and to
conduct its business as the same is now being conducted and (B) the Partnership
has full power and authority (i) to lease or sublease and operate the Hospital
and the Clinics and (ii) to conduct its business as the same is now being
conducted.
6.04. The Financials. True and correct copies of an unaudited balance
sheet and statement of operations of the Corporation as of the close of Seller's
fiscal year ended May 31, 1996, and for the four month period ended September
30, 1996 (the "Company Financials") and of the Partnership with respect to the
Partnership's operation of the Hospital and the Clinics for the Partnership's
fiscal year ended May 31, 1996 and for the four month period ended September 30,
1996 (the "Partnership Financials" and together with the "Company Financials,"
the "Financials") are attached hereto as Exhibit 6.04. All such financial
statements fairly represent the financial condition, and accurately set forth in
all material respects as and to the extent required by GAAP the results of the
operations of the Corporation and of the Partnership at the Hospital and the
Clinics for the periods covered thereby subject to customary year end
adjustments. All of the accounts receivable reflected on the Partnership
Financials (less any allowances for doubtful accounts and contractual allowances
reflected therein) are collectible in the ordinary course of the business of the
Partnership. Any financial statements prepared by the Corporation or by the
Partnership subsequent to the date of the Financials or the date hereof will be
prepared in a manner consistent with the manner in which the Financials were
prepared, will fairly represent the financial condition, and will accurately set
forth in all material respects the results of the operations of the Corporation
and of the Partnership at the Hospital and the Clinics for the periods covered
thereby and will be provided to Purchaser within ten (10) days after the
completion thereof.
6.05. Absence of Adverse Change. Since the date of the Financials
there has not been any material adverse change in the financial condition,
business, assets, liabilities or results of operations of the Hospital or
the Clinics.
6.06. The Assets of the Corporation. As of the Closing Date, the
assets of the Corporation shall consist of the following (collectively, the
"Corporation's Assets"):
(a) The Hospital Lease (which Hospital Lease has been amended by First
Amendment dated September 13, 1990, Second Amendment dated January 31,
1991, Third Amendment dated January 1, 1992 and Fourth Amendment dated
December 31, 1994), including, but not limited to, the Corporation's
leasehold right, title and interest in and to:
(i) The real property situated in the State of California and
more particularly described in Exhibit 6.06(a)(i) (the "Hospital Real
Property") and the improvements thereon that comprise the Hospital.
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Hospital Real Property leased
by the Corporation either under the terms of the Hospital Lease or
under those contracts and commitments described in Exhibit 6.06(a)(ii)
(the "Leased Hospital Personal Property"), which Leased Hospital
Personal Property is more fully described in Exhibit 6.06(a)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Hospital Lease.
(b) That Lease Agreement dated September 5, 1991 between First Herndon
Properties, as lessor, and the Partnership, as lessee (the "Fresno
Clinic Lease"), including, but not limited to, the Corporation's
leasehold right, title and interest in and to:
(i) The real property leased by the Corporation under the
terms of the Fresno Clinic Lease and situated in the State of
California and more particularly described or shown in Exhibit 6.06
(b)(i) (the "Fresno Clinic Real Property") and the improvements thereon
that comprise the outpatient clinic commonly known as CMS WorkAble of
Fresno/Outpatient Clinic (the "Fresno Clinic").
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Fresno Clinic Real Property
leased by the Corporation either under the Fresno Clinic Lease or under
those contracts and commitments described in Exhibit 6.06(f) (the
"Leased Fresno Clinic Personal Property"), which Leased Fresno Clinic
Personal Property is more fully described in Exhibit 6.06(b)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Fresno Clinic Lease. (c) That Lease
Agreement dated June 1, 1994 between Chapel Hill Medical Center, as
lessor, and the Corporation, as lessee as amended by First Amendment
dated June 1, 1995 and by Second Amendment dated [June 1, 1996] (the
"Chapel Hill Clinic Lease" and together with the Fresno Clinic Lease,
the "Clinic Leases" and together with the Hospital Lease, the
"Leases"), including, but not limited to, the Corporation's leasehold
right title and interest in and to:
(i) The real property leased by the Corporation under the
terms of the Chapel Hill Clinic Lease and situated in the State of
California and more particularly described or shown in Exhibit
6.06(c)(i) (the "Chapel Hill Clinic Real Property" and together with
the Fresno Clinic Real Property, the "Clinic Real Property", and
together with the Hospital Real Property, the "Real Property") and the
improvements thereon that comprise the outpatient clinic commonly known
as Chapel Hill Rehab Center (the "Chapel Hill Clinic" and together with
the Fresno Clinic, the "Clinics").
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Chapel Hill Clinic Real
Property leased by the Corporation either under the Chapel Hill Clinic
Lease or under those contracts and commitments described in Exhibit
6.06(f) (the "Leased Chapel Hill Clinic Personal Property" and together
with the Leased Fresno Clinic Personal Property, the "Leased Clinic
Personal Property" and together with the Leased Hospital Personal
Property, the "Leased Personal Property"), which Leased Chapel Hill
Clinic Personal Property is more fully described in Exhibit
6.06(c)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Chapel Hill Clinic Lease.
(d) The Corporation's stock record books, tax returns and minute
books.
(e) All of the Corporation's right, title and interest in and to
the Partnership Note.
(f) All of the Corporation's right, title and interest in
and to and obligations under the Amended Management Agreement.
(g) All of the Corporation's right, title and interest in and to
and obligations, if any, under the Hospital Sublease and the Clinic Subleases.
(h) That one percent general partnership interest and that sixty nine
percent limited partnership interest in the Partnership (the
"Partnership Interests").
6.07. The Corporation's Liabilities. As of the Closing Date, the
liabilities of the Corporation shall include only the following (the
"Corporation Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Leases which relate to the periods on
and after the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 6.06(f) (the "Equipment Leases")
which relate to the periods on and after the Closing Date;
(c) The liability to perform the obligations imposed on it under
the Amended Management Agreement;
(d) The liability to pay when due the Accrued Benefits (as defined
below); and
(e) The obligations of the Corporation under the Corporation Note.
6.08. The Partnership's Assets and Liabilities. As of the Closing
Date the assets and liabilities of the Partnership shall be limited to the
following:
(a) All of the Partnership's right, title and interest in
and to and obligations under the Hospital Sublease;
(b) All of the Partnership's right, title and interest in and to
and obligations under the Clinic Subleases;
(c) All of the Partnership's right, title and interest in
and to and obligations under the Amended Management Agreement;
(d) All of the Partnership's right, title and interest in
and to and obligations under the Partnership Note.
(e) The Partnership Licenses (as defined below).
(f) All of the costs and expenses associated with the day to
day operation of the Hospital and the Clinics.
(g) The provider agreements between the Partnership and the United
States Department of Health and Human Services with respect to the
Medicare reimbursement for services provided at the Hospital and the
Clinics and with the California Department of Health Services with
respect to the Medi-Cal reimbursement for the services provided at the
Hospital and the Clinics.
(h) The inventory, including linens, dietary supplies and housekeeping
supplies, food and other consumable inventories located at, or usable
in the operation of, the Hospital and the Clinics (the "Consumables").
(i) The furniture, fixtures, equipment and vehicles owned by the
Partnership and located on the Real Property or in the Hospital or the
Clinics which is not the property of the lessors under the terms of the
Hospital Lease, the Clinic Leases or any other lease described in
Exhibit 6.08(j), as applicable, (the "Owned Personal Property") and
which Owned Personal Property is more fully described in Exhibit
6.08(i).
(j) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by the
Partnership relating to the Hospital and the Clinics and all rights of
the Partnership in and to (i) those contracts and commitments relating
to the Hospital and the Clinics as listed on Exhibit 6.08(j), true and
correct copies of which contracts have been provided to Purchaser by
Seller as of the date hereof and (ii) the permits and licenses used or
held for use by the Partnership in the operation of the Hospital and
the Clinics (the "Records and Rights").
(k) All of the Partnership's right, title and interest in and to the
trade names "San Joaquin Valley Rehabilitation Hospital" and "Chapel
Hill Rehab Center" and all other trade names used exclusively at the
Hospital or the Clinics and not used generally by Seller at its
hospitals (the "Trade Names").
(l) The liability to make the payment due under purchase orders placed
by the Partnership in the ordinary course of business but which are
open as of the Closing Date for inventory and supplies to be delivered
after the Closing Date;
6.09. The Licenses. The Partnership has all material licenses, permits
and authorizations necessary for the lawful leasing and operation of the
Hospital as a free standing rehabilitation hospital and the Clinics as
outpatient clinics, it being understood and agreed that Seller has represented
and does hereby represent to Purchaser that the Clinics are not required to be
separately licensed but are operated under the Licenses issued to the
Partnership in connection with its operation of the Hospital ( the "Partnership
Licenses"). True and correct copies of all of the Partnership Licenses are
attached hereto as Exhibit 6.09. Neither Seller nor the Partnership has received
written or verbal notice of (A) any action or proceeding which has been
initiated or is proposed to be initiated by the appropriate state or federal
agency having jurisdiction thereof, to (i) revoke, withdraw or suspend any of
the Partnership Licenses, (ii) terminate the participation of the Hospital or
the Clinics in either the Medicare or Medi-Cal Programs or the Joint Commission
on the Accreditation of Health Care Organizations (the "JCAHO") or the
Commission for the Accreditation of Rehabilitation Facilities ("CARF")
accreditation of the Hospital or any of the Clinics (to the extent it or they
are certified to participate therein), (B) any judicial or administrative agency
judgement or decision not to renew any of the Seller Licenses, (C) any action to
limit or ban admissions to the Hospital or the Clinics or (D) any licensure or
certification action of any other type, which would have a material adverse
effect on the business, assets or financial condition of the Hospital or the
Clinics.
6.10. Compliance with Law.
(a) The Hospital and the Clinics and their current operation and use
are in substantial compliance with all applicable health and safety laws,
regulations, ordinances, standards and orders issued by any municipal, county,
state or federal agency having authority over the Hospital and the Clinics and
with all municipal health, building and zoning laws and regulations (including,
without limitation, the building, zoning and life safety codes) where the
failure to comply therewith would have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof and
there are no outstanding cited deficiencies or work orders issued to Seller, the
Corporation or the Partnership under any of the foregoing which have not been
corrected as of the date hereof or which will not be corrected as of the Closing
Date;
(b) Set forth in Exhibit 6.10(b) is a list of the most recent licensure
and Medicare and, if applicable, Medi-Cal certification survey and the results
of any complaint investigations conducted within the last six months for the
Hospital and the Clinics, copies of which have been made available to Purchaser
as of the date hereof. Seller has no knowledge, based on the results of Hospital
or Clinic surveys or complaint investigations provided verbally or in writing to
the Hospital or the Clinics by the applicable supervising agency or authority
and after due inquiry of the Chief Executive Officer of the Hospital, that the
Hospital or the Clinics, if and to the extent the same are currently
participating in the Medicare or Medi-Cal Programs, are not in substantial
compliance with all Conditions and Standards of Participation in the Medicare
and Medi-Cal Programs nor has Seller, the Corporation or the Partnership
received written or, to the best of Seller's knowledge, verbal notice from any
licensing or certifying agency requiring any or all of them to be physically
reworked or redesigned or to add furniture, fixtures, equipment or inventory so
as to conform to or comply with any existing licensure or Medicare or Medi-Cal
certification law, code or standard except where the requirement either (i) has
been fully satisfied prior to the date hereof, (ii) will be satisfied prior to
the Closing Date, (iii) will be in the process of being satisfied in the
ordinary course of business pursuant to the terms of a Plan of Correction or
other documentation submitted to and approved by the appropriate authority or
(iv) will be the subject of a valid written waiver issued by the applicable
licensing or certifying agency;
(c) Set forth in Exhibit 6.10(c) is a list of the most recent JCAHO and
CARF surveys conducted at the Hospital and, if applicable, the Clinics, and the
dates of any correspondence from or to Seller, the Corporation or the
Partnership and the JCAHO or CARF with respect to the correction of any
deficiencies identified in said survey, true and correct copies of which have
been made available to Purchaser as of the date hereof. The Hospital is duly
accredited by the JCAHO and by CARF, without contingencies except such
contingencies reflected in the surveys or correspondence described in Exhibit
6.10(c). Except as reflected in the surveys or correspondence described in
Exhibit 6.10(c), the Corporation has made or caused to be made on behalf of the
Partnership, the Hospital and the Clinics all proper filings required by JCAHO
and CARF. None of Seller, the Corporation or the Partnership has received
written or, to the best of Seller's knowledge after due inquiry of the Chief
Executive Officer of the Hospital, verbal notice from JCAHO or CARF requiring
the Hospital and/or the Clinics to be reworked or redesigned or to add
furniture, fixtures, equipment or inventory so as to retain such accreditation
except where the requirement either (i) has been fully satisfied prior to the
date hereof, (ii) will be satisfied prior to the Closing Date, (iii) will be in
the process of being satisfied in the ordinary course of business pursuant to
the terms of a Plan of Correction or other documentation submitted to and
approved by the appropriate authority or (iv) will be the subject of a valid
written waiver issued by JCAHO or CARF. Neither the Hospitals nor the Clinics
participates in any accreditation programs other than that offered by the JCAHO
and by CARF.
(d) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Hospital, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Hospital or the Clinics, (ii) any of the members of the medical
staff, the Board of Directors or employees of the Hospital or the Clinics.
6.11. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Hospital or the Clinics which provide
for the provision of the care routinely provided at the Hospital or the Clinics
for no consideration nor will Seller, the Corporation or the Partnership enter
into any such agreements between the date hereof and the Closing Date.
6.12. Books and Records. To the best of Seller's knowledge after due
inquiry of the Chief Executive Officer and Medical Director of the Hospital, all
of the books and records of the Hospital and the Clinics, including patient
records, are true and correct in all material respects.
6.13. Title. As of the Closing Date, (i) Seller will own the Seller's
Assets, (ii) the Corporation will own or, in the case of the Leases and the
Equipment subject to the contracts listed in Exhibit 6.06(a)(ii), lease all of
the Corporation's Assets, and (iii) the Partnership will own or, in the case of
the Hospital Sublease, the Clinic Sublease and the contracts listed in Exhibit
6.08(j), lease all of the Partnership Assets free and clear in each instance of
all liens and encumbrances, other than the liens described in Exhibit 6.13 (the
"Permitted Encumbrances"). Neither Seller, the Corporation nor the Partnership
has received notice of any pending or threatened condemnation proceedings with
respect to the Real Property. Seller has good and marketable title to the Stock
and, at Closing Seller will have good and marketable title to the Corporation
Note, in each case free and clear of all liens, charges and encumbrances.
6.14. Unions. There are no union contracts in effect between the
Partnership, which, as of the date hereof, is the employer of the Facility
employees, on the one hand, and the employees of the Hospital or the Clinics, on
the other hand. To the best of Seller's knowledge, none of the Partnership's
employees who are not currently members of a labor union in connection with
their work at the Hospital or the Clinics are actively seeking the formation of
a labor union at the Hospital or the Clinics. In connection with the Operations
Restructuring, all of the Partnership's employees shall be terminated by the
Partnership prior to Closing and concurrently therewith re-hired by the
Corporation. Neither Seller, the Corporation nor the Partnership is a party to
any labor dispute, it being agreed that a claim for wrongful termination shall
not, for purposes of this Paragraph 6.14 be deemed to be a labor dispute.
Neither Seller, the Corporation nor the Partnership is a party to any union
contracts with respect to the Hospital or the Clinics.
6.15. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed prior to date of
execution of this Agreement by Seller with respect to the Seller's Assets, by
the Corporation, with respect to those of the Corporation's Assets which are
currently owned by the Corporation or by the Partnership with respect to those
of the Corporation's Assets which are currently owned by the Partnership and/or
with respect to its operations at the Hospital and the Clinics have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to the foregoing have
been timely paid, except to the extent that the same are being duly contested in
good faith in accordance with applicable law and adequate reserves therefor are
reflected on the Company Financials or the Partnership Financials, as
applicable, or will be reflected in any subsequent financials prepared in
accordance with the representations and warranties contained in this Agreement.
6.16. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), the Seller, the
Company and the Partnership have (i) not released into the environment or
discharged, placed or disposed of any such hazardous materials, substances or
wastes or caused the same to be so released into the environment or discharged,
placed or disposed of at, on or under the Hospital or the Clinics other than to
the extent the same will not have a material adverse affect on the condition,
financial or otherwise, of the Hospital or the Clinics, (ii) not installed any
underground storage tanks and (iii) at all times operated the Hospital and the
Clinics in compliance with all Environmental Laws, except where the failure to
so comply would not have a material adverse affect on the condition, financial
or otherwise, of the Hospital or the Clinics. Seller further represents and
warrants that there is an underground storage tank located on the Hospital Real
Property for which Seller has secured a permit as required by law, a copy of
which is included in Exhibit 6.09.
(b) With respect to the Hospital and the Clinics prior to the date of
the Partnership's ownership or leasing thereof, to the best of Seller's
knowledge after due inquiry of the Director of Plant Operations at the Hospital,
(i) except to the extent permitted by applicable Environmental Laws, no
hazardous materials, substances or wastes were located on or at the Hospital or
the Clinics or were released into the environment or discharged, placed or
disposed of in, on or under the Hospital or the Clinics, (ii) except to the
extent permitted by applicable Environmental Laws, no underground storage tanks
are or were located at the Hospital or the Clinics, (iii) none of the Hospital
or the Clinics are located on property which was used as a dump for waste
material, and (iv) the Hospital and the Clinics have at all times complied with,
all Environmental Laws, except to the extent in each of the foregoing clauses
(i) through (iv) that any such non-compliance would not have a material adverse
effect on the Hospital or the Clinics. Seller has not received any written
notice from any governmental authority or any written complaint from any third
party with respect to its alleged noncompliance with, or potential liability
under, any Environmental Laws at the Hospital or the Clinics which remains
unresolved as of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital or the Clinics which are currently in the
possession of Seller.
6.17. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, including, but not limited to the
Operations Restructuring, which action shall include, but not be limited to,
obtaining the Third Party Consents and Regulatory Approvals for which Seller is
responsible hereunder. No other action by or on behalf of Seller is or will be
necessary to authorize the execution, delivery and performance of this Agreement
and any documents and agreements executed by Seller in connection herewith or
consummation of the transactions contemplated herein, other than securing those
Third Party Consents and Regulatory Approvals (as those terms are defined below)
for which Seller is responsible under the terms hereof. Seller represents and
warrants that as of the date of execution of this Agreement, it has secured the
consent of its Board of Directors and of the Board of Directors of Horizon to
the execution of this Agreement and of any documents and agreements necessary to
carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by Seller that it will be able to secure the Third Party Consents or Regulatory
Approvals for which it is responsible, but rather this paragraph shall be
limited to Seller's representation and warranty that it will use its best
efforts to secure such Third Party Consents and Regulatory Approvals, subject to
the limitation on the costs which Seller must incur in obtaining such consents
being limited in the manner set forth in Paragraph 4.09.
6.18. Litigation. Except as set forth in Exhibit 6.18, there is no, nor
has Seller, the Corporation or the Partnership, received written or verbal
notice of any, litigation, administrative investigation or other proceeding
pending or, to the best of Seller's knowledge based on written notice with
respect thereto, threatened by any governmental authority having jurisdiction
over Seller (with respect to the Hospital and the Clinics only), the
Corporation, the Partnership, the Hospital or the Clinics or by any other party
(A) where the amount claimed exceeds $50,000 in any single action or $100,000 in
the aggregate or (B) which seeks to challenge Seller's title to the Seller's
Assets, the Partnership's title to the Partnership Assets or Seller's right or
ability to consummate the transaction provided for herein, including but not
limited to the Operations Restructuring. None of the Seller, the Corporation nor
the Partnership is a party to nor is Seller, the Corporation, the Partnership,
the Hospital or either of the Clinics bound by any orders, judgments,
injunctions, decrees or settlement agreements under which it may have continuing
obligations as of the date hereof or as of the Closing Date and which are likely
to materially restrict or affect the present business operations of the Hospital
or the Clinics. The right or ability of Seller to consummate the transaction
contemplated herein, including, but not limited to, the Operations
Restructuring, has not been challenged by any governmental agency or any other
person and Seller has no knowledge of the occurrence of any event which would
provide a reasonable basis for any such litigation, investigation or other
proceeding.
6.19. Sensitive Payments. Seller has no reason to believe that it or
the Partnership has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made, (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books, (iii) given or received any
payments or other forms of remuneration in connection with the referral of
patients which would violate the Medicare/Medicaid Anti-kickback Law, Section
1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b) or any analogous
state statute or (iv) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment. Seller has not
filed any reports on behalf of itself or the Corporation and the Corporation has
not filed any reports on behalf of itself or in the name of the Partnership with
any governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.20. The Hospital and the Clinics. The Partnership is duly licensed to
operate the Hospital with 30 acute rehabilitation beds which are licensed under
California law as general acute care beds and 32 skilled nursing facility beds
and to operate the Clinics under the license issued to it for the Hospital and
is duly certified to participate in the Medicare Program and, to the extent the
Partnership has elected to participate therein, is duly certified to participate
in the Medi-Cal Program with respect to its operations at the Hospital. The
Hospital and the Clinics are in good operating condition and repair and
substantially all of the Personal Property and all of the major mechanical
systems located at or used in connection with the operation of the Hospital and
the Clinics are in good working order, condition and repair. The roofs of the
Hospital and the Clinics do not leak. The Personal Property is all of the
property necessary for the lawful operation of the Hospital at its current
occupancy levels and of the Clinics in the manner currently operated by the
Partnership. Seller has provided to Purchaser a true and correct copy of that
annual inspection report dated June 3, 1996 prepared by San Joaquin Health Care
Associates Limited Partnership with respect to those repairs which it has
advised Seller are required to be made by the Partnership under the terms of the
Hospital Lease.
6.21 Inventories. At Closing, each of the Hospital and the Clinics
shall have an inventory of non-perishable food, central supplies, linens,
housekeeping supplies, kitchen supplies, nursing supplies and other supplies,
which will be sufficient in condition and quantity to operate each of the
Hospital and the Clinics at its normal capacity and an inventory of perishable
food at the levels normally maintained by the Partnership at the Hospital.
6.22. Trade Names. Set forth in Exhibit 6.22 is a true and complete
list of the trade names under which the Partnership is, as of the date hereof,
doing business at the Hospital and the Clinics. Seller has not sought on its own
behalf or on behalf of the Corporation or the Partnership protection for such
names under state or federal trademark or trade name laws except to the extent
reflected in Exhibit 6.22. None of the Seller, the Corporation nor the
Partnership has received any notice from any person challenging or questioning
the right of the Partnership to use any such trade names.
6.23. Employees/ERISA.
(a) Set forth in Exhibit 6.23 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller,
the Corporation or the Partnership which relate to the Hospital and the Clinics
or to any current or former employees at or of the Hospital and the Clinics (the
"Plan" or "Plans"). Except as set forth in Exhibit 6.23 and except for stock
purchase and stock options programs administered by Horizon and for which
Purchaser shall have no liability after Closing, neither Seller nor the
Partnership has made any commitment or representation to the current or former
employees of the Hospital and the Clinics to establish any additional Plan,
arrangement or practice or to modify or change any existing Plan, arrangement or
practice. Exhibit 6.23 also lists all employees of the Hospital and the Clinics
as of the date of this Agreement together with their positions and rates of pay
and earned and accrued vacation time, sick leave and holiday pay as of the date
specified therein, which date shall be the most recent date to which such
information is available to Seller.
(b) Set forth in Exhibit 6.23 is a true and correct copy of all
employment contracts between Seller, the Corporation or the Partnership and any
employee of the Hospital or the Clinics. Except as otherwise set forth in
Exhibit 6.23 all such contracts are terminable by Seller, the Corporation or the
Partnership, as applicable, prior to the Closing Date and, in the case of those
contracts listed in Exhibit 6.23A, will be terminated by Seller, the Corporation
or the Partnership, as applicable, prior to the Closing Date if so requested by
Purchaser.
6.24. Operating Contracts. Set forth in Exhibit 6.06(f) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller, the Corporation or the Partnership,
transfer agreements, contracts for or other evidences of indebtedness (other
than indebtedness to be discharged or released at Closing), security agreements
and other contracts and agreements, including without limitation, all provider
agreements with any third party payors and consulting and service contracts to
which Seller, the Corporation or the Partnership is a party in connection with
the operations at the Hospital and the Clinics (the "Operating Contracts").
Seller has provided Purchaser with a true and correct copy of each of the
Operating Contracts. Each of the Operating Contracts is in full force and effect
and none of the Operating Contracts has been modified or amended except as set
forth in Exhibit 6.06(f). None of Seller, the Corporation or the Partnership, as
applicable, is in default of any of its obligations under the Operating
Contracts nor is Seller aware of any default or any action or omission which,
with the passage of time or the giving of notice or both, would constitute a
default under the Operating Contracts by any other party thereto. Purchaser
acknowledges and agrees that Seller shall not be in default of its obligations
under this Paragraph 6.24 in the event Exhibit 6.06(f) fails to list or Seller
fails to provide to Purchaser any Operating Contracts where the payments
remaining due thereunder are less than $25,000.
6.25. The Leases. True and correct copies of the Leases have been
provided by Seller to Purchaser. The Leases remain in full force and effect and
have not been amended or modified except as set forth in Paragraph 6.06. None of
Seller, the Corporation nor the Partnership has received from the landlord under
any of the Leases any written notice that it is in default of its obligations
under the Leases or that any guarantor thereof is in default of its obligations
under any Guaranty delivered in conjunction therewith nor does Seller have
knowledge after inquiry of the Chief Executive Officer of the Hospital of any
events which, with the passage of time or the giving of notice, would constitute
a material default thereunder. Except as set forth in the Clinic Leases with
respect to any common areas, the Partnership enjoys exclusive, peaceful and
undisturbed possession under all real and personal property leases to which it
is a party in connection with the Hospital and the Clinics, including, but not
limited to, under the Leases. Except as set forth in Exhibit 6.25, there are no
security deposits posted with respect to the Leases.
6.26. Physician Contracts. Exhibit 6.06(f) lists each contract between
the Seller, the Corporation, or the Partnership and the physicians providing
services to the patients of the Hospital or the Clinics, including contracts
with any entity owned or controlled by any such physicians, true and correct
copies of which have been provided to Purchaser. Seller represents and warrants
that none of Seller, the Corporation or the Partnership, has received any notice
that any state or federal agency or any other party believes or is attempting to
determine whether any violation exists under any such physician contracts
relating to the requirements of State and federal law governing physician self
referral and "kickbacks" including but not limited to the provisions of "Stark
II" and the federal fraud and abuse laws.
6.27. Medical Staff. Attached hereto as Exhibit 6.27 is a true and
correct copy of the medical staff roster for the Hospital and the Clinics.
Seller has made available to Purchaser a copy of the medical staff bylaws
currently in effect with respect to the Hospital and the Clinics, including any
and all current amendments and modifications thereto.
6.28. Cost Reports. Either Seller, the Corporation or the Partnership
has filed when due all cost reports and other reports required to be filed with
respect to each of the Hospital and the Clinics as of the date hereof under the
Medicare and Medi-Cal Programs. Neither Seller nor the Partnership is required
to file cost reports under any other third party payor and other reimbursement
programs in which the Hospital and the Clinics participate. Seller has no
knowledge that all such reports have not been prepared and filed in compliance
with all applicable rules and regulations. Attached hereto as Exhibit 6.28 is a
list of all such reports which have been filed by Seller, the Corporation or the
Partnership, during the last three years, true and correct copies of which have
been provided to Purchaser.
6.29. Reimbursement. The Hospital is treated under the Medicare Program
for reimbursement purposes as a free standing rehabilitation hospital with a
skilled nursing facility unit and the Clinics are treated under the Medicare
Program for reimbursement purposes as part of the Hospital's outpatient
rehabilitation department. None of Seller, the Corporation, nor the Partnership
has received any written or verbal notice from Medicare or its fiscal
intermediary threatening or challenging the status of the Hospital and the
Clinics for reimbursement purposes as a free standing rehabilitation hospital or
from any third party payor, including Medicare and Medi-Cal, with respect to any
proposed recoupment claim or any other proposed investigation, audit or
reimbursement dispute with respect to the Hospital or the Clinics or which could
adversely affect the Partnership's operations at the Hospital or the Clinics or
the continued licensure or certification thereof.
6.30. PRO Denials. Set forth in Exhibit 6.30 is a list of all of the
Peer Review Organization denials which to the best of Seller's knowledge after
inquiry of the Chief Executive Officer of the Hospital, Seller, the Corporation
and the Partnership have received with respect to the operations at the Hospital
and the Clinics during the last three years, including a description of the
basis therefor, and of the action, if any, taken by Seller, the Corporation or
the Partnership to appeal the same and the status and/or outcome of any such
appeals.
6.31. Insurance. Set forth in Exhibit 6.31 is a list of all insurance
policies held by Seller, the Corporation and the Partnership with respect to the
Hospital, the Clinics and the other Corporation Assets and Partnership Assets
and in effect as of the date of this Agreement, including the types of coverage
and amounts thereof and the amount of deductibles thereunder. Seller has
provided to Purchaser true and correct certificates evidencing such insurance as
well as copies of the current property, professional liability and workers
compensation insurance policies in effect with respect to the Hospital and the
Clinics. All monthly premium installments due with respect to all of such
insurance policies have been paid in full through the date of this Agreement and
will continue to be paid as and when due between the date of this Agreement and
the Closing Date.
6.32. Hill Burton. Neither Seller, the Corporation nor the Partnership
has any liability under the Hill Burton Program and Purchaser will have no
liability or obligation, as a transferee of Seller or otherwise, under the Hill
Burton Program as a result of the transaction contemplated by this Agreement.
6.33. The Partnership Agreement/The Management Agreement. True and
correct copies of the Partnership's Partnership Agreement (the "Partnership
Agreement") and the Existing Management Agreement have been provided by Seller
to Purchaser. Each of the Partnership Agreement and the Existing Management
Agreement is in full force and effect as of the date hereof and has not been
amended or modified except as reflected in Exhibit 6.33. Seller is not in
default of its obligations under the Existing Management Agreement and the
Corporation is not in default of any of its obligations under the Partnership
Agreement nor, to the best of Seller's knowledge after due inquiry of the Chief
Executive Officer of the Hospital, is the other limited partner under the
Partnership Agreement in default of its obligations thereunder. The Partnership
Agreement shall not be amended or modified between the date hereof and the
Closing Date other than with the prior written consent of Purchaser.
6.34. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of California. Regency Health Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own the Interests and (ii) to conduct its business from and
after the Closing Date as the same is now being conducted.
7.04. Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date hereof
and the Closing Date, except as contemplated by this Agreement or with the
consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed, Seller, the Corporation and the Partnership:
(a) Will operate the Hospital and the Clinics only in the ordinary
course and with due regard to the proper maintenance and repair of any real
property or personal property associated therewith, ordinary wear and tear
excepted;
(b) Will take all reasonable action to preserve the goodwill and the
present occupancy levels of the Hospital and the Clinics, it being understood
and agreed that they shall not be required to undertake any action to preserve
occupancy levels other than continuing to engage in the routine marketing
activities in which they are currently engaged at the Hospital and the Clinics;
(c) Except in conjunction with the Operations Restructuring, will not
make any material change in the operation of the Hospital or the Clinics nor,
except in the ordinary course of business, sell or agree to sell any items of
machinery, equipment or other fixed assets of the Hospital, including but not
limited to assets and equipment used in connection with the operation of the
Hospital or the Clinics nor otherwise enter into any agreements materially
affecting the Hospital or the Clinics;
(d) Will use its reasonable efforts to retain the goodwill of the
employees of, medical staff of or physicians under contract with, Seller, the
Corporation and the Partnership, located at or connected with the operation of
the Hospital and the Clinics and will provide Purchaser with notice in the event
of any union organizing activities or contract negotiations are commenced after
the date hereof;
(e) Will not, except in the ordinary course of business, increase the
compensation or bonuses payable or to become payable to any of the employees
located at or connected with the operation of the Hospital or the Clinics,
including employees located at the Seller's corporate or regional offices who
work exclusively on matters related to the Hospital and the Clinics, or grant
any severance benefits to any such employees other than to the extent such
bonuses or severance payments impose no obligation on Purchaser after the
Closing Date;
(f) Will not enter into any written employment agreements in connection
with the operation of the Hospital or the Clinics other than with physicians in
the ordinary course of business; provided, however, that Seller shall provide
Purchaser with copies of any such physician contracts;
(g) Will not, except in the ordinary course of business, enter into any
contract or commitment affecting any of the Seller's Assets, the Corporation's
Assets or the Partnership's Assets or incur any additional indebtedness or
amend, extend or renew any current debt instruments, whether in the ordinary
course of business or otherwise, nor will Seller declare or pay any dividend or
other distribution with respect to any of the Seller Assets nor pledge the
accounts receivable of Seller as security for any indebtedness or lease
agreements executed, amended or extended by Seller after the date hereof;
provided, however, that nothing herein shall be construed as prohibiting (i)
Seller or the Corporation from incurring inter-company indebtedness to Horizon
and loaning the proceeds thereof to the Partnership or the Corporation or the
Partnership from incurring such indebtedness, (ii) Horizon or the Seller from
incurring debt, the proceeds of which may be made available to Seller, the
Corporation or the Partnership or (iii) Seller, the Corporation or the
Partnership from executing any and all documents necessary to amend any debt
instruments under which Horizon may be the borrower and Seller, the Corporation
or the Partnership a guarantor;
(h) Will, during normal business hours, provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller (with respect to the Hospital and the Clinics), the
Corporation, the Partnership, the Hospital and the Clinics provided they do not
interfere with the operation thereof;
(i) Will operate the Hospital and the Clinics in substantial compliance
with all applicable municipal, county, state and federal laws, regulations,
ordinances, standards and orders as now in effect (including, without
limitation, the building, zoning and life safety codes as currently applied with
respect thereto) where the failure to comply therewith could have a material
adverse effect on the business, property, condition (financial or otherwise) or
operation thereof;
(j) Will take all reasonable action to achieve substantial compliance
with any laws, regulations, ordinances, standards and orders applicable to the
Hospital and the Clinics which are enacted or issued after execution of this
Agreement and become effective or require compliance prior to the Closing where
the failure to comply therewith could have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof;
(k) Will cause the Corporation's Assets and the Partnership's Assets to
be maintained in substantially the same condition as they were in at the date
hereof, ordinary wear and tear, casualty loss and taking by eminent domain
excepted;
(l) Will provide Purchaser with copies of the Corporation's
and the Partnership's monthly financial statements prepared in the ordinary
course of business;
(m) Will provide Purchaser with copies of all licensure or
certification surveys received by Seller (with respect to the Hospital and the
Clinics), the Corporation or the Partnership and the related Plans of Correction
prepared by Seller, the Corporation or the Partnership, as applicable;
(n) Will cause the Partnership to pay as and when due the accounts
payable which arise in the ordinary course of the business of the Hospital and
the Clinics, except to the extent that the amount owing is being duly contested
by Seller, the Corporation or the Partnership and such contest does not
materially affect Seller, the Corporation, the Partnership, the Hospital or the
Clinics;
(o) Will maintain in force the existing insurance coverage with
respect to the Hospital and the Clinics described in Exhibit 6.31;
(p) Will file all returns, reports and filings of any kind or nature,
or to secure timely extensions for the filing thereof, required to be filed by
Seller (with respect to the Seller's Assets, the Hospital and the Clinics), the
Corporation or the Partnership, including, but not limited to, state and federal
tax returns and Medicare and Medicaid cost reports with respect to the Hospital
and the Clinics and will timely pay all taxes or other obligations which are due
and payable with respect thereto, except to the extent that the same are being
duly contested in good faith in accordance with applicable law and such contest
does not materially affect Seller's ability to fulfill its obligations under
this Agreement or to consummate the transaction provided for herein or the
Corporation, the Partnership, the Hospital or the Clinics;
(q) Will provide to Purchaser copies of all material documents which
relate to, and, upon request, with verbal or written updates concerning the
status of, any litigation filed as of the date hereof or filed from and after
the date hereof by or against Seller (with respect to the Hospital and the
Clinics), the Corporation or the Partnership after the date of this Agreement
but prior to the Closing Date where the amount claimed or assessed by management
of Seller as likely to be claimed exceeds $500,000; and
(r) Will not amend or permit the amendment of any of the
Medical Staff Bylaws described in Paragraph 6.27.
(s) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(t) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller, any of the Seller's Assets, the Corporation's
Assets, the Partnership or the Partnership Assets, or offer to acquire or convey
in any manner, directly or indirectly, all or substantially all of the equity
interests in, the voting securities of Seller, the Seller's Assets, the
Corporation's Assets, the Partnership or the Partnership Assets; provided,
however, that public announcements of the transaction contemplated by this
Agreement shall not be prohibited hereby;
(u) Will proceed with all due diligence to secure the
Regulatory Approvals and Third Party Consents for which it is responsible
under the terms hereof;
(v) Will cooperate with Purchaser, at Purchaser's cost and expense, in
any audits of the results of operations at the Hospital and/or the Clinics which
Purchaser elects to conduct in order to comply with any requirements applicable
to it under the federal securities laws;
(w) Shall, within ten (10) days after Seller's receipt of Purchaser's
title, UCC search and survey objections pursuant to Paragraph 10.01, shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected; and
(x) Will take such action as may be necessary to ensure that the assets
and the liabilities of the Corporation on the Closing Date exclude the
following:
(i) The Corporation's cash, cash equivalents and accounts
receivable (the "Cash and Cash Equivalents").
(ii) Any claims which the Corporation may have against third parties
relating to or arising from the acts or omissions of third parties
prior to the Closing (the "Third Party Claims").
(iii) Any refunds to which the Corporation may now or hereafter be
entitled relating to payments by or on behalf of the Corporation prior
to the Closing including, without limitation, any federal, state, local
or foreign taxes paid by the Corporation prior to the Closing Date (the
"Refunds").
(iv) The bank accounts of the Corporation (the "Bank Accounts").
(v) The items owned by the Corporation and listed on Exhibit 9.02
(x)(v);
(vi) All computer hardware and software relating to the wide area
network of Horizon used by the Corporation or the Partnership for the
operation of the general ledger and accounts payable software
applications, which computer hardware and software is more fully
described in Exhibit 9.02(x)(vi) (the "GL/AP Hardware and Software");
(vii) Subject to the provisions of Paragraph 9.03(e), the Corporation's
rights and interests in and to proprietary materials, programs,
manuals, promotional materials and other intangibles owned or developed
by Seller and used by the Corporation or the Partnership in connection
with the operations at the Hospital and/or the Clinics.
(y) Will proceed with all due diligence to cause the Operations
Restructuring to be completed as of the Closing Date pursuant to the terms of
documents, including, but not limited to, the Assignment of the Hospital Lease,
the Assignment of the Clinic Leases, the Hospital Sublease, the Clinic Subleases
and the Amended Management Agreement, in form and substance reasonably
acceptable to Seller and Purchaser.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a designated escrow agent in accordance with any
written escrow instructions executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01).
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers executing documents on behalf of
Seller, a copy of the resolutions adopted by Seller's Board of Directors
authorizing the transaction provided for herein and the execution of this
Purchase Agreement and the other documents contemplated herein and attaching a
certificate of good standing issued by each of the California and Delaware
Secretary of State within no more than thirty (30) days prior to Closing;
(c) The duly executed Stock Assignment Agreement;
(d) The duly executed Note Assignment Agreement;
(e) Written Escrow Instructions;
(f) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, the consent of the Bank of
Tokyo, San Joaquin Health Care Associates Limited Partnership (to the Operations
Restructuring and, if applicable, to the sale of the Stock), Professional Office
Corporation ("POC") (to both the sale of the Stock and the Operations
Restructuring) and the landlords under the Clinic Leases and the waiver by POC
of its right of first refusal and put rights, for which it is responsible under
the terms of this Agreement.
(g) An Estoppel Certificate in form and substance reasonably
acceptable to Purchaser executed by the landlord under the Hospital Lease;
(h) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to Purchaser;
(i) The executed original of the Partnership Note;
(j) A duly executed original of the Hospital Sublease;
(k) A duly executed original of the Clinic Subleases;
(l) A duly executed original of the Amended Management Agreement;
(m) A duly executed copy of the agreement assigning the Existing
Management Agreement;
(n) A duly executed original of the Assignment and Assumption
Agreement with respect to the Hospital Lease.
(o) A duly executed original of the Assignment and Assumption
Agreement(s) with respect to the Clinic Leases
(p) Duly executed copies or originals of any other documents executed
by Seller, the Corporation and/or the Partnership in connection with the
Operations Restructuring.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Hospital any and all plans and specifications with
respect to the Hospital and the Clinics which may be in Seller's or the
Partnership's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Hospital
and the Clinics in its filings with the United States Securities and Exchange
Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) File or cause to be filed any final cost reports with respect to
the cost reporting periods prior to the Closing Date for which it or the
Partnership may be responsible under applicable state and federal law within the
time periods proscribed thereunder, it being understood and agreed that the
purpose of this provision is to ensure that there is no adverse affect on the
reimbursement paid to Purchaser or the Partnership with respect to the
operations at the Hospital and the Clinics after Closing.
(e) To permit Purchaser, the Corporation and/or the Partnership to
continue to use, for a period of one hundred eighty (180) days after the
Closing, proprietary materials, programs, manuals, promotional materials and
other intangibles owned or developed by Seller and used by the Corporation or
the Partnership in connection with the operations at the Hospital and/or the
Clinics as are reasonably necessary to the continued licensure, certification
and/or accreditation of the Hospital or the Clinics after Closing.
(f) To provide data processing services with respect to the Hospital
and the hospitals which are the subject of the Other Agreements on the terms and
for the cost specified in Exhibit 9.03(f).
(g) To permit Purchaser, the Corporation and/or the Partnership to use
for a period of 60 days after Closing any signs located at the Hospital and/or
the Clinics or any pre-printed materials, such as admitting forms or patient
information materials, on which the Seller's name or logo may appear.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date, except as contemplated by this Agreement
or with the consent of Seller, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title commitment and/or survey of
the Real Property and the Hospital which Purchaser may elect to obtain;
provided, however, that Purchaser shall not have the right to object to any
items reflected on the title commitment which are reflected in Exhibit 6.13. If
Seller refuses to correct some or all of the title, survey or lien defects
objected to by Purchaser within the time period reflected in Paragraph 9.01(o)
or to give Purchaser reasonable assurances that the same will be corrected as of
the Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and Regulatory Approvals for which it is
responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller and Purchaser agree in writing in the Escrow
Instructions to handle the same outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The executed Note Assignment Agreement;
(c) The cash due at Closing pursuant to Paragraph 2.01;
(d) Duly executed Escrow Closing Instructions;
(e) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to Seller;
(f) The Purchaser's Note;
(g) Evidence that Purchaser has secured for the benefit of the
Corporation or the Partnership, as applicable, insurance with respect to the
Hospital and the Clinics which is substantially the same as the insurance
described in Paragraph 6.31;
(h) If and to the extent required by the Landlord as a condition to
agreeing to Release CMS from its obligations as a guarantor of the Hospital
Lease (which Release is not a condition to closing), evidence that the Initial
Term of the Hospital Lease has been extended for a period of five (5) years
after the expiration date currently reflected therein; and
(i) One or more Guaranty Agreements duly executed by Regency
Health Services, Inc. with respect to the Hospital Lease and the Clinic
Leases if and to the extent, in the case of the Clinic Leases, they are
currently guaranteed by CMS.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns, cost
reports or other filings filed prior to or subsequent to the Closing Date which
relate to the period prior to the Closing Date or which Seller may require for
any other lawful purpose other than litigation commenced by Seller against
Purchaser under the terms of this Agreement and maintain all such books and
records for a period of one year after the Closing Date, at which time Purchaser
shall give Seller notice of Seller's right to remove such books and records from
the Hospital. Seller shall have a period of thirty (30) days after receipt of
such notice to advise Purchaser whether it intends to exercise its removal right
and, in the event Seller elects to do so, Seller shall have a period of thirty
(30) days thereafter in which to arrange, at its sole cost and expense, for the
removal of any or of such books and records from the Hospital, subject to
Purchaser's right to retain copies of any or all of such removed books and
records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller and the staff physicians of
the Hospital employed by Seller or the Partnership prior to the Closing Date
(but in the case of such staff physicians only as necessary for the further care
of their patients and the defense of litigation) shall be entitled, after the
Closing Date, during normal business hours of the Hospital and the Clinics and
on advance notice to Purchaser to have access to and to make copies, at their
sole cost and expense, of the patient records, including the medical records and
medical charts of any patient admitted to the Hospital or the treated in a
Clinic on or before the Closing Date. In addition, to the extent permitted by
law and to the extent required by law, Seller shall be entitled to remove from
the Hospital or a Clinic any such record or chart, but only for the purposes of
pending litigation involving a patient to whom such record or chart refers, as
certified in writing prior to removal by an officer of Seller or counsel
retained by Seller in connection with such litigation, and only prior to making
a copy thereof, at Seller's cost and expense, for retention at the Hospital or
the Clinic, as applicable. Any record or chart so removed by the Hospital or any
Clinic shall be promptly returned to Purchaser following its use by Seller in
accordance with the terms hereof.
(e) Provide any and all working capital loans required for
the day to day operations of the Hospital and the Clinics by the Corporation.
(f) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing, including, but not limited to, JCAHO and CARF.
(g) Not to use the Seller's name in connection with the operation of
the Hospital and the Clinics other than as specifically authorized by Paragraph
9.03(g).
(h) Purchaser shall not renew the term of the Hospital Lease upon the
expiration of the Initial Term thereof unless CMS is released from its Guaranty
at the time of such renewal with respect to any obligations arising under the
Hospital Lease during any and all renewal terms.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets or the Corporation's Assets or
the Partnership's Assets which are the subject of this Agreement or the Other
Agreements which either alone or in the aggregate, with all such other sales or
dispositions, would constitute the sale or disposition of a "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X of the rules and
regulations of the Commission), (ii) take any action, the consummation of which
cannot be conditioned on the consummation of the transactions contemplated by
this Agreement, where such action would have a material adverse effect on Seller
or (iii) take any action which either would have a material adverse effect on
the operations, business or financial condition of Seller or would materially
impair the value of the transaction contemplated herein to Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Hospital and the Clinics from and after the Closing Date (the
"Regulatory Approvals"), and the consent of its lenders, lessors and other third
parties to the extent required under any loan documents, lease agreements,
management agreements or other instruments to which it is a party, including,
but not limited to, the consent of the lessors under the Leases (the "Third
Party Consents"); provided, however, that the consent of the holders of the
bonds issued by Purchaser's parent corporation under that Indenture dated as of
June 28, 1996 in the original principal amount of $50,000,000 and that Indenture
dated as of October 12, 1995 in the original principal amount of $110,000,000
(collectively, the "Subordinated Debt") shall not be deemed to be a required
Third Party Consent, it being understood and agreed that Purchaser has
represented that the transaction as contemplated herein after the completion of
the Operations Restructuring will not require the consent of such bondholders
and that Seller has, in part, relied on such representation in agreeing to
undertake the Operations Restructuring.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by either party of any press release or any
written statement with respect to this Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date (as defined below), of each of the following conditions any
one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof, including, but not limited to, if applicable, change of
ownership approval from the California Department of Health Services (the "CHOW
Approval").
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, neither Seller nor
the Partnership shall be in default, where said default cannot be cured by the
Closing Date, under any mortgage, contract, lease or other agreement to which
Seller, the Corporation or the Partnership is a party or by which Seller, the
Corporation or the Partnership is bound and which will affect or relate to the
Real Property, the Personal Property, the Hospital or the Clinics after the
Closing Date.
(e) Subject to Purchaser ordering the same, a title insurance policy
providing for leasehold coverage shall have been issued with respect to the
Hospital subject only to the Permitted Encumbrances (the "Title Insurance
Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Survey.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date, of each of the following conditions any one or more of which may
be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the landlord under any or all of the
Leases has refused to release Seller from its guarantee thereof or from primary
liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date other than the Purchaser's receipt of the CHOW Approval pursuant to
Paragraph 12.01(c), provided Purchaser is diligently pursuing the issuance of
the CHOW Approval by the California Department of Health, the Outside Closing
Date shall automatically be extended for such additional period of time as may
be necessary to permit Purchaser to secure the CHOW Approval; provided, further
that in the event Purchaser has not secured the same within thirty (30) days
after the Outside Closing Date, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights or
obligations hereunder.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission requires any of the actions described in
Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of any of the Hospital Real Property or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination
or pursue any other remedy referred to in Paragraph 13.01 on account of a breach
of a condition, covenant or warranty by the other, without first given such
other party written notice of such breach and not less than ten (10) days within
which to cure such breach. The Closing Date shall be postponed if necessary to
afford such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Hospital and the Clinics as of
the Closing Date, (ii) their positions and rates of pay, (iii) a reasonable
estimate as of the Closing Date of all earned and accrued vacation, holiday and
sick pay and earned or accrued "EVA" bonuses due to and/or coming due to the
employees of the Hospital and the Clinics as of the Closing Date (the "Estimated
Accrued Benefits"). Purchaser shall agree from and after the Closing Date, to
cause the Corporation to pay the Actual Accrued Benefits, to the employees of
the Hospital and the Clinics as and when due in accordance with the
Corporation's personnel policies from and after the Closing Date, it being
agreed for the benefit of Seller that such policies shall not be modified by
Purchaser after Closing with the intent or result being a reduction of benefits
accrued in favor of any employee as of the Closing Date. Within a reasonable
period of time following the Closing Date, which shall in no event be more than
thirty (30) days, Seller shall provide Purchaser with a schedule of the Accrued
Benefits which were earned or accrued as of the Closing Date (the "Actual
Accrued Benefits").
14.02. Purchaser shall retain as employees of the Corporation at
Closing all of the employees of the Corporation who, as of the Closing, work at
the Hospital and the Clinics and have been employed on average for 20 hours or
more per week. Such employees whose employment is continued shall be referred to
as the "Retained Employees." Any such continued employment of a Retained
Employee by Purchaser shall be on terms which require said Retained Employee to
perform comparable services, in a comparable position and at substantially the
same base salary as such Retained Employee enjoyed with the Partnership prior to
Closing. Seller or any of its affiliates shall have the right to employ or offer
to employ any Retained Employee who declines to continue employment with the
Corporation. The Retained Employees who elect to accept continued employment
with the Corporation shall hereinafter be referred to as the "Hired Employees")
and as to each of the Hired Employees, Purchaser shall recognize each such Hired
Employees original hire date and shall cause the Corporation to continue to
employ each such Hired Employee for a period of no less than ninety (90) days
following the Closing Date unless the employment of such Hired Employee is
terminated in accordance with Purchaser's personnel policies or as a result of
such Hired Employee's resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Hospital and the Clinics of the "closure"
thereof under the Worker Adjustment and Retraining Notification Act (the "WARN
Act") or under any comparable California state law. Accordingly, Purchaser
agrees to indemnify, defend and hold harmless Seller from any liability which it
may incur under the WARN Act or under comparable California State law in the
event of a violation by Purchaser of its obligations thereunder, including a
violation which results from allegations that Purchaser constructively
terminated the employees of the Hospital and the Clinics as a result of the
terms and conditions of employment offered by Purchaser. Nothing in Section
14.02 shall, however, create any rights in favor of any person not a party
hereto, including the employees of the Hospital or the Clinics, or constitute an
employment agreement or condition of employment for any employee of Seller or
any affiliate of Seller who is a Retained Employee or a Hired Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Hospital and the Clinics to whom it is required to offer the
same under applicable law. Seller acknowledges and agrees that Purchaser is not
assuming any of Seller's obligations to its employees under COBRA or otherwise,
except as specifically provided in this Article XIV. As of the Closing Date, all
active employees of the Corporation: (i) who participate as of the Closing Date
in group health insurance coverage sponsored by Seller and (ii) who remain
employees of the Corporation after the Closing Date, shall be eligible for
participation in a group health plan (as defined for purposes of Internal
Revenue Code Section 4980B) established and maintained by Purchaser for the
general benefit of its employees and their dependents and all such employees
shall be covered without a waiting period and without regard to any pre-existing
condition unless (A) they are under a waiting period with Seller at the time of
Closing, in which case they shall be required to complete their waiting period
while under Purchaser's group health plan or (B) they were subject to a
pre-existing condition exclusion while under Seller's group health plan, in
which case they shall be subject to the same exclusion while in Purchaser's
group health plan, which exclusion shall, if applicable, be subject to the same
time limitation while in Purchaser's employ as was applicable thereto while said
employees were in Seller's employ, with the time limit calculated from the date
the same commenced while in Seller's employ. Seller and Purchaser acknowledge
and agree that it is the intent of this provision that Seller shall not be
required to provide continued health coverage under ERISA or Section 4980 of the
Internal Revenue Code to any of such employees of the Corporation who are
retained after Closing or to any qualified beneficiary (as defined for purposes
of Section 4980B of the Internal Revenue Code) with respect to any such
employees.
14.05. Seller agrees that the continued employment of the Hired
Employees of the Hospital and the Clinics will be important to the viability of
Purchaser's operations at the Hospital and the Clinics. Accordingly, Seller
agrees that for a period of one year after the Closing Date it will not directly
or indirectly solicit the employment of any of such Hired Employees nor shall it
take any action to directly or indirectly interfere with their employment
relationship with Purchaser or to induce them in any manner to terminate their
employment relationship with Purchaser. Seller acknowledges and agrees that
Purchaser would not be fully compensated by damages in the event of a breach or
threatened breach by Seller of this provision and accordingly agrees that
Purchaser shall be entitled, without the need to post a bond, to seek an
injunction to restrain such violation or threatened violation of this Paragraph
14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Seller shall indemnify and hold Purchaser harmless from and
against an amount equal to any and all damages, liabilities, losses, costs or
expenses (the "Losses") which Purchaser may incur as a result of the following
(it being understood and agreed that in the event of any such Losses incurred by
Purchaser in its capacity as the sole shareholder of a partner in the
Partnership, the amount of such Losses suffered by Purchaser shall be equal to
70% of the Losses suffered or incurred by the Partnership):
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of the Seller's Assets, the Corporation's Assets and/or the
Partnership's Assets and the operation of the Hospital and the Clinics prior to
the Closing Date, whether or not the same are covered by the Partnership's
insurance, including, but not limited to (i) any obligations under the Leases,
the Operating Contracts, the Corporation Liabilities, and the Partnership
Liabilities, (ii) any violations of the Medicare or Medicaid fraud and abuse
laws, the Stark II law governing relationships with physicians or any other
state or federal law governing the operation of the Hospital and/or the Clinics
(whether or not such violations would constitute a breach by Seller of a
representation or warranty set forth herein) and (iii) any failure of any cost
report filed by the Corporation, the Partnership or Seller, for the cost
reporting periods prior to the Closing Date, including the final cost reports
filed after the Closing Date, to comply with applicable state or federal law
(whether or not such violation would constitute a breach by Seller of a
representation or warranty set forth herein);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or nonfulfillment of any agreement on the part of
Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the requirements of any laws or
regulations relating to bulk sales or transfers;
(d) Any claims against Seller, the Partnership, Purchaser, the
Hospital, the Clinics or the other Partnership Assets under the Medicare or
Medi-Cal Programs or under any other third party payor programs (i) with respect
to the operation of the Hospital and the Clinics by the Partnership prior to the
Closing Date, (ii) for recapture of depreciation generated by the transaction
contemplated hereby or (iii) for repayment of any overpayments made to the
Partnership or Seller under the Medicare or Medi-Cal Programs or any other third
party payor program for services rendered at the Hospital or the Clinics prior
to the Closing Date, including, but not limited to, claims against Purchaser in
the form of offsets by Medicare or Medi-Cal or any other third party payor
against their payments due to Purchaser on and after the Closing Date;
(e) The assets and liabilities described in Paragraph 9.01(x); and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of the Seller's Assets, the
Corporation's Assets, the Partnership's Assets and the operation of the Hospital
and the Clinics from and after the Closing Date, including, but not limited to,
any obligations under the Leases, the Operating Contracts, the Corporation
Liabilities and the Partnership Liabilities (if and to the extent they relate
solely to the period from and after the Closing Date);
(b) Any misrepresentation or breach of warranty by Purchaser
set forth in this Agreement or nonfulfillment of any agreement on the part of
Purchaser under this Agreement; and
(c) Any federal income tax liability which Seller may incur in
connection with the consummation of the Transaction provided for herein which is
directly attributable to the Operations Restructuring; provided, however, in no
event shall Purchaser's liability under this Paragraph 15.02(c) exceed $100,000;
provided, further, that Purchaser's indemnity obligation shall be conditional on
a review and approval by Purchaser's independent certified public accountant of
Seller's tax liability calculation.
(d) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches equals or exceeds Fifty Thousand and no/100 Dollars
($50,000) (the "Representation and Warranty Liability Threshold"). In the event
the Representation and Warranty Threshold is met, then the Non-Breaching Party
shall be entitled to seek to collect from the Breaching Party any and all
damages, liabilities, losses, costs or expenses suffered or incurred as a result
of all such breaches of the representations and warranties set forth herein on a
first dollar basis and not merely to recover damages in excess of the
Representation and Warranty Liability Threshold.
15.04. Notwithstanding anything to the contrary contained in this
Paragraph 15 in addition to all other available rights and remedies, in the
event of a breach by Purchaser of its covenant set forth in Paragraph 10.03(h),
Seller shall have the right to require Purchaser to post as security for the
performance by Purchaser of its obligations under the Hospital Lease an
irrevocable letter of credit from a lender and in a form reasonably acceptable
to Seller and in an amount equal to one year's Base Rent then due under the
Hospital Lease (the "Letter of Credit"). Purchaser acknowledges and agrees that
Seller shall have the right to draw on such Letter of Credit, in the event of a
breach by Purchaser of its obligations under the Hospital Lease as a result of
which the landlord thereunder seeks to enforce the obligations of CMS under its
Guaranty thereof and that, in the event of such a draw against the Letter of
Credit, that Purchaser shall be required to reinstate the Letter of Credit to
its original principal balance. Seller and Purchaser shall have the right to
enter into Letter of Credit Agreement if and when such Letter of Credit is
posted setting forth such additional details with respect thereto as they deem
to be appropriate.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall be in writing and shall be sent by registered
or certified mail, postage prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder with respect to any Real Property and Personal Property included in
the Corporation's Assets effective at Closing to a real estate investment trust
(the "REIT") in connection with its financing of the transaction provided for
herein provided Seller first confirms to Purchaser that, in its reasonable
determination, such assignment will not have adverse reimbursement consequences
for Seller; and provided, further, that no such assignment shall relieve
Purchaser of its obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including successors by operation of law pursuant to any
merger, consolidation or sale of assets involving either party. In the event of
an assignment of this Purchase Agreement to a REIT, Purchaser shall advise
Seller as to those documents and deliveries contemplated by this Agreement which
are to run in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the REIT
rather than Purchaser, if any, it being understood and agreed that in the event
of such an assignment, the only right which the REIT will assume is Purchaser's
right to take title to the Corporation's Assets and the only obligation which
the REIT will assume is Purchaser's obligation to pay the purchase price in
accordance with the terms hereof .
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be invalid, unlawful or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.15
and 6.16, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of the Other Agreements has been executed and
delivered by the parties hereto or thereto.
16.15. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
CONTINENTAL MEDICAL SYSTEMS, INC.
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between Continental Medical Systems, Inc.,
as Seller, and Purchaser dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Seller, guarantees
and promises to and for the benefit of Purchaser that (i) the representations
and warranties of Seller are true and correct as of the date of execution of the
Agreement and shall be true and correct as of the Closing Date (as modified by
any supplements to the Seller Disclosure Letter to reflect events after the date
hereof) and (ii) Seller shall perform all of its obligations, covenants and
agreements, including, but not limited to, its indemnity obligations under
Paragraph 15, to be performed on its part under the Agreement . If Seller
defaults under the Agreement , Purchaser may proceed immediately against Horizon
or Seller or both to enforce any rights it has under the Agreement or this
Guaranty. Notwithstanding the foregoing, the representations and warranties of
Seller will not survive beyond the periods applicable thereto set forth in
Paragraph 16.13 hereof and this Guaranty shall not be construed to give
Purchaser a claim or cause of action against Horizon after the expiration of the
applicable survival period for a breach by Seller of any representation or
warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the performance of Seller's obligations under the
Agreement ;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the Agreement (whether absolute or as
collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or
agreed to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement ;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the rejection of the Agreement by Seller or by a
trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement , and Purchaser may
exercise its remedies hereunder without the necessity of any notice to Seller or
Horizon of nonpayment, nonobservance, nonperformance or other default by Seller
under the Agreement other than such notice as may be specifically required by
the terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Continental Medical Systems, Inc. ("Seller") to enter
into the Purchase and Sale Agreement between Seller and Regency Rehab Hospitals,
Inc. ("Purchaser") dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Purchaser,
guarantees and promises to and for the benefit of Seller that (i) the
representations and warranties of Purchaser are true and correct as of the date
of execution of the Agreement or the Purchaser's Note and shall be true and
correct as of the Closing Date (as modified by any supplements to the Purchaser
Disclosure Letter to reflect events after the date hereof), (ii) Purchaser shall
perform all of its obligations, covenants and agreements, including, but not
limited to, its indemnity obligations under Paragraph 15, to be performed on its
part under the Agreement or the Purchaser's Note and (iii) Purchaser's
obligations under the Purchaser's Note (as defined in the Agreement or the
Purchaser's Note). If Purchaser defaults under the Agreement or the Purchaser's
Note or the Purchaser's Note, Seller may proceed immediately against Regency or
Purchaser or both to enforce any rights it has under the Agreement or the
Purchaser's Note or the Purchaser's Note or this Guaranty. Notwithstanding the
foregoing, the representations and warranties of Purchaser will not survive
beyond the periods applicable thereto set forth in Paragraph 16.13 hereof and
this Guaranty shall not be construed to give Seller a claim or cause of action
against Regency after the expiration of the applicable survival period for a
breach by Purchaser of any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement or the Purchaser's Note or the Purchaser's Note by lapse of
time or otherwise (all of which are hereby authorized by Regency) or a
release or limitation of the liability of Purchaser or its estate in
any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or the Purchaser's Note or acceptance of partial
payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance of Purchaser's obligations under the
Agreement or the Purchaser's Note;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or the
Purchaser's Note or to exercise any remedy available thereunder or any
other security instrument given as security for performance of the
same, in the event of a default in the performance by Purchaser in its
obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement or the
Purchaser's Note, including the commencement by Seller of any
proceedings against Purchaser upon the occurrence of a default
thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or
agreed to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement or the Purchaser's Note;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the rejection of the Agreement or the
Purchaser's Note by Purchaser or by a trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Agreement or the
Purchaser's Note to the extent Regency is lawfully entitled to raise the same as
a defense to its obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement or the Purchaser's Note, and Seller may exercise
its remedies hereunder without the necessity of any notice to Purchaser or
Regency of nonpayment, nonobservance, nonperformance or other default by
Purchaser under the Agreement or the Purchaser's Note other than such notice as
may be specifically required by the terms of the Agreement or the Purchaser's
Note prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.02
PURCHASE AND SALE AGREEMENT
KENTFIELD
This Agreement is made and entered into this 19th day of November, 1996
by and between Kentfield Hospital Corporation, a California corporation
("Seller") and Regency Rehab Hospitals, Inc., a California corporation
("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to the
following:
(a) That Lease Agreement dated March 10, 1988 between Marin Health Care
Associates Limited Partnership, a Delaware limited partnership, as lessor, and
Seller, as Lessee, as amended by First Amendment dated June 29, 1990 (the
"Hospital Lease"), including, but not limited to, Seller's leasehold right title
and interest in and to:
(1) The real property leased by Seller under the terms of the Hospital
Lease and situated in the State of California and more particularly described in
Exhibit 1.01(a)(1) (the "Hospital Real Property") and the improvements thereon
that comprise the free standing rehabilitation hospital with 40 acute
rehabilitation beds and 26 skilled nursing facility beds and commonly known as
Kentfield Rehabilitation Hospital, 1125 Sir Francis Drake Boulevard, Kentfield,
California (the "Hospital") and the medical office building located adjacent to
the Hospital (the "MOB") which is currently used for administrative offices,
outpatient services and treatment rooms.
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Hospital Real Property leased by Seller
either under the terms of the Hospital Lease or under those contracts and
commitments described in Exhibit 1.01(f) (the "Leased Hospital Personal
Property"), which Leased Hospital Personal Property is more fully described in
Exhibit 1.01(a)(2).
(3) All rights of first refusal, extension rights, and purchase
options set forth in the Hospital Lease.
(b) That Sublease Agreement dated January 2, 1996 between Exertec
Health Systems, Inc., as sublessor, and Seller, as sublessee (the "Exertec
Clinic Lease"), including, but not limited to, Seller's leasehold right title
and interest in and to:
(1) The real property leased by Seller under the terms of the Exertec
Clinic Lease and situated in the State of California and more particularly
described or shown in Exhibit 1.01(b)(1) (the "Exertec Clinic Real Property")
and the improvements thereon that comprise the outpatient clinic commonly known
as Kentfield Physical Therapy at Exertec (the "Exertec Clinic").
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Exertec Clinic Real Property leased by
Seller either under the Exertec Clinic Lease or under those contracts and
commitments described in Exhibit 1.01(f) (the "Leased Exertec Clinic Personal
Property"), which Leased Exertec Clinic Personal Property is more fully
described in Exhibit 1.01(b)(2).
(3) All rights of first refusal, extension rights, and purchase options
set forth in the Exertec Clinic Lease.
(c) That Sublease Agreement dated February 1, 1995 between Vatche
Cabayan, M.D., as lessor, and Seller, as Lessee (the "Cabayan Clinic Lease" and
together with the Exertec Clinic Lease, the "Clinic Leases" and together with
the Hospital Lease, the "Leases"), including, but not limited to, Seller's
leasehold right title and interest in and to:
(1) The real property leased by Seller under the terms of the Cabayan
Clinic Lease and situated in the State of California and more particularly
described or shown in Exhibit 1.01(c)(1) (the "Cabayan Clinic Real Property" and
together with the Exertec Clinic Real Property, the "Clinic Real Property", and
together with the Hospital Real Property, the "Real Property") and the
improvements thereon that comprise the outpatient clinic commonly known as
Kentfield Physical Therapy at Mission Bay (the "Cabayan Clinic" and together
with the Exertec Clinic, the "Clinics").
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Cabayan Clinic Real Property leased by
Seller either under the Cabayan Clinic Lease or under those contracts and
commitments described in Exhibit 1.01(f) (the "Leased Cabayan Clinic Personal
Property" and together with the Leased Exertec Clinic Personal Property, the
"Leased Clinic Personal Property" and together with the Leased Hospital Personal
Property, the "Leased Personal Property"), which Leased Cabayan Clinic Personal
Property is more fully described in Exhibit 1.01(c)(2).
(3) All rights of first refusal, extension rights, and purchase options
set forth in the Cabayan Clinic Lease.
(d) The inventory, including linens, dietary supplies and housekeeping
supplies, food and other consumable inventories located at, or usable in the
operation of, the Hospital and the Clinics on the Closing Date (the
"Consumables").
(e) Any furniture, fixtures, equipment and vehicles owned by Seller and
located on the Real Property or in the Hospital or the Clinics which is not the
property of the lessors under the terms of the Hospital Lease, the Clinic Leases
or any other lease described in Exhibit 1.01(f), as applicable, (the "Owned
Personal Property") and which Owned Personal Property is more fully described in
Exhibit 1.01 (e).
(f) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by Seller
relating to the Hospital and the Clinics and all rights of Seller in and to (i)
those contracts and commitments relating to the Seller's Assets (as hereinafter
defined) as listed on Exhibit 1.01(f), true and correct copies of which
contracts have been provided to Purchaser by Seller as of the date hereof, (ii)
the permits and licenses used or held for use by Seller in the operation of the
Seller's Assets and (iii) any and all warranties issued to Seller in connection
with the repairs described in Exhibit 4.15 (the "Records and Rights").
(g) All of Seller's right, title and interest in and to the trade names
"Kentfield Rehabilitation Hospital" and "Kentfield Physical Therapy at Mission
Bay" and "Kentfield Physical Therapy at Exertec" and all other trade names used
exclusively at the Hospital or the Clinics and not used generally by Continental
Medical Systems, Inc., a Delaware corporation ("CMS") at its hospitals (the
"Trade Names"); provided, however, that Purchaser shall have the right to
continue to use for a period of 60 days after Closing any signs located at the
Hospital and/or the Clinics or any pre-printed materials, such as admitting
forms or patient information materials, on which the CMS name or logo may
appear.
Hereinafter Seller's leasehold rights under the Hospital Lease and the
Clinic Leases in and to the Hospital, the Clinics, the Real Property, the Leased
Personal Property, the Owned Personal Property, the Consumables, the Records and
Rights and the Trade Names will sometimes be collectively referred to as the
"Seller's Assets."
1.02. Notwithstanding anything in this Agreement to the contrary, the
Seller's Assets shall not include , and Seller shall retain as its property, the
following assets (the "Excluded Assets"):
(a) Seller's stock record books, tax returns and minute books;
(b) The items owned by Seller and listed on Exhibit 1.02(b);
(c) All of Seller's rights under this Agreement, including,
without limitation, the right of Seller to receive the Purchase Price (as
hereinafter defined);
(d) All refunds, whenever paid, relating to payments by or on behalf of
Seller prior to the Closing including, without limitation, any federal, state,
local or foreign taxes paid by Seller prior to the Closing Date;
(e) All bank accounts of Seller;
(f) All cash, cash equivalents and accounts receivable of Seller,
including any amounts due or which may, after the Closing, become due to the
Hospital or the Clinics from its or their participation in the Medicare or any
other third party payor Programs for any period prior to the Closing Date, and
all of Seller's prepaid assets and deposits;
(g) All computer hardware and software relating to the wide area
network of Horizon/CMS Healthcare Corporation ("Horizon") used for the operation
of the general ledger and accounts payable software applications, which computer
hardware and software is more fully described in Exhibit 1.02(g) (the "GL/AP
Hardware and Software");
(h) Seller's interest in the Straddle Patient Payments (as defined
below) for the services rendered and medicine, drugs and supplies provided prior
to the Closing Date, all in accordance with Paragraph 16.14 hereof;
(i) Seller's claims, if any, against third parties relating to or
arising from the acts or omissions of third parties prior to the Closing;
provided that Seller shall give notice to Purchaser before pursuing any claims
against a third party who continues to have any business relationship with the
Hospital or the Clinics after the Closing; and
(j) Seller's rights and interests in and to proprietary materials,
programs, manuals, promotional materials and other intangibles not included in
Paragraph 1.01; provided, however, that Seller hereby agrees to permit Purchaser
to continue to use, for a period of one hundred eighty (180) days after the
Closing, any of such proprietary assets as are reasonably necessary to the
continued licensure, certification and/or accreditation of the Hospital or the
Clinics after Closing.
1.03. Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge the following
liabilities and obligations (the "Assumed Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Leases which relate to the periods on and after
the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 1.01(f) (the "Equipment Leases") which relate
to the periods on and after the Closing Date;
(c) The liability to make the payments and to perform any other
obligations under the contracts other than the Equipment Leases listed on
Exhibit 1.01(f) (other than those contracts indicated on Exhibit 1.01(f) which
are to be terminated by Seller prior to Closing) which relate to the periods on
and after the Closing Date;
(d) The liability to make the payment due after Closing under purchase
orders placed by Seller in the ordinary course of business prior to the Closing
Date but which are open as of the Closing Date for inventory and supplies to be
delivered after the Closing Date; and
(e) The liability to pay when due the Accrued Benefits (as defined
below).
1.04. Except for the Assumed Liabilities, no obligation or liability of
Seller relating to or arising from the operation of the business of Seller or
the Seller's Assets prior to the Closing Date is to be assumed by Purchaser.
1.05. At Purchaser's request, Seller will use its best efforts to
obtain prior to Closing, at Purchaser's sole cost, software licenses in favor of
Purchaser to enable Purchaser to use all of the software presently being used by
Seller at the Hospital and/or the Clinics other than the software listed in
Exhibit 1.05 and the GL/AP Software described in Exhibit 1.02(g). At the Closing
and subject to Seller obtaining any necessary consents or approvals, Seller will
assign to Purchaser, and Purchaser will assume from Seller, all existing leases
and maintenance agreements listed on Exhibit 1.01(f) relating to any computer or
systems hardware which is a part of the Leased Personal Property and to all
computer software with respect to which Seller is able to secure a license in
favor of Purchaser pursuant to the immediately preceding sentence.
1.06. Seller will provide to Purchaser data processing services with
respect to the Hospital and the hospitals which are the subject of the Other
Agreements (as hereinafter defined) on the terms and for the cost specified in
Exhibit 1.06.
ARTICLE II
PURCHASE PRICE
2.01. The purchase price for Seller's Assets shall be One Million Three
Hundred Fifty Thousand and no/100 Dollars ($1,350,000) (the "Purchase Price")
which shall be payable in cash at Closing concurrently with the transfer of the
Seller's Assets to, and the assumption of the Assumed Liabilities by, Purchaser,
which cash shall be subject to adjustment to reflect the costs, expenses and
prorations for which Seller and Purchaser are responsible under Paragraph 4
hereof.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall occur effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date. The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver leasehold title to the Real
Property, the Hospital, the Clinics and the Leased Personal Property and title
to the Consumables, the Owned Personal Property, the Records and Rights and the
Trade Names free and clear of all liens and encumbrances other than the
following (collectively, the "Permitted Exceptions"):
(a) Liens for real and personal property taxes which are not yet
due and payable;
(b) Liens and encumbrances affecting the fee simple title to
any of the Clinic Real Property or the Hospital Real Property created by the
owner thereof and not by Seller;
(c) The Permitted Exceptions listed in Exhibit 3.02(c); and
(d) Such liens as may be approved or deemed approved by Purchaser
pursuant to Paragraph 10.01.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser
at Closing by Seller's delivery of the following documents:
(a) Seller shall deliver a separate Assignment of Lease in the form and
substance substantially the same as that attached hereto as Exhibit 3.03(a)
pursuant to which Seller shall convey to Purchaser Seller's right, title and
interest in and to each of the Leases (the "Lease Assignment Agreements").
(b) Seller shall deliver a Bill of Sale in form and substance
substantially the same as that attached hereto as Exhibit 3.03(b) with respect
to the Consumables, the Owned Personal Property, if any, the Records and Rights
and the Trade Names (the "Bill of Sale").
(c) Such other documents or instruments as may be necessary to convey
title to the Seller's Assets to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
and operation of the Seller's Assets shall be allocated between Seller and
Purchaser as follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of Seller's leasehold
interest in and to the Real Property and the Hospital and the Clinics to
Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of either
Seller's leasehold interest in and to the Leased Personal Property or title to
the Owned Personal Property to Purchaser.
4.03. Seller shall pay the base premium for a standard ALTA leasehold
title insurance policy for the Hospital in the amount of the Purchase Price,
insuring Purchaser's title to the Hospital; Purchaser shall pay the cost of any
premiums for extended coverage which Purchaser may elect to secure, including
the cost of the ALTA survey required to obtain the same, any lender's coverage
which it elects or is required to secure in connection with its acquisition of
the Seller's Assets or financing thereof and any title endorsements which it
elects to obtain or is required to obtain to satisfy the requirements of its
lender.
4.04. Purchaser shall pay the cost of any environmental Phase I
assessment of the Seller's Assets which Purchaser elects to secure prior to
Closing.
4.05. To the extent Seller is responsible therefor under the terms of
the Leases, Real and Personal Property taxes related to the Hospital, the MOB
and the Clinics shall be prorated as of the Closing Date, with Seller
responsible therefor for the period prior to the Closing Date and with Purchaser
responsible therefor for the period from and after the Closing Date. Purchaser
shall receive a credit against the cash due at Closing pursuant to Paragraph
2.01 for any taxes for which it is responsible under the terms of the Leases and
which are accrued but unpaid as of the Closing Date. Purchaser shall reimburse
Seller at Closing for any taxes relating to any period from and after the
Closing Date which have been paid by Seller prior to the Closing Date.
4.06. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.07. Purchaser and Seller shall share recording fees related to the
recording of any of the conveyancing documents, such as the Lease Assignment
Agreement or an amendment to the Memoranda of Lease if the same appear of record
with respect to any or all of the Leases, and any escrow fees on a 50-50 basis.
4.08. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Seller's Assets in accordance with the terms
of this Agreement.
4.09. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Leases as a
condition to securing consent to an assignment thereof which are necessary to
secure the consent of the lessors under the Leases.
4.10. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.10 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.11. Seller shall pay the cost of any repairs or renovations or other
work to the physical plant of the Hospital or the Clinics required to be
undertaken by the State of California in connection with any change of ownership
surveys which it may elect to conduct as a condition to its review and, if
applicable, approval of the transaction which is the subject of this Agreement;
provided, however, that in the event the cost thereof, along with the cost of
any repairs or renovations or other work to the physical plant of the facilities
which are the subject of the Other Agreements, exceeds $250,000 (the "Licensure
Cost Cap") Seller shall have the right to terminate this Agreement in lieu of
incurring such costs in excess of the Licensure Cost Cap; and provided, further,
that Purchaser shall have the right to pay such costs in excess of the Licensure
Cost Cap in lieu of permitting Seller to terminate this Agreement.
4.12. Purchaser shall pay any filing or licensure fees due in
connection with the submission of any licensure or Medicare certification
applications which it is required to file in order to secure the approval of the
State of California of the transaction which is the subject of this Agreement
under applicable licensure and/or certification laws governing the operation of
the Hospital and the Clinics, as well as the fees and expenses of Davis Wright
Tremaine or any other legal counsel retained or utilized by Purchaser to assist
it with such matters.
4.13. Purchaser shall reimburse Seller at Closing for any prepaid
expenses and deposits which relate to the period on and after the Closing Date.
4.14. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Seller's Assets and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Credit Agreement dated December 28, 1995
between Regency Health Services, Inc. and NationsBank of Texas, N.A.
4.15. Seller and Purchaser acknowledge and agree that the purchase
price reflects a credit against the Purchase Price and that, in consideration
therefor, Purchaser has agreed to assume responsibility for the completion of
those repairs described in Exhibit 4.15 which Seller agreed with Marin Health
Care Associates Limited Partnership, as a condition to securing the consent
thereof to the transaction provided for herein. Accordingly from and after the
Closing Date Seller shall have no further obligations or responsibility with
respect to the completion thereof.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets, subject only to the rights of the lessors under the Leases and
the rights of the patients of the Hospital and the Clinics.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller. Seller is a duly organized, validly
existing California corporation and is in good standing under the laws thereof.
Horizon is a duly organized, validly existing Delaware corporation
and is in good standing under the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's Articles of Incorporation or
Bylaws or any law, regulation, court order, mortgage, note, bond, indenture,
agreement, license or other instrument or obligation to which Seller is now a
party or by which any of Seller's Assets may be bound or affected or any
agreement, option, understanding or commitment or any or privilege granted by
Seller to any other party to purchase or otherwise acquire the Seller's Assets
or result in the acceleration of or an increase in the interest rate payable
under any indebtedness other than indebtedness of Seller which does not relate
to the Hospital or the Clinics or which is to be discharged by Seller as of the
Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to lease and to operate the Hospital and the Clinics as the same are presently
leased and operated and (ii) to conduct its business as the same is now being
conducted.
6.04. The Seller Financials. True and correct copies of an unaudited
balance sheet and statement of operations of Seller with respect to the
operation of the Hospital and the Clinics as of the close of Seller's fiscal
year ended May 31, 1996, and for the four month period ended September 30, 1996
(collectively, the "Seller's Financials") are attached hereto as Exhibit 6.04.
All such financial statements fairly represent the financial condition, and
accurately set forth in all material respects the results of the operations of,
Seller at the Hospital and the Clinics for the periods covered thereby subject
to customary year end adjustments. Any financial statements prepared by Seller
subsequent to the date of the Seller Financials or the date hereof will be
prepared in a manner consistent with the manner in which the Seller's Financials
were prepared, will fairly represent the financial condition, and will
accurately set forth in all material respects the results of the operations of
Seller at the Hospital and the Clinics for the periods covered thereby and will
be provided to Purchaser within ten (10) days after the completion thereof.
6.05. Absence of Adverse Change. Since the date of the most recent
Seller Financials there has not been any material adverse change in the
financial condition, business, assets, liabilities or results of
operations of the Hospital or the Clinics.
6.06. The Licenses. Seller has all material licenses, permits and
authorizations necessary for the lawful leasing and operation of the Hospital as
a free standing rehabilitation hospital and the Clinics as outpatient clinics,
it being understood and agreed that Seller has represented and does hereby
represent to Purchaser that the Clinics are not required to be separately
licensed but are operated under the Licenses issued to Seller in connection with
its operation of the Hospital ( the "Seller Licenses"). There are no licenses
required in connection with the ownership or operation of the services provided
at the MOB other than the Seller Licenses. True and correct copies of all of the
Seller Licenses are attached hereto as Exhibit 6.06. Seller has not received
written or verbal notice of (A) any action or proceeding which has been
initiated or is proposed to be initiated by the appropriate state or federal
agency having jurisdiction thereof, to (i) revoke, withdraw or suspend any of
the Seller Licenses, (ii) terminate the participation of the Hospital or the
Clinics in the Medicare Program or the accreditation of the Hospital or any of
the Clinics (to the extent it or they are certified to participate therein) by
the Joint Commission on Accreditation of Health Care Organizations ("JCAHO") or
by the Commission for the Accreditation of Rehabilitation Facilities ("CARF"),
(B) any judicial or administrative agency judgement or decision not to renew any
of the Seller Licenses, (C) any action to limit or ban admissions to the
Hospital or the Clinics or (D) any licensure or certification action of any
other type, which would have a material adverse effect on the business, assets
or financial condition of the Hospital or the Clinics.
6.07. Compliance with Law.
(a) The Hospital, the MOB and the Clinics and their current operation
and use are in substantial compliance with all applicable health and safety
laws, regulations, ordinances, standards and orders issued by any municipal,
county, state or federal agency having authority over the Hospital and the
Clinics and with all municipal health, building and zoning laws and regulations
(including, without limitation, the building, zoning and life safety codes)
where the failure to comply therewith would have a material adverse effect on
the business, property, condition (financial or otherwise) or operation thereof
and there are no outstanding cited deficiencies or work orders issued to Seller
under any of the foregoing which have not been corrected as of the date hereof
or which will not be corrected as of the Closing Date;
(b) Set forth in Exhibit 6.07(b) is a list of the most recent licensure
and Medicare certification survey and the results of any complaint
investigations conducted within the last six months for the Hospital and the
Clinics, copies of which have been made available to Purchaser as of the date
hereof. Seller has no knowledge, based on the results of Hospital or Clinic
surveys or complaint investigations provided verbally or in writing to the
Hospital or the Clinics by the applicable supervising agency or authority and
after due inquiry of the Chief Executive Officer of the Hospital, that the
Hospital or the Clinics, if and to the extent the same are currently
participating in the Medicare Program, are not in substantial compliance with
all Conditions and Standards of Participation in the Medicare Program nor has
Seller received written or, to the best of Seller's knowledge, verbal notice
from any licensing or certifying agency requiring any or all of them to be
physically reworked or redesigned or to add furniture, fixtures, equipment or
inventory so as to conform to or comply with any existing licensure or Medicare
certification law, code or standard except where the requirement either (i) has
been fully satisfied prior to the date hereof, (ii) will be satisfied by Seller
prior to the Closing Date, (iii) will be in the process of being satisfied in
the ordinary course of Seller's business pursuant to the terms of a Plan of
Correction or other documentation submitted to and approved by the appropriate
authority or (iv) will be the subject of a valid written waiver issued by the
applicable licensing or certifying agency;
(c) Set forth in Exhibit 6.07(c) is a list of the most recent JCAHO and
CARF surveys conducted at the Hospital and, if applicable, the Clinics, and the
dates of any correspondence from or to Seller and the JCAHO or CARF with respect
to the correction of any deficiencies identified in said survey, true and
correct copies of which have been made available to Purchaser as of the date
hereof. The Hospital is duly accredited by the JCAHO and by CARF, without
contingencies except such contingencies reflected in the surveys or
correspondence described in Exhibit 6.07(c). Except as reflected in the surveys
or correspondence described in Exhibit 6.07(c), Seller has made or caused to be
made on behalf of the Hospital and the Clinics all proper filings required by
JCAHO and CARF. Seller has not received written or, to the best of Seller's
knowledge after due inquiry of the Chief Executive Officer of the Hospital,
verbal notice from JCAHO or CARF requiring the Hospitals and/or the Clinics to
be reworked or redesigned or to add furniture, fixtures, equipment or inventory
so as to retain such accreditation except where the requirement either (i) has
been fully satisfied prior to the date hereof, (ii) will be satisfied by Seller
prior to the Closing Date, (iii) will be in the process of being satisfied in
the ordinary course of Seller's business pursuant to the terms of a Plan of
Correction or other documentation submitted to and approved by the appropriate
authority or (iv) will be the subject of a valid written waiver issued by JCAHO
or CARF. Neither the Hospital nor the Clinics participates in any accreditation
programs other than that offered by the JCAHO and the voluntary accreditation
program offered by CARF by which the Hospital is currently accredited.
(d) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Hospital, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Hospital or the Clinics, (ii) any of the members of the medical
staff, the Board of Directors or employees of the Hospital or the Clinics.
6.08. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Hospital or the Clinics which provide
for the provision of the care routinely provided at the Hospital or the Clinics
for no consideration nor will Seller enter into any such agreements between the
date hereof and the Closing Date.
6.09. Books and Records. To the best of Seller's knowledge after due
inquiry of the Chief Executive Officer and Medical Director of the Hospital, all
of the books and records of the Hospital, the MOB, if any, and the Clinics,
including patient records, are true and correct in all material respects.
6.10. Title. Seller has leasehold title to all of the Seller's Assets
(other than the Owned Personal Property, the Consumables, the Records and Rights
and the Trade Names which are owned by Seller) free and clear of all liens,
charges and encumbrances other than the liens provided for in Paragraph 3.02.
Seller has not received notice of any pending or threatened condemnation
proceedings with respect to the Real Property.
6.11. Unions. There are no union contracts in effect between Seller, on
the one hand, and the employees of the Hospital or the Clinics, on the other
hand. To the best of Seller's knowledge, none of its employees who are not
currently members of a labor union in connection with their work at the Hospital
or the Clinics are actively seeking the formation of a labor union at the
Hospital or the Clinics. Seller is not a party to any labor dispute, it being
agreed that a claim for wrongful termination shall not, for purposes of this
Paragraph 6.11 be deemed to be a labor dispute. Seller is not a party to any
union contracts with respect to the Hospital or the Clinics.
6.12. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Seller prior to date
of execution of this Agreement with respect to its operations at the Hospital,
the MOB and the Clinics have been properly completed and timely filed, or
extensions for the filing thereof have been timely secured, with all such
filings being in material compliance with all applicable requirements and all
taxes due with respect to Seller's operations at the Hospital, the MOB and the
Clinics have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on the Seller Financials or will be reflected in any
subsequent financials prepared in accordance with the representations and
warranties contained in this Agreement.
6.13. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under the
Hospital, the MOB or the Clinics other than to the extent the same will not have
a material adverse affect on the condition, financial or otherwise, of the
Hospital, the MOB or the Clinics, (ii) not installed any underground storage
tanks and (iii) at all times operated the Hospital, the MOB and the Clinics in
compliance with all Environmental Laws, except where the failure to so comply
would not have a material adverse affect on the condition, financial or
otherwise, of the Hospital, the MOB or the Clinics.
(b) With respect to the Hospital, the MOB and the Clinics prior to the
date of the Seller's ownership or leasing thereof, to the best of Seller's
knowledge after due inquiry of the Director of Plant Operations at the Hospital,
(i) except to the extent permitted by applicable Environmental Laws, no
hazardous materials, substances or wastes were located on or at the Hospital,
the MOB or the Clinics or were released into the environment or discharged,
placed or disposed of in, on or under the Hospital, the MOB or the Clinics, (ii)
except to the extent permitted by applicable Environmental Laws, no underground
storage tanks are or were located at the Hospital, the MOB or the Clinics, (iii)
none of the Hospital, the MOB or the Clinics are located on property which was
used as a dump for waste material, and (iv) the Hospital, the MOB and the
Clinics have at all times complied with, all Environmental Laws, except to the
extent in each of the foregoing clauses (i) through (iv) that any such
non-compliance would not have a material adverse effect on the Hospital, the MOB
or the Clinics. Seller has not received any written notice from any governmental
authority or any written complaint from any third party with respect to its
alleged noncompliance with, or potential liability under, any Environmental Laws
at the Hospital, the MOB or the Clinics which remains unresolved as of the date
hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital, the MOB or the Clinics which are currently in
the possession of Seller.
6.14. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals (as those terms are
defined below) for which Seller is responsible under the terms hereof. Seller
represents and warrants that as of the date of execution of this Agreement, it
has secured the consent of its Board of Directors and of the Board of Directors
of Horizon to the execution of this Agreement and of any documents and
agreements necessary to carry out the terms hereof and for the consummation of
the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Seller that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Seller's representation and warranty that it
will use its best efforts to secure such Third Party Consents and Regulatory
Approvals, subject to the limitation on the costs which Seller must incur in
obtaining such consents being limited in the manner set forth in Paragraph 4.09.
6.15. Litigation. Except as set forth in Exhibit 6.15, there is no, nor
has Seller received written or verbal notice of any, litigation, administrative
investigation or other proceeding pending or, to the best of Seller's knowledge
based on written notice with respect thereto, threatened by any governmental
authority having jurisdiction over Seller, the Hospital, the MOB or the Clinics
or by any other party where the amount claimed exceeds $50,000 in any single
action or $100,000 in the aggregate or which seeks to challenge Seller's title
to the Seller's Assets or Seller's right or ability to consummate the
transaction provided for herein. Seller is not a party to nor is Seller or the
Hospital, the MOB or either of the Clinics bound by any orders, judgments,
injunctions, decrees or settlement agreements under which it may have continuing
obligations as of the date hereof or as of the Closing Date and which are likely
to materially restrict or affect the present business operations of the
Hospital, the MOB or the Clinics. The right or ability of Seller to consummate
the transaction contemplated herein has not been challenged by any governmental
agency or any other person and Seller has no knowledge of the occurrence of any
event which would provide a reasonable basis for any such litigation,
investigation or other proceeding.
6.16. Sensitive Payments. Seller has no reason to believe that it has
(i) made any contributions, payments or gifts to or for the private use of any
governmental official, employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment. Seller has not filed any reports with any
governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.17. The Hospital and the Clinics. Seller is duly licensed to operate
the Hospital with 40 acute rehabilitation beds which are licensed under
California law as general acute care beds and 26 skilled nursing facility beds
and to operate the Clinics under the license issued to it for the Hospital and
is duly certified to participate in the Medicare Program with respect to its
operations at the Hospital. Except for those items referenced in Exhibit 4.15,
the Hospital, the MOB and the Clinics are in good operating condition and repair
and substantially all of the Personal Property and all of the major mechanical
systems located at or used in connection with the operation of the Hospital, the
MOB and the Clinics are in good working order, condition and repair. The
Personal Property is all of the property necessary for the lawful operation of
the Hospital at its current occupancy levels and of the Clinics in the manner
currently operated by Seller. Seller has provided to Purchaser a true and
correct copy of that annual inspection report dated July 18, 1996 prepared by
Marin Health Care Associates Limited Partnership and that follow up letter dated
October 16, 1996, both of which address those repairs which it has advised
Seller are required to be made by Seller under the terms of the Hospital Lease
and which will be handled in the manner set forth in Paragraph 4.15.
6.18 Inventories. At Closing, each of the Hospital and the Clinics
shall have an inventory of non-perishable food, central supplies, linens,
housekeeping supplies, kitchen supplies, nursing supplies and other supplies,
which will be sufficient in condition and quantity to operate each of the
Hospital and the Clinics at its normal capacity and an inventory of perishable
food at the levels normally maintained by Seller at the Hospital.
6.19. Trade Names. Set forth in Exhibit 6.19 is a true and complete
list of the trade names under which Seller is doing business at the Hospital,
the MOB and the Clinics. Seller has not sought protection for such names under
state or federal trademark or trade name laws except to the extent reflected in
Exhibit 6.19. Seller has not received any notice from any person challenging or
questioning the right of Seller to use any such trade names.
6.20. Employees/ERISA.
(a) Set forth in Exhibit 6.20 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller
which relate to the Hospital, the MOB, if applicable, and the Clinics or to any
current or former employees at or of the Hospital and the Clinics (the "Plan" or
"Plans"). Except as set forth in Exhibit 6.20 and except for stock purchase and
stock options programs administered by Horizon and for which Purchaser shall
have no liability after Closing, Seller has made no commitment or representation
to the current or former employees of the Hospital, the MOB, if applicable, and
the Clinics to establish any additional Plan, arrangement or practice or to
modify or change any existing Plan, arrangement or practice. Exhibit 6.20 also
lists all employees of the Hospital, the MOB, if applicable, and the Clinics as
of the date of this Agreement together with their positions and rates of pay and
earned and accrued vacation time, sick leave and holiday pay as of the date
specified therein, which date shall be the most recent date to which such
information is available to Seller.
(b) Set forth in Exhibit 6.20 is a true and correct copy of all
employment contracts between Seller and any employee of the Hospital, the MOB,
if applicable, or the Clinics. Except as otherwise set forth in Exhibit 6.20 all
such contracts are terminable by Seller prior to the Closing Date and, in the
case of those contracts listed in Exhibit 6.20A, will be terminated by Seller
prior to the Closing Date if so requested by Purchaser.
6.21. Operating Contracts. Set forth in Exhibit 1.01(f) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller, transfer agreements, contracts for or other
evidences of indebtedness (other than indebtedness to be discharged or released
at Closing), security agreements and other contracts and agreements, including
without limitation, all provider agreements with any third party payors and
consulting and service contracts to which Seller is a party in connection with
its operations at the Hospital, the MOB and the Clinics (the "Operating
Contracts"). Seller has provided Purchaser with a true and correct copy of each
of the Operating Contracts. Each of the Operating Contracts is in full force and
effect and none of the Operating Contracts has been modified or amended except
as set forth in Exhibit 1.01(f). Seller is not in default of any of its
obligations under the Operating Contracts nor is Seller aware of any default or
any action or omission which, with the passage of time or the giving of notice
or both, would constitute a default under the Operating Contracts by any other
party thereto. At Closing, Seller shall deliver to Purchaser a duly executed
assignment of the Operating Contracts. Purchaser acknowledges and agrees that
Seller shall not be in default of its obligations under this Paragraph 6.21 in
the event Exhibit 1.01(f) fails to list or Seller fails to provide to Purchaser
any Operating Contracts where the payments remaining due thereunder are less
than $25,000.
6.22. The Leases. True and correct copies of the Leases have been
provided by Seller to Purchaser. The Leases remain in full force and effect and
have not been amended or modified except as set forth in Article 1. Seller has
not received from the landlord under any of the Leases any written notice that
it is in default of its obligations under the Leases or that any guarantor
thereof is in default of its obligations under any Guaranty delivered in
conjunction therewith nor does Seller have knowledge after inquiry of the Chief
Executive Officer of the Hospital of any events which, with the passage of time
or the giving of notice, would constitute a material default thereunder. Except
as set forth in the Clinic Leases with respect to certain common areas, Seller
enjoys exclusive, peaceful and undisturbed possession under all real and
personal property leases to which it is a party in connection with the Hospital
and the Clinics, including, but not limited to, under the Leases. Except as set
forth in Exhibit 6.22, there are no security deposits posted with respect to the
Leases.
6.23. Physician Contracts. Exhibit 1.01(f) lists each contract between
Seller and the physicians providing services to the patients of the Hospital or
the Clinics, including contracts with any entity owned or controlled by any such
physicians, true and correct copies of which have been provided to Purchaser.
Seller represents and warrants that Seller has not received any notice that any
state or federal agency or any other party believes or is attempting to
determine whether any violation exists under any such physician contracts
relating to the requirements of State and federal law governing physician self
referral and "kickbacks" including but not limited to the provisions of "Stark
II" and the federal fraud and abuse laws.
6.24. Medical Staff. Attached hereto as Exhibit 6.24 is a true and
correct copy of the medical staff roster for the Hospital and the Clinics.
Seller has made available to Purchaser a copy of the medical staff bylaws
currently in effect with respect to the Hospital and the Clinics, including any
and all current amendments and modifications thereto.
6.25. Cost Reports. Seller has filed when due all cost reports and
other reports required to be filed with respect to each of the Hospital and the
Clinics as of the date hereof under the Medicare Program. Seller is not required
to file cost reports under any other third party payor and other reimbursement
programs in which the Hospital and the Clinics participate. Seller has no
knowledge that all such reports have not been prepared and filed in compliance
with all applicable rules and regulations. Attached hereto as Exhibit 6.25 is a
list of all such reports which have been filed by Seller during the last three
years, true and correct copies of which have been provided to Purchaser.
6.26. Reimbursement. The Hospital is treated under the Medicare Program
for reimbursement purposes as a free standing rehabilitation hospital with a
skilled nursing facility unit and the Clinics are treated under the Medicare
Program for reimbursement purposes as part of the Hospital's outpatient
rehabilitation department. Seller has not received any written or verbal notice
from Medicare or its fiscal intermediary threatening or challenging the status
of the Hospital and the Clinics for reimbursement purposes as a free standing
rehabilitation hospital or from any third party payor, including Medicare, with
respect to any proposed recoupment claim or any other proposed investigation,
audit or reimbursement dispute with respect to the Hospital or the Clinics or
which could adversely affect Seller's operations at the Hospital or the Clinics
or the continued licensure or certification thereof.
6.27. PRO Denials. Set forth in Exhibit 6.27 is a list of all of the
Peer Review Organization denials which to the best of Seller's knowledge after
inquiry of the Chief Executive Officer of the Hospital, Seller has received with
respect to its operations at the Hospital and the Clinics during the last three
years, including a description of the basis therefor, and of the action taken by
Seller, if any, to appeal the same and the status and/or outcome of any such
appeals.
6.28. Insurance. Set forth in Exhibit 6.28 is a list of all insurance
policies held by Seller with respect to the Hospital, the MOB and the Clinics
and the other Seller's Assets and in effect as of the date of this Agreement,
including the types of coverage and amounts thereof and the amount of
deductibles thereunder. Seller has provided to Purchaser true and correct
certificates evidencing such insurance as well as copies of the Seller's current
property, professional liability and workers compensation insurance policies in
effect with respect to the Hospital, the MOB and the Clinics. All monthly
premium installments due with respect to all of such insurance policies have
been paid in full through the date of this Agreement and will continue to be
paid as and when due between the date of this Agreement and the Closing Date.
6.29. Hill Burton. Seller has no liability under the Hill Burton
Program and Purchaser will have no liability or obligation, as a transferee
of Seller or otherwise, under the Hill Burton Program as a result of the
transaction contemplated by this Agreement.
6.30. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of California. Regency Health Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to lease and to operate the Hospital, the MOB and the Clinics
from and after the Closing Date as the same are presently leased and operated
and (ii) to conduct its business from and after the Closing Date as the same is
now being conducted.
7.04 Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except as contemplated by this Agreement or with
the consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Seller will operate the Hospital, the MOB and the Clinics only in
the ordinary course and with due regard to the proper maintenance and repair of
any real property or personal property associated therewith, ordinary wear and
tear excepted, other than those repairs for which Purchaser has agreed to be
responsible under Paragraph 4.15;
(b) Seller will take all reasonable action to preserve the goodwill and
the present occupancy levels of the Hospital and the Clinics, it being
understood and agreed that Seller shall not be required to undertake any action
to preserve occupancy levels other than continuing to engage in the routine
marketing activities in which it is currently engaged at the Hospital and the
Clinics;
(c) Seller will not make any material change in the operation of the
Hospital or the Clinics nor, except in the ordinary course of business, sell or
agree to sell any items of machinery, equipment or other fixed assets of the
Hospital, including but not limited to assets and equipment used in connection
with the operation of the Hospital and located at the MOB, or the Clinics nor
otherwise enter into any agreements materially affecting the Hospital or the
Clinics;
(d) Seller will use its reasonable efforts to retain the goodwill of
the employees of, medical staff of or physicians under contract with, Seller
located at or connected with the operation of the Hospital and the Clinics and
will provide Purchaser with notice in the event of any union organizing
activities or contract negotiations are commenced after the date hereof;
(e) Except in the ordinary course of business, Seller will not increase
the compensation or bonuses payable or to become payable to any of its employees
located at or connected with the operation of the Hospital or the Clinics,
including employees located at the Seller's corporate or regional offices who
work exclusively on matters related to the Hospital and the Clinics, or grant
any severance benefits to any such employees other than to the extent such
bonuses or severance payments impose no obligation on Purchaser after the
Closing Date;
(f) Seller will not enter into any written employment agreements in
connection with the operation of the Hospital or the Clinics other than with
physicians in the ordinary course of business; provided, however, that Seller
shall provide Purchaser with copies of any such physician contracts;
(g) Seller will not, except in the ordinary course of business, enter
into any contract or commitment affecting any of the Seller's Assets or incur
any additional indebtedness or amend, extend or renew any current debt
instruments, whether in the ordinary course of business or otherwise, nor will
Seller declare or pay any dividend or other distribution with respect to any of
the Seller Assets nor pledge the accounts receivable of Seller as security for
any indebtedness or lease agreements executed, amended or extended by Seller
after the date hereof; provided, however, that nothing herein shall be construed
as prohibiting (i) Seller from incurring inter-company indebtedness to Horizon
and/or CMS, (ii) Horizon and/or CMS from incurring debt, the proceeds of which
may be made available to Seller or (iii) Seller from executing any and all
documents necessary to amend any debt instruments under which Horizon and/or CMS
may be the borrower and Seller a guarantor;
(h) During normal business hours, Seller will provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller and the Hospital, including, but not limited to any books
or records located in the MOB, and the Clinics provided they do not interfere
with the operation thereof;
(i) Seller will operate the Hospital and the Clinics in substantial
compliance with all applicable municipal, county, state and federal laws,
regulations, ordinances, standards and orders as now in effect (including,
without limitation, the building, zoning and life safety codes as currently
applied with respect thereto) where the failure to comply therewith could have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation thereof;
(j) Seller will take all reasonable action to achieve substantial
compliance with any laws, regulations, ordinances, standards and orders
applicable to the Hospital, the MOB and the Clinics which are enacted or issued
after execution of this Agreement and become effective or require compliance
prior to the Closing where the failure to comply therewith could have a material
adverse effect on the business, property, condition (financial or otherwise) or
operation thereof;
(k) Seller will maintain the Seller's Assets in substantially the same
condition as they were in at the date hereof, ordinary wear and tear, casualty
loss and taking by eminent domain excepted;
(l) Seller will provide Purchaser with copies of its monthly
financial statements prepared in the ordinary course of business;
(m) Seller will provide Purchaser with copies of all licensure or
certification surveys received by Seller and the related Plans of Correction
prepared by Seller;
(n) Seller will pay as and when due the accounts payable which arise in
the ordinary course of business, except to the extent that the amount owing is
being duly contested by Seller and such contest does not materially affect
Seller or the Hospital or the Clinics;
(o) Within ten (10) days after Seller's receipt of Purchaser's title,
UCC search and survey objections pursuant to Paragraph 10.01, Seller shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected;
(p) Seller will maintain in force the existing insurance
coverage with respect to the Hospital, the MOB and the Clinics described in
Exhibit 6.28;
(q) Seller will file all returns, reports and filings of any kind or
nature, or to secure timely extensions for the filing thereof, required to be
filed by Seller including, but not limited to, state and federal tax returns and
Medicare cost reports with respect to the Hospital and the Clinics and will
timely pay all taxes or other obligations which are due and payable with respect
thereto, except to the extent that the same are being duly contested in good
faith in accordance with applicable law and such contest does not materially
affect Seller or the Hospital and the Clinics;
(r) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(s) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller or any of the Seller's Assets, or offer to acquire
or convey in any manner, directly or indirectly, all or substantially all of the
equity interests in, the voting securities of Seller or the Seller's Assets;
provided, however, that public announcements of the transaction contemplated by
this Agreement shall not be prohibited hereby;
(t) Seller will provide to Purchaser copies of all material documents
which relate to, and, upon request, with verbal or written updates concerning
the status of, any litigation filed as of the date hereof or filed from and
after the date hereof by or against Seller after the date of this Agreement but
prior to the Closing Date where the amount claimed or assessed by management of
Seller as likely to be claimed exceeds $500,000;
(u) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party Consents for which it is responsible under
the terms hereof;
(v) Seller will not amend or permit the amendment of any of the
Medical Staff Bylaws described in Paragraph 6.24; and
(w) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits of the results of operations at the Hospital and/or the
Clinics which Purchaser elects to conduct in order to comply with any
requirements applicable to it under the federal securities laws.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a designated escrow agent in accordance with any
written escrow instructions executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01);
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers executing documents on behalf of
Seller, a copy of the resolutions adopted by Seller's Board of Directors
authorizing the transaction provided for herein and the execution of this
Purchase Agreement and the other documents contemplated herein and attaching a
certificate of good standing issued by each of the California and Delaware
Secretary of State within no more than thirty (30) days prior to Closing;
(c) The duly executed Lease Assignment Agreements;
(d) The duly executed Bill of Sale;
(e) A duly executed Assignment of the Operating Contracts described in
Paragraph 6.22, which shall be in substantially the form attached hereto as
Exhibit 9.02(e) (the "Operating Contract Assignment Agreement");
(f) The original titles to any motor vehicles included within the
Owned Personal Property;
(g) Written Escrow Instructions;
(h) An Estoppel Certificate in form and substance reasonably
acceptable to Purchaser executed by the landlord under the Hospital Lease;
(i) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to Purchaser;
(j) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, the consent of the Marin
Health Care Associates Limited Partnership and the landlords under the Clinic
Leases, for which Seller is responsible under the terms of this Agreement.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and the Accrued Benefits (as
defined in Paragraph 14.01) and shall cause to be made available to Purchaser at
the Hospital any and all plans and specifications with respect to the Hospital
and the Clinics which may be in Seller's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Hospital
and the Clinics in its filings with the United States Securities and Exchange
Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) File any final cost reports with respect to the cost reporting
periods prior to the Closing Date for which it may be responsible under
applicable state and federal law within the time periods proscribed thereunder,
it being understood and agreed that the purpose of this provision is to ensure
that there is no adverse affect on the reimbursement paid to Purchaser with
respect to its operations at the Hospital and the Clinics after Closing.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date, except as contemplated by this Agreement
or with the consent of Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title commitment and/or survey of
the Real Property and the Hospital which Purchaser may elect to obtain;
provided, however, that Purchaser shall not have the right to object to any
items reflected on the title commitment which are referred to in Paragraph 3.02.
If Seller refuses to correct some or all of the title, survey or lien defects
objected to by Purchaser within the time period reflected in Paragraph 9.01(o)
or to give Purchaser reasonable assurances that the same will be corrected as of
the Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and Regulatory Approvals for which it is
responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller and Purchaser agree in writing in the Escrow
Instructions to handle the same outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The executed Operating Contract Assignment Agreement;
(c) The cash due at Closing pursuant to Paragraph 2.01;
(d) Duly executed Escrow Closing Instructions;
(e) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to Seller;
(f) The duly executed Lease Assignment Agreements; and
(g) One or more Guaranty Agreements duly executed by Regency Health
Services, Inc., with respect to the Hospital Lease and the Clinic Leases if and
to the extent, in the case of the Clinic Leases, they are currently guaranteed
by CMS.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Hospital.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Hospital, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller and the staff physicians of
the Hospital employed by Seller prior to the Closing Date (but in the case of
such staff physicians only as necessary for the further care of their patients
and the defense of litigation) shall be entitled, after the Closing Date, during
normal business hours of the Hospital and the Clinics and on advance notice to
Purchaser to have access to and to make copies, at their sole cost and expense,
of the patient records, including the medical records and medical charts of any
patient admitted to the Hospital or the treated in a Clinic on or before the
Closing Date. In addition, to the extent permitted by law and to the extent
required by law, Seller shall be entitled to remove from the Hospital or a
Clinic any such record or chart, but only for the purposes of pending litigation
involving a patient to whom such record or chart refers, as certified in writing
prior to removal by an officer of Seller or counsel retained by Seller in
connection with such litigation, and only prior to making a copy thereof, at
Seller's cost and expense, for retention at the Hospital or the Clinic, as
applicable. Any record or chart so removed by the Hospital or any Clinic shall
be promptly returned to Purchaser following its use by Seller in accordance with
the terms hereof.
(e) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing, including, but not limited to, JCAHO and CARF.
(f) Purchaser shall not renew the term of the Hospital Lease upon the
expiration of the Initial Term thereof unless CMS is released from its Guaranty
at the time of such renewal with respect to any obligations arising under the
Hospital Lease during any and all renewal terms.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets which are the subject of this
Agreement or the Other Agreements which either alone or in the aggregate, with
all such other sales or dispositions, would constitute the sale or disposition
of a "significant subsidiary" (as defined in Rule 1-02 of Regulation S-X of the
rules and regulations of the Commission), (ii) take any action, the consummation
of which cannot be conditioned on the consummation of the transactions
contemplated by this Agreement, where such action would have a material adverse
effect on Seller or (iii) take any action which either would have a material
adverse effect on the operations, business or financial condition of Seller or
would materially impair the value of the transaction contemplated herein to
Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Hospital and the Clinics from and after the Closing Date (the
"Regulatory Approvals"), and the consent of its lenders, lessors and other third
parties to the extent required under any loan documents, lease agreements,
management agreements or other instruments to which it is a party, including,
but not limited to, the consent of the lessors under the Leases (the "Third
Party Consents"), provided, however, that the consent of the holders of the
bonds issued by Purchaser's parent corporation under that Indenture dated as of
June 28, 1996 in the original principal amount of $50,000,000 and that Indenture
dated as of October 12, 1996 in the original principal amount of $110,000,000
shall not be deemed to be a required Third Party Consent, it being understood
and agreed that Purchaser has represented that the transaction as contemplated
herein will not require the consent of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by either party of any press release or any written
statement with respect to this Agreement or the transactions contemplated
hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date (as defined below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals, including, but not limited to, change of ownership
approval from the California Department of Health Services (the "CHOW Approval")
and shall have satisfied any and all conditions to the effectiveness thereof.
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, Seller shall not be
in default, where said default cannot be cured by the Closing Date, under any
mortgage, contract, lease or other agreement to which Seller is a party or by
which Seller is bound and which will affect or relate to the Real Property, the
Personal Property, the Hospital or the Clinics after the Closing Date.
(e) Subject to Purchaser ordering the same, a title insurance policy
providing for leasehold coverage shall have been issued to Purchaser with
respect to the Hospital subject only to the Permitted Exceptions (the "Title
Insurance Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Survey.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date, of each of the following conditions any one or more of which may
be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the Landlord under any or all of the
Leases has refused to release Seller from its guarantee thereof or from primary
liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date other than the Purchaser's receipt of the CHOW Approval pursuant to
Paragraph 12.01(c), provided Purchaser is diligently pursuing the issuance of
the CHOW Approval by the California Department of Health, the Outside Closing
Date shall automatically be extended for such additional period of time as may
be necessary to permit Purchaser to secure the CHOW Approval; provided, further
that in the event Purchaser has not secured the same within thirty (30) days
after the Outside Closing Date, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights or
obligations hereunder.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission requires any of the actions described in
Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of any of the Hospital Real Property or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination or pursue
any other remedy referred to in Paragraph 13.01 on account of a breach of a
condition, covenant or warranty by the other, without first given such other
party written notice of such breach and not less than ten (10) days within which
to cure such breach. The Closing Date shall be postponed if necessary to afford
such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Hospital and the Clinics as of
the Closing Date, (ii) their positions and rates of pay, (iii) a reasonable
estimate as of the Closing Date of all earned and accrued vacation, holiday and
sick pay and earned or accrued "EVA" bonuses due to and/or coming due to the
employees of the Hospital and the Clinics as of the Closing Date (the "Estimated
Accrued Benefits"). On the Closing Date, Seller shall deliver to Purchaser an
amount equal to the Estimated Accrued Benefits reflected on the Employee
Schedule and Purchaser shall agree from and after the Closing Date, to pay the
Accrued Benefits, to the employees of the Hospital and the Clinics as and when
due in accordance with Purchaser's personnel policies from and after the Closing
Date, it being agreed for the benefit of Seller that such policies shall not
result in a reduction of benefits accrued in favor of any employee as of the
Closing Date. In addition, on the Closing Date or as soon thereafter as is
required by California law, Seller shall pay to the employees of the Hospital
and the Clinics any wages due to them as of the Closing Date. Any benefits due
to the employees of the Hospital and the Clinics for the period prior to the
Closing Date and not included within the Accrued Benefits paid to Purchaser at
Closing shall be and remain the responsibility of Seller after Closing. Within a
reasonable period of time following the Closing Date, which shall in no event be
more than thirty (30) days, Seller shall provide Purchaser with a schedule of
the Accrued Benefits which were earned or accrued as of the Closing Date (the
"Actual Accrued Benefits"). To the extent the Estimated Accrued Benefits
exceeded the Actual Accrued Benefits, Purchaser shall remit said difference to
Seller within ten (10) days after Purchaser's receipt of the Actual Accrued
Benefits schedule. To the extent the Estimated Accrued Benefits were less than
the Actual Accrued Benefits, Seller shall remit said difference to Purchaser
along with the schedule of Actual Accrued Benefits.
14.02. Purchaser shall offer to hire at Closing all of the employees of
Seller who, as of the Closing, work at the Hospital and/or the Clinics and have
been employed on average for 20 hours or more per week. Such employees who are
offered employment by Purchaser shall be referred to as the "Retained
Employees." Any such offer of employment to a Retained Employee by Purchaser
shall be to perform comparable services, in a comparable position and at
substantially the same base salary as such Retained Employee enjoyed with
Seller. Seller or any of its affiliates shall have the right to employ or offer
to employ any Retained Employee who declines Purchaser's offer of employment.
Purchaser shall hire at Closing each Retained Employee who elects to accept
employment with Purchaser (the "Hired Employees"), shall recognize each such
Hired Employees original hire date and shall continue to employ each such Hired
Employee for a period of no less than ninety (90) days following the Closing
Date unless the employment of such Hired Employee is terminated in accordance
with Purchaser's personnel policies or as a result of such Hired Employee's
resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Hospital and the Clinics of the "closure"
thereof under the Worker Adjustment and Retraining Notification Act (the "WARN
Act") or under any comparable California state law. Accordingly, Purchaser
agrees to indemnify, defend and hold harmless Seller from any liability which it
may incur under the WARN Act or under any comparable California State law in the
event of a violation by Purchaser of its obligations thereunder, including a
violation which results from allegations that Purchaser constructively
terminated the employees of the Facility as a result of the terms and conditions
of employment offered by Purchaser. Nothing in Section 14.02 shall, however,
create any rights in favor of any person not a party hereto, including the
employees of the Hospital or the Clinics, or constitute an employment agreement
or condition of employment for any employee of Seller or any affiliate of Seller
who is a Retained Employee or a Hired Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Hospital and the Clinics to whom it is required to offer the
same under applicable law. Seller acknowledges and agrees that Purchaser is not
assuming any of Seller's obligations to its employees under COBRA or otherwise,
except as specifically provided in this Article XIV. As of the Closing Date, all
active employees of Seller: (i) who participate as of the Closing Date in group
health insurance coverage sponsored by Seller and (ii) who become employees of
Purchaser on the Closing Date, shall be eligible for participation in a group
health plan (as defined for purposes of Internal Revenue Code Section 4980B)
established and maintained by Purchaser for the general benefit of its employees
and their dependents and all such employees shall be covered without a waiting
period and without regard to any pre-existing condition unless (A) they are
under a waiting period with Seller at the time of Closing, in which case they
shall be required to complete their waiting period while in Purchaser's employ
or (B) they were subject to a pre-existing condition exclusion while in Seller's
employ, in which case they shall be subject to the same exclusion while in
Purchaser's employ, which exclusion shall, if applicable, be subject to the same
time limitation while in Purchaser's employ as was applicable thereto while said
employees were in Seller's employ, with the time limit calculated from the date
the same commenced while in Seller's employ. Seller and Purchaser acknowledge
and agree that it is the intent of this provision that Seller shall not be
required to provide continued health coverage under ERISA or Section 4980 of the
Internal Revenue Code to any of such employees of Seller who are hired by
Purchaser or to any qualified beneficiary (as defined for purposes of Section
4980B of the Internal Revenue Code) with respect to any such employees.
14.05. Seller agrees that the continued employment of the Hired
Employees will be important to the viability of Purchaser's operations at the
Hospital and the Clinics. Accordingly, Seller agrees that for a period of one
year after the Closing Date it will not directly or indirectly solicit the
employment of any of such Hired Employees nor shall it take any action to
directly or indirectly interfere with their employment relationship with
Purchaser or to induce them in any manner to terminate their employment
relationship with Purchaser. Seller acknowledges and agrees that Purchaser would
not be fully compensated by damages in the event of a breach or threatened
breach by Seller of this provision and accordingly agrees that Purchaser shall
be entitled, without the need to post a bond, to seek an injunction to restrain
such violation or threatened violation of this Paragraph 14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Seller shall indemnify and hold Purchaser harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of Seller's Assets and the operation of the Hospital, the MOB and the
Clinics prior to the Closing Date, whether or not the same are covered by
Seller's insurance, including, but not limited to (i) any obligations under the
Leases, the Operating Contracts and the Assumed Liabilities, (ii) any violations
of the Medicare or Medicaid fraud and abuse laws, the Stark II law governing
relationships with physicians or any other state or federal law governing the
operation of the Hospital and/or the Clinics (whether or not such violations
would constitute a breach by Seller of a representation or warranty set forth
herein), and (iii) any failure of any cost report filed by Seller for the cost
reporting periods prior to the Closing Date, including the final cost reports
filed after the Closing Date, to comply with applicable state or federal law
(whether or not such violation would constitute a breach by Seller of a
representation or warranty set forth herein) provided, however, nothing in this
Paragraph 15.01(a) shall be construed as imposing any liability on Seller as a
result of the negative impact, if any, on Purchaser's operations at the Hospital
and Clinics from and after the Closing Date resulting from the items described
in Exhibit 15.01(a);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or nonfulfillment of any agreement on the part of
Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the requirements of any laws or
regulations relating to bulk sales or transfers;
(d) Any claims against Seller, Purchaser, the Hospital, the Clinics or
the other Seller's Assets under the Medicare Program or under any other third
party payor programs (i) with respect to the operation of the Hospital and the
Clinics by Seller prior to the Closing Date, (ii) for recapture of depreciation
generated by the transaction contemplated hereby or (iii) for repayment of any
overpayments made to Seller under the Medicare Program or any other third party
payor program for services rendered at the Hospital or the Clinics prior to the
Closing Date, including, but not limited to, claims against Purchaser in the
form of offsets by Medicare or any other third party payor against their
payments due to Purchaser on and after the Closing Date;
(e) The Excluded Assets; and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of Seller's Assets and the
operation of the Hospital, the MOB and the Clinics from and after the Closing
Date, including, but not limited to, any obligations under the Leases, the
Operating Contracts and the Assumed Liabilities;
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or nonfulfillment of any agreement on the part of
Purchaser under this Agreement; and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches equals or exceeds Fifty Thousand and no/100 Dollars
($50,000) (the "Representation and Warranty Liability Threshold"). In the event
the Representation and Warranty Threshold is met, then the Non-Breaching Party
shall be entitled to seek to collect from the Breaching Party any and all
damages, liabilities, losses, costs or expenses suffered or incurred as a result
of all such breaches of the representations and warranties set forth herein on a
first dollar basis and not merely to recover damages in excess of the
Representation and Warranty Liability Threshold.
15.04. Notwithstanding anything to the contrary contained in this
Paragraph 15 in addition to all other available rights and remedies, in the
event of a breach by Purchaser of its covenant set forth in Paragraph 10.03(f),
Seller shall have the right to require Purchaser to post as security for the
performance by Purchaser of its obligations under the Hospital Lease an
irrevocable letter of credit from a lender and in a form reasonably acceptable
to Seller and in an amount equal to one year's Base Rent then due under the
Hospital Lease (the "Letter of Credit"). Purchaser acknowledges and agrees that
Seller shall have the right to draw on such Letter of Credit, in the event of a
breach by Purchaser of its obligations under the Hospital Lease as a result of
which the landlord thereunder seeks to enforce the obligations of CMS under its
Guaranty thereof and that, in the event of such a draw against the Letter of
Credit, that Purchaser shall be required to reinstate the Letter of Credit to
its original principal balance. Seller and Purchaser shall have the right to
enter into Letter of Credit Agreement if and when such Letter of Credit is
posted setting forth such additional details with respect thereto as they deem
to be appropriate.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall be in writing and shall be sent by registered
or certified mail, postage prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder with respect to any Real Property and Personal Property included in
the Seller's Assets effective at Closing to a real estate investment trust (the
"REIT") in connection with its financing of the transaction provided for herein
provided Seller first confirms to Purchaser that, in its reasonable
determination, such assignment will not have adverse reimbursement consequences
for Seller; and provided, further, that no such assignment shall relieve
Purchaser of its obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including successors by operation of law pursuant to any
merger, consolidation or sale of assets involving either party. In the event of
an assignment of this Purchase Agreement to a REIT, Purchaser shall advise
Seller as to those documents and deliveries contemplated by this Agreement which
are to run in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the REIT
rather than Purchaser, if any, it being understood and agreed that in the event
of such an assignment, the only right which the REIT will assume is Purchaser's
right to take title to the Seller's Assets and the only obligation which the
REIT will assume is Purchaser's obligation to pay the purchase price in
accordance with the terms hereof .
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be invalid, unlawful or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Remittances and Receivables.
(a) All remittances, mail and other communications relating to the
Excluded Assets or liabilities other than the Assumed Liabilities received by
Purchaser at any time after the Closing shall be promptly remitted by Purchaser
to Seller and, pending such delivery, Purchaser shall have no interest in the
same and shall hold such remittances, mail and other communications in trust for
the benefit of Seller. All remittances, mail and other communications relating
to the Seller's Assets or the Assumed Liabilities received by Seller at any time
after the Closing shall be promptly remitted by Seller to Purchaser and, pending
such delivery, Seller shall have no interest in the same and shall hold such
remittances, mail and other communications in trust for the benefit of
Purchaser.
(b) Any payments received by Purchaser (or its successors in interest
or assigns) which relate solely to accounts receivable for services rendered and
medicines, drugs and supplies provided by Seller to patients of the Hospital or
the Clinics who are discharged prior to the Closing Date or otherwise not
receiving such goods or services as of the Closing Date (the "Receivables")
whether from patients, payors, clients, customer or others (collectively, the
"Account Parties") shall be paid by Purchaser to Seller weekly commencing on the
first Monday following the Closing and covering the seven day period ending on
the immediately preceding Saturday (or, in the case of the first such payment,
the period beginning on the Closing Date and ending on the next succeeding
Saturday). Within no more than ten (10) days after Closing, Seller shall deliver
to Purchaser a schedule of all such Receivables which are outstanding as of the
Closing Date, which schedule shall show (i) the amount due from each Account
Party and (ii) if possible, the portion thereof, if any, due from a third party
payor on behalf of an Account Party who is a patient. Any payments received by
Seller with respect to balances owing to Purchaser for services rendered or
medicines, drugs or supplies provided after the Closing Date shall be remitted
to Purchaser within five (5) business days after the receipt thereof. All
payments which are remitted by Purchaser to Seller shall be applied to the
oldest receivable reflected on the schedule provided by Seller to Purchaser
unless Purchaser in good faith determines that the same should be applied to a
more recent Receivable and so advises Seller at the time of the remittance
thereof to Seller.
(c) To compensate Seller for services rendered and medicines, drugs and
supplies provided to the Closing Date to patients who were admitted to the
Hospital or treated at the Clinics before the Closing Date and discharged by the
Hospital or whose treatment at the Clinics terminated after the Closing Date
(the "Straddle Patients"), the following provisions shall apply:
(i) Seller shall prepare cut-off billings for all Straddle Patients,
other than Medicare and Champus program patients (the "Program Patients") as of
the close of business on the day prior to the Closing Date. All payments which
are received by Purchaser (or its successors in interest or assigns) after the
Closing Date with respect to such non-Program Patients to whom cut-off billings
were provided shall constitute Excluded Assets and shall be remitted to Seller
within two (2) weeks after Purchaser's receipt of such payments.
(ii) Seller shall prepare its final cost reports under Medicare and, if
applicable, Champus with respect to amounts owing from the Program Patients as
of the close of business on the day prior to the Closing Date and shall file
such cost reports within such period as may be required by law for the timely
filing thereof, it being understood and agreed that the intent and purpose of
this provision is to ensure both that Seller receives the final payments to
which it is entitled and that the payments due to Purchaser after Closing from
Medicare and, if applicable, Champus, are not adversely affected by Seller's
failure to timely file such final cost reports. All payments which are received
by Purchaser (or its successors in interest or assigns) after the Closing Date
with respect to such Program Patients shall constitute Excluded Assets and shall
be remitted to Seller within two (2) weeks after Purchaser's receipt of such
payments.
(iii) For any Program Patients or Non-Program Straddle Patients with
respect to which either a cut off billing cannot be made or a final cost report
cannot be filed until he/she ceases to be a patient of the Hospital or the
Clinics, Seller shall deliver to Purchaser a statement calculating the total
charges made by Seller for services rendered and medicine, drugs and supplies
provided through the Closing Date with respect to such Straddle Patients. Within
ten (10) days following the discharge or termination of treatment of each such
Straddle Patient, Purchaser shall deliver to Seller a statement reflecting the
total charges for the services rendered and medicine, drugs and supplies
provided to such Straddle Patient after the Closing Date and the amount owing
from said Straddle Patient (including amounts owing from any third party payor
on behalf of such Straddle Patient and amounts owing from such Straddle Patient
as co-payment or deductible amounts) (the "Straddle Patient Payments"). Upon
receipt of any such Straddle Patient Payments Purchaser shall remit to Seller
its pro rata portion thereof which shall be calculated by multiplying the
Straddle Patient Payment so received by a fraction, the numerator of which is
the total patient days of Seller with respect to such Straddle Patient through
the Closing Date and the denominator of which is the total patient days of
Purchaser and Seller with respect to such Straddle Patient through the date of
discharge or termination of treatment. Such payment shall be due to Seller
within five (5) business days after the receipt thereof by Purchaser.
(iv) Seller shall be required to file its final cost reports with
Medicare in the event Purchaser elects to change fiscal intermediaries, in which
case the provisions of clause (ii) shall apply to all patients affected thereby.
(d) Any payments in excess of One Hundred Thousand and no/100 Dollars
($100,000) owing from either party to the other under this Section 16.14 shall
be paid in immediately available funds. All other payments shall be paid by
check made payable to the party entitled to such payment in accordance with the
terms hereof. Any payment not paid when due hereunder or within thirty (30) days
thereafter (the "Overdue Date"), shall bear interest at the rate of 10% per
annum from the Overdue Date to the date paid in full.
(e) Seller acknowledges and agrees that Purchaser's obligations under
this Paragraph 16.14 shall be limited to remitting to Seller any payments
received by Purchaser which belong to Purchaser in accordance with the terms
hereof and that Purchaser shall not be obligated to attempt to bill for or to
collect Seller's Receivables, other than Seller's pro rata portion of any
payments owing from the Straddle Patients which are not the subject of cut off
billings or final cost reports. Accordingly, in order to facilitate Seller's
collection efforts, Purchaser agrees to cooperate with Seller and, to the extent
permitted by law, to provide access to records (both medical and financial)
during normal business hours and to a reasonable number of Seller's personnel
and representatives, to assist Seller in the collection, rebilling and auditing
(by Seller or its representatives, including its independent certified public
accountants) of the Receivables included in the Excluded Assets (including but
not limited to, any and all Receivables from Account Parties or amounts due to
Seller from any other payor). Without limiting the generality of the foregoing,
Purchaser agrees that (A) for a period of six months following the Closing Date,
(i) Seller may, at its sole cost and expense, locate an employee or
representative at the Hospital, without charge, in order to facilitate such
collection, rebilling and auditing efforts, (ii) Purchaser shall provide such
employee or representative, without charge, adequate space to facilitate the
performance of such duties and (iii) Purchaser shall provide reasonable
assistance of the employees of Purchaser, without charge; provided, however, in
each instance that Purchaser's obligations hereunder are subject to such
presence of Seller's employee or representative and such assistance of
Purchaser's employee not interfering with Purchaser's day to day operations at
the Hospital and the Clinics and (B) with respect to any Receivables for which
collection has not been received within one hundred and twenty (120) days
following its due date, to the extent Purchaser has not already provided the
same to Seller's employees or representatives under clause (A) hereof, Purchaser
shall upon the request of Seller promptly turn over to Seller all evidences of
any such Receivables and documents pertaining to the same that are in the
possession of Purchaser (or its successors in interest or assigns) and, to the
extent it has not already done so pursuant to clause (A), Seller shall be free
to institute such collection efforts, including without limitation, initiating
such legal proceedings, with respect thereto as Seller shall, in its sole
discretion, determine to be necessary or appropriate for the collection thereof.
(f) In the event any collection efforts are necessary with respect to
the Straddle Patient Payments, Seller and Purchaser shall cooperate in
determining the nature and extent of such collection efforts and shall share the
cost thereof on the same pro rata basis as the Straddle Patient Payments are
allocated between Seller and Purchaser in accordance with clause (c)(iii)
hereof.
16.15. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of the Other Agreements has been executed and
delivered by the parties hereto or thereto.
16.16. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
KENTFIELD HOSPITAL CORPORATION
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between Kentfield Hospital Corporation, as
Seller and Purchaser dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Seller, guarantees
and promises to and for the benefit of Purchaser that (i) the representations
and warranties of Seller are true and correct as of the date of execution of the
Agreement and shall be true and correct as of the Closing Date (as modified by
any supplements to the Seller Disclosure Letter to reflect events after the date
hereof) and (ii) Seller shall perform all of its obligations, covenants and
agreements, including, but not limited to, its indemnity obligations under
Paragraph 15, to be performed on its part under the Agreement. If Seller
defaults under the Agreement, Purchaser may proceed immediately against Horizon
or Seller or both to enforce any rights it has under the Agreement or this
Guaranty. Notwithstanding the foregoing, the representations and warranties of
Seller will not survive beyond the periods applicable thereto set forth in
Paragraph 16.13 hereof and this Guaranty shall not be construed to give
Purchaser a claim or cause of action against Horizon after the expiration of the
applicable survival period for a breach by Seller of any representation or
warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the performance of Seller's obligations under the
Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the Agreement (whether absolute or as
collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or agreed
to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the rejection of the Agreement by Seller or by a
trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Kentfield Hospital Corporation ("Seller") to enter into
the Purchase and Sale Agreement between Seller and Regency Rehab Hospitals, Inc.
("Purchaser") dated November 19, 1996 (the "Agreement"), hereby unconditionally,
irrevocably and jointly and severally with Purchaser, guarantees and promises to
and for the benefit of Seller that (i) the representations and warranties of
Purchaser are true and correct as of the date of execution of the Agreement and
shall be true and correct as of the Closing Date (as modified by any supplements
to the Purchaser Disclosure Letter to reflect events after the date hereof),
(ii) Purchaser shall perform all of its obligations, covenants and agreements,
including, but not limited to, its indemnity obligations under Paragraph 15, to
be performed on its part under the Agreement and (iii) the Note being delivered
at Closing. If Purchaser defaults under the Agreement, Seller may proceed
immediately against Regency or Purchaser or both to enforce any rights it has
under the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Purchaser will not survive beyond the periods
applicable thereto set forth in Paragraph 16.13 hereof and this Guaranty shall
not be construed to give Seller a claim or cause of action against Regency after
the expiration of the applicable survival period for a breach by Purchaser of
any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or acceptance of partial payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance of Purchaser's obligations under the
Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement (whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or agreed
to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the rejection of the Agreement by Purchaser or by a
trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.03
STOCK PURCHASE AND SALE AGREEMENT
REHABWORKS OF CALIFORNIA, INC.
This Agreement is made and entered into this 19th day of November, 1996
by and between CMS Therapies, Inc., a North Carolina corporation ("Seller") and
Regency Rehab Hospitals, Inc., a California corporation ("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. In consideration of One Dollar and other good and valuable
consideration, on the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to all of
the issued and outstanding stock (the "Stock") of RehabWorks of California,
Inc., a California corporation (the "Corporation").
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Stock shall be effective as of 12:01 a.m. on January 1, 1997 unless
extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 a.m.
or at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date.
The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver title to the Stock
free and clear of all liens and encumbrances.
3.03. Title to the Stock shall be conveyed to Purchaser at
Closing by Seller's delivery of the following documents:
(a) Seller shall deliver an Assignment Separate From Certificate in the
form and substance substantially the same as that attached hereto as Exhibit
3.03(a) pursuant to which Seller shall convey to Purchaser Seller's right, title
and interest in and to the Stock (the "Stock Assignment Agreement").
(b) Such other documents or instruments as may be necessary to convey
title to the Stock to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
of the Stock shall be allocated between Seller and Purchaser as follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of the Stock to Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of the
Stock to Purchaser.
4.03. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.04. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Stock and to the Corporation's Assets (as
defined below) in accordance with the terms of this Agreement.
4.05. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Clinic Agreement
(as defined below) as a condition to securing consent to an assignment thereof
from the lessor thereunder.
4.06. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.06 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.07. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Stock and Purchaser shall pay any reasonable
attorneys' fees, processing fees and other fees and expenses contemplated by the
terms of the Credit Agreement dated September 26, 1995 between Regency Health
Services, Inc. and NationsBank of Texas, N.A.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Stock and the Corporation will continue to have possession of the Real Property
(as defined below).
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller/Status of Corporation. Seller is a duly
organized, validly existing North Carolina corporation and is in good standing
under the laws thereof. Seller is the sole shareholder of the Corporation. The
Corporation is a duly organized, validly existing California corporation in good
standing under the laws thereof. Horizon is a duly organized, validly existing
Delaware corporation and is in good standing under the laws thereof. The
Corporation has 100,0000 shares of its common stock no par value authorized and
200 shares of its common stock no par value issued and outstanding. The
Corporation has not authorized the issuance of or issued any preferred stock,
stock options, warrants or other rights to acquire its common stock or any
interest therein. All of the Stock is fully paid and non-assessable. True and
correct copies of the Articles of Incorporation and Bylaws of the Corporation
have been provided by Seller to Purchaser.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's or the Corporation's
Articles of Incorporation or Bylaws or any law, regulation, court order,
mortgage, note, bond, indenture, agreement, license or other instrument or
obligation to which Seller or the Corporation is now a party or by which any of
the Stock, the Clinic or the Corporation may be bound or affected or any
agreement, option, understanding or commitment or any or privilege granted by
Seller or the Corporation to any other party to purchase or otherwise acquire
the Stock or the Corporation's Assets or result in the acceleration of or an
increase in the interest rate payable under any indebtedness to which Seller or
the Corporation is a party other than indebtedness of Seller which does not
relate to the Stock, the Corporation or the Clinic or which is to be discharged
by Seller as of the Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own the Stock and (ii) to conduct its business as the same is now being
conducted and the Corporation has full power and authority (i) to occupy and/or
to operate the Clinic and (ii) to conduct its business as the same is now being
conducted.
6.04. The Financials. True and correct copies of an unaudited balance
sheet and statement of operations of the Corporation with respect to the
operation of the Clinic as of the close of the Corporation's fiscal year ended
May 31, 1996 and for the four month period ended September 30, 1996 (the
"Financials") are attached hereto as Exhibit 6.04. Except as otherwise noted
therein, all such financial statements fairly represent the financial condition,
and accurately set forth in all material respects as and to the extent required
by GAAP the results of the operations of the Corporation at the Clinic for the
periods covered thereby subject to customary year end adjustments. Any financial
statements prepared by the Corporation subsequent to the date of the Financials
or the date hereof will be prepared in a manner consistent with the manner in
which the Financials were prepared, will fairly represent the financial
condition, and will accurately set forth in all material respects the results of
the operations of the Corporation at the Clinic and of Seller's interest therein
for the periods covered thereby and will be provided to Purchaser within ten
(10) days after the completion thereof.
6.05. Absence of Adverse Change. Since the date of the most recent
Financials there has not been any material adverse change in the financial
condition, business, assets, liabilities or results of operations of the
Clinic.
6.06. The Assets of the Corporation. The assets of the
Corporation consist of the following (collectively, the "Corporation's
Assets"):
(a) That certain Service and Staffing Agreement dated
February 1, 1995 between Coastal Healthcare Group, Inc. and the Corporation
(the "Clinic Agreement"), including, but not limited to the Corporation's
right, title and interest in and to:
(i) The real property occupied by the Corporation under the
terms of the Clinic Agreement and situated in the State of California
and more particularly described in Exhibit 6.06(a)(i) (the "Clinic Real
Property") and the improvements thereon that comprise the outpatient
rehabilitation clinic located at 26 California Street, San Francisco,
California (the "Clinic");
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Clinic Real Property used by
the Corporation either under the terms of the Clinic Agreement or under
those contracts and commitments described in Exhibit 6.06(d) (the
"Leased Clinic Personal Property"), which Leased Clinic Personal
Property is more fully described in Exhibit 6.06(a)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Clinic Agreement, if any.
(b) The inventory, including linens, housekeeping supplies, and other
consumable inventories located at, or usable in the operation of, the
Clinic (the "Consumables").
(c) The furniture, fixtures, equipment and vehicles owned by the
Corporation and located on the Clinic Real Property or in the Clinic
which is not the property of the lessor under the terms of the Clinic
Agreement or any lease described in Exhibit 6.06(d), as applicable (the
"Owned Personal Property") and which Owned Personal Property is more
fully described in Exhibit 6.06(c).
(d) All patient medical records, employment records, and files and
other intangible personal property owned by the Corporation relating to
the Clinic and all rights of the Corporation in and to (i) those
contracts and commitments relating to the Clinic as listed on Exhibit
6.06(d), true and correct copies of which contracts have been provided
to Purchaser by Seller as of the date hereof and (ii) the permits and
licenses used or held for use by the Corporation in the operation of
the Clinic (the "Records and Rights").
(e) The Corporation's books, tax returns and records (the
"Corporation Records").
6.07. The Excluded Assets. The Corporation's Assets shall not
include the following which shall be and remain the property of the Seller and
shall not be transferred or conveyed to Purchaser at Closing (the
"Excluded Assets"):
(a) Seller's stock record books, tax returns and minute books;
(b) The items owned by Seller and listed on Exhibit 6.07(b);
(c) All of Seller's rights under this Agreement;
(d) All refunds, whenever paid, relating to payments by or on behalf of
Seller prior to the Closing including, without limitation, any federal,
state, local or foreign taxes paid by Seller prior to the Closing Date;
(e) All bank accounts of Seller;
(f) All cash, cash equivalents and accounts receivable of Seller;
(g) All computer hardware and software relating to the wide area
network of Horizon used by Seller or the Corporation for the operation
of the general ledger and accounts payable software applications, which
computer hardware and software is more fully described in Exhibit
6.07(g) (the "GL/AP Hardware and Software");
(h) Seller's rights and interests in and to proprietary materials,
programs, manuals, promotional materials and other intangibles owned or
developed by Seller and used by the Corporation in connection with its
operations at the Clinic; provided, however, that Seller hereby agrees
to permit Purchaser and/or the Corporation to continue to use, for a
period of one hundred eighty (180) days after the Closing. (i) The
Corporation's cash, cash equivalents and accounts receivable (the "Cash
and Cash Equivalents"), which the Corporation accrues or receives prior
to the Closing.
(j) Any claims which the Corporation may have against third parties
relating to or arising from the acts or omissions of third parties
prior to the Closing (the "Third Party Claims").
(k) Any refunds to which the Corporation may now or hereafter be
entitled relating to payments by or on behalf of the Corporation prior
to the Closing including, without limitation, any federal, state, local
or foreign taxes paid by the Corporation prior to the Closing Date (the
"Refunds").
(l) The bank accounts of the Corporation (the "Bank Accounts").
(m) All of the Corporation's right, title and interest in and to the
trade names "RehabWorks" and all other trade names used generally by
Continental Medical Systems, Inc., a Delaware corporation ("CMS") (the
"Trade Names"); provided, however, that Purchaser shall have the right
to continue to use for a period of 60 days after Closing any signs
located at the Clinic or any pre-printed materials, such as admitting
forms or patient information materials, on which the Rehabworks or CMS
name or logo may appear.
6.08. Corporation Liabilities. The Liabilities of the Corporation
include, or as of Closing will include, only the following (the "Corporation
Liabilities"), it being understood and agreed that notwithstanding Purchaser's
acquisition of the Stock, Purchaser shall not assume any of the liabilities of
the Corporation which relate to the period prior to the Closing Date other than
those set forth below:
(a) The liability to make the payments due under the Clinic Agreement
and other payments due with respect to the contracts and commitments
described in Exhibit 6.06(d) and to perform any other obligations under
the Clinic Agreement or such other contracts and commitments which
relate to periods from and after the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 6.06(d) (the "Equipment Leases")
which relate to periods from and after the Closing Date;
(c) The liability to make the payments and to perform any other
obligations under the contracts other than the Equipment Leases listed
on Exhibit 6.06(d) which relate to periods from and after the Closing
Date;
(d) The liability to make the payment due under purchase orders placed
by the Corporation in the ordinary course of business prior to the
Closing Date but which are open as of the Closing Date for inventory
and supplies to be delivered after the Closing Date; and
(e) The liability to pay when due the Accrued Benefits (as defined
below).
6.09. The Licenses. The Clinic is not licensed by the California
Department of Health nor is such a license required for the lawful operation
thereof. The Clinic is not certified to participate in Medicare or Medi-Cal. Any
and all other business licenses and permits issued with respect to the operation
of the Clinic to Seller, the Corporation or the Clinic are described in Exhibit
6.09 (the "Corporation Permits").
6.10. Compliance with Law.
(a) The Clinic and its current operation and use is in substantial
compliance with all applicable health and safety laws, regulations, ordinances,
standards and orders issued by any municipal, county, state or federal agency
having authority over the Clinic and with all municipal health, building and
zoning laws and regulations (including, without limitation, the building, zoning
and life safety codes) where the failure to comply therewith would have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation thereof and there are no outstanding cited deficiencies
or work orders issued to Seller or the Corporation under any of the foregoing
which have not been corrected as of the date hereof or which will not be
corrected as of the Closing Date;
(b) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Clinic, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Clinic or (ii) any of the members of the Board of Directors or
employees of the Clinic.
6.11. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Clinic which provide for the provision
of the care routinely provided at the Clinic for no consideration nor will
Seller or the Corporation enter into any such agreements between the date hereof
and the Closing Date.
6.12. Books and Records. To the best of Seller's knowledge
after due inquiry of the Chief Executive Officer of the Clinic, all of the
books and records of the Clinic, including patient records, are true and
correct in all material respects.
6.13. Title. The Corporation has title to all of the Corporation's
Assets free and clear of all liens, charges and encumbrances other than the
liens described in Exhibit 6.13 (the "Permitted Encumbrances"). Seller has good
and marketable title to the Stock free and clear of all liens, charges and
encumbrances, other than the lien granted to NationsBank under the Credit
Agreement which lien shall be released at Closing.
6.14. Unions. There are no union contracts in effect between the
Corporation, on the one hand, and the employees of the Clinic, on the other
hand. To the best of Seller's knowledge, none of the Corporation's employees who
are not currently members of a labor union in connection with their work at the
Clinic are actively seeking the formation of a labor union at the Clinic.
Neither Seller nor the Corporation is a party to any labor dispute, it being
agreed that a claim for wrongful termination shall not, for purposes of this
Paragraph 6.14 be deemed to be a labor dispute. Neither Seller nor the
Corporation is a party to any union contracts with respect to the Clinic.
6.15. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed prior to date of
execution of this Agreement by Seller with respect to the Stock or by the
Corporation with respect to its operations at the Clinic have been properly
completed and timely filed, or extensions for the filing thereof have been
timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to the Stock and with
respect to the Corporation's operations at the Clinic have been timely paid,
except to the extent that the same are being duly contested in good faith in
accordance with applicable law and adequate reserves therefor are reflected on
the Financials or will be reflected in any subsequent financials prepared in
accordance with the representations and warranties contained in this Agreement.
6.16. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under the
Clinic other than to the extent the same will not have a material adverse affect
on the condition, financial or otherwise, of the Clinic, (ii) not installed any
underground storage tanks and (iii) at all times operated the Clinic in
compliance with all Environmental Laws, except where the failure to so comply
would not have a material adverse affect on the condition, financial or
otherwise, of the Clinic.
(b) With respect to the Clinic prior to the date of the Seller's
ownership or leasing thereof, to the best of Seller's knowledge after due
inquiry of the Director of Plant Operations at the Clinic, (i) except to the
extent permitted by applicable Environmental Laws, no hazardous materials,
substances or wastes were located on or at the Clinic or were released into the
environment or discharged, placed or disposed of in, on or under the Clinic,
(ii) except to the extent permitted by applicable Environmental Laws, no
underground storage tanks are or were located at the Clinic, (iii) the Clinic is
not located on property which was used as a dump for waste material, and (iv)
the Clinic has at all times complied with, all Environmental Laws, except to the
extent in each of the foregoing clauses (i) through (iv) that any such
non-compliance would not have a material adverse effect on the Clinic. Seller
has not received any written notice from any governmental authority or any
written complaint from any third party with respect to its alleged noncompliance
with, or potential liability under, any Environmental Laws at the Clinic which
remains unresolved as of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Clinic which are currently in the possession of Seller.
6.17. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals for which Seller is
responsible under the terms hereof. Seller represents and warrants that as of
the date of execution of this Agreement, it has secured the consent of its Board
of Directors and of the Board of Directors of Horizon to the execution of this
Agreement and of any documents and agreements necessary to carry out the terms
hereof and for the consummation of the transactions contemplated by this
Agreement. Nothing herein shall be construed as a guarantee by Seller that it
will be able to secure the Third Party Consents or Regulatory Approvals for
which it is responsible, but rather this paragraph shall be limited to Seller's
representation and warranty that it will use its best efforts to secure such
Third Party Consents and Regulatory Approvals, subject to the limitation on the
costs which Seller must incur in obtaining such consents being limited in the
manner set forth in Paragraph 4.08.
6.18. Litigation. Except as set forth in Exhibit 6.18, there is no, nor
has Seller or the Corporation received written or verbal notice of any,
litigation, administrative investigation or other proceeding pending or, to the
best of Seller's knowledge based on written notice with respect thereto,
threatened by any governmental authority having jurisdiction over Seller (with
respect to the Clinic only), the Corporation, the Clinic or by any other party
where the amount claimed exceeds $50,000 in any single action or $100,000 in the
aggregate or which seeks to challenge Seller's title to the Stock, the
Corporation's title to the Corporation's Assets or Seller's right or ability to
consummate the transaction provided for herein. Neither Seller nor the
Corporation is a party to nor is Seller or the Corporation or the Clinic bound
by any orders, judgments, injunctions, decrees or settlement agreements under
which it may have continuing obligations as of the date hereof or as of the
Closing Date and which are likely to materially restrict or affect the present
business operations of the Clinic. The right or ability of Seller to consummate
the transaction contemplated herein has not been challenged by any governmental
agency or any other person and Seller has no knowledge of the occurrence of any
event which would provide a reasonable basis for any such litigation,
investigation or other proceeding.
6.19. Sensitive Payments. Seller has no reason to believe that it or
the Corporation has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made, (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books, (iii) given or received any
payments or other forms of remuneration in connection with the referral of
patients which would violate the Medicare/Medicaid Anti-kickback Law, Section
1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b) or any analogous
state statute or (iv) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment. Seller has not
filed any reports on behalf of itself or in the name of the Corporation with any
governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.20. The Clinic. The Corporation is duly authorized to operate the
Clinic under California law as an outpatient rehabilitation clinic. The
Personal Property is all of the property necessary for the lawful operation of
the Clinic at its current level of business.
6.21 Inventories. At Closing, the Clinic shall have an inventory of
central supplies, nursing supplies and other supplies, which will be sufficient
in condition and quantity to operate the Clinic in the ordinary course of
business.
6.22. Trade Names. Set forth in Exhibit 6.22 is a true and complete
list of the trade names under which the Corporation is doing business at the
Clinic. Seller has not sought on its own behalf or on behalf of the Corporation
protection for such names under state or federal trademark or trade name laws
except to the extent reflected in Exhibit 6.22. Neither the Seller nor the
Corporation has received any notice from any person challenging or questioning
the right of the Corporation to use any such trade names.
6.23. Employees/ERISA.
(a) Set forth in Exhibit 6.23 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller
which relate to the Clinic or to any current or former employees at or of the
Clinic (the "Plan" or "Plans"). Except as set forth in Exhibit 6.23 and except
for stock purchase and stock options programs administered by Horizon and for
which Purchaser shall have no liability after Closing, Seller has not made any
commitment or representation to the current or former employees of the Clinic to
establish any additional Plan, arrangement or practice or to modify or change
any existing Plan, arrangement or practice. Exhibit 6.23 also lists all
employees of the Clinic as of the date of this Agreement together with their
positions and rates of pay and earned and accrued vacation time, sick leave and
holiday pay as the date specified therein, which date shall be the most recent
date to which such information is available to Seller.
(b) There are no employment contracts between Seller or the
Corporation and any employee of the Clinic.
6.24. Operating Contracts. Set forth in Exhibit 6.06(d) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller or the Corporation, transfer agreements,
contracts for or other evidences of indebtedness (other than indebtedness to be
discharged or released at Closing), security agreements and other contracts and
agreements, including without limitation, all provider agreements with any third
party payors and consulting and service contracts to which Seller or the
Corporation is a party in connection with the Corporation's operations at the
Clinic (the "Operating Contracts"). Seller has provided Purchaser with a true
and correct copy of each of the Operating Contracts. Each of the Operating
Contracts is in full force and effect and none of the Operating Contracts has
been modified or amended except as set forth in Exhibit 6.06(d). Neither the
Seller nor the Corporation is in default of any of its obligations under the
Operating Contracts nor is Seller aware of any default or any action or omission
which, with the passage of time or the giving of notice or both, would
constitute a default under the Operating Contracts by any other party thereto.
Purchaser acknowledges and agrees that Seller shall not be in default of its
obligations under this Paragraph 6.24 in the event Exhibit 6.06(d) fails to list
or Seller fails to provide to Purchaser any Operating Contracts where the
payments remaining due thereunder are less than $7,500.
6.25. The Clinic Agreement. A true and correct copy of the Clinic
Agreement has been provided by Seller to Purchaser. The Clinic Agreement remains
in full force and effect and has not been amended or modified except as set
forth in Paragraph 6.06. Neither Seller nor the Corporation has received any
written notice under the Clinic Agreement that it is in default of its
obligations under the Clinic Agreement nor does Seller have knowledge after
inquiry of the Chief Executive Officer of the Clinic of any events which, with
the passage of time or the giving of notice, would constitute a material default
thereunder. The Corporation does not have exclusive possession of the real and
personal property which is the subject of the Clinic Agreement. Except as set
forth in Exhibit 6.25, there are no security deposits posted with respect to the
Clinic Agreement.
6.26. Physician Contracts. There are no contracts between the
Seller or the Corporation and the physicians providing services to the
patients of the Clinic.
6.27. Intentionally Omitted.
6.28. Intentionally Omitted.
6.29. Reimbursement. Neither the Seller nor the Corporation has
received any written or verbal notice from any third party payor with respect to
any proposed recoupment claim or any other proposed investigation, audit or
reimbursement dispute with respect to the Clinic or which could adversely affect
the Corporation's operations at the Clinic.
6.30. Intentionally Omitted.
6.31. Insurance. Set forth in Exhibit 6.31 is a list of all insurance
policies held by Seller or the Corporation with respect to the Clinic and the
other Corporation's Assets and in effect as of the date of this Agreement,
including the types of coverage and amounts thereof and the amount of
deductibles thereunder. Seller has provided to Purchaser true and correct
certificates evidencing such insurance as well as copies of the current
property, professional liability and workers compensation insurance policies in
effect with respect to the Clinic. All monthly premium installments due with
respect to all of such insurance policies have been paid in full through the
date of this Agreement and will continue to be paid as and when due between the
date of this Agreement and the Closing Date.
6.32. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of California. Regency Health Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own the Stock and (ii) to conduct the business of the
Corporation from and after the Closing Date as the same is now being conducted.
7.04. Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Investment Representations. Purchaser is acquiring the Stock for
investment purposes only and not with a view to the re-sale or distribution
thereof. Purchaser acknowledges and agrees that Seller has represented to
Purchaser that the Stock is not registered under any state or federal securities
law. Purchaser is knowledgeable with respect to the purchase of health care
companies such as the Corporation and accordingly has conducted such
investigations and undertaken such inquiries as it deemed necessary to enter
into this Agreement and to agree to purchase the Stock.
7.09. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except as contemplated by this Agreement or with
the consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed, Seller and the Corporation:
(a) Will operate the Clinic only in the ordinary course and with due
regard to the proper maintenance and repair of any real property or personal
property associated therewith, ordinary wear and tear excepted;
(b) Will take all reasonable action to preserve the goodwill and the
present business operations of the Clinic, it being understood and agreed that
they shall not be required to undertake any action to preserve the business of
the Clinic other than continuing to engage in the routine marketing activities
in which they are currently engaged at the Clinic;
(c) Will not make any material change in the operation of the Clinic
nor, except in the ordinary course of business, sell or agree to sell any items
of machinery, equipment or other fixed assets of the Clinic, including but not
limited to assets and equipment used in connection with the operation of the
Clinic nor otherwise enter into any agreements materially affecting the Clinic;
(d) Will use its reasonable efforts to retain the goodwill of the
employees of Seller or the Corporation located at or connected with the
operation of the Clinic and will provide Purchaser with notice in the event of
any union organizing activities or contract negotiations are commenced after the
date hereof;
(e) Will not, except in the ordinary course of business, increase the
compensation or bonuses payable or to become payable to any of the employees
located at or connected with the operation of the Clinic, including employees
located at the Seller's corporate or regional offices who work exclusively on
matters related to the Clinic, or grant any severance benefits to any such
employees other than to the extent such bonuses or severance payments impose no
obligation on Purchaser after the Closing Date;
(f) Will not enter into any written employment agreements in connection
with the operation of the Clinic other than with physicians in the ordinary
course of business; provided, however, that Seller shall provide Purchaser with
copies of any such physician contracts;
(g) Will not, except in the ordinary course of business, enter into any
contract or commitment affecting any of the Stock and the Corporation's Assets
or incur any additional indebtedness or amend, extend or renew any current debt
instruments, whether in the ordinary course of business or otherwise, nor will
Seller declare or pay any dividend or other distribution with respect to any of
the Stock or the Corporation's Assets nor pledge the accounts receivable of
Seller as security for any indebtedness or lease agreements executed, amended or
extended by Seller after the date hereof; provided, however, that nothing herein
shall be construed as prohibiting (i) Seller from incurring inter-company
indebtedness to Horizon and/or CMS and loaning the proceeds thereof to Seller or
Seller from incurring such indebtedness, (ii) Horizon and/or CMS from incurring
debt, the proceeds of which may be made available to Seller or (iii) Seller from
executing any and all documents necessary to amend any debt instruments under
which Horizon and/or CMS may be the borrower and Seller a guarantor; provided,
however, that nothing herein shall be construed as prohibiting Seller from
dividending Excluded Assets from the Corporation prior to Closing.
(h) Will, during normal business hours, provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller, the Corporation, the Clinic provided they do not
interfere with the operation thereof;
(i) Will operate the Clinic in substantial compliance with all
applicable municipal, county, state and federal laws, regulations, ordinances,
standards and orders as now in effect (including, without limitation, the
building, zoning and life safety codes as currently applied with respect
thereto) where the failure to comply therewith could have a material adverse
effect on the business, property, condition (financial or otherwise) or
operation thereof;
(j) Will take all reasonable action to achieve substantial compliance
with any laws, regulations, ordinances, standards and orders applicable to the
Clinic which are enacted or issued after execution of this Agreement and become
effective or require compliance prior to the Closing where the failure to comply
therewith could have a material adverse effect on the business, property,
condition (financial or otherwise) or operation thereof;
(k) Will maintain the Corporation's Assets in substantially the same
condition as they were in at the date hereof, ordinary wear and tear, casualty
loss and taking by eminent domain excepted;
(l) Will provide Purchaser with copies of the Corporation's
monthly financial statements prepared in the ordinary course of business;
(m) Will pay as and when due the accounts payable which arise in the
ordinary course of business, except to the extent that the amount owing is being
duly contested by Seller or the Corporation and such contest does not materially
affect Seller, the Corporation or the Clinic;
(n) Will maintain in force the existing insurance coverage with
respect to the Clinic described in Exhibit 6.31;
(o) Will file all returns, reports and filings of any kind or nature,
or to secure timely extensions for the filing thereof, required to be filed by
Seller or the Corporation, including, but not limited to, state and federal tax
returns and Medicare and Medi-Cal cost reports with respect to the Clinic and
will timely pay all taxes or other obligations which are due and payable with
respect thereto, except to the extent that the same are being duly contested in
good faith in accordance with applicable law and such contest does not
materially affect Seller, the Corporation or the Clinic;
(p) Will provide to Purchaser copies of all material documents which
relate to, and, upon request, with verbal or written updates concerning the
status of, any litigation filed as of the date hereof or filed from and after
the date hereof by or against Seller or the Corporation after the date of this
Agreement but prior to the Closing Date where the amount claimed or assessed by
management of Seller as likely to be claimed exceeds $500,000; and
(r) Will not amend or permit the amendment of the Corporation's
Articles of Incorporation or Bylaws.
In addition, Seller covenants and agrees that:
(a) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement or which is intended to cause
any representation, warranty or covenant made by Seller in this Agreement;
(b) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller, any of the Stock, the Corporation or the
Corporation's Assets, or offer to acquire or convey in any manner, directly or
indirectly, all or substantially all of the equity interests in, the voting
securities of Seller, the Stock, the Corporation or the Corporation's Assets;
provided, however, that public announcements of the transaction contemplated by
this Agreement shall not be prohibited hereby;
(c) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party Consents for which it is responsible under
the terms hereof;
(d) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits of the results of operations at the Clinic which
Purchaser elects to conduct in order to comply with any requirements applicable
to it under the federal securities laws; and
(e) Within ten (10) days after Seller's receipt of Purchaser's UCC
search objections pursuant to Paragraph 10.01, Seller shall advise Purchaser
whether it intends to correct the defects to which Purchaser has objected.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a designated escrow agent in accordance with any
written escrow instructions executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01);
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers executing documents on behalf of
Seller, a copy of the resolutions adopted by Seller's Board of Directors
authorizing the transaction provided for herein and the execution of this
Purchase Agreement and the other documents contemplated herein and attaching a
certificate of good standing with respect to Seller issued by the North Carolina
Secretary of State and with respect to the Corporation issued by the California
Secretary of State within no more than thirty (30) days prior to Closing;
(c) The duly executed Stock Assignment Agreement;
(d) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, consent under the Clinic
Agreement for which Seller is responsible under the terms of this Agreement;
(e) The Articles of Incorporation of the Corporation certified by the
California Secretary of State, the Bylaws of the Corporation certified by the
Secretary or Assistant Secretary of the Corporation and the Minute Books and
Stock records of the Corporation, including the corporate seal if the same
exists;
(f) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to Purchaser.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Clinic any and all plans and specifications with
respect to the Clinic which may be in Seller's or the Corporation's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Clinic in
its filings with the United States Securities and Exchange Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of the Stock.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) Seller will provide to Purchaser data processing services with
respect to the Clinic and the facilities which are the subject of the Other
Agreements (as hereinafter defined) on the terms set forth in Exhibit 9.03 but
at no additional cost to Purchaser other than the cost specified therein for the
other facilities listed therein.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date, except as contemplated by this Agreement
or with the consent of Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, which Purchaser may elect to
obtain. If Seller refuses to correct some or all of the lien defects objected to
by Purchaser within the time period reflected in Paragraph 9.01(o) or to give
Purchaser reasonable assurances that the same will be corrected as of the
Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and Regulatory Approvals for which it is
responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller and Purchaser agree in writing in the Escrow
Instructions to handle the same outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to Seller.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Clinic.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Clinic, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller shall be entitled, after the
Closing Date, during normal business hours of the Clinic and on advance notice
to Purchaser to have access to and to make copies, at their sole cost and
expense, of the patient records, including the medical records and medical
charts of any patient admitted to the Clinic on or before the Closing Date. In
addition, to the extent permitted by law and to the extent required by law,
Seller shall be entitled to remove from the Clinic any such record or chart, but
only for the purposes of pending litigation involving a patient to whom such
record or chart refers, as certified in writing prior to removal by an officer
of Seller or counsel retained by Seller in connection with such litigation, and
only prior to making a copy thereof, at Seller's cost and expense, for retention
at the Clinic. Any record or chart so removed by Seller from the Clinic shall be
promptly returned to Purchaser following its use by Seller in accordance with
the terms hereof.
(e) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Clinic, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Stock or the Corporation's Assets which are
the subject of this Agreement or the Other Agreements which either alone or in
the aggregate, with all such other sales or dispositions, would constitute the
sale or disposition of a "significant subsidiary" (as defined in Rule 1-02 of
Regulation S-X of the rules and regulations of the Commission), (ii) take any
action, the consummation of which cannot be conditioned on the consummation of
the transactions contemplated by this Agreement, where such action would have a
material adverse effect on Seller or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Seller or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Clinic from and after the Closing Date (the "Regulatory Approvals"),
and the consent of its lenders, lessors and other third parties to the extent
required under any loan documents, lease agreements, management agreements or
other instruments to which it is a party, including, but not limited to, consent
under the Clinic Agreement (the "Third Party Consents"), provided, however, that
the consent of the holders of the bonds issued by Purchaser's parent corporation
under that Indenture dated as of June 28, 1996 in the original principal amount
of $50,000,000 and that Indenture dated as of October 12, 196 in the original
principal amount of $110,000,000 shall not be deemed to be a required Third
Party Consent, it being understood and agreed that Purchaser has represented
that the transaction as contemplated herein after will not require the consent
of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by either party of any press release or any written
statement with respect to this Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date (as defined below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof.
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, neither Seller nor
the Corporation shall be in default, where said default cannot be cured by the
Closing Date, under any mortgage, contract, lease or other agreement to which
Seller or the Corporation is a party or by which Seller or the Corporation is
bound and which will affect or relate to the Real Property, the Personal
Property or the Clinic after the Closing Date.
(e) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(f) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(g) The closing of the transactions which are the subject of
the Other Agreements shall have occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the fulfillment, prior to or as of the Outside
Closing Date, of each of the following conditions any one or more of which may
be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the other party to the Clinic
Agreement has refused to release Seller from its guarantee thereof or from
primary liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission requires any of the actions described in
Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of the Real Property or the Clinic is damaged or destroyed by fire or
other casualty or has been taken or condemned by any public or quasi-public
authority under the power or eminent domain; provided, however, that in the
event Purchaser fails to exercise its termination rights hereunder, then it
shall be conclusively deemed to have waived said right and Seller shall assign
to Purchaser all of its rights to any insurance proceeds or condemnation award
and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination or pursue
any other remedy referred to in Paragraph 13.01 on account of a breach of a
condition, covenant or warranty by the other, without first given such other
party written notice of such breach and not less than ten (10) days within which
to cure such breach. The Closing Date shall be postponed if necessary to afford
such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled to
seek damages from Purchaser as a result of said breach.
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Clinic as of the Closing Date,
(ii) their positions and rates of pay, (iii) a reasonable estimate as of the
Closing Date of all earned and accrued vacation, holiday and sick pay and earned
or accrued "EVA" bonuses due to and/or coming due to the employees of the Clinic
as of the Closing Date (the "Estimated Accrued Benefits"). On the Closing Date,
Seller shall deliver to Purchaser an amount equal to the Estimated Accrued
Benefits reflected on the Employee Schedule and Purchaser shall agree from and
after the Closing Date, to pay the Accrued Benefits, to the employees of the
Clinic as and when due in accordance with Purchaser's personnel policies from
and after the Closing Date, it being agreed for the benefit of Seller that such
policies shall not result in a reduction of benefits accrued in favor of any
employee as of the Closing Date. In addition, on the Closing Date or as soon
thereafter as is required by California law, Seller shall pay to the employees
of the Clinic any wages due to them as of the Closing Date. Any benefits due to
the employees of the Clinic for the period prior to the Closing Date and not
included within the Accrued Benefits paid to Purchaser at Closing shall be and
remain the responsibility of Seller after Closing. Within a reasonable period of
time following the Closing Date, which shall in no event be more than thirty
(30) days, Seller shall provide Purchaser with a schedule of the Accrued
Benefits which were earned or accrued as of the Closing Date (the "Actual
Accrued Benefits"). To the extent the Estimated Accrued Benefits exceeded the
Actual Accrued Benefits, Purchaser shall remit said difference to Seller within
ten (10) days after Purchaser's receipt of the Actual Accrued Benefits schedule.
To the extent the Estimated Accrued Benefits were less than the Actual Accrued
Benefits, Seller shall remit said difference to Purchaser along with the
schedule of Actual Accrued Benefits.
14.02. Purchaser shall offer to hire at Closing all of the employees of
Seller who, as of the Closing, work at the Clinic and have been employed on
average for 20 hours or more per week. Such employees who are offered employment
by Purchaser shall be referred to as the "Retained Employees." Any such offer of
employment to a Retained Employee by Purchaser shall be to perform comparable
services, in a comparable position and at substantially the same base salary as
such Retained Employee enjoyed with Seller. Seller or any of its affiliates
shall have the right to employ or offer to employ any Retained Employee who
declines Purchaser's offer of employment. Purchaser shall hire at Closing each
Retained Employee who elects to accept employment with Purchaser (the "Hired
Employees"), shall recognize each such Hired Employees original hire date and
shall continue to employ each such Hired Employee for a period of no less than
ninety (90) days following the Closing Date unless the employment of such Hired
Employee is terminated in accordance with Purchaser's personnel policies or as a
result of such Hired Employee's resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Clinic of the "closure" thereof under the
Worker Adjustment and Retraining Notification Act (the "WARN Act") or under any
comparable California state law. Accordingly, Purchaser agrees to indemnify,
defend and hold harmless Seller from any liability which it may incur under the
WARN Act or under any comparable California State law in the event of a
violation by Purchaser of its obligations thereunder, including a violation
which results from allegations that Purchaser constructively terminated the
employees of the Clinic as a result of the terms and conditions of employment
offered by Purchaser. Nothing in Section 14.02 shall, however, create any rights
in favor of any person not a party hereto, including the employees of the
Clinic, or constitute an employment agreement or condition of employment for any
employee of Seller or any affiliate of Seller who is a Retained Employee or a
Hired Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Clinic to whom it is required to offer the same under
applicable law. Seller acknowledges and agrees that Purchaser is not assuming
any of Seller's obligations to its employees under COBRA or otherwise, except as
specifically provided in this Article XIV. As of the Closing Date, all active
employees of Seller: (i) who participate as of the Closing Date in group health
insurance coverage sponsored by Seller and (ii) who become employees of
Purchaser on the Closing Date, shall be eligible for participation in a group
health plan (as defined for purposes of Internal Revenue Code Section 4980B)
established and maintained by Purchaser for the general benefit of its employees
and their dependents and all such employees shall be covered without a waiting
period and without regard to any pre-existing condition unless (A) they are
under a waiting period with Seller at the time of Closing, in which case they
shall be required to complete their waiting period while in Purchaser's employ
or (B) they were subject to a pre-existing condition exclusion while in Seller's
employ, in which case they shall be subject to the same exclusion while in
Purchaser's employ, which exclusion shall, if applicable, be subject to the same
time limitation while in Purchaser's employ as was applicable thereto while said
employees were in Seller's employ, with the time limit calculated from the date
the same commenced while in Seller's employ. Seller and Purchaser acknowledge
and agree that it is the intent of this provision that Seller shall not be
required to provide continued health coverage under ERISA or Section 4980 of the
Internal Revenue Code to any of such employees of Seller who are hired by
Purchaser or to any qualified beneficiary (as defined for purposes of Section
4980B of the Internal Revenue Code) with respect to any such employees.
14.05. Seller agrees that the continued employment of the Hired
Employees will be important to the viability of Purchaser's operations at the
Clinic. Accordingly, Seller agrees that for a period of one year after the
Closing Date it will not directly or indirectly solicit the employment of any of
such Hired Employees nor shall it take any action to directly or indirectly
interfere with their employment relationship with Purchaser or to induce them in
any manner to terminate their employment relationship with Purchaser. Seller
acknowledges and agrees that Purchaser would not be fully compensated by damages
in the event of a breach or threatened breach by Seller of this provision and
accordingly agrees that Purchaser shall be entitled, without the need to post a
bond, to seek an injunction to restrain such violation or threatened violation
of this Paragraph 14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Notwithstanding Purchaser's acquisition of the Stock, Seller and
Purchaser acknowledge and agree that it is the intent of the parties that Seller
remain liable for the obligations of the Corporation which relate to the period
prior to the Closing Date. Accordingly, Seller shall indemnify and hold
Purchaser harmless from and against any and all damages, liabilities, losses,
costs or expenses which the Corporation may incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of the Corporation's Assets and the operation of the Clinic prior to
the Closing Date, whether or not the same are covered by the Corporation's
insurance, including, but not limited to (i) any obligations under the Clinic
Agreement, the Operating Contracts and the Corporation Liabilities, (ii) any
violations of the Medicare or Medicaid fraud and abuse laws, the Stark II law
governing relationships with physicians or any other state or federal law
governing the operation of the Clinic (whether or not such violations would
constitute a breach by Seller of a representation or warranty set forth herein);
and (iii) any failure of any cost report filed by Seller or the Corporation for
the cost reporting periods prior to the Closing Date, including the final cost
reports filed after the Closing Date, to comply with applicable state or federal
law (whether or not such violation would constitute a breach by Seller of a
representation or warranty set forth herein);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or nonfulfillment of any agreement on the part
of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the requirements of any laws or
regulations relating to bulk sales or transfers;
(d) Any claims against Seller, the Corporation, Purchaser, the Clinic,
or the other Corporation's Assets under any third party payor programs (i) with
respect to the operation of the Clinic by the Corporation prior to the Closing
Date, (ii) for recapture of depreciation generated by the transaction
contemplated hereby or (iii) for repayment of any overpayments made to the
Corporation or Seller under any third party payor program for services rendered
at the Clinic prior to the Closing Date, including, but not limited to, claims
against Purchaser in the form of offsets by any third party payor against their
payments due to Purchaser on and after the Closing Date;
(e) The Excluded Assets; and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of the Corporation's Assets and
the operation of the Clinic from and after the Closing Date, including, but not
limited to, any obligations under the Clinic Agreement, the Operating Contracts
and the Corporation Liabilities (if and to the extent they relate solely to the
period from and after the Closing Date);
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or nonfulfillment of any agreement on the part of
Purchaser under this Agreement; and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches equals or exceeds Twenty Five Thousand and no/100 Dollars
($25,000) (the "Representation and Warranty Liability Threshold"). In the event
the Representation and Warranty Threshold is met, then the Non-Breaching Party
shall be entitled to seek to collect from the Breaching Party any and all
damages, liabilities, losses, costs or expenses suffered or incurred as a result
of all such breaches of the representations and warranties set forth herein on a
first dollar basis and not merely to recover damages in excess of the
Representation and Warranty Liability Threshold.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall be in writing and shall be sent by registered
or certified mail, postage prepaid, by overnight delivery, hand delivery or
facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns,
including successors by operation of law pursuant to any merger, consolidation
or sale of assets involving either party.
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be invalid, unlawful or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of the Other Agreements has been executed and
delivered by the parties hereto or thereto.
16.15. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
CMS THERAPIES, INC.
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between CMS Therapies, Inc., as Seller, and
Purchaser dated November 19, 1996 (the "Agreement"), hereby unconditionally,
irrevocably and jointly and severally with Seller, guarantees and promises to
and for the benefit of Purchaser that (i) the representations and warranties of
Seller are true and correct as of the date of execution of the Agreement and
shall be true and correct as of the Closing Date (as modified by any supplements
to the Seller Disclosure Letter to reflect events after the date hereof) and
(ii) Seller shall perform all of its obligations, covenants and agreements,
including, but not limited to, its indemnity obligations under Paragraph 15, to
be performed on its part under the Agreement. If Seller defaults under the
Agreement, Purchaser may proceed immediately against Horizon or Seller or both
to enforce any rights it has under the Agreement or this Guaranty.
Notwithstanding the foregoing, the representations and warranties of Seller will
not survive beyond the periods applicable thereto set forth in Paragraph 16.13
hereof and this Guaranty shall not be construed to give Purchaser a claim or
cause of action against Horizon after the expiration of the applicable survival
period for a breach by Seller of any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release of the Agreement or limitation of
the liability of Seller or its estate in any bankruptcy or insolvency
proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the performance of Seller's obligations under the
Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the Agreement (whether absolute or as
collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or agreed
to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the rejection of the Agreement by Seller or by a
trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to CMS Therapies, Inc. ("Seller") to enter into the Purchase
and Sale Agreement between Seller and Regency Rehab Hospitals, Inc.
("Purchaser") dated November 19, 1996 (the "Agreement"), hereby unconditionally,
irrevocably and jointly and severally with Purchaser, guarantees and promises to
and for the benefit of Seller that (i) the representations and warranties of
Purchaser are true and correct as of the date of execution of the Agreement and
shall be true and correct as of the Closing Date (as modified by any supplements
to the Purchaser Disclosure Letter to reflect events after the date hereof) and
(ii) Purchaser shall perform all of its obligations, covenants and agreements,
including, but not limited to, its indemnity obligations under Paragraph 15, to
be performed on its part under the Agreement. If Purchaser defaults under the
Agreement, Seller may proceed immediately against Regency or Purchaser or both
to enforce any rights it has under the Agreement or this Guaranty.
Notwithstanding the foregoing, the representations and warranties of Purchaser
will not survive beyond the periods applicable thereto set forth in Paragraph
16.13 hereof and this Guaranty shall not be construed to give Seller a claim or
cause of action against Regency after the expiration of the applicable survival
period for a breach by Purchaser of any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or acceptance of partial payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance of Purchaser's obligations under the
Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement (whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or agreed
to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the rejection of the Agreement by Purchaser or by a
trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.04
PURCHASE AND SALE AGREEMENT
SAN BERNARDINO
This Agreement is made and entered into this 19th day of November, 1996
by and between Continental Medical Systems, Inc., a Delaware corporation
("Seller") and Regency Rehab Hospitals, Inc., a California corporation
("Purchaser").
RECITALS
A. Seller is the sole shareholder of San Bernardino
Rehabilitation Hospital, Inc., a Delaware
corporation (the "Corporation").
B. The Corporation is the sole general partner of San
Bernardino Rehabilitation Hospital, a
California general partnership (the "Partnership").
C. The Partnership is the licensed operator of that 60 bed free
standing rehabilitation hospital
commonly known as Robert H. Ballard Rehabilitation Hospital, 1760 West 16th
Street, San Bernardino, CA (the
"Hospital").
D. In order to satisfy the requirements of certain financing documents
by which Purchaser and its parent corporation are bound, Seller and the
Corporation have agreed to restructure the operations of the Partnership in
order to permit the Corporation to assume direct operational and financial
responsibility for certain aspects of the Hospital subject to the obligation of
the Partnership to pay the Corporation therefor under the terms of the Amended
Management Agreement (as defined below) (the "Operations Restructuring"). To
that end, Seller and the Corporation intend, subject to obtaining the consent of
the limited partner in the Partnership and the Landlord (as defined below) to
take certain actions immediately prior to Closing which are more fully described
in the following recitals.
E. The Corporation has been providing management services to the
Partnership under the terms of an Agreement to Provide Management Services dated
as of June 14, 1993 (the "Existing Management Agreement"). In furtherance of the
Operations Restructuring, Seller intends to assign the Existing Management
Agreement to the Corporation and the Corporation intends to enter into an
Amended and Restated Management Agreement with the Partnership (the "Amended
Management Agreement").
F. In furtherance of the Operations Restructuring, the Seller and the
Corporation further intend to cause the Partnership to assign to the
Corporation, all of its right, title and interest in and to and obligations
under that Lease Agreement dated July 9, 1993 (as amended, the "Hospital Lease")
between the Partnership, as Tenant, and Rehab Concepts Corp, as landlord, and
concurrently therewith to sublease the Hospital back from the Corporation under
the terms of a Sublease Agreement (the "Hospital Sublease").
G. In furtherance of the Operations Restructuring, Seller, anticipates
that as of the Closing Date it will hold a promissory note from the Partnership
in the principal amount equal to all of the Intercompany Debt (as defined below)
owing from the Partnership to the Seller (the "Partnership Note") and that it
will sell, assign, transfer and convey to the Corporation, all of its right,
title and interest in and to the Partnership Note and the Corporation will
deliver to the Seller in consideration therefor its Promissory Note (the
"Corporation Note") in the principal amount equal to the principal amount of the
Partnership Note and containing all such other terms and conditions as are
reflected in the Partnership Note.
H. Upon completion of the Operations Restructuring and immediately
prior to Closing, the assets and liabilities of the Corporation shall consist of
those assets and liabilities described in Paragraphs 6.06 and 6.07 below.
I. Purchaser is interested in acquiring all of the Seller's
right, title and interest in and to
the issued and outstanding common stock of the Corporation and in and to the
Corporation Note upon completion
of the Operations Restructuring.
J. Purchaser and Seller are interested in documenting the terms
and conditions under which said
Operations Restructuring and purchase and sale shall occur.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to all of
the issued and outstanding common stock of the Corporation (the "Stock"). In
addition, after consummation of the purchase of the Stock, Seller does hereby
agree to sell to Purchaser and Purchaser does hereby agree to acquire from
Seller, all of Seller's right, title and interest in and to the Corporation
Note.
Hereinafter the Stock and the Corporation Note will be collectively
referred to as the Seller's Assets.
ARTICLE II
PURCHASE PRICE/REFINANCING OF DEBT
2.01. Except as otherwise provided below, the purchase price for the
Stock shall be One Dollar.
2.02. Purchaser and Seller acknowledge and agree that the face amount
of the Corporation Note at Closing shall be equal to the Intercompany Debt (as
hereinafter defined). For purposes hereof, the Intercompany Debt shall be in an
amount equal to all of the funds loaned by CMS or Orange to the Partnership
which have not been repaid as of the Closing Date. Seller and Purchaser shall
agree on the amount of the Intercompany Debt as of the Closing Date based on the
Partnership's financial statements as of December 26, 1996. Purchaser shall
purchase the Corporation Note in the following manner:
(a) Purchaser shall deliver to Seller its promissory note in the face
amount equal to the working capital of the Partnership (the "Working Capital"),
which promissory note shall be in substantially the same form as that attached
hereto as Exhibit 2.02(b). As used herein Working Capital shall be defined as
the current assets of the Partnership, minus the current liabilities of the
Partnership, minus the value of the inventory owned by the Partnership, all as
determined in accordance with generally accepted accounting principles.
(b) Purchaser shall draw on the proceeds of its Subordinated Debt (as
hereinafter defined) and shall use the proceeds thereof to refinance an amount
equal to the difference between the Intercompany Debt and the Working Capital
and shall pay the same in cash at Closing (the "Cash Amount");
2.03. In the event the Intercompany Debt at Closing equals the sum of
the Working Capital at Closing plus $2,082,064, there shall be no adjustment to
the purchase price for the Stock.
2.04. If the amount of the Intercompany Debt at Closing exceeds the sum
of the Working Capital at Closing plus $2,082,064, then, unless the parties
agree to a different arrangement, the Cash Amount due and payable by Purchaser
at Closing will be reduced on a dollar for dollar basis by the amount of such
difference.
2.05. In the event the Intercompany Debt at Closing is less than the
sum of the Working Capital at Closing and $2,082,064, then, unless the parties
agree to a different arrangement, the purchase price for the Stock shall be
increased by the amount of such difference.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall be effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
cause the transactions provided for herein to be effective as of the Outside
Closing Date. The actual date of Closing is referred to herein as the "Closing
Date."
3.02. At Closing, Seller shall deliver title to the Seller's Assets
free and clear of all liens and
encumbrances.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser
at Closing by Seller's delivery
of the following documents:
(a) Seller shall deliver an Assignment Separate From Certificate in the
form and substance substantially the same as that attached hereto as Exhibit
3.03(a) pursuant to which Seller shall convey to Purchaser Seller's right, title
and interest in and to the Stock (the "Stock Assignment Agreement").
(b) Seller shall deliver an Assignment Agreement in form and substance
substantially the same as that attached hereto as Exhibit 3.03(b) pursuant to
which Seller shall convey to Purchaser Seller's right, title and interest in and
to the Corporation Note (the "Note Assignment Agreement").
(c) Such other documents or instruments as may be necessary to convey
title to the Seller's Assets to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
of the Seller's Assets shall be allocated between Seller and Purchaser as
follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of the Seller's Assets to
Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of the
Seller's Assets to Purchaser.
4.03. Purchaser shall pay the cost of any environmental Phase I
assessment of the Hospital which Purchaser elects to secure prior to Closing.
4.04. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.05. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Seller's Assets and to the Corporation's
Assets (as defined below) in accordance with the terms of this Agreement.
4.06. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Hospital Lease and
the Partnership Agreement as a condition to the sale of the Seller's Assets to
Purchaser in accordance with the terms hereof and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Hospital Lease and the Partnership Agreement as
a condition to securing consent to the Operations Restructuring.
4.07. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.07 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.08. Seller shall pay 50% of the cost of any repairs or renovations or
other work to the physical plant of the Hospital required to be undertaken by
the State of California in connection with any change of ownership survey which
it may elect to conduct as a condition to its review and, if applicable,
approval of the transaction which is the subject of this Agreement; provided,
however, that in the event the cost thereof, along with the cost of any repairs
or renovations or other work to the physical plant of the facilities which are
the subject of the Other Agreements, exceeds $250,000 (the "Licensure Cost Cap")
Seller shall have the right to terminate this Agreement in lieu of incurring
such costs in excess of the Licensure Cost Cap; and provided, further, that
Purchaser shall have the right to pay such costs in excess of the Licensure Cost
Cap in lieu of permitting Seller to terminate this Agreement.
4.09. Purchaser shall pay any filing or licensure fees due in
connection with the submission of any licensure or Medicare or Medi-Cal
certification applications which it is required to file in order to secure the
approval of the State of California of the transaction which is the subject of
this Agreement under applicable licensure and/or certification laws governing
the operation of the Facilities, as well as the fees and expenses of Davis
Wright Tremaine or any other legal counsel retained or utilized by Purchaser to
assist it with such matters.
4.10. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Stock and Purchaser shall pay any reasonable
attorneys' fees, processing fees and other fees and expenses contemplated by the
terms of the Credit Agreement dated December 29, 1995 between Regency Health
Services, Inc. and NationsBank of Texas, N.A.
4.11. The management fee due to the Corporation under the Amended
Management Agreement shall be prorated as of the Closing Date, with the Seller
entitled to any fees which relate to services rendered by it prior to the
Closing Date and with Purchaser entitled to any fees which relate to services to
be rendered by it from and after the Closing Date.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller, the Corporation, the Partnership and the
Guarantor. Seller is a duly organized, validly existing Delaware corporation and
is in good standing under the laws thereof. The Corporation is a duly organized,
validly existing Delaware corporation and is in good standing under the laws
thereof. The Partnership is a duly organized, validly existing California
general partnership and is in good standing under the laws thereof. Horizon/CMS
Healthcare Corporation ("Horizon") is a duly organized, validly existing
Delaware corporation and is in good standing under the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof, including, but not limited to the consummation prior to Closing of
the Operations Restructure, will not result in a breach of the terms and
conditions of nor constitute a default under or violation of Seller's Articles
of Incorporation or Bylaws or any law, regulation, court order, mortgage, note,
bond, indenture, agreement, license or other instrument or obligation to which
Seller is now a party or by which any of Seller's Assets and the Hospital (as
defined below), the Corporation's Assets or the Partnership may be bound or
affected or any agreement, option, understanding or commitment or any privilege
granted by Seller, the Corporation or the Partnership to any other party to
purchase or otherwise acquire the Seller's Assets, the Corporation's or the
Partnership's Assets (as defined below) or result in the acceleration of or an
increase in the interest rate payable under any indebtedness to which Seller,
the Corporation or the Partnership is a party other than indebtedness of Seller
which does not relate to the Hospital or indebtedness which is to be discharged
by Seller or the Corporation as of the Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own the Seller's Assets and (ii) to conduct its business as the same is now
being conducted. Seller further represents and warrants that (A) the Corporation
has full power and authority (i) to own the Corporation's Assets and (ii) to
lease the Hospital, to manage the operations thereof and to conduct its business
as the same is now being conducted and (B) the Partnership has full power and
authority (i) to lease or sublease and operate the Hospital and (ii) to conduct
its business as the same is now being conducted.
6.04. The Financials. True and correct copies of an unaudited balance
sheet and statement of operations of the Corporation as of the close of Seller's
fiscal year ended May 31, 1996, and for the four month period ended September
30, 1996 (the "Company Financials") and of the Partnership with respect to the
Partnership's operation of the Hospital for the Partnership's fiscal year ended
May 31, 1996 and for the four month period ended September 30, 1996 (the
"Partnership Financials" and together with the "Company Financials," the
"Financials") are attached hereto as Exhibit 6.04. All such financial statements
fairly represent the financial condition, and accurately set forth in all
material respects as and to the extent required by GAAP the results of the
operations of the Corporation and of the Partnership at the Hospital for the
periods covered thereby subject to customary year end adjustments. All of the
accounts receivable reflected on the Partnership Financials (less any allowances
for doubtful accounts and contractual allowances reflected therein) are
collectible in the ordinary course of the business of the Partnership. Any
financial statements prepared by the Corporation or by the Partnership
subsequent to the date of the Financials or the date hereof will be prepared in
a manner consistent with the manner in which the Financials were prepared, will
fairly represent the financial condition, and will accurately set forth in all
material respects the results of the operations of the Corporation and of the
Partnership at the Hospital for the periods covered thereby and will be provided
to Purchaser within ten (10) days after the completion thereof.
6.05. Absence of Adverse Change. Since the date of the Financials
there has not been any material
adverse change in the financial condition, business, assets, liabilities
or results of operations of the
Hospital.
6.06. The Assets of the Corporation. As of the Closing Date, the
assets of the Corporation shall
consist of the following (collectively, the "Corporation's Assets"):
(a) The Hospital Lease, including, but not limited to, the
Corporation's leasehold right, title
and interest in and to:
(i) The real property situated in the State of California and
more particularly described in Exhibit 6.06(a)(i) (the "Hospital Real
Property") and the improvements thereon that comprise the Hospital.
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Hospital Real Property leased
by the Corporation either under the terms of the Hospital Lease or
under those contracts and commitments described in Exhibit 6.06(a)(ii)
(the "Leased Hospital Personal Property"), which Leased Hospital
Personal Property is more fully described in Exhibit 6.06(a)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Hospital Lease.
(b) The Corporation's stock record books, tax returns and minute
books.
(c) All of the Corporation's right, title and interest in and to
the Partnership Note.
(d) All of the Corporation's right, title and interest in
and to and obligations under the
Amended Management Agreement.
(e) All of the Corporation's right, title and interest in and to
and obligations, if any, under
the Hospital Sublease.
(h) That fifty percent general partnership interest in the
Partnership (the "Partnership
Interests").
6.07. The Corporation's Liabilities. As of the Closing Date, the
liabilities of the Corporation
shall include only the following (the "Corporation Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Hospital Lease which relates to the
periods on and after the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 6.06(a)(ii) (the "Equipment Leases")
which relate to the periods on and after the Closing Date;
(c) The liability to perform the obligations imposed on it under
the Amended Management Agreement;
(d) The liability to pay when due the Accrued Benefits (as defined
below); and
(e) The obligations of the Corporation under the Corporation Note.
6.08. The Partnership's Assets and Liabilities. As of the Closing
Date the assets and liabilities
of the Partnership shall be limited to the following:
(a) All of the Partnership's right, title and interest in
and to and obligations under the
Hospital Sublease;
(b) All of the Partnership's right, title and interest in
and to and obligations under the
Amended Management Agreement;
(c) All of the Partnership's right, title and interest in
and to and obligations under the
Partnership Note.
(d) The Partnership Licenses (as defined below).
(e) All of the costs and expenses associated with the day to day
operation of the Hospital.
(f) The provider agreements between the Partnership and the United
States Department of Health and Human Services with respect to the
Medicare reimbursement for services provided at the Hospital and with
the California Department of Health Services with respect to the
Medi-Cal reimbursement for the services provided at the Hospital.
(g) The inventory, including linens, dietary supplies and housekeeping
supplies, food and other consumable inventories located at, or usable
in the operation of, the Hospital (the "Consumables").
(h) The furniture, fixtures, equipment and vehicles owned by the
Partnership and located on the Real Property or in the Hospital which
is not the property of the lessors under the terms of the Hospital
Lease or any other lease described in Exhibit 6.08(i), as applicable,
(the "Owned Personal Property") and which Owned Personal Property is
more fully described in Exhibit 6.08(h).
(i) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by the
Partnership relating to the Hospital and all rights of the Partnership
in and to (i) those contracts and commitments relating to the Hospital
as listed on Exhibit 6.08(i), true and correct copies of which
contracts have been provided to Purchaser by Seller as of the date
hereof and (ii) the permits and licenses used or held for use by the
Partnership in the operation of the Hospital (the "Records and
Rights").
(j) All of the Partnership's right, title and interest in and to the
trade name "Robert H. Ballard Rehabilitation Hospital" and all other
trade names used exclusively at the Hospital and not used generally by
Seller at its hospitals (the "Trade Names").
(k) The liability to make the payment due under purchase orders placed
by the Partnership in the ordinary course of business but which are
open as of the Closing Date for inventory and supplies to be delivered
after the Closing Date;
6.09. The Licenses. The Partnership has all material licenses, permits
and authorizations necessary for the lawful leasing and operation of the
Hospital as a free standing rehabilitation hospital ( the "Partnership
Licenses"). True and correct copies of all of the Partnership Licenses are
attached hereto as Exhibit 6.09. Neither Seller nor the Partnership has received
written or verbal notice of (A) any action or proceeding which has been
initiated or is proposed to be initiated by the appropriate state or federal
agency having jurisdiction thereof, to (i) revoke, withdraw or suspend any of
the Partnership Licenses, (ii) terminate the participation of the Hospital in
either the Medicare or Medi-Cal Programs or the Joint Commission on the
Accreditation of Health Care Organizations (the "JCAHO") or the Commission for
the Accreditation of Rehabilitation Facilities ("CARF") accreditation of the
Hospital (to the extent it or they are certified to participate therein), (B)
any judicial or administrative agency judgement or decision not to renew any of
the Seller Licenses, (C) any action to limit or ban admissions to the Hospital
or (D) any licensure or certification action of any other type, which would have
a material adverse effect on the business, assets or financial condition of the
Hospital.
6.10. Compliance with Law.
(a) The Hospital and its current operation and use is in substantial
compliance with all applicable health and safety laws, regulations, ordinances,
standards and orders issued by any municipal, county, state or federal agency
having authority over the Hospital and with all municipal health, building and
zoning laws and regulations (including, without limitation, the building, zoning
and life safety codes) where the failure to comply therewith would have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation thereof and there are no outstanding cited deficiencies
or work orders issued to Seller, the Corporation or the Partnership under any of
the foregoing which have not been corrected as of the date hereof or which will
not be corrected as of the Closing Date;
(b) Set forth in Exhibit 6.10(b) is a list of the most recent licensure
and Medicare and, if applicable, Medi-Cal certification survey and the results
of any complaint investigations conducted within the last six months for the
Hospital, copies of which have been made available to Purchaser as of the date
hereof. Seller has no knowledge, based on the results of Hospital surveys or
complaint investigations provided verbally or in writing to the Hospital by the
applicable supervising agency or authority and after due inquiry of the Chief
Executive Officer of the Hospital, that the Hospital, if and to the extent the
same is currently participating in the Medicare or Medi-Cal Programs, are not in
substantial compliance with all Conditions and Standards of Participation in the
Medicare and Medi-Cal Programs nor has Seller, the Corporation or the
Partnership received written or, to the best of Seller's knowledge, verbal
notice from any licensing or certifying agency requiring any or all of them to
be physically reworked or redesigned or to add furniture, fixtures, equipment or
inventory so as to conform to or comply with any existing licensure or Medicare
or Medi-Cal certification law, code or standard except where the requirement
either (i) has been fully satisfied prior to the date hereof, (ii) will be
satisfied prior to the Closing Date, (iii) will be in the process of being
satisfied in the ordinary course of business pursuant to the terms of a Plan of
Correction or other documentation submitted to and approved by the appropriate
authority or (iv) will be the subject of a valid written waiver issued by the
applicable licensing or certifying agency;
(c) Set forth in Exhibit 6.10(c) is a list of the most recent JCAHO and
CARF surveys conducted at the Hospital and the dates of any correspondence from
or to Seller, the Corporation or the Partnership and the JCAHO or CARF with
respect to the correction of any deficiencies identified in said survey, true
and correct copies of which have been made available to Purchaser as of the date
hereof. The Hospital is duly accredited by the JCAHO and by CARF, without
contingencies except such contingencies reflected in the surveys or
correspondence described in Exhibit 6.10(c). Except as reflected in the surveys
or correspondence described in Exhibit 6.10(c), the Corporation has made or
caused to be made on behalf of the Partnership, the Hospital all proper filings
required by JCAHO and CARF. None of Seller, the Corporation or the Partnership
has received written or, to the best of Seller's knowledge after due inquiry of
the Chief Executive Officer of the Hospital, verbal notice from JCAHO or CARF
requiring the Hospital to be reworked or redesigned or to add furniture,
fixtures, equipment or inventory so as to retain such accreditation except where
the requirement either (i) has been fully satisfied prior to the date hereof,
(ii) will be satisfied prior to the Closing Date, (iii) will be in the process
of being satisfied in the ordinary course of business pursuant to the terms of a
Plan of Correction or other documentation submitted to and approved by the
appropriate authority or (iv) will be the subject of a valid written waiver
issued by JCAHO or CARF. The Hospital does not participate in any accreditation
programs other than that offered by the JCAHO and by CARF.
(d) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Hospital, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Hospital, (ii) any of the members of the medical staff, the
Board of Directors or employees of the Hospital.
6.11. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Hospital which provide for the provision
of the care routinely provided at the Hospital for no consideration nor will
Seller, the Corporation or the Partnership enter into any such agreements
between the date hereof and the Closing Date.
6.12. Books and Records. To the best of Seller's knowledge after due
inquiry of the Chief Executive Officer and Medical Director of the Hospital, all
of the books and records of the Hospital, including patient records, are true
and correct in all material respects.
6.13. Title. As of the Closing Date, (i) Seller will own the Seller's
Assets, (ii) the Corporation will own or, in the case of the Leases and the
Equipment subject to the contracts listed in Exhibit 6.06(a)(ii), lease all of
the Corporation's Assets, and (iii) the Partnership will own or, in the case of
the Hospital Sublease and the contracts listed in Exhibit 6.08(i), lease all of
the Partnership Assets free and clear in each instance of all liens and
encumbrances, other than the liens described in Exhibit 6.13 (the "Permitted
Encumbrances"). Neither Seller, the Corporation nor the Partnership has received
notice of any pending or threatened condemnation proceedings with respect to the
Real Property. Seller has good and marketable title to the Stock and, at Closing
Seller will have good and marketable title to the Corporation Note, in each case
free and clear of all liens, charges and encumbrances.
6.14. Unions. There are no union contracts in effect between the
Partnership, which, as of the date hereof, is the employer of the Facility
employees, on the one hand, and the employees of the Hospital, on the other
hand. To the best of Seller's knowledge, none of the Partnership's employees who
are not currently members of a labor union in connection with their work at the
Hospital are actively seeking the formation of a labor union at the Hospital. In
connection with the Operations Restructuring, all of the Partnership's employees
shall be terminated by the Partnership prior to Closing and concurrently
therewith re-hired by the Corporation. Neither Seller, the Corporation nor the
Partnership is a party to any labor dispute, it being agreed that a claim for
wrongful termination shall not, for purposes of this Paragraph 6.14 be deemed to
be a labor dispute. Neither Seller, the Corporation nor the Partnership is a
party to any union contracts with respect to the Hospital.
6.15. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed prior to date of
execution of this Agreement by Seller with respect to the Seller's Assets, by
the Corporation, with respect to those of the Corporation's Assets which are
currently owned by the Corporation or by the Partnership with respect to those
of the Corporation's Assets which are currently owned by the Partnership and/or
with respect to its operations at the Hospital have been properly completed and
timely filed, or extensions for the filing thereof have been timely secured,
with all such filings being in material compliance with all applicable
requirements and all taxes due with respect to the foregoing have been timely
paid, except to the extent that the same are being duly contested in good faith
in accordance with applicable law and adequate reserves therefor are reflected
on the Company Financials or the Partnership Financials, as applicable, or will
be reflected in any subsequent financials prepared in accordance with the
representations and warranties contained in this Agreement.
6.16. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), the Company, the
Seller and the Partnership have (i) not released into the environment or
discharged, placed or disposed of any such hazardous materials, substances or
wastes or caused the same to be so released into the environment or discharged,
placed or disposed of at, on or under the Hospital other than to the extent the
same will not have a material adverse affect on the condition, financial or
otherwise, of the Hospital, (ii) not installed any underground storage tanks and
(iii) at all times operated the Hospital in compliance with all Environmental
Laws, except where the failure to so comply would not have a material adverse
affect on the condition, financial or otherwise, of the Hospital. Seller further
represents and warrants that there is an underground storage tank located on the
Hospital Real Property for which Seller has secured a permit as required by law,
a copy of which is included in Exhibit 6.09.
(b) With respect to the Hospital prior to the date of the Partnership's
ownership or leasing thereof, to the best of Seller's knowledge after due
inquiry of the Director of Plant Operations at the Hospital, (i) except to the
extent permitted by applicable Environmental Laws, no hazardous materials,
substances or wastes were located on or at the Hospital or were released into
the environment or discharged, placed or disposed of in, on or under the
Hospital, (ii) except to the extent permitted by applicable Environmental Laws,
no underground storage tanks are or were located at the Hospital, (iii) none of
the Hospital are located on property which was used as a dump for waste
material, and (iv) the Hospital have at all times complied with, all
Environmental Laws, except to the extent in each of the foregoing clauses (i)
through (iv) that any such non-compliance would not have a material adverse
effect on the Hospital. Seller has not received any written notice from any
governmental authority or any written complaint from any third party with
respect to its alleged noncompliance with, or potential liability under, any
Environmental Laws at the Hospital which remains unresolved as of the date
hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital which are currently in the possession of
Seller.
6.17. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, including, but not limited to the
Operations Restructuring, which action shall include, but not be limited to,
obtaining the Third Party Consents and Regulatory Approvals for which Seller is
responsible hereunder. No other action by or on behalf of Seller is or will be
necessary to authorize the execution, delivery and performance of this Agreement
and any documents and agreements executed by Seller in connection herewith or
consummation of the transactions contemplated herein, other than securing those
Third Party Consents and Regulatory Approvals (as those terms are defined below)
for which Seller is responsible under the terms hereof. Seller represents and
warrants that as of the date of execution of this Agreement, it has secured the
consent of its Board of Directors and of the Board of Directors of Horizon to
the execution of this Agreement and of any documents and agreements necessary to
carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by Seller that it will be able to secure the Third Party Consents or Regulatory
Approvals for which it is responsible, but rather this paragraph shall be
limited to Seller's representation and warranty that it will use its best
efforts to secure such Third Party Consents and Regulatory Approvals, subject to
the limitation on the costs which Seller must incur in obtaining such consents
being limited in the manner set forth in Paragraph 4.09.
6.18. Litigation. Except as set forth in Exhibit 6.18, there is no, nor
has Seller, the Corporation or the Partnership, received written or verbal
notice of any, litigation, administrative investigation or other proceeding
pending or, to the best of Seller's knowledge based on written notice with
respect thereto, threatened by any governmental authority having jurisdiction
over Seller (with respect to the Hospital only), the Corporation, the
Partnership, the Hospital or by any other party (A) where the amount claimed
exceeds $50,000 in any single action or $100,000 in the aggregate or (B) which
seeks to challenge Seller's title to the Seller's Assets, the Partnership's
title to the Partnership Assets or Seller's right or ability to consummate the
transaction provided for herein, including but not limited to the Operations
Restructuring. None of the Seller, the Corporation nor the Partnership is a
party to nor is Seller, the Corporation, the Partnership, the Hospital bound by
any orders, judgments, injunctions, decrees or settlement agreements under which
it may have continuing obligations as of the date hereof or as of the Closing
Date and which are likely to materially restrict or affect the present business
operations of the Hospital. The right or ability of Seller to consummate the
transaction contemplated herein, including, but not limited to, the Operations
Restructuring, has not been challenged by any governmental agency or any other
person and Seller has no knowledge of the occurrence of any event which would
provide a reasonable basis for any such litigation, investigation or other
proceeding.
6.19. Sensitive Payments. Seller has no reason to believe that it or
the Partnership has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made, (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books, (iii) given or received any
payments or other forms of remuneration in connection with the referral of
patients which would violate the Medicare/Medicaid Anti-kickback Law, Section
1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b) or any analogous
state statute or (iv) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the documents supporting the payment. Seller has not
filed any reports on behalf of itself or the Corporation and the Corporation has
not filed any reports on behalf of itself or in the name of the Partnership with
any governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.20. The Hospital. The Partnership is duly licensed to operate the
Hospital with 45 acute rehabilitation beds which are licensed under California
law as general acute care beds and 15 skilled nursing facility beds and is duly
certified to participate in the Medicare Program and, to the extent the
Partnership has elected to participate therein, is duly certified to participate
in the Medi-Cal Program with respect to its operations at the Hospital. The
Hospital is in good operating condition and repair and substantially all of the
Personal Property and all of the major mechanical systems located at or used in
connection with the operation of the Hospital is in good working order,
condition and repair. The roof of the Hospital does not leak. The Personal
Property is all of the property necessary for the lawful operation of the
Hospital at its current occupancy levels.
6.21 Inventories. At Closing, the Hospital shall have an inventory of
non-perishable food, central supplies, linens, housekeeping supplies, kitchen
supplies, nursing supplies and other supplies, which will be sufficient in
condition and quantity to operate the Hospital at its normal capacity and an
inventory of perishable food at the levels normally maintained by the
Partnership at the Hospital.
6.22. Trade Names. Set forth in Exhibit 6.22 is a true and complete
list of the trade names under which the Partnership is, as of the date hereof,
doing business at the Hospital. Seller has not sought on its own behalf or on
behalf of the Corporation or the Partnership protection for such names under
state or federal trademark or trade name laws except to the extent reflected in
Exhibit 6.22. None of the Seller, the Corporation nor the Partnership has
received any notice from any person challenging or questioning the right of the
Partnership to use any such trade names.
6.23. Employees/ERISA.
(a) Set forth in Exhibit 6.23 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller,
the Corporation or the Partnership which relate to the Hospital or to any
current or former employees at or of the Hospital (the "Plan" or "Plans").
Except as set forth in Exhibit 6.23 and except for stock purchase and stock
options programs administered by Horizon and for which Purchaser shall have no
liability after Closing, neither Seller nor the Partnership has made any
commitment or representation to the current or former employees of the Hospital
to establish any additional Plan, arrangement or practice or to modify or change
any existing Plan, arrangement or practice. Exhibit 6.23 also lists all
employees of the Hospital as of the date of this Agreement together with their
positions and rates of pay and earned and accrued vacation time, sick leave and
holiday pay as of the date specified therein, which date shall be the most
recent date to which such information is available to Seller.
(b) Set forth in Exhibit 6.23 is a true and correct copy of all
employment contracts between Seller, the Corporation or the Partnership and any
employee of the Hospital. Except as otherwise set forth in Exhibit 6.23 all such
contracts are terminable by Seller, the Corporation or the Partnership, as
applicable, prior to the Closing Date and, in the case of those contracts listed
in Exhibit 6.23A, will be terminated by Seller, the Corporation or the
Partnership, as applicable, prior to the Closing Date if so requested by
Purchaser.
6.24. Operating Contracts. Set forth in Exhibit 6.06(f) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller, the Corporation or the Partnership,
transfer agreements, contracts for or other evidences of indebtedness (other
than indebtedness to be discharged or released at Closing), security agreements
and other contracts and agreements, including without limitation, all provider
agreements with any third party payors and consulting and service contracts to
which Seller, the Corporation or the Partnership is a party in connection with
the operations at the Hospital (the "Operating Contracts"). Seller has provided
Purchaser with a true and correct copy of each of the Operating Contracts. Each
of the Operating Contracts is in full force and effect and none of the Operating
Contracts has been modified or amended except as set forth in Exhibit 6.06(f).
None of Seller, the Corporation or the Partnership, as applicable, is in default
of any of its obligations under the Operating Contracts nor is Seller aware of
any default or any action or omission which, with the passage of time or the
giving of notice or both, would constitute a default under the Operating
Contracts by any other party thereto. Purchaser acknowledges and agrees that
Seller shall not be in default of its obligations under this Paragraph 6.24 in
the event Exhibit 6.06(f) fails to list or Seller fails to provide to Purchaser
any Operating Contracts where the payments remaining due thereunder are less
than $25,000.
6.25. The Hospital Lease. A true and correct copies of the Hospital
Lease has been provided by Seller to Purchaser. The Hospital Lease remains in
full force and effect and has not been amended or modified except as set forth
in Paragraph 6.06. None of Seller, the Corporation nor the Partnership has
received from the landlord under the Hospital Lease any written notice that it
is in default of its obligations under the Hospital Lease or that any guarantor
thereof is in default of its obligations under any Guaranty delivered in
conjunction therewith nor does Seller have knowledge after inquiry of the Chief
Executive Officer of the Hospital of any events which, with the passage of time
or the giving of notice, would constitute a material default thereunder. The
Partnership enjoys exclusive, peaceful and undisturbed possession under all real
and personal property leases to which it is a party in connection with the
Hospital, including, but not limited to, under the Hospital Lease. Except as set
forth in Exhibit 6.25, there are no security deposits posted with respect to the
Hospital Lease.
6.26. Physician Contracts. Exhibit 6.06(f) lists each contract between
the Seller, the Corporation, or the Partnership and the physicians providing
services to the patients of the Hospital, including contracts with any entity
owned or controlled by any such physicians, true and correct copies of which
have been provided to Purchaser. Seller represents and warrants that none of
Seller, the Corporation or the Partnership, has received any notice that any
state or federal agency or any other party believes or is attempting to
determine whether any violation exists under any such physician contracts
relating to the requirements of State and federal law governing physician self
referral and "kickbacks" including but not limited to the provisions of "Stark
II" and the federal fraud and abuse laws.
6.27. Medical Staff. Attached hereto as Exhibit 6.27 is a true and
correct copy of the medical staff roster for the Hospital. Seller has made
available to Purchaser a copy of the medical staff bylaws currently in effect
with respect to the Hospital, including any and all current amendments and
modifications thereto.
6.28. Cost Reports. Either Seller, the Corporation or the Partnership
has filed when due all cost reports and other reports required to be filed with
respect to the Hospital as of the date hereof under the Medicare and Medi-Cal
Programs. Neither Seller nor the Partnership is required to file cost reports
under any other third party payor and other reimbursement programs in which the
Hospital participates. Seller has no knowledge that all such reports have not
been prepared and filed in compliance with all applicable rules and regulations.
Attached hereto as Exhibit 6.28 is a list of all such reports which have been
filed by Seller, the Corporation or the Partnership, during the last three
years, true and correct copies of which have been provided to Purchaser.
6.29. Reimbursement. The Hospital is treated under the Medicare Program
for reimbursement purposes as a free standing rehabilitation hospital with a
skilled nursing facility unit. None of Seller, the Corporation, nor the
Partnership has received any written or verbal notice from Medicare or its
fiscal intermediary threatening or challenging the status of the Hospital for
reimbursement purposes as a free standing rehabilitation hospital or from any
third party payor, including Medicare and Medi-Cal, with respect to any proposed
recoupment claim or any other proposed investigation, audit or reimbursement
dispute with respect to the Hospital or which could adversely affect the
Partnership's operations at the Hospital or the continued licensure or
certification thereof.
6.30. PRO Denials. Set forth in Exhibit 6.30 is a list of all of the
Peer Review Organization denials which to the best of Seller's knowledge after
inquiry of the Chief Executive Officer of the Hospital, Seller, the Corporation
and the Partnership have received with respect to the operations at the Hospital
during the last three years, including a description of the basis therefor, and
of the action, if any, taken by Seller, the Corporation or the Partnership to
appeal the same and the status and/or outcome of any such appeals.
6.31. Insurance. Set forth in Exhibit 6.31 is a list of all insurance
policies held by Seller, the Corporation and the Partnership with respect to the
Hospital and the other Corporation Assets and Partnership Assets and in effect
as of the date of this Agreement, including the types of coverage and amounts
thereof and the amount of deductibles thereunder. Seller has provided to
Purchaser true and correct certificates evidencing such insurance as well as
copies of the current property, professional liability and workers compensation
insurance policies in effect with respect to the Hospital. All monthly premium
installments due with respect to all of such insurance policies have been paid
in full through the date of this Agreement and will continue to be paid as and
when due between the date of this Agreement and the Closing Date.
6.32. Hill Burton. Neither Seller, the Corporation nor the Partnership
has any liability under the Hill Burton Program and Purchaser will have no
liability or obligation, as a transferee of Seller or otherwise, under the Hill
Burton Program as a result of the transaction contemplated by this Agreement.
6.33. The Partnership Agreement/The Management Agreement. True and
correct copies of the Partnership's Partnership Agreement (the "Partnership
Agreement") and the Existing Management Agreement have been provided by Seller
to Purchaser. Each of the Partnership Agreement and the Existing Management
Agreement is in full force and effect as of the date hereof and has not been
amended or modified except as reflected in Exhibit 6.33. Seller is not in
default of its obligations under the Existing Management Agreement and the
Corporation is not in default of any of its obligations under the Partnership
Agreement nor, to the best of Seller's knowledge after due inquiry of the Chief
Executive Officer of the Hospital, is the other partner under the Partnership
Agreement in default of its obligations thereunder. The Partnership Agreement
shall not be amended or modified between the date hereof and the Closing Date
other than with the prior written consent of Purchaser.
6.34. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in
good standing under the laws of the State of California. Regency Health
Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own the Interest and (ii) to conduct its business from and
after the Closing Date as the same is now being conducted.
7.04. Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date hereof
and the Closing Date, except as contemplated by this Agreement or with the
consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed, Seller, the Corporation and the Partnership:
(a) Will operate the Hospital only in the ordinary course and with due
regard to the proper maintenance and repair of any real property or personal
property associated therewith, ordinary wear and tear excepted;
(b) Will take all reasonable action to preserve the goodwill and the
present occupancy levels of the Hospital, it being understood and agreed that
they shall not be required to undertake any action to preserve occupancy levels
other than continuing to engage in the routine marketing activities in which
they are currently engaged at the Hospital;
(c) Except in conjunction with the Operations Restructuring, will not
make any material change in the operation of the Hospital nor, except in the
ordinary course of business, sell or agree to sell any items of machinery,
equipment or other fixed assets of the Hospital, including but not limited to
assets and equipment used in connection with the operation of the Hospital nor
otherwise enter into any agreements materially affecting the Hospital;
(d) Will use its reasonable efforts to retain the goodwill of the
employees of, medical staff of or physicians under contract with, Seller, the
Corporation and the Partnership, located at or connected with the operation of
the Hospital and will provide Purchaser with notice in the event of any union
organizing activities or contract negotiations are commenced after the date
hereof;
(e) Will not, except in the ordinary course of business, increase the
compensation or bonuses payable or to become payable to any of the employees
located at or connected with the operation of the Hospital, including employees
located at the Seller's corporate or regional offices who work exclusively on
matters related to the Hospital, or grant any severance benefits to any such
employees other than to the extent such bonuses or severance payments impose no
obligation on Purchaser after the Closing Date;
(f) Will not enter into any written employment agreements in connection
with the operation of the Hospital other than with physicians in the ordinary
course of business; provided, however, that Seller shall provide Purchaser with
copies of any such physician contracts;
(g) Will not, except in the ordinary course of business, enter into any
contract or commitment affecting any of the Seller's Assets, the Corporation's
Assets or the Partnership's Assets or incur any additional indebtedness or
amend, extend or renew any current debt instruments, whether in the ordinary
course of business or otherwise, nor will Seller declare or pay any dividend or
other distribution with respect to any of the Seller Assets nor pledge the
accounts receivable of Seller as security for any indebtedness or lease
agreements executed, amended or extended by Seller after the date hereof;
provided, however, that nothing herein shall be construed as prohibiting (i)
Seller or the Corporation from incurring inter-company indebtedness to Horizon
and loaning the proceeds thereof to the Partnership or the Corporation or the
Partnership from incurring such indebtedness, (ii) Horizon or the Seller from
incurring debt, the proceeds of which may be made available to Seller, the
Corporation or the Partnership or (iii) Seller, the Corporation or the
Partnership from executing any and all documents necessary to amend any debt
instruments under which Horizon may be the borrower and Seller, the Corporation
or the Partnership a guarantor;
(h) Will, during normal business hours, provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller (with respect to the Hospital), the Corporation, the
Partnership, the Hospital provided they do not interfere with the operation
thereof;
(i) Will operate the Hospital in substantial compliance with all
applicable municipal, county, state and federal laws, regulations, ordinances,
standards and orders as now in effect (including, without limitation, the
building, zoning and life safety codes as currently applied with respect
thereto) where the failure to comply therewith could have a material adverse
effect on the business, property, condition (financial or otherwise) or
operation thereof;
(j) Will take all reasonable action to achieve substantial compliance
with any laws, regulations, ordinances, standards and orders applicable to the
Hospital which are enacted or issued after execution of this Agreement and
become effective or require compliance prior to the Closing where the failure to
comply therewith could have a material adverse effect on the business, property,
condition (financial or otherwise) or operation thereof;
(k) Will cause the Corporation's Assets and the Partnership's Assets to
be maintained in substantially the same condition as they were in at the date
hereof, ordinary wear and tear, casualty loss and taking by eminent domain
excepted;
(l) Will provide Purchaser with copies of the Corporation's
and the Partnership's monthly
financial statements prepared in the ordinary course of business;
(m) Will provide Purchaser with copies of all licensure or
certification surveys received by Seller (with respect to the Hospital), the
Corporation or the Partnership and the related Plans of Correction prepared by
Seller, the Corporation or the Partnership, as applicable;
(n) Will cause the Partnership to pay as and when due the accounts
payable which arise in the ordinary course of the business of the Hospital,
except to the extent that the amount owing is being duly contested by Seller,
the Corporation or the Partnership and such contest does not materially affect
Seller, the Corporation, the Partnership, the Hospital;
(o) Will maintain in force the existing insurance coverage with
respect to the Hospital described
in Exhibit 6.31;
(p) Will file all returns, reports and filings of any kind or nature,
or to secure timely extensions for the filing thereof, required to be filed by
Seller (with respect to the Seller's Assets, the Hospital), the Corporation or
the Partnership, including, but not limited to, state and federal tax returns
and Medicare and Medicaid cost reports with respect to the Hospital and will
timely pay all taxes or other obligations which are due and payable with respect
thereto, except to the extent that the same are being duly contested in good
faith in accordance with applicable law and such contest does not materially
affect Seller's ability to fulfill its obligations under this Agreement or to
consummate the transaction provided for herein or the Corporation, the
Partnership, the Hospital;
(q) Will provide to Purchaser copies of all material documents which
relate to, and, upon request, with verbal or written updates concerning the
status of, any litigation filed as of the date hereof or filed from and after
the date hereof by or against Seller (with respect to the Hospital), the
Corporation or the Partnership after the date of this Agreement but prior to the
Closing Date where the amount claimed or assessed by management of Seller as
likely to be claimed exceeds $500,000; and
(r) Will not amend or permit the amendment of any of the
Medical Staff Bylaws described in
Paragraph 6.27.
(s) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(t) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller, any of the Seller's Assets, the Corporation's
Assets, the Partnership or the Partnership Assets, or offer to acquire or convey
in any manner, directly or indirectly, all or substantially all of the equity
interests in, the voting securities of Seller, the Seller's Assets, the
Corporation's Assets, the Partnership or the Partnership Assets; provided,
however, that public announcements of the transaction contemplated by this
Agreement shall not be prohibited hereby;
(u) Will proceed with all due diligence to secure the
Regulatory Approvals and Third Party
Consents for which it is responsible under the terms hereof;
(v) Will cooperate with Purchaser, at Purchaser's cost and expense, in
any audits of the results of operations at the Hospital which Purchaser elects
to conduct in order to comply with any requirements applicable to it under the
federal securities laws;
(w) Shall, within ten (10) days after Seller's receipt of Purchaser's
title, UCC search and survey objections pursuant to Paragraph 10.01, shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected; and
(x) Will take such action as may be necessary to ensure that the assets
and the liabilities of the Corporation on the Closing Date exclude the
following:
(i) The Corporation's cash, cash equivalents and accounts
receivable (the "Cash and Cash
Equivalents").
(ii) Any claims which the Corporation may have against third parties
relating to or arising from the acts or omissions of third parties
prior to the Closing (the "Third Party Claims").
(iii) Any refunds to which the Corporation may now or hereafter be
entitled relating to payments by or on behalf of the Corporation prior
to the Closing including, without limitation, any federal, state, local
or foreign taxes paid by the Corporation prior to the Closing Date (the
"Refunds").
(iv) The bank accounts of the Corporation (the "Bank Accounts").
(v) The items owned by the Corporation and listed on Exhibit 9.02
(x)(v);
(vi) All computer hardware and software relating to the wide area
network of Horizon used by the Corporation or the Partnership for the
operation of the general ledger and accounts payable software
applications, which computer hardware and software is more fully
described in Exhibit 9.02(x)(vi) (the "GL/AP Hardware and Software");
(vii) Subject to the provisions of Paragraph 9.03(e), the Corporation's
rights and interests in and to proprietary materials, programs,
manuals, promotional materials and other intangibles owned or developed
by Seller and used by the Corporation or the Partnership in connection
with the operations at the Hospital.
(y) Will proceed with all due diligence to cause the Operations
Restructuring to be completed as of the Closing Date pursuant to the terms of
documents, including, but not limited to, the Assignment of the Hospital Lease,
the Hospital Sublease, and the Amended Management Agreement, in form and
substance reasonably acceptable to Seller and Purchaser.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a
designated escrow agent in accordance with any written escrow instructions
executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01).
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers executing documents on behalf of
Seller, a copy of the resolutions adopted by Seller's Board of Directors
authorizing the transaction provided for herein and the execution of this
Purchase Agreement and the other documents contemplated herein and attaching a
certificate of good standing issued by each of the California and Delaware
Secretary of State within no more than thirty (30) days prior to Closing;
(c) The duly executed Stock Assignment Agreement;
(d) The duly executed Note Assignment Agreement;
(e) Written Escrow Instructions;
(f) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, the consent of the Bank of
Tokyo, the Partnership (to the Operations Restructuring and, if applicable, to
the sale of the Stock), The San Bernardino Community Hospital ("Community
Hospital") (to both the sale of the Stock and the Operations Restructuring) and
the waiver by Community Hospital and Arrowhead Health Care Systems of its and
their rights of first refusal, for which it is responsible under the terms of
this Agreement.
(g) An Estoppel Certificate in form and substance reasonably
acceptable to Purchaser duly
executed by the Landlord under the Hospital Lease;
(h) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to
Purchaser.
(i) The executed original of the Partnership Note;
(j) A duly executed original of the Hospital Sublease;
(k) A duly executed original of the Amended Management Agreement;
(l) A duly executed original of the Assignment and Assumption
Agreement with respect to the
Hospital Lease; and
(m) Duly executed copies or originals of any other documents executed
by Seller, the Corporation and/or the Partnership in connection with the
Operations Restructuring.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Hospital any and all plans and specifications with
respect to the Hospital which may be in Seller's or the Partnership's
possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Hospital in
its filings with the United States Securities and Exchange Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) File or cause to be filed any final cost reports with respect to
the cost reporting periods prior to the Closing Date for which it or the
Partnership may be responsible under applicable state and federal law within the
time periods proscribed thereunder, it being understood and agreed that the
purpose of this provision is to ensure that there is no adverse affect on the
reimbursement paid to Purchaser or the Partnership with respect to the
operations at the Hospital after Closing.
(e) To permit Purchaser, the Corporation and/or the Partnership to
continue to use, for a period of one hundred eighty (180) days after the
Closing, proprietary materials, programs, manuals, promotional materials and
other intangibles owned or developed by Seller and used by the Corporation or
the Partnership in connection with the operations at the Hospital as are
reasonably necessary to the continued licensure, certification and/or
accreditation of the Hospital after Closing.
(f) To provide data processing services with respect to the Hospital
and the hospitals which are the subject of the Other Agreements on the terms and
for the cost specified in Exhibit 9.03(f).
(g) To permit Purchaser, the Corporation and/or the Partnership to use
for a period of 60 days after Closing any signs located at the Hospital or any
pre-printed materials, such as admitting forms or patient information materials,
on which the Seller's name or logo may appear.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of
Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title commitment and/or survey of
the Real Property and the Hospital which Purchaser may elect to obtain;
provided, however, that Purchaser shall not have the right to object to any
items reflected on the title commitment which are reflected in Exhibit 6.13. If
Seller refuses to correct some or all of the title, survey or lien defects
objected to by Purchaser within the time period reflected in Paragraph 9.01(o)
or to give Purchaser reasonable assurances that the same will be corrected as of
the Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and
Regulatory Approvals for which it is responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller
and Purchaser agree in writing in the Escrow Instructions to handle the same
outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The executed Note Assignment Agreement;
(c) The cash due at Closing pursuant to Paragraph 2.01;
(d) Duly executed Escrow Closing Instructions;
(e) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to
Seller;
(f) The Purchaser's Note; and
(g) Evidence that Purchaser has secured for the benefit of the
Corporation or the Partnership, as applicable, insurance with respect to the
Hospital which is substantially the same as the insurance described in Paragraph
6.31.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Hospital.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Hospital, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller and the staff physicians of
the Hospital employed by Seller or the Partnership prior to the Closing Date
(but in the case of such staff physicians only as necessary for the further care
of their patients and the defense of litigation) shall be entitled, after the
Closing Date, during normal business hours of the Hospital and on advance notice
to Purchaser to have access to and to make copies, at their sole cost and
expense, of the patient records, including the medical records and medical
charts of any patient admitted to the Hospital on or before the Closing Date. In
addition, to the extent permitted by law and to the extent required by law,
Seller shall be entitled to remove from the Hospital or a Clinic any such record
or chart, but only for the purposes of pending litigation involving a patient to
whom such record or chart refers, as certified in writing prior to removal by an
officer of Seller or counsel retained by Seller in connection with such
litigation, and only prior to making a copy thereof, at Seller's cost and
expense, for retention at the Hospital. Any record or chart so removed by the
Hospital shall be promptly returned to Purchaser following its use by Seller in
accordance with the terms hereof.
(e) Provide any and all working capital loans required for
the day to day operations of the
Hospital by the Corporation.
(f) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing, including, but not limited to, JCAHO and CARF.
(g) Not to use the Seller's name in connection with the operation of
the Hospital other than as specifically authorized by Paragraph 9.03(f).
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets or the Corporation's Assets or
the Partnership's Assets which are the subject of this Agreement or the Other
Agreements which either alone or in the aggregate, with all such other sales or
dispositions, would constitute the sale or disposition of a "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X of the rules and
regulations of the Commission), (ii) take any action, the consummation of which
cannot be conditioned on the consummation of the transactions contemplated by
this Agreement, where such action would have a material adverse effect on Seller
or (iii) take any action which either would have a material adverse effect on
the operations, business or financial condition of Seller or would materially
impair the value of the transaction contemplated herein to Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Hospital from and after the Closing Date (the "Regulatory
Approvals"), and the consent of its lenders, lessors and other third parties to
the extent required under any loan documents, lease agreements, management
agreements or other instruments to which it is a party, including, but not
limited to, the consent of the lessors under the Hospital Lease (the "Third
Party Consents"); provided, however, that the consent of the holders of the
bonds issued by Purchaser's parent corporation under that Indenture dated as of
June 28, 1996 in the original principal amount of $50,000,000 and that Indenture
dated as of October 12, 1996 in the original principal amount of $110,000,000
(collectively, the "Subordinated Debt") shall not be deemed to be a required
Third Party Consent, it being understood and agreed that Purchaser has
represented that the transaction as contemplated herein after the completion of
the Operations Restructuring will not require the consent of such bondholders
and that Seller has, in part, relied on such representation in agreeing to
undertake the Operations Restructuring.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by
either party of any press release or any written statement with respect to this
Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined
below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof, including, but not limited to, if applicable, change of
ownership approval from the California Department of Health Services (the "CHOW
Approval").
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, neither Seller nor
the Partnership shall be in default, where said default cannot be cured by the
Closing Date, under any mortgage, contract, lease or other agreement to which
Seller, the Corporation or the Partnership is a party or by which Seller, the
Corporation or the Partnership is bound and which will affect or relate to the
Real Property, the Personal Property or the Hospital after the Closing Date.
(e) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(f) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(g) The closing of the transactions which are the subject of
the Other Agreements shall have
occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date, of each of the
following conditions any one or more
of which may be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the landlord under the Hospital
Lease has refused to release Seller from its guarantee thereof or from primary
liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have
occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following
conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date other than the Purchaser's receipt of the CHOW Approval pursuant to
Paragraph 12.01(c), provided Purchaser is diligently pursuing the issuance of
the CHOW Approval by the California Department of Health, the Outside Closing
Date shall automatically be extended for such additional period of time as may
be necessary to permit Purchaser to secure the CHOW Approval; provided, further
that in the event Purchaser has not secured the same within thirty (30) days
after the Outside Closing Date, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights or
obligations hereunder.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission
requires any of the actions described in Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of any of the Hospital Real Property or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination
or pursue any other remedy referred to in Paragraph 13.01 on account of a breach
of a condition, covenant or warranty by the other, without first given such
other party written notice of such breach and not less than ten (10) days within
which to cure such breach. The Closing Date shall be postponed if necessary to
afford such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Hospital as of the Closing Date,
(ii) their positions and rates of pay, (iii) a reasonable estimate as of the
Closing Date of all earned and accrued vacation, holiday and sick pay and earned
or accrued "EVA" bonuses due to and/or coming due to the employees of the
Hospital as of the Closing Date (the "Estimated Accrued Benefits"). Purchaser
shall agree from and after the Closing Date, to cause the Corporation to pay the
Actual Accrued Benefits, to the employees of the Hospital as and when due in
accordance with the Corporation's personnel policies from and after the Closing
Date, it being agreed for the benefit of Seller that such policies shall not be
modified by Purchaser after Closing with the intent or result being a reduction
of benefits accrued in favor of any employee as of the Closing Date. Within a
reasonable period of time following the Closing Date, which shall in no event be
more than thirty (30) days, Seller shall provide Purchaser with a schedule of
the Accrued Benefits which were earned or accrued as of the Closing Date (the
"Actual Accrued Benefits").
14.02. Purchaser shall retain as employees of the Corporation at
Closing all of the employees of the Corporation who, as of the Closing, work at
the Hospital and have been employed on average for 20 hours or more per week.
Such employees whose employment is continued shall be referred to as the
"Retained Employees." Any such continued employment of a Retained Employee by
Purchaser shall be on terms which require said Retained Employee to perform
comparable services, in a comparable position and at substantially the same base
salary as such Retained Employee enjoyed with the Partnership prior to Closing.
Seller or any of its affiliates shall have the right to employ or offer to
employ any Retained Employee who declines to continue employment with the
Corporation. The Retained Employees who elect to accept continued employment
with the Corporation shall hereinafter be referred to as the "Hired Employees")
and as to each of the Hired Employees, Purchaser shall recognize each such Hired
Employees original hire date and shall cause the Corporation to continue to
employ each such Hired Employee for a period of no less than ninety (90) days
following the Closing Date unless the employment of such Hired Employee is
terminated in accordance with Purchaser's personnel policies or as a result of
such Hired Employee's resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Hospital of the "closure" thereof under the
Worker Adjustment and Retraining Notification Act (the "WARN Act") or under any
comparable California state law. Accordingly, Purchaser agrees to indemnify,
defend and hold harmless Seller from any liability which it may incur under the
WARN Act or under comparable California State law in the event of a violation by
Purchaser of its obligations thereunder, including a violation which results
from allegations that Purchaser constructively terminated the employees of the
Hospital as a result of the terms and conditions of employment offered by
Purchaser. Nothing in Section 14.02 shall, however, create any rights in favor
of any person not a party hereto, including the employees of the Hospital, or
constitute an employment agreement or condition of employment for any employee
of Seller or any affiliate of Seller who is a Retained Employee or a Hired
Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Hospital to whom it is required to offer the same under
applicable law. Seller acknowledges and agrees that Purchaser is not assuming
any of Seller's obligations to its employees under COBRA or otherwise, except as
specifically provided in this Article XIV. As of the Closing Date, all active
employees of the Corporation: (i) who participate as of the Closing Date in
group health insurance coverage sponsored by Seller and (ii) who remain
employees of the Corporation after the Closing Date, shall be eligible for
participation in a group health plan (as defined for purposes of Internal
Revenue Code Section 4980B) established and maintained by Purchaser for the
general benefit of its employees and their dependents and all such employees
shall be covered without a waiting period and without regard to any pre-existing
condition unless (A) they are under a waiting period with Seller at the time of
Closing, in which case they shall be required to complete their waiting period
while under Purchaser's group health plan or (B) they were subject to a
pre-existing condition exclusion while under Seller's group health plan, in
which case they shall be subject to the same exclusion while in Purchaser's
group health plan, which exclusion shall, if applicable, be subject to the same
time limitation while in Purchaser's employ as was applicable thereto while said
employees were in Seller's employ, with the time limit calculated from the date
the same commenced while in Seller's employ. Seller and Purchaser acknowledge
and agree that it is the intent of this provision that Seller shall not be
required to provide continued health coverage under ERISA or Section 4980 of the
Internal Revenue Code to any of such employees of the Corporation who are
retained after Closing or to any qualified beneficiary (as defined for purposes
of Section 4980B of the Internal Revenue Code) with respect to any such
employees.
14.05. Seller agrees that the continued employment of the Hired
Employees of the Hospital will be important to the viability of Purchaser's
operations at the Hospital. Accordingly, Seller agrees that for a period of one
year after the Closing Date it will not directly or indirectly solicit the
employment of any of such Hired Employees nor shall it take any action to
directly or indirectly interfere with their employment relationship with
Purchaser or to induce them in any manner to terminate their employment
relationship with Purchaser. Seller acknowledges and agrees that Purchaser would
not be fully compensated by damages in the event of a breach or threatened
breach by Seller of this provision and accordingly agrees that Purchaser shall
be entitled, without the need to post a bond, to seek an injunction to restrain
such violation or threatened violation of this Paragraph 14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Seller shall indemnify and hold Purchaser harmless from and
against an amount equal to any and all damages, liabilities, losses, costs or
expenses (the "Losses") which Purchaser may incur as a result of the following
(it being understood and agreed that in the event of any such Losses incurred by
Purchaser in its capacity as the sole shareholder of a partner in the
Partnership, the amount of such Losses suffered by Purchaser shall be equal to
50% of the Losses suffered or incurred by the Partnership):
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of the Seller's Assets, the Corporation's Assets and/or the
Partnership's Assets and the operation of the Hospital prior to the Closing
Date, whether or not the same are covered by the Partnership's insurance,
including, but not limited to (i) any obligations under the Hospital Lease, the
Operating Contracts, the Corporation Liabilities, and the Partnership
Liabilities, (ii) any violations of the Medicare or Medicaid fraud and abuse
laws, the Stark II law governing relationships with physicians or any other
state or federal law governing the operation of the Hospital (whether or not
such violations would constitute a breach by Seller of a representation or
warranty set forth herein) and (iii) any failure of any cost report filed by the
Corporation, the Partnership or Seller, for the cost reporting periods prior to
the Closing Date, including the final cost reports filed after the Closing Date,
to comply with applicable state or federal law (whether or not such violation
would constitute a breach by Seller of a representation or warranty set forth
herein);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or
nonfulfillment of any agreement on the part of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers;
(d) Any claims against Seller, the Partnership, Purchaser, the Hospital
or the other Partnership Assets under the Medicare or Medi-Cal Programs or under
any other third party payor programs (i) with respect to the operation of the
Hospital by the Partnership prior to the Closing Date, (ii) for recapture of
depreciation generated by the transaction contemplated hereby or (iii) for
repayment of any overpayments made to the Partnership or Seller under the
Medicare or Medi-Cal Programs or any other third party payor program for
services rendered at the Hospital prior to the Closing Date, including, but not
limited to, claims against Purchaser in the form of offsets by Medicare or
Medi-Cal or any other third party payor against their payments due to Purchaser
on and after the Closing Date;
(e) The assets and liabilities described in Paragraph 9.01(x); and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of the Seller's Assets, the
Corporation's Assets, the Partnership's Assets and the operation of the Hospital
from and after the Closing Date, including, but not limited to, any obligations
under the Hospital Lease, the Operating Contracts, the Corporation Liabilities
and the Partnership Liabilities (if and to the extent they relate solely to the
period from and after the Closing Date);
(b) Any misrepresentation or breach of warranty by Purchaser
set forth in this Agreement or
nonfulfillment of any agreement on the part of Purchaser under this Agreement;
and
(c) Any federal income tax liability which Seller may incur in
connection with the consummation of the Transaction provided for herein which is
directly attributable to the Operations Restructuring; provided, however, in no
event shall Purchaser's liability under this Paragraph 15.02(c) exceed $100,000;
provided, further, that Purchaser's indemnity obligation shall be conditional on
a review and approval by Purchaser's independent certified public accountant of
Seller's tax liability calculation.
(d) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party or under that Purchase and Sale Agreement of
even date herewith between Rehab Concepts Corp., as Seller, and Regency Rehab
Properties, Inc., a California corporation, as Purchaser, individually or in the
aggregate with any and all prior breaches equals or exceeds Fifty Thousand and
no/100 Dollars ($50,000) (the "Representation and Warranty Liability
Threshold"). In the event the Representation and Warranty Threshold is met, then
the Non-Breaching Party shall be entitled to seek to collect from the Breaching
Party any and all damages, liabilities, losses, costs or expenses suffered or
incurred as a result of all such breaches of the representations and warranties
set forth herein on a first dollar basis and not merely to recover damages in
excess of the Representation and Warranty Liability Threshold.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder with respect to any Real Property and Personal Property included in
the Corporation's Assets effective at Closing to a real estate investment trust
(the "REIT") in connection with its financing of the transaction provided for
herein provided Seller first confirms to Purchaser that, in its reasonable
determination, such assignment will not have adverse reimbursement consequences
for Seller; and provided, further, that no such assignment shall relieve
Purchaser of its obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including successors by operation of law pursuant to any
merger, consolidation or sale of assets involving either party. In the event of
an assignment of this Purchase Agreement to a REIT, Purchaser shall advise
Seller as to those documents and deliveries contemplated by this Agreement which
are to run in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the REIT
rather than Purchaser, if any, it being understood and agreed that in the event
of such an assignment, the only right which the REIT will assume is Purchaser's
right to take title to the Corporation's Assets and the only obligation which
the REIT will assume is Purchaser's obligation to pay the purchase price in
accordance with the terms hereof .
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.15
and 6.16, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
16.15. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
CONTINENTAL MEDICAL SYSTEMS, INC.
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between Continental Medical Systems, Inc.,
as Seller, and Purchaser dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Seller, guarantees
and promises to and for the benefit of Purchaser that (i) the representations
and warranties of Seller are true and correct as of the date of execution of the
Agreement and shall be true and correct as of the Closing Date (as modified by
any supplements to the Seller Disclosure Letter to reflect events after the date
hereof) and (ii) Seller shall perform all of its obligations, covenants and
agreements, including, but not limited to, its indemnity obligations under
Paragraph 15, to be performed on its part under the Agreement . If Seller
defaults under the Agreement , Purchaser may proceed immediately against Horizon
or Seller or both to enforce any rights it has under the Agreement or this
Guaranty. Notwithstanding the foregoing, the representations and warranties of
Seller will not survive beyond the periods applicable thereto set forth in
Paragraph 16.13 hereof and this Guaranty shall not be construed to give
Purchaser a claim or cause of action against Horizon after the expiration of the
applicable survival period for a breach by Seller of any representation or
warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the
performance of Seller's obligations under the Agreement ;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the
Agreement (whether absolute or as collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement ,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or
agreed to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement ;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the
rejection of the Agreement by Seller or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement , and Purchaser may
exercise its remedies hereunder without the necessity of any notice to Seller or
Horizon of nonpayment, nonobservance, nonperformance or other default by Seller
under the Agreement other than such notice as may be specifically required by
the terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Continental Medical Systems, Inc. ("Seller") to enter
into the Purchase and Sale Agreement between Seller and Regency Rehab Hospitals,
Inc. ("Purchaser") dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Purchaser,
guarantees and promises to and for the benefit of Seller that (i) the
representations and warranties of Purchaser are true and correct as of the date
of execution of the Agreement or the Purchaser's Note and shall be true and
correct as of the Closing Date (as modified by any supplements to the Purchaser
Disclosure Letter to reflect events after the date hereof), (ii) Purchaser shall
perform all of its obligations, covenants and agreements, including, but not
limited to, its indemnity obligations under Paragraph 15, to be performed on its
part under the Agreement or the Purchaser's Note and (iii) Purchaser's
obligations under the Purchaser's Note (as defined in the Agreement or the
Purchaser's Note). If Purchaser defaults under the Agreement or the Purchaser's
Note or the Purchaser's Note, Seller may proceed immediately against Regency or
Purchaser or both to enforce any rights it has under the Agreement or the
Purchaser's Note or the Purchaser's Note or this Guaranty. Notwithstanding the
foregoing, the representations and warranties of Purchaser will not survive
beyond the periods applicable thereto set forth in Paragraph 16.13 hereof and
this Guaranty shall not be construed to give Seller a claim or cause of action
against Regency after the expiration of the applicable survival period for a
breach by Purchaser of any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement or the Purchaser's Note or the Purchaser's Note by lapse of
time or otherwise (all of which are hereby authorized by Regency) or a
release or limitation of the liability of Purchaser or its estate in
any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or the
Purchaser's Note or acceptance of partial payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance
of Purchaser's obligations under the Agreement or the Purchaser's Note;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or the
Purchaser's Note or to exercise any remedy available thereunder or any
other security instrument given as security for performance of the
same, in the event of a default in the performance by Purchaser in its
obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement or the
Purchaser's Note, including the commencement by Seller of any
proceedings against Purchaser upon the occurrence of a default
thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or
agreed to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement or the Purchaser's Note;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the
rejection of the Agreement or the Purchaser's Note by
Purchaser or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Agreement or the
Purchaser's Note to the extent Regency is lawfully entitled to raise the same as
a defense to its obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement or the Purchaser's Note, and Seller may exercise
its remedies hereunder without the necessity of any notice to Purchaser or
Regency of nonpayment, nonobservance, nonperformance or other default by
Purchaser under the Agreement or the Purchaser's Note other than such notice as
may be specifically required by the terms of the Agreement or the Purchaser's
Note prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.05
PURCHASE AND SALE AGREEMENT
SAN BERNARDINO REAL ESTATE
This Agreement is made and entered into this 19th day of November, 1996
by and between Rehab Concepts Corp., a Delaware corporation ("Seller") and
Regency Rehab Properties, Inc., a California corporation ("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to the
following:
(a) The real property more particularly described in Exhibit 1.01(a)(1)
(the "Hospital Real Property") and the improvements thereon that comprise the
free standing rehabilitation hospital with 45 acute rehabilitation beds and 15
skilled nursing facility beds and commonly known as Robert H. Ballard
Rehabilitation Hospital, 1760 West 16th Street, San Bernardino, California (the
"Hospital").
(b) All equipment, furniture and fixtures located on or used in
connection with the operation of the Hospital Real Property (the "Hospital
Personal Property"), which Hospital Personal Property is more fully described in
Exhibit 1.01(a)(2) and the Lease with respect to the Hospital Personal Property
between Seller and San Bernardino Rehabilitation Hospital, a California general
partnership ("SBRH"), as lessee (the "Equipment Lease").
(c) The lessor's interest under the Lease Agreement dated July 9, 1993
between Seller, as lessor, and SBRH, as Lessee (the "Hospital Lease").
Hereinafter the Hospital Real Property, the Hospital, the Hospital
Personal Property, the Seller's interest under the Equipment Lease and Seller's
interest under the Hospital Lease will sometimes be collectively referred to as
the "Seller's Assets."
1.02. Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge the liabilities
and obligations of Seller as the lessor under the Hospital Lease and the
Equipment Lease which relate to periods on and after the Closing Date (the
"Assumed Liabilities").
1.03. Except for the Assumed Liabilities, no obligation or liability of
Seller relating to or arising from the Seller's Assets prior to the Closing Date
is to be assumed by Purchaser.
ARTICLE II
PURCHASE PRICE
2.01. The purchase price for Seller's Assets shall be Thirteen Million
Six Hundred Seventy-Two Thousand and no/100 Dollars ($13,672,000) (the "Purchase
Price") which shall be payable in cash at Closing concurrently with the transfer
of the Seller's Assets to, and the assumption of the Assumed Liabilities by,
Purchaser, and which cash shall be subject to adjustment to reflect the costs,
expenses and prorations for which Seller and Purchaser are responsible under
Paragraph 4 hereof.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall occur effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date. The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver title to the Hospital Real
Property, the Hospital Personal Property and Seller's interest under the
Hospital Lease free and clear of all liens and encumbrances other than the
following (collectively, the "Permitted Exceptions"):
(a) Liens for real and personal property taxes which are not yet
due and payable;
(b) The title matters listed in Exhibit 3.02(b); and
(c) Such liens as may be approved or deemed approved by Purchaser
pursuant to Paragraph 10.01.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser at
Closing by Seller's delivery of
the following documents:
(a) Seller shall deliver a Grant Deed in the form attached hereto
as Exhibit 3.03(a) (the "Grant
Deed").
(b) Seller shall deliver a Bill of Sale in the form attached
hereto as Exhibit 3.03(b) (the "Bill
of Sale").
(c) Seller shall deliver an Assignment of Lease in the form attached
hereto as Exhibit 3.03(c) with respect to the Hospital Lease and the Equipment
Lease (the "Lease Assignment Agreement").
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
and operation of the Seller's Assets shall be allocated between Seller and
Purchaser as follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any transfer or
excise taxes due on the transfer of title to the Hospital Real Property and the
Hospital or Seller's interest in the Hospital Lease.
4.02. Purchaser shall pay any sales tax due on the transfer of the
Hospital Personal Property and the
Seller's interest in and to the Equipment Lease to Purchaser.
4.03. Seller shall pay the base premium for a standard ALTA owner's
policy of title insurance in the amount of the Purchase Price for the Hospital
Real Property and the Hospital, insuring Purchaser's title to the Hospital Real
Property and the Hospital; Purchaser shall pay the cost of any premiums for
extended coverage which Purchaser may elect to secure, including the cost of the
ALTA survey ("Survey") required to obtain the same, any lender's coverage which
it elects or is required to secure in connection with its acquisition of the
Seller's Assets or financing thereof and any title endorsements which it elects
to obtain or is required to obtain to satisfy the requirements of its lender.
4.04. Purchaser shall pay the cost of any environmental Phase I
assessment of the Seller's Assets which Purchaser elects to secure prior to
Closing.
4.05.Any rent due to Seller under the terms of the Hospital Lease or
the Equipment Lease shall be prorated as of the Closing Date, it being
understood and agreed that there will be no proration with respect to the
payment of any real and personal property taxes or assessments or other expenses
related to the ownership or operation of the Seller's Assets as Seller has no
responsibility for such costs and expenses under the terms of the Hospital Lease
and the Equipment Lease but SBRH is solely responsible therefor under the terms
thereof.
4.06. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.07. Purchaser and Seller shall share recording fees related to the
recording of the conveyancing documents and any escrow fees on a 50-50 basis.
4.08. Seller shall pay the cost of obtaining and recording any releases
and consents necessary to deliver title to the Seller's Assets in accordance
with the terms of this Agreement.
4.09. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements listed in Exhibit 4.09 (the "Other Agreements") under the Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
4.10. Purchaser shall reimburse Seller at Closing for any prepaid
expenses and deposits which relate to the period on and after the Closing Date.
4.11.Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Seller's Assets and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Credit Agreement dated December 28, 1995
between Regency Health Services, Inc. and NationsBank of Texas, N.A.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets, subject only to the rights of SBRH under the Hospital Lease and
the Equipment Lease.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as otherwise
specifically set forth in the disclosure letter addressed to Purchaser and dated
the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller. Seller is a duly organized, validly existing
Delaware corporation and is duly qualified to do business in the State of
California and is in good standing under the laws thereof. Horizon is a duly
organized, validly existing Delaware corporation and is in good standing under
the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's Articles of Incorporation or
Bylaws or any law, regulation, court order, mortgage, note, bond, indenture,
agreement, license or other instrument or obligation to which Seller is now a
party or by which any of Seller's Assets may be bound or affected or any
agreement, option, understanding or commitment or any or privilege granted by
Seller to any other party to purchase or otherwise acquire the Seller's Assets
or result in the acceleration of or an increase in the interest rate payable
under any indebtedness other than indebtedness of Seller which does not relate
to the Hospital or which is to be discharged by Seller as of the Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own and lease the Hospital Real Property, the Hospital and the Hospital
Personal Property as the same are presently owned and leased and (ii) to conduct
its business as the same is now being conducted.
6.04. Absence of Liabilities. There are no material liabilities
with respect to the Seller's
Assets of which Seller has knowledge and which Seller has failed to disclose to
Purchaser.
6.05. The Licenses. To the extent not obtained by the tenant under the
Hospital Lease or the Equipment Lease in accordance with the requirements
thereof, Seller has all material licenses, permits and authorizations, if any,
necessary for the lawful ownership and leasing under the terms of the Hospital
Lease and the Equipment Lease of the Seller's Assets (the "Seller Licenses").
True and correct copies of all of the Seller Licenses are attached hereto as
Exhibit 6.05. Seller has not received written or verbal notice of any action or
proceeding which has been initiated or is proposed to be initiated by the
appropriate state or federal agency having jurisdiction thereof, to revoke,
withdraw or suspend any of the Seller Licenses.
6.06. Compliance with Law. Seller has no knowledge that the Hospital
was not constructed and has not been maintained in substantial compliance with
all applicable health and safety laws, regulations, ordinances, standards and
orders issued by any municipal, county, state or federal agency having authority
there over and with all applicable municipal health, building and zoning laws
and regulations (including, without limitation, the building, zoning and life
safety codes) where the failure to comply therewith would have a material
adverse effect on the business, property, condition (financial or otherwise) of
the Seller's Assets or the operation of the Hospital under the terms of the
Hospital Lease and there are no outstanding cited deficiencies or work orders
issued to Seller with respect to the Seller's Assets for which it is responsible
(as compared to for which the tenant under the Hospital Lease is responsible in
accordance with the terms thereof) under any of the foregoing which have not
been corrected as of the date hereof or which will not be corrected as of the
Closing Date.
6.07. Books and Records. All of the Seller's books and records
relating to the Seller's Assets are
true and correct in all material respects.
6.09. Title. Seller has title to all of the Seller's Assets free
and clear of all liens, charges
and encumbrances other than the liens provided for in Paragraph 3.02. Seller
has not received notice of any
pending or threatened condemnation proceedings with respect to the Hospital Real
Property.
6.10. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Seller prior to date
of execution of this Agreement with respect to the Hospital have been properly
completed and timely filed, or extensions for the filing thereof have been
timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Seller's ownership and
leasing of the Hospital have been timely paid, except to the extent that the
same are being duly contested in good faith in accordance with applicable law.
6.11. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under the
Hospital or the Hospital Real Property other than to the extent the same will
not have a material adverse affect on the condition, financial or otherwise, of
the Seller's Assets, (ii) not installed any underground storage tanks at or
under the Hospital Real Property and (iii) at all times maintained or caused to
be maintained the Hospital and the Hospital Real Property in compliance with all
Environmental Laws, except where the failure to so comply would not have a
material adverse affect on the condition, financial or otherwise, of the
Seller's Assets.
(b) With respect to the Hospital and the Hospital Real Property prior
to the date of the Seller's ownership thereof, to the best of Seller's knowledge
after due inquiry of the Director of Plant Operations at the Hospital, (i)
except to the extent permitted by applicable Environmental Laws, no hazardous
materials, substances or wastes were located on or at the Hospital or the
Hospital Real Property or were released into the environment or discharged,
placed or disposed of in, on or under the Hospital or the Hospital Real
Property, (ii) except to the extent permitted by applicable Environmental Laws,
no underground storage tanks are or were located at the Hospital Real Property,
(iii) the Hospital is not located on property which was used as a dump for waste
material, and (iv) the Hospital and the Hospital Real Property have at all times
complied with, all Environmental Laws, except to the extent in each of the
foregoing clauses (i) through (iv) that any such non-compliance would not have a
material adverse effect on the Seller's Assets. Seller has not received any
written notice from any governmental authority or any written complaint from any
third party with respect to its alleged noncompliance with, or potential
liability under, any Environmental Laws at the Hospital or the Hospital Real
Property which remains unresolved as of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital and the Hospital Real Property which are
currently in the possession of Seller.
6.12. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals (as those terms are
defined below) for which Seller is responsible under the terms hereof. Seller
represents and warrants that as of the date of execution of this Agreement, it
has secured the consent of its partners and of the Board of Directors of Horizon
to the execution of this Agreement and of any documents and agreements necessary
to carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by Seller that it will be able to secure the Third Party Consents or Regulatory
Approvals for which it is responsible, but rather this paragraph shall be
limited to Seller's representation and warranty that it will use its best
efforts to secure such Third Party Consents and Regulatory Approvals.
6.13. Litigation. There is no, nor has Seller received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened against or relating to Seller by any
governmental authority having jurisdiction over Seller or by any other party
which seeks to challenge Seller's title to the Seller's Assets or Seller's right
or ability to consummate the transaction provided for herein or to impose any
lien on Seller's Assets not permitted by the terms of this Agreement. Seller is
not a party to nor is Seller bound by any orders, judgments, injunctions,
decrees or settlement agreements under which it may have continuing obligations
as of the date hereof or as of the Closing Date and which are likely to
materially restrict or affect Seller's present business operations. The right or
ability of Seller to consummate the transaction contemplated herein has not been
challenged by any governmental agency or any other person and Seller has no
knowledge of the occurrence of any event which would provide a reasonable basis
for any such litigation, investigation or other proceeding.
6.14. The Hospital Lease and the Equipment Lease. A true and correct
copy of each of the Hospital Lease and the Equipment Lease has been provided by
Seller to Purchaser. Each of the Hospital Lease and the Equipment Lease remains
in full force and effect and has not been amended or modified except as set
forth in Article 1. Seller has not received from SBRH any written notice that
Seller is in default of its obligations under the Hospital Lease or the
Equipment Lease nor does Seller have knowledge of any events which, with the
passage of time or the giving of notice, would constitute a material default
thereunder. There are no security deposits posted with respect to the Hospital
Lease or the Equipment Lease.
6.16. Insurance. All of the insurance required to be maintained by
Seller with respect to the Seller's Assets is maintained by SBRH under the terms
of the Hospital Lease and the Equipment Lease. All of such insurance names
Seller as an additional insured or loss payee thereunder and, to the best of
Seller's knowledge based on Seller having not received any notice of termination
or cancellation as of the date hereof, all of such insurance is in full force
and effect as of the date hereof.
6.17. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as otherwise
specifically set forth in the letter from Purchaser to Seller dated the date
hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in
good standing under the laws of the State of California. Regency Health
Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own and lease the Hospital from and after the Closing Date
as the same are presently owned and leased and (ii) to conduct its business from
and after the Closing Date as the same is now being conducted.
7.04 Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.07. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except
as contemplated by this Agreement or with the consent of Purchaser, which
consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Seller will enforce the obligations of SBRH under the Hospital
Lease and the Equipment Lease.
(b) Seller will not sell or agree to sell the Seller's Assets
nor otherwise enter into any
agreements materially affecting the Seller's Assets;
(c) Seller will not, except in the ordinary course of business, enter
into any contract or commitment affecting any of the Seller's Assets or incur
any additional indebtedness or amend, extend or renew any current debt
instruments, whether in the ordinary course of business or otherwise, nor will
Seller declare or pay any dividend or other distribution with respect to any of
the Seller Assets nor pledge the accounts receivable of Seller as security for
any indebtedness or lease agreements executed, amended or extended by Seller
after the date hereof; provided, however, that nothing herein shall be construed
as prohibiting (i) Seller from incurring inter-company indebtedness to Horizon
and/or Continental Medical Systems, Inc. ("CMS"), (ii) Horizon and/or CMS from
incurring debt, the proceeds of which may be made available to Seller directly
or by means of a working capital loan from Seller's general partner to Seller or
(iii) Seller from executing any and all documents necessary to amend any debt
instruments under which Horizon and/or CMS may be the borrower and Seller a
guarantor;
(d) During normal business hours, Seller will provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller relating to the Seller's Assets provided they do not
interfere with the operation thereof;
(e) If and to the extent Seller has not delegated responsibility
therefor to SBRH under the Hospital Lease or the Equipment Lease, Seller will
maintain the Seller's Assets in substantial compliance with all applicable
municipal, county, state and federal laws, regulations, ordinances, standards
and orders as now in effect (including, without limitation, the building, zoning
and life safety codes as currently applied with respect thereto) where the
failure to comply therewith could have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof;
(f) If and to the extent Seller has not delegated responsibility
therefor to SBRH under the Hospital Lease or the Equipment Lease, Seller will
take all reasonable action to achieve substantial compliance with any laws,
regulations, ordinances, standards and orders applicable to the Seller's Assets
which are enacted or issued after execution of this Agreement and become
effective or require compliance prior to the Closing where the failure to comply
therewith could have a material adverse effect on the business, property,
condition (financial or otherwise) or operation thereof;
(g) Within ten (10) days after Seller's receipt of Purchaser's title,
UCC search and survey objections pursuant to Paragraph 10.01, Seller shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected;
(h) If and to the extent Seller has not delegated responsibility
therefor to SBRH under the Hospital Lease or the Equipment Lease, Seller will
file all returns, reports and filings of any kind or nature, or secure timely
extensions for the filing thereof, required to be filed by Seller including, but
not limited to, state and federal tax returns with respect to the Seller's
Assets and will timely pay all taxes or other obligations which are due and
payable with respect thereto where the failure to pay the same is reasonably
likely to result in the imposition of a lien on the Seller's Assets not
permitted by the terms of this Agreement;
(i) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement or which is intended to cause
any representation, warranty or covenant made by Seller in this Agreement;
(j) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller or any of the Seller's Assets, or offer to acquire
or convey in any manner, directly or indirectly, all or substantially all of the
equity interests in Seller or the Seller's Assets; provided, however, that
public announcements of the transaction contemplated by this Agreement shall not
be prohibited hereby;
(k) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party
Consents for which it is responsible under the terms hereof; and
(l) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits relating to the Seller's Assets which Purchaser elects to
conduct in order to comply with any requirements applicable to it under the
federal securities laws.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a
designated escrow agent in accordance with any written escrow instructions
executed by Seller and Purchaser:
(a) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers of Seller executing documents on
behalf of Seller, a copy of the resolutions adopted by Seller's Board of
Directors authorizing the transaction provided for herein and the execution of
this Purchase Agreement and the other documents contemplated herein and
attaching a certificate of good standing issued by each of the California and
Delaware Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The duly executed Grant Deed;
(c) The duly executed Bill of Sale;
(d) Written Escrow Instructions;
(e) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to
Purchaser;
(f) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals for which Seller is responsible under the terms of this
Agreement; and.
(g) The duly executed Lease Assignment Agreement.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Hospital any and all plans and specifications with
respect to the Hospital which may be in Seller's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Seller's
Assets in its filings with the United States Securities and Exchange Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser, may be reasonably necessary to
assure, complete and evidence the full and effective transfer and conveyance of
Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of
Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title report or title insurance
commitment and/or survey of the Hospital Real Property and the Hospital which
Purchaser may elect to obtain; provided, however, that Purchaser shall not have
the right to object to any of the Permitted Exceptions. If Seller refuses to
correct some or all of the title, survey or lien defects objected to by
Purchaser within the time period reflected in Paragraph 9.01(o) or to give
Purchaser reasonable assurances that the same will be corrected as of the
Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and
Regulatory Approvals for which it is responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller
and Purchaser agree in writing in the Escrow Instructions to handle the same
outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The cash due at Closing pursuant to Paragraph 2.01;
(c) Duly executed Escrow Closing Instructions;
(d) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to
Seller; and
(e) The duly executed Hospital Lease Assignment Agreement.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Hospital.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Hospital, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings or other ownership interests
in Seller, with the Antitrust Division of the United States Department of
Justice and the Federal Trade Commission a Notification and Report Form in
accordance with the notification requirements of the HSR Act and to use its and
their best efforts to achieve the prompt termination or expiration of the
waiting period or any extension thereof provided for under the HSR Act as a
prerequisite to the consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets which are the subject of this
Agreement or the Other Agreements which either alone or in the aggregate, with
all such other sales or dispositions, would constitute the sale or disposition
of a "significant subsidiary" (as defined in Rule 1-02 of Regulation S-X of the
rules and regulations of the Commission), (ii) take any action, the consummation
of which cannot be conditioned on the consummation of the transactions
contemplated by this Agreement, where such action would have a material adverse
effect on Seller or (iii) take any action which either would have a material
adverse effect on the operations, business or financial condition of Seller or
would materially impair the value of the transaction contemplated herein to
Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or lease
the Hospital from and after the Closing Date (the "Regulatory Approvals"), and
the consent of its lenders, lessors and other third parties to the extent
required under any loan documents, lease agreements, management agreements or
other instruments to which it is a party (the "Third Party Consents"), provided,
however, that the consent of the holders of the bonds issued by Purchaser's
parent corporation under that Indenture dated as of June 28, 1996 in the
original principal amount of $50,000,000 and that Indenture dated as of October
12, 1995 in the original principal amount of $110,000,000 shall not be deemed to
be a required Third Party Consent, it being understood and agreed that Purchaser
has represented that the transaction as contemplated herein will not require the
consent of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by
either party of any press release or any written statement with respect to this
Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined
below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof.
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, Seller shall not be
in default, where said default cannot be cured by the Closing Date, under any
mortgage, contract, lease or other agreement to which Seller is a party or by
which Seller is bound and which will affect or relate to the Seller's Assets
after the Closing.
(e) Subject to Purchaser ordering the same, an ALTA title insurance
policy providing for extended owner's coverage shall have been issued to
Purchaser with respect to the Hospital subject only to the Permitted Exceptions
(the "Title Insurance Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Survey.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have
occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date, of each of the
following conditions any one or more
of which may be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have
occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following
conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date as the same may be extended in accordance with the terms of the
Other Purchase Agreements;
(e) By either party if the United States Department of Justice
or the Federal Trade Commission
requires any of the actions described in Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in the event that prior to the Closing Date a material
portion of any of the Hospital Real Property or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination
or pursue any other remedy referred to in Paragraph 13.01 on account of a breach
of a condition, covenant or warranty by the other, without first given such
other party written notice of such breach and not less than ten (10) days within
which to cure such breach. The Closing Date shall be postponed if necessary to
afford such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
INDEMNIFICATION
14.01. Seller shall indemnify and hold Purchaser harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of Seller's Assets prior to the Closing Date, whether or not the same
are covered by Seller's insurance, including, but not limited to, any
obligations under the Hospital Lease and the Equipment Lease (if and to the
extent they relate solely to the period prior to the Closing Date);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or
nonfulfillment of any agreement on the part of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers; and
(d) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
14.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of Seller's Assets from and
after the Closing Date including, but not limited to, any obligations under the
Hospital Lease and the Equipment Lease (if and to the extent they relate solely
to the period from and after the Closing Date);
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or
nonfulfillment of any agreement on the part of Purchaser under this Agreement;
and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
14.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 14.01(b) and 14.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches hereunder or under that Purchase and Sale Agreement of
even date herewith between [CMS], as Seller, and Regency Rehab Hospitals, as
Purchaser, with respect to the stock of San Bernardino Rehabilitation Hospital,
Inc. equals or exceeds Fifty Thousand and no/100 Dollars ($50,000) (the
"Representation and Warranty Liability Threshold"). In the event the
Representation and Warranty Threshold is met, then the Non-Breaching Party shall
be entitled to seek to collect from the Breaching Party any and all damages,
liabilities, losses, costs or expenses suffered or incurred as a result of all
such breaches of the representations and warranties set forth herein on a first
dollar basis and not merely to recover damages in excess of the Representation
and Warranty Liability Threshold.
ARTICLE XV
MISCELLANEOUS
15.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Properties, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Properties, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
15.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its any or all of
Purchaser's rights and obligations hereunder effective at Closing to a real
estate investment trust (the "REIT") in connection with its financing of the
transaction provided for herein provided Seller first confirms to Purchaser
that, in its reasonable determination, such assignment will not have adverse
reimbursement consequences for Seller; and provided, further, that no such
assignment shall relieve Purchaser of its obligations hereunder. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns, including successors by
operation of law pursuant to any merger, consolidation or sale of assets
involving either party. In the event of an assignment of this Purchase Agreement
to a REIT, Purchaser shall advise Seller as to those documents and deliveries
contemplated by this Agreement which are to run in favor of the REIT rather than
Purchaser and those documents and deliveries contemplated by this Agreement
which will be delivered by the REIT rather than Purchaser, if any, it being
understood and agreed that in the event of such an assignment, the only right
which the REIT will assume is Purchaser's right to take title to the Seller's
Assets and the only obligation which the REIT will assume is Purchaser's
obligation to pay the purchase price in accordance with the terms hereof.
15.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
15.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
15.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
15.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
15.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
15.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
15.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
15.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
15.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
15.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
15.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 15.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 14.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
15.14. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
15.15. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
REHAB CONCEPTS CORP.
By: ___________________________
Its: ____________________________
REGENCY REHAB PROPERTIES, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Properties, Inc. ("Purchaser") to
enter into the Purchase and Sale Agreement between Rehab Concepts Corp., a
Delaware corporation, as Seller and Purchaser dated November 19, 1996 (the
"Agreement"), hereby unconditionally, irrevocably and jointly and severally with
Seller, guarantees and promises to and for the benefit of Purchaser that (i) the
representations and warranties of Seller are true and correct as of the date of
execution of the Agreement and shall be true and correct as of the Closing Date
(as modified by any supplements to the Seller Disclosure Letter to reflect
events after the date hereof) and (ii) Seller shall perform all of its
obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 14, to be performed on its part under the
Agreement. If Seller defaults under the Agreement, Purchaser may proceed
immediately against Horizon or Seller or both to enforce any rights it has under
the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Seller will not survive beyond the periods
applicable thereto set forth in Paragraph 15.13 hereof and this Guaranty shall
not be construed to give Purchaser a claim or cause of action against Horizon
after the expiration of the applicable survival period for a breach by Seller of
any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment due
under the Agreement or acceptance
of partial payment from Seller;
(c) The acceptance or release by Purchaser of any additional
security for the performance of
Seller's obligations under the Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or
agreed to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of
this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the rejection
of the Agreement by Seller or by a trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for this
Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Rehab Concepts Corp. ("Seller") to enter into the
Purchase and Sale Agreement between Seller and Regency Rehab Properties, Inc.
("Purchaser") dated November 19, 1996 (the "Agreement"), hereby unconditionally,
irrevocably and jointly and severally with Purchaser, guarantees and promises to
and for the benefit of Seller that (i) the representations and warranties of
Purchaser are true and correct as of the date of execution of the Agreement and
shall be true and correct as of the Closing Date (as modified by any supplements
to the Purchaser Disclosure Letter to reflect events after the date hereof) and
(ii) Purchaser shall perform all of its obligations, covenants and agreements,
including, but not limited to, its indemnity obligations under Paragraph 14, to
be performed on its part under the Agreement. If Purchaser defaults under the
Agreement, Seller may proceed immediately against Regency or Purchaser or both
to enforce any rights it has under the Agreement or this Guaranty.
Notwithstanding the foregoing, the representations and warranties of Purchaser
will not survive beyond the periods applicable thereto set forth in Paragraph
15.13 hereof and this Guaranty shall not be construed to give Seller a claim or
cause of action against Regency after the expiration of the applicable survival
period for a breach by Purchaser of any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment due
under the Agreement or acceptance
of partial payment from Purchaser;
(c) The acceptance or release by Seller of any additional
security for the performance of
Purchaser's obligations under the Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of Seller's
interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or
agreed to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of
this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the
rejection of the Agreement by Purchaser or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for this
Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.06
PURCHASE AND SALE AGREEMENT
SAN DIEGO
This Agreement is made and entered into this 19th day of November, 1996
by and between San Diego Rehab Limited Partnership, a Delaware limited
partnership ("Seller") and Regency Rehab Hospitals, Inc., a California
corporation ("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to the
following:
(a) That Lease Agreement dated October 26, 1992 between San Diego
Health Associates Limited Partnership, a Delaware limited partnership, as
lessor, and Seller, as Lessee (the "Hospital Lease"), including, but not limited
to, Seller's leasehold right title and interest in and to:
(1) The real property leased by Seller under the terms of the Hospital
Lease and situated in the State of California and more particularly described in
Exhibit 1.01(a)(1) (the "Hospital Real Property") and the improvements thereon
that comprise the free standing rehabilitation hospital with 57 acute
rehabilitation beds and 53 skilled nursing facility beds and commonly known as
Continental Rehabilitation Hospital of San Diego, 555 Washington Street, San
Diego, California (the "Hospital").
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Hospital Real Property leased by Seller
either under the terms of the Hospital Lease or under those contracts and
commitments described in Exhibit 1.01(f) (the "Leased Hospital Personal
Property"), which Leased Hospital Personal Property is more fully described in
Exhibit 1.01(a)(2).
(3) All rights of first refusal, extension rights, and purchase
options set forth in the Hospital
Lease.
(b) That Lease Agreement dated February 9, 1996 between Market Street
Square, as lessor, and Seller, as lessee as amended by Addendum dated March 15,
1996 (the "Market Street Square Clinic Lease" and together with the Hospital
Lease, the "Leases"), including, but not limited to, Seller's leasehold right
title and interest in and to:
(1) The real property leased by Seller under the terms of the Market
Street Square Clinic Lease and situated in the State of California and more
particularly described or shown in Exhibit 1.01(b)(1) (the "Clinic Real
Property" and together with the Hospital Real Property, the "Real Property") and
the improvements thereon that comprise the outpatient clinic commonly known as
The Market Street Square Clinic (the "Clinic").
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Clinic Real Property leased by Seller
either under the Clinic Lease or under those contracts and commitments described
in Exhibit 1.01(f) (the "Leased Clinic Personal Property" and together with the
Leased Hospital Personal Property the "Leased Personal Property" ), which Leased
Clinic Personal Property is more fully described in Exhibit 1.01(b)(2).
(3) All rights of first refusal, extension rights, and purchase
options set forth in the Clinic
Lease.
(c) The inventory, including linens, dietary supplies and housekeeping
supplies, food and other consumable inventories located at, or usable in the
operation of, the Hospital and the Clinic on the Closing Date (the
"Consumables").
(d) Any furniture, fixtures, equipment and vehicles owned by Seller and
located on the Real Property or in the Hospital or the Clinic which is not the
property of the lessors under the terms of the Hospital Lease, the Clinic Lease
or any other lease described in Exhibit 1.01(f), as applicable, (the "Owned
Personal Property") and which Owned Personal Property is more fully described in
Exhibit 1.01 (d).
(e) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by Seller
relating to the Hospital and the Clinic and all rights of Seller in and to (i)
those contracts and commitments relating to the Seller's Assets (as hereinafter
defined) as listed on Exhibit 1.01(e), true and correct copies of which
contracts have been provided to Purchaser by Seller as of the date hereof and
(ii) the permits and licenses used or held for use by Seller in the operation of
the Seller's Assets (the "Records and Rights").
(f) All of Seller's right, title and interest in and to the trade name
"Market Street Square Clinic" and all other trade names used exclusively at the
Hospital or the Clinics and not used generally by Continental Medical Systems,
Inc., a Delaware corporation ("CMS") at its hospitals (the "Trade Name");
provided, however, that Purchaser shall have the right to continue to use for a
period of 60 days after Closing any signs located at the Hospital and/or the
Clinics or any pre-printed materials, such as admitting forms or patient
information materials, on which the CMS name or logo may appear.
Hereinafter Seller's leasehold rights under the Hospital Lease and the
Clinic Lease in and to the Hospital, the Clinic, the Real Property, the Leased
Personal Property, the Owned Personal Property, the Consumables, the Records and
Rights and the Trade Name will sometimes be collectively referred to as the
"Seller's Assets."
1.02. Notwithstanding anything in this Agreement to the contrary, the
Seller's Assets shall not include , and Seller shall retain as its property, the
following assets (the "Excluded Assets"):
(a) Seller's partnership record books, tax returns and minute
books or the record books, tax
returns or minutes books of either of Seller's partners;
(b) The items owned by Seller and listed on Exhibit 1.02(b);
(c) All of Seller's rights under this Agreement, including,
without limitation, the right of
Seller to receive the Purchase Price (as hereinafter defined);
(d) All refunds, whenever paid, relating to payments by or on behalf of
Seller prior to the Closing including, without limitation, any federal, state,
local or foreign taxes paid by Seller prior to the Closing Date;
(e) All bank accounts of Seller;
(f) All cash, cash equivalents and accounts receivable of Seller,
including any amounts due or which may, after the Closing, become due to the
Hospital or the Clinics from its or their participation in the Medicare,
Medi-Cal or any other third party payor Programs for any period prior to the
Closing Date, and all of Seller's prepaid assets and deposits;
(g) All computer hardware and software relating to the wide area
network of Horizon/CMS Healthcare Corporation ("Horizon") used for the operation
of the general ledger and accounts payable software applications, which computer
hardware and software is more fully described in Exhibit 1.02(g) (the "GL/AP
Hardware and Software");
(h) Seller's interest in the Straddle Patient Payments (as defined
below) for the services rendered and medicine, drugs and supplies provided prior
to the Closing Date, all in accordance with Paragraph 16.14 hereof;
(i) Seller's claims, if any, against third parties relating to or
arising from the acts or omissions of third parties prior to the Closing;
provided that Seller shall give notice to Purchaser before pursuing any claims
against a third party who continues to have any business relationship with the
Hospital or the Clinics after the Closing; and
(j) Seller's rights and interests in and to proprietary materials,
programs, manuals, promotional materials and other intangibles not included in
Paragraph 1.01; provided, however, that Seller hereby agrees to permit Purchaser
to continue to use, for a period of one hundred eighty (180) days after the
Closing, any of such proprietary assets as are reasonably necessary to the
continued licensure, certification and/or accreditation of the Hospital or the
Clinic after Closing.
1.03. Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge the following
liabilities and obligations (the "Assumed Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Leases which relate to the periods on and after
the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 1.01(f) (the "Equipment Leases") which relate
to the periods on and after the Closing Date;
(c) The liability to make the payments and to perform any other
obligations under the contracts other than the Equipment Leases listed on
Exhibit 1.01(e) which relate to the periods on and after the Closing Date;
(d) The liability to make the payment due after Closing under purchase
orders placed by Seller in the ordinary course of business prior to the Closing
Date but which are open as of the Closing Date for inventory and supplies to be
delivered after the Closing Date; and
(e) The liability to pay when due the Accrued Benefits (as defined
below).
1.04. Except for the Assumed Liabilities, no obligation or liability of
Seller relating to or arising from the operation of the business of Seller or
the Seller's Assets prior to the Closing Date is to be assumed by Purchaser.
1.05. At Purchaser's request, Seller will use its best efforts to
obtain prior to Closing, at Purchaser's sole cost, software licenses in favor of
Purchaser to enable Purchaser to use all of the software presently being used by
Seller at the Hospital and/or the Clinic other than the software listed in
Exhibit 1.05 and the GL/AP Software described in Exhibit 1.02(g). At the Closing
and subject to Seller obtaining any necessary consents or approvals, Seller will
assign to Purchaser, and Purchaser will assume from Seller, all existing leases
and maintenance agreements listed on Exhibit 1.01(f) relating to any computer or
systems hardware which is a part of the Leased Personal Property and to all
computer software with respect to which Seller is able to secure a license in
favor of Purchaser pursuant to the immediately preceding sentence.
1.06. Seller will provide to Purchaser data processing services with
respect to the Hospital and the facilities which are the subject of the Other
Agreements (as hereinafter defined) on the terms and for the cost specified in
Exhibit 1.06.
ARTICLE II
PURCHASE PRICE
2.01. The purchase price for Seller's Assets shall be One Million Five
Hundred Fifty Thousand and no/100 Dollars ($1,550,000) (the "Purchase Price")
which shall be payable in cash at Closing concurrently with the transfer of the
Seller's Assets to, and the assumption of the Assumed Liabilities by, Purchaser,
which cash shall be subject to adjustment to reflect the costs, expenses and
prorations for which Seller and Purchaser are responsible under Paragraph 4
hereof.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall occur effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date. The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver leasehold title to the Real
Property, the Hospital, the Clinic and the Leased Personal Property and title to
the Consumables, the Owned Personal Property, the Records and Rights and the
Trade Name free and clear of all liens and encumbrances other than the following
(collectively, the "Permitted Exceptions"):
(a) Liens for real and personal property taxes which are not yet
due and payable;
(b) Liens and encumbrances affecting the fee simple title to
any of the Clinic Real Property or
the Hospital Real Property created by the owner thereof and not by Seller;
(c) The Permitted Exceptions listed in Exhibit 3.02(c); and
(d) Such liens as may be approved or deemed approved by Purchaser
pursuant to Paragraph 10.01.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser
at Closing by Seller's delivery
of the following documents:
(a) Seller shall deliver a separate Assignment of Lease in the form and
substance substantially the same as that attached hereto as Exhibit 3.03(a)
pursuant to which Seller shall convey to Purchaser Seller's right, title and
interest in and to each of the Leases (the "Lease Assignment Agreements").
(b) Seller shall deliver a Bill of Sale in form and substance
substantially the same as that attached hereto as Exhibit 3.03(b) with respect
to the Consumables, the Owned Personal Property, if any, the Records and Rights
and the Trade Name (the "Bill of Sale").
(c) Such other documents or instruments as may be necessary to convey
title to the Seller's Assets to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
and operation of the Seller's Assets shall be allocated between Seller and
Purchaser as follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of Seller's leasehold
interest in and to the Real Property and the Hospital and the Clinic to
Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of either
Seller's leasehold interest in and to the Leased Personal Property or title to
the Owned Personal Property to Purchaser.
4.03. Purchaser shall pay the cost of any environmental Phase I
assessment of the Seller's Assets which Purchaser elects to secure prior to
Closing.
4.04. To the extent Seller is responsible therefor under the terms of
the Leases, Real and Personal Property taxes related to the Hospital and the
Clinic shall be prorated as of the Closing Date, with Seller responsible
therefor for the period prior to the Closing Date and with Purchaser responsible
therefor for the period from and after the Closing Date. Purchaser shall receive
a credit against the cash due at Closing pursuant to Paragraph 2.01 for any
taxes for which it is responsible under the terms of the Leases and which are
accrued but unpaid as of the Closing Date. Purchaser shall reimburse Seller at
Closing for any taxes relating to any period from and after the Closing Date
which have been paid by Seller prior to the Closing Date.
4.05. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.06. Purchaser and Seller shall share recording fees related to the
recording of any of the conveyancing documents, such as the Lease Assignment
Agreement or an amendment to the Memoranda of Lease if the same appear of record
with respect to any or all of the Leases, and any escrow fees on a 50-50 basis.
4.07. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Seller's Assets in accordance with the terms
of this Agreement.
4.08. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Leases as a
condition to securing consent to an assignment thereof which are necessary to
secure the consent of the lessors under the Leases and Seller's partners, San
Diego Rehabilitation Associates shall pay any costs, fees and expenses necessary
to secure the consent of Mercy Services Corporation-San Diego ("Mercy"), which
is the other partner in Seller, to the transaction provided for herein or to
acquire or cause to be acquired the partnership interest of Mercy prior to
Closing in order to facilitate the transaction provided for herein.
4.09. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.09 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.10. Seller shall pay the cost of any repairs or renovations or other
work to the physical plant of the Hospital or the Clinic required to be
undertaken by the State of California in connection with any change of ownership
surveys which it may elect to conduct as a condition to its review and, if
applicable, approval of the transaction which is the subject of this Agreement;
provided, however, that in the event the cost thereof, along with the cost of
any repairs or renovations or other work to the physical plant of the hospitals
which are the subject of the Other Agreements, exceeds $250,000 (the "Licensure
Cost Cap") Seller shall have the right to terminate this Agreement in lieu of
incurring such costs in excess of the Licensure Cost Cap; and provided, further,
that Purchaser shall have the right to pay such costs in excess of the Licensure
Cost Cap in lieu of permitting Seller to terminate this Agreement.
4.11. Purchaser shall pay any filing or licensure fees due in
connection with the submission of any licensure or Medicare or Medi-Cal
certification applications which it is required to file in order to secure the
approval of the State of California of the transaction which is the subject of
this Agreement under applicable licensure and/or certification laws governing
the operation of the Hospital and the Clinic, as well as the fees and expenses
of Davis Wright Tremaine or any other legal counsel retained or utilized by
Purchaser to assist it with such matters.
4.12. Purchaser shall reimburse Seller at Closing for any prepaid
expenses and deposits which relate to the period on and after the Closing Date.
4.13. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Seller's Assets and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Credit Agreement dated December 28, 1995
between Regency Health Services, Inc. and NationsBank of Texas, N.A.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets, subject only to the rights of the lessors under the Leases and
the rights of the patients of the Hospital and the Clinic.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller. Seller is a duly organized, validly existing
Delaware limited partnership and is duly qualified to do business in the State
of California and is in good standing under the laws thereof. Horizon is a duly
organized, validly existing Delaware corporation and is in good standing under
the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's Partnership Agreement or any
law, regulation, court order, mortgage, note, bond, indenture, agreement,
license or other instrument or obligation to which Seller is now a party or by
which any of Seller's Assets may be bound or affected or any agreement, option,
understanding or commitment or any or privilege granted by Seller to any other
party to purchase or otherwise acquire the Seller's Assets or result in the
acceleration of or an increase in the interest rate payable under any
indebtedness other than indebtedness of Seller which does not relate to the
Hospital or the Clinic or which is to be discharged by Seller as of the Closing
Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to lease and to operate the Hospital and the Clinic as the same are presently
leased and operated and (ii) to conduct its business as the same is now being
conducted.
6.04. The Seller Financials. True and correct copies of an unaudited
balance sheet and statement of operations of Seller with respect to the
operation of the Hospital and the Clinics as of the close of Seller's fiscal
year ended May 31, 1996, and for the four month period ended September 30, 1996
(collectively, the "Seller's Financials") are attached hereto as Exhibit 6.04.
All such financial statements fairly represent the financial condition, and
accurately set forth in all material respects the results of the operations of,
Seller at the Hospital and the Clinic for the periods covered thereby subject to
customary year end adjustments. Any financial statements prepared by Seller
subsequent to the date of the Seller Financials or the date hereof will be
prepared in a manner consistent with the manner in which the Seller's Financials
were prepared, will fairly represent the financial condition, and will
accurately set forth in all material respects the results of the operations of
Seller at the Hospital and the Clinic for the periods covered thereby and will
be provided to Purchaser within ten (10) days after the completion thereof.
6.05. Absence of Adverse Change. Since the date of the most recent
Seller Financials there has not
been any material adverse change in the financial condition, business,
assets, liabilities or results of
operations of the Hospital or the Clinic.
6.06. The Licenses. Seller has all material licenses, permits and
authorizations necessary for the lawful leasing and operation of the Hospital as
a free standing rehabilitation hospital and the Clinic as an outpatient clinic,
it being understood and agreed that Seller has represented and does hereby
represent to Purchaser that the Clinic is not required to be separately licensed
but is operated under the licenses issued to Seller in connection with its
operation of the Hospital (the "Seller Licenses"). True and correct copies of
all of the Seller Licenses are attached hereto as Exhibit 6.06. Seller has not
received written or verbal notice of (A) any action or proceeding which has been
initiated or is proposed to be initiated by the appropriate state or federal
agency having jurisdiction thereof, to (i) revoke, withdraw or suspend any of
the Seller Licenses, (ii) terminate the participation of the Hospital or the
Clinic in either the Medicare or Medi-Cal Programs or the accreditation of the
Hospital or the Clinic by the Joint Commission on Accreditation of Health Care
Organizations ("JCAHO")(to the extent it or they are certified to participate
therein), (B) any judicial or administrative agency judgement or decision not to
renew any of the Seller Licenses, (C) any action to limit or ban admissions to
the Hospital or the Clinic or (D) any licensure or certification action of any
other type, which would have a material adverse effect on the business, assets
or financial condition of the Hospital or the Clinic.
6.07. Compliance with Law.
(a) The Hospital and the Clinic and their current operation and use are
in substantial compliance with all applicable health and safety laws,
regulations, ordinances, standards and orders issued by any municipal, county,
state or federal agency having authority over the Hospital and the Clinic and
with all municipal health, building and zoning laws and regulations (including,
without limitation, the building, zoning and life safety codes) where the
failure to comply therewith would have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof and
there are no outstanding cited deficiencies or work orders issued to Seller
under any of the foregoing which have not been corrected as of the date hereof
or which will not be corrected as of the Closing Date;
(b) Set forth in Exhibit 6.07(b) is a list of the most recent licensure
and Medicare and, if applicable, Medi-Cal certification survey and the results
of any complaint investigations conducted within the last six months for the
Hospital and the Clinic, copies of which have been made available to Purchaser
as of the date hereof. Seller has no knowledge, based on the results of Hospital
or Clinic surveys or complaint investigations provided verbally or in writing to
the Hospital or the Clinic by the applicable supervising agency or authority and
after due inquiry of the Chief Executive Officer of the Hospital, that the
Hospital or the Clinic, if and to the extent the same are currently
participating in the Medicare or Medi-Cal Programs, are not in substantial
compliance with all Conditions and Standards of Participation in the Medicare
and Medi-Cal Programs nor has Seller received written or, to the best of
Seller's knowledge, verbal notice from any licensing or certifying agency
requiring any or all of them to be physically reworked or redesigned or to add
furniture, fixtures, equipment or inventory so as to conform to or comply with
any existing licensure or Medicare or Medi-Cal certification law, code or
standard except where the requirement either (i) has been fully satisfied prior
to the date hereof, (ii) will be satisfied by Seller prior to the Closing Date,
(iii) will be in the process of being satisfied in the ordinary course of
Seller's business pursuant to the terms of a Plan of Correction or other
documentation submitted to and approved by the appropriate authority or (iv)
will be the subject of a valid written waiver issued by the applicable licensing
or certifying agency;
(c) Set forth in Exhibit 6.07(c) is a list of the most recent JCAHO
surveys conducted at the Hospital and, if applicable, the Clinic, and the dates
of any correspondence from or to Seller and the JCAHO with respect to the
correction of any deficiencies identified in said survey, true and correct
copies of which have been made available to Purchaser as of the date hereof. The
Hospital is duly accredited by the JCAHO, without contingencies except such
contingencies reflected in the surveys or correspondence described in Exhibit
6.07(c). Except as reflected in the surveys or correspondence described in
Exhibit 6.07(c), Seller has made or caused to be made on behalf of the Hospital
and the Clinic all proper filings required by JCAHO. Seller has not received
written or, to the best of Seller's knowledge after due inquiry of the Chief
Executive Officer of the Hospital, verbal notice from JCAHO requiring the
Hospitals and/or the Clinic to be reworked or redesigned or to add furniture,
fixtures, equipment or inventory so as to retain such accreditation except where
the requirement either (i) has been fully satisfied prior to the date hereof,
(ii) will be satisfied by Seller prior to the Closing Date, (iii) will be in the
process of being satisfied in the ordinary course of Seller's business pursuant
to the terms of a Plan of Correction or other documentation submitted to and
approved by the appropriate authority or (iv) will be the subject of a valid
written waiver issued by JCAHO. Neither the Hospitals nor the Clinic
participates in any accreditation programs other than that offered by the JCAHO.
(d) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Hospital, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Hospital or the Clinic, (ii) any of the members of the medical
staff, the Board of Directors or employees of the Hospital or the Clinic.
6.08. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Hospital or the Clinic which provide for
the provision of the care routinely provided at the Hospital or the Clinic for
no consideration nor will Seller enter into any such agreements between the date
hereof and the Closing Date.
6.09. Books and Records. To the best of Seller's knowledge after due
inquiry of the Chief Executive Officer and Medical Director of the Hospital, all
of the books and records of the Hospital and the Clinic, including patient
records, are true and correct in all material respects.
6.10. Title. Seller has leasehold title to all of the Seller's Assets
(other than the Owned Personal Property, the Consumables, the Records and Rights
and the Trade Name which are owned by Seller) free and clear of all liens,
charges and encumbrances other than the liens provided for in Paragraph 3.02.
Seller has not received notice of any pending or threatened condemnation
proceedings with respect to the Real Property.
6.11. Unions. There are no union contracts in effect between Seller, on
the one hand, and the employees of the Hospital or the Clinic, on the other
hand. To the best of Seller's knowledge, none of its employees who are not
currently members of a labor union in connection with their work at the Hospital
or the Clinic are actively seeking the formation of a labor union at the
Hospital or the Clinic. Seller is not a party to any labor dispute, it being
agreed that a claim for wrongful termination shall not, for purposes of this
Paragraph 6.11 be deemed to be a labor dispute. Seller is not a party to any
union contracts with respect to the Hospital or the Clinic.
6.12. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Seller prior to date
of execution of this Agreement with respect to its operations at the Hospital
and the Clinic have been properly completed and timely filed, or extensions for
the filing thereof have been timely secured, with all such filings being in
material compliance with all applicable requirements and all taxes due with
respect to Seller's operations at the Hospital and the Clinic have been timely
paid, except to the extent that the same are being duly contested in good faith
in accordance with applicable law and adequate reserves therefor are reflected
on the Seller Financials or will be reflected in any subsequent financials
prepared in accordance with the representations and warranties contained in this
Agreement.
6.13. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under the
Hospital or the Clinic other than to the extent the same will not have a
material adverse affect on the condition, financial or otherwise, of the
Hospital or the Clinic, (ii) not installed any underground storage tanks and
(iii) at all times operated the Hospital and the Clinic in compliance with all
Environmental Laws, except where the failure to so comply would not have a
material adverse affect on the condition, financial or otherwise, of the
Hospital or the Clinic.
(b) With respect to the Hospital and the Clinic prior to the date of
the Seller's ownership or leasing thereof, to the best of Seller's knowledge
after due inquiry of the Director of Plant Operations at the Hospital, (i)
except to the extent permitted by applicable Environmental Laws, no hazardous
materials, substances or wastes were located on or at the Hospital or the Clinic
or were released into the environment or discharged, placed or disposed of in,
on or under the Hospital or the Clinic, (ii) except to the extent permitted by
applicable Environmental Laws, no underground storage tanks are or were located
at the Hospital or the Clinic, (iii) neither the Hospital nor the Clinic is
located on property which was used as a dump for waste material, and (iv) the
Hospital and the Clinic have at all times complied with, all Environmental Laws,
except to the extent in each of the foregoing clauses (i) through (iv) that any
such non-compliance would not have a material adverse effect on the Hospital or
the Clinic. Seller has not received any written notice from any governmental
authority or any written complaint from any third party with respect to its
alleged noncompliance with, or potential liability under, any Environmental Laws
at the Hospital or the Clinic which remains unresolved as of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital or the Clinic which are currently in the
possession of Seller.
6.14. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals (as those terms are
defined below) for which Seller is responsible under the terms hereof. Seller
represents and warrants that as of the date of execution of this Agreement, it
has secured the consent of its partners and of the Board of Directors of Horizon
to the execution of this Agreement and of any documents and agreements necessary
to carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by Seller that it will be able to secure the Third Party Consents or Regulatory
Approvals for which it is responsible, but rather this paragraph shall be
limited to Seller's representation and warranty that it will use its best
efforts to secure such Third Party Consents and Regulatory Approvals, subject to
the limitation on the costs which Seller must incur in obtaining such consents
being limited in the manner set forth in Paragraph 4.09.
6.15. Litigation. Except as set forth in Exhibit 6.15, there is no, nor
has Seller received written or verbal notice of any, litigation, administrative
investigation or other proceeding pending or, to the best of Seller's knowledge
based on written notice with respect thereto, threatened by any governmental
authority having jurisdiction over Seller, the Hospital or the Clinic or by any
other party where the amount claimed exceeds $50,000 in any single action or
$100,000 in the aggregate or which seeks to challenge Seller's title to the
Seller's Assets or Seller's right or ability to consummate the transaction
provided for herein. Seller is not a party to nor is Seller or the Hospital or
the Clinic bound by any orders, judgments, injunctions, decrees or settlement
agreements under which it may have continuing obligations as of the date hereof
or as of the Closing Date and which are likely to materially restrict or affect
the present business operations of the Hospital or the Clinic. The right or
ability of Seller to consummate the transaction contemplated herein has not been
challenged by any governmental agency or any other person and Seller has no
knowledge of the occurrence of any event which would provide a reasonable basis
for any such litigation, investigation or other proceeding.
6.16. Sensitive Payments. Seller has no reason to believe that it has
(i) made any contributions, payments or gifts to or for the private use of any
governmental official, employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment. Seller has not filed any reports with any
governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.17. The Hospital and the Clinic. Seller is duly licensed to operate
the Hospital with 57 acute rehabilitation beds which are licensed under
California law as general acute care beds and 53 skilled nursing facility beds
and to operate the Clinic under the license issued to it for the Hospital and is
duly certified to participate in the Medicare Program and, to the extent Seller
has elected to participate therein, is duly certified to participate in the
Medi-Cal Program with respect to its operations at the Hospital. The Hospital
and the Clinic are in good operating condition and repair and substantially all
of the Personal Property and all of the major mechanical systems located at or
used in connection with the operation of the Hospital and the Clinic are in good
working order, condition and repair. The roofs of the Hospital and the Clinic do
not leak. The Personal Property is all of the property necessary for the lawful
operation of the Hospital at its current occupancy levels and of the Clinic in
the manner currently operated by Seller.
6.18 Inventories. At Closing, each of the Hospital and the Clinic shall
have an inventory of non-perishable food, central supplies, linens, housekeeping
supplies, kitchen supplies, nursing supplies and other supplies, which will be
sufficient in condition and quantity to operate each of the Hospital and the
Clinic at its normal capacity and an inventory of perishable food at the levels
normally maintained by Seller at the Hospital.
6.19. Trade Names. Set forth in Exhibit 6.19 is a true and complete
list of the trade names under which Seller is doing business at the Hospital and
the Clinic. Seller has not sought protection for such names under state or
federal trademark or trade name laws except to the extent reflected in Exhibit
6.19. Seller has not received any notice from any person challenging or
questioning the right of Seller to use any such trade names.
6.20. Employees/ERISA.
(a) Set forth in Exhibit 6.20 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller
which relate to the Hospital and the Clinic or to any current or former
employees at or of the Hospital and the Clinic (the "Plan" or "Plans"). Except
as set forth in Exhibit 6.20 and except for stock purchase and stock options
programs administered by Horizon and for which Purchaser shall have no liability
after Closing, Seller has made no commitment or representation to the current or
former employees of the Hospital and the Clinic to establish any additional
Plan, arrangement or practice or to modify or change any existing Plan,
arrangement or practice. Exhibit 6.20 also lists all employees of the Hospital
and the Clinic as of the date of this Agreement together with their positions
and rates of pay and earned and accrued vacation time, sick leave and holiday
pay as of the date specified therein, which date shall be the most recent date
to which such information is available to Seller.
(b) Set forth in Exhibit 6.20 is a true and correct copy of all
employment contracts between Seller and any employee of the Hospital or the
Clinic. Except as otherwise set forth in Exhibit 6.20 all such contracts are
terminable by Seller prior to the Closing Date and, in the case of those
contracts listed in Exhibit 6.20A, will be terminated by Seller prior to the
Closing Date if so requested by Purchaser.
6.21. Operating Contracts. Set forth in Exhibit 1.01(f) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller, transfer agreements, contracts for or other
evidences of indebtedness (other than indebtedness to be discharged or released
at Closing), security agreements and other contracts and agreements, including
without limitation, all provider agreements with any third party payors and
consulting and service contracts to which Seller is a party in connection with
its operations at the Hospital and the Clinic (the "Operating Contracts").
Seller has provided Purchaser with a true and correct copy of each of the
Operating Contracts. Each of the Operating Contracts is in full force and effect
and none of the Operating Contracts has been modified or amended except as set
forth in Exhibit 1.01(f). Seller is not in default of any of its obligations
under the Operating Contracts nor is Seller aware of any default or any action
or omission which, with the passage of time or the giving of notice or both,
would constitute a default under the Operating Contracts by any other party
thereto. At Closing, Seller shall deliver to Purchaser a duly executed
assignment of the Operating Contracts. Purchaser acknowledges and agrees that
Seller shall not be in default of its obligations under this Paragraph 6.21 in
the event Exhibit 1.01(f) fails to list or Seller fails to provide to Purchaser
any Operating Contracts where the payments remaining due thereunder are less
than $25,000.
6.22. The Leases. True and correct copies of the Leases have been
provided by Seller to Purchaser. The Leases remain in full force and effect and
have not been amended or modified except as set forth in Article 1. Seller has
not received from the landlord under any of the Leases any written notice that
it is in default of its obligations under the Leases or that any guarantor
thereof is in default of its obligations under any Guaranty delivered in
conjunction therewith nor does Seller have knowledge after inquiry of the Chief
Executive Officer of the Hospital of any events which, with the passage of time
or the giving of notice, would constitute a material default thereunder. Except
as set forth in the Clinic Lease with respect to certain common areas, Seller
enjoys exclusive, peaceful and undisturbed possession under all real and
personal property leases to which it is a party in connection with the Hospital
and the Clinic, including, but not limited to, under the Leases. Except as set
forth in Exhibit 6.22, there are no security deposits posted with respect to the
Leases.
6.23. Physician Contracts. Exhibit 1.01(e) lists each contract between
Seller and the physicians providing services to the patients of the Hospital or
the Clinic, including contracts with any entity owned or controlled by any such
physicians, true and correct copies of which have been provided to Purchaser.
Seller represents and warrants that Seller has not received any notice that any
state or federal agency or any other party believes or is attempting to
determine whether any violation exists under any such physician contracts
relating to the requirements of State and federal law governing physician self
referral and "kickbacks" including but not limited to the provisions of "Stark
II" and the federal fraud and abuse laws.
6.24. Medical Staff. Attached hereto as Exhibit 6.24 is a true and
correct copy of the medical staff roster for the Hospital and the Clinic. Seller
has made available to Purchaser a copy of the medical staff bylaws currently in
effect with respect to the Hospital and the Clinic, including any and all
current amendments and modifications thereto.
6.25. Cost Reports. Seller has filed when due all cost reports and
other reports required to be filed with respect to each of the Hospital and the
Clinic as of the date hereof under the Medicare and Medi-Cal Programs. Seller is
not required to file cost reports under any other third party payor and other
reimbursement programs in which the Hospital and the Clinic participate. Seller
has no knowledge that all such reports have not been prepared and filed in
compliance with all applicable rules and regulations. Attached hereto as Exhibit
6.25 is a list of all such reports which have been filed by Seller during the
last three years, true and correct copies of which have been provided to
Purchaser.
6.26. Reimbursement. The Hospital is treated under the Medicare Program
for reimbursement purposes as a free standing rehabilitation hospital with a
skilled nursing facility unit and the Clinic is treated under the Medicare
Program for reimbursement purposes as part of the Hospital's outpatient
rehabilitation department. Seller has not received any written or verbal notice
from Medicare or its fiscal intermediary threatening or challenging the status
of the Hospital and the Clinic for reimbursement purposes as a free standing
rehabilitation hospital or from any third party payor, including Medicare and
Medi-Cal, with respect to any proposed recoupment claim or any other proposed
investigation, audit or reimbursement dispute with respect to the Hospital or
the Clinic or which could adversely affect Seller's operations at the Hospital
or the Clinic or the continued licensure or certification thereof.
6.27. PRO Denials. Set forth in Exhibit 6.27 is a list of all of the
Peer Review Organization denials which to the best of Seller's knowledge after
inquiry of the Chief Executive Officer of the Hospital, Seller has received with
respect to its operations at the Hospital and the Clinic during the last three
years, including a description of the basis therefor, and of the action taken by
Seller, if any, to appeal the same and the status and/or outcome of any such
appeals.
6.28. Insurance. Set forth in Exhibit 6.28 is a list of all insurance
policies held by Seller with respect to the Hospital and the Clinic and the
other Seller's Assets and in effect as of the date of this Agreement, including
the types of coverage and amounts thereof and the amount of deductibles
thereunder. Seller has provided to Purchaser true and correct certificates
evidencing such insurance as well as copies of the Seller's current property,
professional liability and workers compensation insurance policies in effect
with respect to the Hospital and the Clinic. All monthly premium installments
due with respect to all of such insurance policies have been paid in full
through the date of this Agreement and will continue to be paid as and when due
between the date of this Agreement and the Closing Date.
6.29. Hill Burton. Seller has no liability under the Hill Burton
Program and Purchaser will have
no liability or obligation, as a transferee of Seller or otherwise, under the
Hill Burton Program as a result
of the transaction contemplated by this Agreement.
6.30. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in
good standing under the laws of the State of California. Regency Health
Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to lease and to operate the Hospital and the Clinic from and
after the Closing Date as the same are presently leased and operated and (ii) to
conduct its business from and after the Closing Date as the same is now being
conducted.
7.04 Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except
as contemplated by this Agreement or with the consent of Purchaser, which
consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Seller will operate the Hospital and the Clinic only in the
ordinary course and with due regard to the proper maintenance and repair of any
real property or personal property associated therewith, ordinary wear and tear
excepted;
(b) Seller will take all reasonable action to preserve the goodwill and
the present occupancy levels of the Hospital and the Clinic, it being understood
and agreed that Seller shall not be required to undertake any action to preserve
occupancy levels other than continuing to engage in the routine marketing
activities in which it is currently engaged at the Hospital and the Clinic;
(c) Seller will not make any material change in the operation of the
Hospital or the Clinic nor, except in the ordinary course of business, sell or
agree to sell any items of machinery, equipment or other fixed assets of the
Hospital or the Clinic nor otherwise enter into any agreements materially
affecting the Hospital or the Clinic;
(d) Seller will use its reasonable efforts to retain the goodwill of
the employees of, medical staff of or physicians under contract with, Seller
located at or connected with the operation of the Hospital and the Clinic and
will provide Purchaser with notice in the event of any union organizing
activities or contract negotiations are commenced after the date hereof;
(e) Except in the ordinary course of business, Seller will not increase
the compensation or bonuses payable or to become payable to any of its employees
located at or connected with the operation of the Hospital or the Clinic,
including employees located at the Seller's corporate or regional offices who
work exclusively on matters related to the Hospital and the Clinic, or grant any
severance benefits to any such employees other than to the extent such bonuses
or severance payments impose no obligation on Purchaser after the Closing Date;
(f) Seller will not enter into any written employment agreements in
connection with the operation of the Hospital or the Clinic other than with
physicians in the ordinary course of business; provided, however, that Seller
shall provide Purchaser with copies of any such physician contracts;
(g) Seller will not, except in the ordinary course of business, enter
into any contract or commitment affecting any of the Seller's Assets or incur
any additional indebtedness or amend, extend or renew any current debt
instruments, whether in the ordinary course of business or otherwise, nor will
Seller declare or pay any dividend or other distribution with respect to any of
the Seller Assets nor pledge the accounts receivable of Seller as security for
any indebtedness or lease agreements executed, amended or extended by Seller
after the date hereof; provided, however, that nothing herein shall be construed
as prohibiting (i) Seller from incurring inter-company indebtedness to Horizon
and/or CMS, (ii) Horizon and/or CMS from incurring debt, the proceeds of which
may be made available to Seller directly or by means of a working capital loan
from Seller's general partner to Seller or (iii) Seller from executing any and
all documents necessary to amend any debt instruments under which Horizon and/or
CMS may be the borrower and Seller a guarantor;
(h) During normal business hours, Seller will provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller and the Hospital and the Clinic provided they do not
interfere with the operation thereof;
(i) Seller will operate the Hospital and the Clinic in substantial
compliance with all applicable municipal, county, state and federal laws,
regulations, ordinances, standards and orders as now in effect (including,
without limitation, the building, zoning and life safety codes as currently
applied with respect thereto) where the failure to comply therewith could have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation thereof;
(j) Seller will take all reasonable action to achieve substantial
compliance with any laws, regulations, ordinances, standards and orders
applicable to the Hospital and the Clinic which are enacted or issued after
execution of this Agreement and become effective or require compliance prior to
the Closing where the failure to comply therewith could have a material adverse
effect on the business, property, condition (financial or otherwise) or
operation thereof;
(k) Seller will maintain the Seller's Assets in substantially the same
condition as they were in at the date hereof, ordinary wear and tear, casualty
loss and taking by eminent domain excepted;
(l) Seller will provide Purchaser with copies of its monthly
financial statements prepared in the
ordinary course of business;
(m) Seller will provide Purchaser with copies of all licensure or
certification surveys received
by Seller and the related Plans of Correction prepared by Seller;
(n) Seller will pay as and when due the accounts payable which arise in
the ordinary course of business, except to the extent that the amount owing is
being duly contested by Seller and such contest does not materially affect
Seller or the Hospital or the Clinic;
(o) Within ten (10) days after Seller's receipt of Purchaser's title,
UCC search and survey objections pursuant to Paragraph 10.01, Seller shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected;
(p) Seller will maintain in force the existing insurance
coverage with respect to the Hospital
and the Clinic described in Exhibit 6.28;
(q) Seller will file all returns, reports and filings of any kind or
nature, or to secure timely extensions for the filing thereof, required to be
filed by Seller including, but not limited to, state and federal tax returns and
Medicare and Medicaid cost reports with respect to the Hospital and the Clinic
and will timely pay all taxes or other obligations which are due and payable
with respect thereto, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and such contest does
not materially affect Seller or the Hospital and the Clinic;
(r) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(s) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller or any of the Seller's Assets, or offer to acquire
or convey in any manner, directly or indirectly, all or substantially all of the
equity interests in, the voting securities of Seller or the Seller's Assets;
provided, however, that public announcements of the transaction contemplated by
this Agreement shall not be prohibited hereby;
(t) Seller will provide to Purchaser copies of all material documents
which relate to, and, upon request, with verbal or written updates concerning
the status of, any litigation filed as of the date hereof or filed from and
after the date hereof by or against Seller after the date of this Agreement but
prior to the Closing Date where the amount claimed or assessed by management of
Seller as likely to be claimed exceeds $500,000;
(u) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party
Consents for which it is responsible under the terms hereof;
(v) Seller will not amend or permit the amendment of any of the
Medical Staff Bylaws described in
Paragraph 6.24; and
(w) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits of the results of operations at the Hospital and/or the
Clinic which Purchaser elects to conduct in order to comply with any
requirements applicable to it under the federal securities laws.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a
designated escrow agent in accordance with any written escrow instructions
executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01);
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the partners or the officers of the partners
executing documents on behalf of Seller, a copy of the resolutions adopted by
Seller's Partners authorizing the transaction provided for herein and the
execution of this Purchase Agreement and the other documents contemplated herein
and attaching a certificate of good standing issued by each of the California
and Delaware Secretary of State within no more than thirty (30) days prior to
Closing;
(c) The duly executed Lease Assignment Agreements;
(d) The duly executed Bill of Sale;
(e) A duly executed Assignment of the Operating Contracts described in
Paragraph 6.22, which shall be in substantially the form attached hereto as
Exhibit 9.02(e) (the "Operating Contract Assignment Agreement");
(f) The original titles to any motor vehicles included within the
Owned Personal Property;
(g) Written Escrow Instructions;
(h) An Estoppel Certificate in substantially the form attached
hereto as Exhibit 9.02(h) duly
executed by the lessor under the Hospital Lease;
(i) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to
Purchaser;
(j) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, the consent of the
landlord under the Clinic Lease, for which Seller is responsible under the terms
of this Agreement; and
(k) Evidence that the Agreement to provide Management Services
between Seller and CMS San Diego
Rehab, Inc. dated April 14, 1992 has been terminated.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and the Accrued Benefits (as
defined in Paragraph 14.01) and shall cause to be made available to Purchaser at
the Hospital any and all plans and specifications with respect to the Hospital
and the Clinic which may be in Seller's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Hospital
and the Clinic in its filings with the United States Securities and Exchange
Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) File any final cost reports for the cost reporting periods prior to
the Closing Date for which it may be responsible under applicable state and
federal law within the time periods proscribed thereunder, it being understood
and agreed that the purpose of this provision is to ensure that there is no
adverse affect on the reimbursement paid to Purchaser with respect to its
operations at the Hospital and the Clinic after Closing.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of
Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title commitment and/or survey of
the Real Property and the Hospital which Purchaser may elect to obtain;
provided, however, that Purchaser shall not have the right to object to any
items reflected on the title commitment which are referred to in Paragraph 3.02.
If Seller refuses to correct some or all of the title, survey or lien defects
objected to by Purchaser within the time period reflected in Paragraph 9.01(o)
or to give Purchaser reasonable assurances that the same will be corrected as of
the Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and
Regulatory Approvals for which it is responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller
and Purchaser agree in writing in the Escrow Instructions to handle the same
outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The executed Operating Contract Assignment Agreement;
(c) The cash due at Closing pursuant to Paragraph 2.01;
(d) Duly executed Escrow Closing Instructions;
(e) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to
Seller; and
(f) The duly executed Lease Assignment Agreements.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns, cost
reports or other filings filed prior to or subsequent to the Closing Date which
relate to the period prior to the Closing Date or which Seller may require for
any other lawful purpose other than litigation commenced by Seller against
Purchaser under the terms of this Agreement and maintain all such books and
records for a period of one year after the Closing Date, at which time Purchaser
shall give Seller notice of Seller's right to remove such books and records from
the Hospital. Seller shall have a period of thirty (30) days after receipt of
such notice to advise Purchaser whether it intends to exercise its removal right
and, in the event Seller elects to do so, Seller shall have a period of thirty
(30) days thereafter in which to arrange, at its sole cost and expense, for the
removal of any or of such books and records from the Hospital, subject to
Purchaser's right to retain copies of any or all of such removed books and
records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller and the staff physicians of
the Hospital employed by Seller prior to the Closing Date (but in the case of
such staff physicians only as necessary for the further care of their patients
and the defense of litigation) shall be entitled, after the Closing Date, during
normal business hours of the Hospital and the Clinic and on advance notice to
Purchaser to have access to and to make copies, at their sole cost and expense,
of the patient records, including the medical records and medical charts of any
patient admitted to the Hospital or the treated in a Clinic on or before the
Closing Date. In addition, to the extent permitted by law and to the extent
required by law, Seller shall be entitled to remove from the Hospital or the
Clinic any such record or chart, but only for the purposes of pending litigation
involving a patient to whom such record or chart refers, as certified in writing
prior to removal by an officer of Seller or counsel retained by Seller in
connection with such litigation, and only prior to making a copy thereof, at
Seller's cost and expense, for retention at the Hospital or the Clinic, as
applicable. Any record or chart so removed by the Hospital or the Clinic shall
be promptly returned to Purchaser following its use by Seller in accordance with
the terms hereof.
(e) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital, the consent of which
was not required as a condition to Closing but notice to which is required or
recommended after Closing, including, but not limited to, JCAHO.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets which are the subject of this
Agreement or the Other Agreements which either alone or in the aggregate, with
all such other sales or dispositions, would constitute the sale or disposition
of a "significant subsidiary" (as defined in Rule 1-02 of Regulation S-X of the
rules and regulations of the Commission), (ii) take any action, the consummation
of which cannot be conditioned on the consummation of the transactions
contemplated by this Agreement, where such action would have a material adverse
effect on Seller or (iii) take any action which either would have a material
adverse effect on the operations, business or financial condition of Seller or
would materially impair the value of the transaction contemplated herein to
Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Hospital and the Clinic from and after the Closing Date (the
"Regulatory Approvals"), and the consent of its lenders, lessors and other third
parties to the extent required under any loan documents, lease agreements,
management agreements or other instruments to which it is a party, including,
but not limited to, the consent of the lessors under the Leases (the "Third
Party Consents") provided, however, that the consent of the holders of the bonds
issued by Purchaser's parent corporation under that Indenture dated as of June
28, 1996 in the original principal amount of $50,000,000 and that Indenture
dated as of October 12, 1995 in the original principal amount of $110,000,000
shall not be deemed to be a required Third Party Consent, it being understood
and agreed that Purchaser has represented that the transaction as contemplated
herein will not require the consent of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by
either party of any press release or any written statement with respect to this
Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined
below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals, including, but not limited to, change of ownership
approval from the California Department of Health Services (the "CHOW Approval")
and shall have satisfied any and all conditions to the effectiveness thereof.
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, Seller shall not be
in default, where said default cannot be cured by the Closing Date, under any
mortgage, contract, lease or other agreement to which Seller is a party or by
which Seller is bound and which will affect or relate to the Real Property, the
Personal Property, the Hospital or the Clinic after the Closing Date.
(e) Subject to Purchaser ordering the same, a title insurance policy
providing for leasehold coverage shall have been issued to Purchaser with
respect to the Hospital subject only to the Permitted Exceptions (the "Title
Insurance Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Survey.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have
occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date, of each of the
following conditions any one or more
of which may be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the Landlord under any or all of the
Leases has refused to release Seller from its guarantee thereof or from primary
liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have
occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following
conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date other than the Purchaser's receipt of the CHOW Approval pursuant to
Paragraph 12.01(c), provided Purchaser is diligently pursuing the issuance of
the CHOW Approval by the California Department of Health, the Outside Closing
Date shall automatically be extended for such additional period of time as may
be necessary to permit Purchaser to secure the CHOW Approval; provided, further
that in the event Purchaser has not secured the same within thirty (30) days
after the Outside Closing Date, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights or
obligations hereunder.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission
requires any of the actions described in Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of any of the Hospital Real Property or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination or pursue
any other remedy referred to in Paragraph 13.01 on account of a breach of a
condition, covenant or warranty by the other, without first given such other
party written notice of such breach and not less than ten (10) days within which
to cure such breach. The Closing Date shall be postponed if necessary to afford
such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Hospital and the Clinic as of the
Closing Date, (ii) their positions and rates of pay, (iii) a reasonable estimate
as of the Closing Date of all earned and accrued vacation, holiday and sick pay
and earned or accrued "EVA" bonuses due to and/or coming due to the employees of
the Hospital and the Clinic as of the Closing Date (the "Estimated Accrued
Benefits"). On the Closing Date, Seller shall deliver to Purchaser an amount
equal to the Estimated Accrued Benefits reflected on the Employee Schedule and
Purchaser shall agree from and after the Closing Date, to pay the Accrued
Benefits, to the employees of the Hospital and the Clinic as and when due in
accordance with Purchaser's personnel policies from and after the Closing Date,
it being agreed for the benefit of Seller that such policies shall not result in
a reduction of benefits accrued in favor of any employee as of the Closing Date.
In addition, on the Closing Date or as soon thereafter as is required by
California law, Seller shall pay to the employees of the Hospital and the Clinic
any wages due to them as of the Closing Date. Any benefits due to the employees
of the Hospital and the Clinic for the period prior to the Closing Date and not
included within the Accrued Benefits paid to Purchaser at Closing shall be and
remain the responsibility of Seller after Closing. Within a reasonable period of
time following the Closing Date, which shall in no event be more than thirty
(30) days, Seller shall provide Purchaser with a schedule of the Accrued
Benefits which were earned or accrued as of the Closing Date (the "Actual
Accrued Benefits"). To the extent the Estimated Accrued Benefits exceeded the
Actual Accrued Benefits, Purchaser shall remit said difference to Seller within
ten (10) days after Purchaser's receipt of the Actual Accrued Benefits schedule.
To the extent the Estimated Accrued Benefits were less than the Actual Accrued
Benefits, Seller shall remit said difference to Purchaser along with the
schedule of Actual Accrued Benefits.
14.02. Purchaser shall offer to hire at Closing all of the employees of
Seller who, as of the Closing, work at the Hospital and/or the Clinic and have
been employed on average for 20 hours or more per week. Such employees who are
offered employment by Purchaser shall be referred to as the "Retained
Employees." Any such offer of employment to a Retained Employee by Purchaser
shall be to perform comparable services, in a comparable position and at
substantially the same base salary as such Retained Employee enjoyed with
Seller. Seller or any of its affiliates shall have the right to employ or offer
to employ any Retained Employee who declines Purchaser's offer of employment.
Purchaser shall hire at Closing each Retained Employee who elects to accept
employment with Purchaser (the "Hired Employees"), shall recognize each such
Hired Employees original hire date and shall continue to employ each such Hired
Employee for a period of no less than ninety (90) days following the Closing
Date unless the employment of such Hired Employee is terminated in accordance
with Purchaser's personnel policies or as a result of such Hired Employee's
resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Hospital and the Clinic of the "closure"
thereof under the Worker Adjustment and Retraining Notification Act (the "WARN
Act") or under any comparable California state law. Accordingly, Purchaser
agrees to indemnify, defend and hold harmless Seller from any liability which it
may incur under the WARN Act or under any comparable California State law in the
event of a violation by Purchaser of its obligations thereunder, including a
violation which results from allegations that Purchaser constructively
terminated the employees of the Facility as a result of the terms and conditions
of employment offered by Purchaser. Nothing in Section 14.02 shall, however,
create any rights in favor of any person not a party hereto, including the
employees of the Hospital or the Clinic, or constitute an employment agreement
or condition of employment for any employee of Seller or any affiliate of Seller
who is a Retained Employee or a Hired Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Hospital and the Clinic to whom it is required to offer the
same under applicable law. Seller acknowledges and agrees that Purchaser is not
assuming any of Seller's obligations to its employees under COBRA or otherwise,
except as specifically provided in this Article XIV. As of the Closing Date, all
active employees of Seller: (i) who participate as of the Closing Date in group
health insurance coverage sponsored by Seller and (ii) who become employees of
Purchaser on the Closing Date, shall be eligible for participation in a group
health plan (as defined for purposes of Internal Revenue Code Section 4980B)
established and maintained by Purchaser for the general benefit of its employees
and their dependents and all such employees shall be covered without a waiting
period and without regard to any pre-existing condition unless (A) they are
under a waiting period with Seller at the time of Closing, in which case they
shall be required to complete their waiting period while in Purchaser's employ
or (B)they were subject to a pre-existing condition exclusion while in Seller's
employ, in which case they shall be subject to the same exclusion while in
Purchaser's employ, which exclusion shall, if applicable, be subject to the same
time limitation while in Purchaser's employ as was applicable thereto while said
employees were in Seller's employ, with the time limit calculated from the date
the same commenced while in Seller's employ. Seller and Purchaser acknowledge
and agree that it is the intent of this provision that Seller shall not be
required to provide continued health coverage under ERISA or Section 4980 of the
Internal Revenue Code to any of such employees of Seller who are hired by
Purchaser or to any qualified beneficiary (as defined for purposes of Section
4980B of the Internal Revenue Code) with respect to any such employees.
14.05. Seller agrees that the continued employment of the Hired
Employees will be important to the viability of Purchaser's operations at the
Hospital and the Clinic. Accordingly, Seller agrees that for a period of one
year after the Closing Date it will not directly or indirectly solicit the
employment of any of such Hired Employees nor shall it take any action to
directly or indirectly interfere with their employment relationship with
Purchaser or to induce them in any manner to terminate their employment
relationship with Purchaser. Seller acknowledges and agrees that Purchaser would
not be fully compensated by damages in the event of a breach or threatened
breach by Seller of this provision and accordingly agrees that Purchaser shall
be entitled, without the need to post a bond, to seek an injunction to restrain
such violation or threatened violation of this Paragraph 14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Seller shall indemnify and hold Purchaser harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of Seller's Assets and the operation of the Hospital and the Clinic
prior to the Closing Date, whether or not the same are covered by Seller's
insurance, including, but not limited to (i) any obligations under the Leases,
the Operating Contracts and the Assumed Liabilities, (ii) any violations of the
Medicare or Medicaid fraud and abuse laws, the Stark II law governing
relationships with physicians or any other state or federal law governing the
operation of the Hospital and/or the Clinic (whether or not such violations
would constitute a breach by Seller of a representation or warranty set forth
herein) and (iii) any failure of any cost report filed by Seller for the cost
reporting periods prior to the Closing Date, including the final cost reports
filed after the Closing Date, to comply with applicable state or federal law
(whether or not such violation would constitute a breach by Seller of a
representation or warranty set forth herein), provided, however, nothing herein
shall be construed as imposing any liability on Seller as a result of the
negative impact, if any, on Purchaser's operations at the Hospital and Clinic
from and after the Closing Date resulting from the items described in Exhibit
15.01(a);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or
nonfulfillment of any agreement on the part of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers;
(d) Any claims against Seller, Purchaser, the Hospital, the Clinic or
the other Seller's Assets under the Medicare or Medi-Cal Programs or under any
other third party payor programs (i) with respect to the operation of the
Hospital and the Clinic by Seller prior to the Closing Date, (ii) for recapture
of depreciation generated by the transaction contemplated hereby; or (iii) for
repayment of any overpayments made to Seller under the Medicare or Medi-Cal
Programs or any other third party payor program for services rendered at the
Hospital or the Clinic prior to the Closing Date, including, but not limited to,
claims against Purchaser in the form of offsets by Medicare or Medi-Cal or any
other third party payor against their payments due to Purchaser on and after the
Closing Date;
(e) The Excluded Assets; and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of Seller's Assets and the
operation of the Hospital and the Clinic from and after the Closing Date,
including, but not limited to, any obligations under the Leases, the Operating
Contracts and the Assumed Liabilities;
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or
nonfulfillment of any agreement on the part of Purchaser under this Agreement;
and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches equals or exceeds Fifty Thousand and no/100 Dollars
($50,000) (the "Representation and Warranty Liability Threshold"). In the event
the Representation and Warranty Threshold is met, then the Non-Breaching Party
shall be entitled to seek to collect from the Breaching Party any and all
damages, liabilities, losses, costs or expenses suffered or incurred as a result
of all such breaches of the representations and warranties set forth herein on a
first dollar basis and not merely to recover damages in excess of the
Representation and Warranty Liability Threshold.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder with respect to any Real Property and Personal Property included in
the Seller's Assets effective at Closing to a real estate investment trust (the
"REIT") in connection with its financing of the transaction provided for herein
provided Seller first confirms to Purchaser that, in its reasonable
determination, such assignment will not have adverse reimbursement consequences
for Seller; and provided, further, that no such assignment shall relieve
Purchaser of its obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including successors by operation of law pursuant to any
merger, consolidation or sale of assets involving either party. In the event of
an assignment of this Purchase Agreement to a REIT, Purchaser shall advise
Seller as to those documents and deliveries contemplated by this Agreement which
are to run in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the REIT
rather than Purchaser, if any, it being understood and agreed that in the event
of such an assignment, the only right which the REIT will assume is Purchaser's
right to take title to the Seller's Assets and the only obligation which the
REIT will assume is Purchaser's obligation to pay the purchase price in
accordance with the terms hereof.
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Remittances and Receivables.
(a) All remittances, mail and other communications relating to the
Excluded Assets or liabilities other than the Assumed Liabilities received by
Purchaser at any time after the Closing shall be promptly remitted by Purchaser
to Seller and, pending such delivery, Purchaser shall have no interest in the
same and shall hold such remittances, mail and other communications in trust for
the benefit of Seller. All remittances, mail and other communications relating
to the Seller's Assets or the Assumed Liabilities received by Seller at any time
after the Closing shall be promptly remitted by Seller to Purchaser and, pending
such delivery, Seller shall have no interest in the same and shall hold such
remittances, mail and other communications in trust for the benefit of
Purchaser.
(b) Any payments received by Purchaser (or its successors in interest
or assigns) which relate solely to accounts receivable for services rendered and
medicines, drugs and supplies provided by Seller to patients of the Hospital or
the Clinic who are discharged prior to the Closing Date or otherwise not
receiving such goods or services as of the Closing Date (the "Receivables")
whether from patients, payors, clients, customer or others (collectively, the
"Account Parties") shall be paid by Purchaser to Seller weekly commencing on the
first Monday following the Closing and covering the seven day period ending on
the immediately preceding Saturday (or, in the case of the first such payment,
the period beginning on the Closing Date and ending on the next succeeding
Saturday). Within no more than ten (10) days after Closing, Seller shall deliver
to Purchaser a schedule of all such Receivables which are outstanding as of the
Closing Date, which schedule shall show (i) the amount due from each Account
Party and (ii) if possible, the portion thereof, if any, due from a third party
payor on behalf of an Account Party who is a patient. Any payments received by
Seller with respect to balances owing to Purchaser for services rendered or
medicines, drugs or supplies provided after the Closing Date shall be remitted
to Purchaser within five (5) business days after the receipt thereof. All
payments which are remitted by Purchaser to Seller shall be applied to the
oldest receivable reflected on the schedule provided by Seller to Purchaser
unless Purchaser in good faith determines that the same should be applied to a
more recent Receivable and so advises Seller at the time of the remittance
thereof to Seller.
(c) To compensate Seller for services rendered and medicines, drugs and
supplies provided to the Closing Date to patients who were admitted to the
Hospital or treated at the Clinic before the Closing Date and discharged by the
Hospital or whose treatment at the Clinic terminated after the Closing Date (the
"Straddle Patients"), the following provisions shall apply:
(i) Seller shall prepare cut-off billings for all Straddle Patients,
other than Medicare, Medi-Cal and Champus program patients (the "Program
Patients") as of the close of business on the day prior to the Closing Date. All
payments which are received by Purchaser (or its successors in interest or
assigns) after the Closing Date with respect to such non-Program Patients to
whom cut-off billings were provided shall constitute Excluded Assets and shall
be remitted to Seller within two (2) weeks after Purchaser's receipt of such
payments.
(ii) Seller shall prepare its final cost reports under Medicare and, if
applicable, Medi-Cal and Champus with respect to amounts owing from the Program
Patients as of the close of business on the day prior to the Closing Date and
shall file such cost reports within such period as may be required by law for
the timely filing thereof, it being understood and agreed that the intent and
purpose of this provision is to ensure both that Seller receives the final
payments to which it is entitled and that the payments due to Purchaser after
Closing from Medicare and, if applicable, Medi-Cal and Champus, are not
adversely affected by Seller's failure to timely file such final cost reports.
All payments which are received by Purchaser (or its successors in interest or
assigns) after the Closing Date with respect to such Program Patients shall
constitute Excluded Assets and shall be remitted to Seller within two (2) weeks
after Purchaser's receipt of such payments.
(iii) For any Program Patients or Non-Program Straddle Patients with
respect to which either a cut off billing cannot be made or a final cost report
cannot be filed until he/she ceases to be a patient of the Hospital or the
Clinic, Seller shall deliver to Purchaser a statement calculating the total
charges made by Seller for services rendered and medicine, drugs and supplies
provided through the Closing Date with respect to such Straddle Patients. Within
ten (10) days following the discharge or termination of treatment of each such
Straddle Patient, Purchaser shall deliver to Seller a statement reflecting the
total charges for the services rendered and medicine, drugs and supplies
provided to such Straddle Patient after the Closing Date and the amount owing
from said Straddle Patient (including amounts owing from any third party payor
on behalf of such Straddle Patient and amounts owing from such Straddle Patient
as co-payment or deductible amounts) (the "Straddle Patient Payments"). Upon
receipt of any such Straddle Patient Payments Purchaser shall remit to Seller
its pro rata portion thereof which shall be calculated by multiplying the
Straddle Patient Payment so received by a fraction, the numerator of which is
the total patient days of Seller with respect to such Straddle Patient through
the Closing Date and the denominator of which is the total patient days of
Purchaser and Seller with respect to such Straddle Patient through the date of
discharge or termination of treatment. Such payment shall be due to Seller
within five (5) business days after the receipt thereof by Purchaser.
(iv) Seller shall be required to file its final cost reports with
Medicare and Medi-Cal in the event Purchaser elects to change fiscal
intermediaries, in which case the provisions of clause (ii) shall apply to all
patients affected thereby.
(d) Any payments in excess of One Hundred Thousand and no/100 Dollars
($100,000) owing from either party to the other under this Section 16.14 shall
be paid in immediately available funds. All other payments shall be paid by
check made payable to the party entitled to such payment in accordance with the
terms hereof. Any payment not paid when due hereunder or within thirty (30) days
thereafter (the "Overdue Date"), shall bear interest at the rate of 10% per
annum from the Overdue Date to the date paid in full.
(e) Seller acknowledges and agrees that Purchaser's obligations under
this Paragraph 16.14 shall be limited to remitting to Seller any payments
received by Purchaser which belong to Purchaser in accordance with the terms
hereof and that Purchaser shall not be obligated to attempt to bill for or to
collect Seller's Receivables, other than Seller's pro rata portion of any
payments owing from the Straddle Patients which are not the subject of cut off
billings or final cost reports. Accordingly, in order to facilitate Seller's
collection efforts, Purchaser agrees to cooperate with Seller and, to the extent
permitted by law, to provide access to records (both medical and financial)
during normal business hours and to a reasonable number of Seller's personnel
and representatives, to assist Seller in the collection, rebilling and auditing
(by Seller or its representatives, including its independent certified public
accountants) of the Receivables included in the Excluded Assets (including but
not limited to, any and all Receivables from Account Parties or amounts due to
Seller from any other payor). Without limiting the generality of the foregoing,
Purchaser agrees that (A) for a period of six months following the Closing Date,
(i) Seller may, at its sole cost and expense, locate an employee or
representative at the Hospital, without charge, in order to facilitate such
collection, rebilling and auditing efforts, (ii) Purchaser shall provide such
employee or representative, without charge, adequate space to facilitate the
performance of such duties and (iii) Purchaser shall provide reasonable
assistance of the employees of Purchaser, without charge; provided, however, in
each instance that Purchaser's obligations hereunder are subject to such
presence of Seller's employee or representative and such assistance of
Purchaser's employee not interfering with Purchaser's day to day operations at
the Hospital and the Clinic and (B) with respect to any Receivables for which
collection has not been received within one hundred and twenty (120) days
following its due date, to the extent Purchaser has not already provided the
same to Seller's employees or representatives under clause (A) hereof, Purchaser
shall upon the request of Seller promptly turn over to Seller all evidences of
any such Receivables and documents pertaining to the same that are in the
possession of Purchaser (or its successors in interest or assigns) and, to the
extent it has not already done so pursuant to clause (A), Seller shall be free
to institute such collection efforts, including without limitation, initiating
such legal proceedings, with respect thereto as Seller shall, in its sole
discretion, determine to be necessary or appropriate for the collection thereof.
(f) In the event any collection efforts are necessary with respect to
the Straddle Patient Payments, Seller and Purchaser shall cooperate in
determining the nature and extent of such collection efforts and shall share the
cost thereof on the same pro rata basis as the Straddle Patient Payments are
allocated between Seller and Purchaser in accordance with clause (c)(iii)
hereof.
16.15. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
16.16. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
SAN DIEGO REHAB LIMITED PARTNERSHIP
By: SAN DIEGO REHABILITATION ASSOCIATES
Its: GENERAL PARTNER
By: CMS SAN DIEGO REHABILITATION, INC.
Its: GENERAL PARTNER
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between San Diego Rehab Limited
Partnership, as Seller and Purchaser dated November 19, 1996 (the "Agreement"),
hereby unconditionally, irrevocably and jointly and severally with Seller,
guarantees and promises to and for the benefit of Purchaser that (i) the
representations and warranties of Seller are true and correct as of the date of
execution of the Agreement and shall be true and correct as of the Closing Date
(as modified by any supplements to the Seller Disclosure Letter to reflect
events after the date hereof) and (ii) Seller shall perform all of its
obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 15, to be performed on its part under the
Agreement. If Seller defaults under the Agreement, Purchaser may proceed
immediately against Horizon or Seller or both to enforce any rights it has under
the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Seller will not survive beyond the periods
applicable thereto set forth in Paragraph 16.13 hereof and this Guaranty shall
not be construed to give Purchaser a claim or cause of action against Horizon
after the expiration of the applicable survival period for a breach by Seller of
any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the
performance of Seller's obligations under the Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the
Agreement (whether absolute or as collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or agreed
to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the
rejection of the Agreement by Seller or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to San Diego Rehab Limited Partnership ("Seller") to enter
into the Purchase and Sale Agreement between Seller and Regency Rehab Hospitals,
Inc. ("Purchaser") dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Purchaser,
guarantees and promises to and for the benefit of Seller that (i) the
representations and warranties of Purchaser are true and correct as of the date
of execution of the Agreement and shall be true and correct as of the Closing
Date (as modified by any supplements to the Purchaser Disclosure Letter to
reflect events after the date hereof) and (ii) Purchaser shall perform all of
its obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 15, to be performed on its part under the
Agreement. If Purchaser defaults under the Agreement, Seller may proceed
immediately against Regency or Purchaser or both to enforce any rights it has
under the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Purchaser will not survive beyond the periods
applicable thereto set forth in Paragraph 16.13 hereof and this Guaranty shall
not be construed to give Seller a claim or cause of action against Regency after
the expiration of the applicable survival period for a breach by Purchaser of
any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance
of Purchaser's obligations under the Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or agreed
to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the
rejection of the Agreement by Purchaser or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.07
PURCHASE AND SALE AGREEMENT
SAN DIEGO REAL ESTATE
This Agreement is made and entered into this19th day of November, 1996
by and between San Diego Health Associates Limited Partnership, a Delaware
limited partnership ("Seller") and Regency Rehab Properties, Inc., a California
corporation ("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to the
following:
(a) The hospital condominium unit more particularly described in
Exhibit 1.01(a)(1) (the "Hospital Condominium Unit") and the improvements
thereon that comprise the free standing rehabilitation hospital with 57 acute
rehabilitation beds and 53 skilled nursing facility beds and commonly known as
Continental Rehabilitation Hospital of San Diego, 555 Washington Street, San
Diego, California (the "Hospital"), including without limitation the Seller's
interest under the Condominium Plan, the Hospital/Medical Offices Declaration
and the Master Declaration, the Articles of Incorporation and Bylaws of the
Association and the Maintenance Agreement (as all such terms are defined in
Exhibit 1.01(a)(1), which documents are collectively referred to herein as the
"Condominium Documents"), Seller's membership in the Association and the
Seller's interest under the "Hospital Sublease" dated October 26, 1992 between
Oliver McMillan Village Hillcrest 2, L.P. (predecessor in interest to Lennar
U.S. Partners, L.P.), as ground sublessor, to Seller, as ground sublessee (the
"Ground Sublease").
(b) The lessor's interest under the "Amended and Restated Lease
Rehabilitation Hospital of San Diego" dated October 26, 1992 between Seller, as
lessor, and San Diego Rehab Limited Partnership, a Delaware limited partnership
("SDRLP"), as lessee, as amended by First Amendment to Amended and Restated
Lease dated as of October 28, 1992 (as amended, the "Hospital Lease").
(c) Seller's interest under the Parking Agreement between Oliver
McMillan Village Hillcrest 2, L.P. (predecessor in interest to Lennar U.S.
Partners, L.P.), as grantor, and Seller, as grantee, dated October 26, 1992,
providing the parking rights for the Hospital (the "Parking Agreement").
Hereinafter the Hospital Condominium Unit, the Seller's interest under
the Hospital Lease, the Ground Sublease and the Parking Agreement will sometimes
be collectively referred to as the "Seller's Assets."
1.02. Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge the following
liabilities and obligations (the "Assumed Liabilities"):
(a) The liabilities and obligations of Seller under the
Condominium Documents which relate to the
periods on and after the Closing Date; and
(b) The liabilities and obligations of Seller as the lessor
under the Hospital Lease and Ground
Sublease which relate to periods on and after the Closing Date; and
(c) The liabilities and obligations of Seller as the grantee under the
Parking Agreement which relate to periods on and after the Closing Date.
1.03. Except for the Assumed Liabilities, no obligation or liability of
Seller relating to or arising from the Seller's Assets prior to the Closing Date
is to be assumed by Purchaser.
ARTICLE II
PURCHASE PRICE
2.01. The purchase price for Seller's Assets shall be Thirteen Million
Three Hundred Thousand and no/100 Dollars ($13,300,000) (the "Purchase Price")
which shall be payable in cash at Closing concurrently with the transfer of the
Seller's Assets to, and the assumption of the Assumed Liabilities by, Purchaser,
which cash shall be paid at Closing, subject to adjustment to reflect the costs,
expenses and prorations for which Seller and Purchaser are responsible under
Paragraph 4 hereof.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall occur effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date. The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver title to the Hospital
Condominium Unit and the Seller's interest under the Hospital Lease, the Ground
Sublease and the Parking Agreement to Purchaser free and clear of all liens and
encumbrances other than the following (collectively, the "Permitted
Exceptions"):
(a) Liens for real and personal property taxes which are not yet
due and payable;
(b) The title matters listed in Exhibit 3.02(b); and
(c) Such liens as may be approved or deemed approved by Purchaser
pursuant to Paragraph 10.01.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser at
Closing by Seller's delivery of
the following documents:
(a) Seller shall deliver a Grant Deed in the form attached hereto
as Exhibit 3.03(a) (the "Grant
Deed").
(b) Seller shall deliver an Assignment of Lease in the form attached
hereto as Exhibit 3.03(b) (the "Hospital Lease Assignment Agreement").
(c) Seller shall deliver an Assignment of Lease in the form attached
hereto as Exhibit 3.03(c) (the "Ground Sublease Assignment Agreement").
(d) Seller shall deliver an Assignment of Seller's interest in the
Parking Agreement in the form attached hereto as Exhibit 3.03(d)(the "Parking
Assignment").
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
and operation of the Seller's Assets shall be allocated between Seller and
Purchaser as follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any transfer or
excise taxes due on the transfer of title to the Hospital Condominium Unit or
Seller's interest in the Hospital Lease, the Ground Sublease or the Parking
Agreement to Purchaser.
4.02. Seller shall pay the base premium for a standard ALTA owner's
policy of title insurance for the Hospital Condominium Unit in the amount of the
Purchase Price, insuring Purchaser's title to the Hospital Condominium Unit;
Purchaser shall pay the cost of any premiums for extended coverage which
Purchaser may elect to secure, including the cost of the ALTA survey ("Survey")
required to obtain the same, any lender's coverage which it elects or is
required to secure in connection with its acquisition of the Seller's Assets or
financing thereof and any title endorsements which it elects to obtain or is
required to obtain to satisfy the requirements of its lender.
4.03. Purchaser shall pay the cost of any environmental Phase I
assessment of the Seller's Assets which Purchaser elects to secure prior to
Closing.
4.04. Any rent due to Seller under the terms of the Hospital Lease
shall be prorated as of the Closing Date, it being understood and agreed that
there will be no proration with respect to the payment of any real and personal
property taxes, ground rent, rent, and assessments under the Condominium
Documents or other expenses related to the ownership of the Hospital Condominium
Unit or the ownership or operation of the Hospital as Seller has no
responsibility for such costs and expenses under the terms of the Hospital Lease
but SDRLP is solely responsible therefor under the terms thereof.
4.05. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.06. Purchaser and Seller shall share recording fees related to the
recording of the conveyancing documents and any escrow fees on a 50-50 basis.
4.07. Seller shall pay the cost of obtaining and recording any releases
and consents necessary to deliver title to the Seller's Assets in accordance
with the terms of this Agreement. Without limitation of the foregoing, Seller
shall pay any reasonable attorneys fees, processing fees and other fees and
expenses contemplated by the terms of the Ground Sublease, the Condominium
Documents or the Parking Agreement as a condition to securing any consents to a
transfer or assignment thereof.
4.08. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements listed in Exhibit 4.08 (the "Other Agreements") under the Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
4.09. Purchaser shall reimburse Seller at Closing for any prepaid
expenses and deposits which relate to the period on and after the Closing Date.
4.10. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Seller's Assets and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Credit Agreement dated December 28, 1995
between Regency Health Services, Inc. and NationsBank of Texas, N.A.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets, subject only to the rights of SDRLP under the Hospital Lease.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as otherwise
specifically set forth in the disclosure letter addressed to Purchaser and dated
the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller. Seller is a duly organized, validly existing
Delaware limited partnership and is duly qualified to do business in the State
of California and is in good standing under the laws thereof. Horizon/CMS
Healthcare Corporation ("Horizon") is a duly organized, validly existing
Delaware corporation and is in good standing under the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's Partnership Agreement or any
law, regulation, court order, mortgage, note, bond, indenture, agreement,
license or other instrument or obligation to which Seller is now a party or by
which any of Seller's Assets may be bound or affected or any agreement, option,
understanding or commitment or any or privilege granted by Seller to any other
party to purchase or otherwise acquire the Seller's Assets or result in the
acceleration of or an increase in the interest rate payable under any
indebtedness other than indebtedness of Seller which does not relate to the
Hospital Condominium Unit or which is to be discharged by Seller as of the
Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full partnership power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own and lease the Hospital Condominium Unit as the same is presently owned
and leased and (ii) to conduct its business as the same is now being conducted.
6.04. Absence of Liabilities. There are no material liabilities
with respect to the Hospital
Condominium Unit of which Seller has knowledge and which Seller has failed to
disclose to Purchaser.
6.05. The Licenses. To the extent not obtained by SDRLP under the
Hospital Lease in accordance with the requirements thereof, Seller has all
material licenses, permits and authorizations, if any, necessary for the lawful
ownership and leasing under the terms of the Hospital Lease of the Hospital
Condominium Unit (the "Seller Licenses"). True and correct copies of all of the
Seller Licenses are attached hereto as Exhibit 6.05. Seller has not received
written or verbal notice of any action or proceeding which has been initiated or
is proposed to be initiated by the appropriate state or federal agency having
jurisdiction thereof, to revoke, withdraw or suspend any of the Seller Licenses.
6.06. Compliance with Law. Seller has no knowledge that the
improvements of which the Hospital Condominium Unit comprises a part were not
constructed and have not been maintained in substantial compliance with all
applicable health and safety laws, regulations, ordinances, standards and orders
issued by any municipal, county, state or federal agency having authority there
over and with all applicable municipal health, building and zoning laws and
regulations (including, without limitation, the building, zoning and life safety
codes) where the failure to comply therewith would have a material adverse
effect on the business, property, condition (financial or otherwise) of the
Hospital Condominium Unit or the operation of the Hospital under the terms of
the Hospital Lease and there are no outstanding cited deficiencies or work
orders issued to Seller with respect to the Hospital Condominium Unit for which
it is responsible (as compared to for which SDRLP is responsible under the
Hospital Lease in accordance with the terms thereof) under any of the foregoing
which have not been corrected as of the date hereof or which will not be
corrected as of the Closing Date.
6.07. Books and Records. All of the Seller's books and records
relating to the Seller's Assets are
true and correct in all material respects.
6.08. Title. Seller has title to all of the Seller's Assets free
and clear of all liens, charges
and encumbrances other than the liens provided for in Paragraph 3.02. Seller
has not received notice of any
pending or threatened condemnation proceedings with respect to the Hospital
Condominium Unit.
6.09. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Seller prior to date
of execution of this Agreement with respect to the Hospital Condominium Unit for
which Seller (as compared to SDRLP under the Hospital Lease) is responsible have
been properly completed and timely filed, or extensions for the filing thereof
have been timely secured, with all such filings being in material compliance
with all applicable requirements and all taxes due with respect to Seller's
ownership and leasing under the terms of the Hospital Lease of the Hospital
Condominium Unit have been timely paid, except to the extent that the same are
being duly contested in good faith in accordance with applicable law.
6.10. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under the
Hospital Condominium Unit other than to the extent the same will not have a
material adverse affect on the condition, financial or otherwise, of the
Hospital Condominium Unit, (ii) not installed any underground storage tanks at
or under the Hospital Condominium Unit and (iii) at all times maintained or
caused to be maintained the Hospital Condominium Unit in compliance with all
Environmental Laws, except where the failure to so comply would not have a
material adverse affect on the condition, financial or otherwise, of the
Hospital Condominium Unit.
(b) With respect to the Hospital Condominium Unit prior to the date of
the Seller's ownership thereof, to the best of Seller's knowledge after due
inquiry of the Director of Plant Operations at the Hospital, (i) except to the
extent permitted by applicable Environmental Laws, no hazardous materials,
substances or wastes were located on or at the Hospital Condominium Unit or were
released into the environment or discharged, placed or disposed of in, on or
under the Hospital Condominium Unit, (ii) except to the extent permitted by
applicable Environmental Laws, no underground storage tanks are or were located
at the Hospital Condominium Unit, (iii) the Hospital Condominium Unit is not
located on property which was used as a dump for waste material, and (iv) the
Hospital Condominium Unit has at all times complied with, all Environmental
Laws, except to the extent in each of the foregoing clauses (i) through (iv)
that any such non-compliance would not have a material adverse effect on the
Hospital Condominium Unit. Seller has not received any written notice from any
governmental authority or any written complaint from any third party with
respect to its alleged noncompliance with, or potential liability under, any
Environmental Laws at the Hospital Condominium Unit which remains unresolved as
of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Hospital Condominium Unit which are currently in the
possession of Seller.
6.11. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals (as those terms are
defined below) for which Seller is responsible under the terms hereof. Seller
represents and warrants that as of the date of execution of this Agreement, it
has secured the consent of its partners and of the Board of Directors of Horizon
to the execution of this Agreement and of any documents and agreements necessary
to carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by Seller that it will be able to secure the Third Party Consents or Regulatory
Approvals for which it is responsible, but rather this paragraph shall be
limited to Seller's representation and warranty that it will use its best
efforts to secure such Third Party Consents and Regulatory Approvals.
6.12. Litigation. There is no, nor has Seller received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened against or relating to Seller by any
governmental authority having jurisdiction over Seller or by any other party
which seeks to challenge Seller's title to the Seller's Assets or Seller's right
or ability to consummate the transaction provided for herein or to impose any
lien on Seller's Assets not permitted by the terms of this Agreement. Seller is
not a party to nor is Seller bound by any orders, judgments, injunctions,
decrees or settlement agreements under which it may have continuing obligations
as of the date hereof or as of the Closing Date and which are likely to
materially restrict or affect Seller's present business operations. The right or
ability of Seller to consummate the transaction contemplated herein has not been
challenged by any governmental agency or any other person and Seller has no
knowledge of the occurrence of any event which would provide a reasonable basis
for any such litigation, investigation or other proceeding.
6.13. The Hospital Lease and the Ground Sublease. True and correct
copies of the Hospital Lease and the Ground Sublease (collectively, the
"Leases") have been provided by Seller to Purchaser. The Leases remain in full
force and effect and have not been amended or modified except as set forth in
Article 1. Seller has not received from any other party to either of the Leases
any written notice that Seller is in default of its obligations under the Leases
nor does Seller have knowledge of any events which, with the passage of time or
the giving of notice, would constitute a material default thereunder. Seller
enjoys exclusive, peaceful and undisturbed possession under the Ground Sublease
(subject to the Hospital Lease). There are no security deposits posted with
respect to the Leases.
6.14. Insurance. All of the insurance required to be maintained by
Seller with respect to the Hospital Condominium Unit and the other Seller's
Assets and the Hospital is maintained by SDRLP under the terms of the Hospital
Lease. All of such insurance names Seller as an additional insured or loss payee
thereunder and, to the best of Seller's knowledge based on Seller having not
received any notice of termination or cancellation as of the date hereof, all of
such insurance is in full force and effect as of the date hereof.
6.15 Condominium Documents. Seller has provided to Purchaser true,
correct and complete copies of the Condominium Documents. The Condominium
Documents remain in full force and effect and have not been amended or modified
except as set forth in Article 1. Seller has not received from any other party
to any of the Condominium Documents any written notice that Seller is in default
of its obligations thereunder nor does Seller have knowledge of any events
which, with the passage of time or the giving of notice, would constitute a
material default thereunder by any party thereto. There are no condominium
governing documents or agreements, other than the Condominium Documents, that
establish, modify or govern the rights of owners of condominium units that are
subject to the Condominium Documents.
6.16. Parking Agreement. Seller has provided Purchaser with a true and
correct copy of the Parking Agreement and the Settlement Agreement executed by
Seller on October 31, 1996 with respect thereto. The Parking Agreement is in
full force and effect and has not been modified or amended but has been
interpreted by the terms of the Settlement Agreement. Seller is not in default
of any of its obligations under the Parking Agreement nor is Seller aware of any
default or any action or omission which, with the passage of time or the giving
of notice or both, would constitute a default under the Parking Agreement by any
party thereto. At Closing, Seller shall deliver to Purchaser a duly executed
assignment of the Parking Agreement.
6.17. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as otherwise
specifically set forth in the letter from Purchaser to Seller dated the date
hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in
good standing under the laws of the State of California. Regency Health
Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own and lease the Hospital Condominium Unit from and after
the Closing Date as the same are presently owned and leased and (ii) to conduct
its business from and after the Closing Date as the same is now being conducted.
7.04 Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financial statements prepared by Purchaser.
7.07. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except
as contemplated by this Agreement or with the consent of Purchaser, which
consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Seller will enforce the obligations of SDRLP under the Hospital
Lease, including but not limited to, any obligations which require SDRLP to
fulfill any obligations imposed on Seller under the Ground Sublease and the
Parking Agreement.
(b) Seller will not sell or agree to sell the Hospital Condominium Unit
nor otherwise enter into any agreements materially affecting the Hospital
Condominium Unit;
(c) Seller will not, except in the ordinary course of business, enter
into any contract or commitment affecting any of the Seller's Assets or incur
any additional indebtedness or amend, extend or renew any current debt
instruments, whether in the ordinary course of business or otherwise, nor will
Seller declare or pay any dividend or other distribution with respect to any of
the Seller Assets nor pledge the accounts receivable of Seller as security for
any indebtedness or lease agreements executed, amended or extended by Seller
after the date hereof; provided, however, that nothing herein shall be construed
as prohibiting (i) Seller from incurring inter-company indebtedness to Horizon
and/or Continental Medical Systems, Inc. ("CMS"), (ii) Horizon and/or CMS from
incurring debt, the proceeds of which may be made available to Seller directly
or by means of a working capital loan from Seller's general partner to Seller or
(iii) Seller from executing any and all documents necessary to amend any debt
instruments under which Horizon and/or CMS may be the borrower and Seller a
guarantor;
(d) During normal business hours, Seller will provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller relating to the Hospital Condominium Unit provided they do
not interfere with the operation thereof;
(e) If and to the extent Seller has not delegated responsibility
therefor to SDRLP under the Hospital Lease, Seller will maintain the Hospital
Condominium Unit in substantial compliance with all applicable municipal,
county, state and federal laws, regulations, ordinances, standards and orders as
now in effect (including, without limitation, the building, zoning and life
safety codes as currently applied with respect thereto) where the failure to
comply therewith could have a material adverse effect on the business, property,
condition (financial or otherwise) or operation thereof;
(f) If and to the extent Seller has not delegated responsibility
therefor to SDRLP under the Hospital Lease, Seller will take all reasonable
action to achieve substantial compliance with any laws, regulations, ordinances,
standards and orders applicable to the Hospital Condominium Unit which are
enacted or issued after execution of this Agreement and become effective or
require compliance prior to the Closing where the failure to comply therewith
could have a material adverse effect on the business, property, condition
(financial or otherwise) or operation thereof;
(g) Within ten (10) days after Seller's receipt of Purchaser's title,
UCC search and survey objections pursuant to Paragraph 10.01, Seller shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected;
(h) If and to the extent Seller has not delegated responsibility
therefor to SDRLP under the Hospital Lease, Seller will file all returns,
reports and filings of any kind or nature, or secure timely extensions for the
filing thereof, required to be filed by Seller including, but not limited to,
state and federal tax returns with respect to the Hospital Condominium Unit and
will timely pay all taxes or other obligations which are due and payable with
respect thereto where the failure to pay the same is reasonably likely to result
in the imposition of a lien on the Hospital Condominium Unit not permitted by
the terms of this Agreement;
(i) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement or which is intended to cause
any representation, warranty or covenant made by Seller in this Agreement;
(j) Neither Seller nor any of its partners, advisors or others
authorized to act on its behalf shall directly initiate or solicit discussions
relating to any alternative acquisition proposal or similar transaction
including, without limitation, a merger or other business combination involving
Seller or any of the Seller's Assets, or offer to acquire or convey in any
manner, directly or indirectly, all or substantially all of the equity interests
in Seller or the Seller's Assets; provided, however, that public announcements
of the transaction contemplated by this Agreement shall not be prohibited
hereby;
(k) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party
Consents for which it is responsible under the terms hereof; and
(l) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits relating to the Hospital Condominium Unit which Purchaser
elects to conduct in order to comply with any requirements applicable to it
under the federal securities laws.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a
designated escrow agent in accordance with any written escrow instructions
executed by Seller and Purchaser:
(a) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the partners or the officers of the partners
executing documents on behalf of Seller, a copy of the resolutions adopted by
Seller's Partners authorizing the transaction provided for herein and the
execution of this Purchase Agreement and the other documents contemplated herein
and attaching a certificate of good standing issued by each of the California
and Delaware Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The duly executed Grant Deed;
(c) The duly executed Hospital Lease Assignment Agreement and
the duly executed Ground Sublease
Assignment Agreement;
(d) The duly executed Parking Assignment;
(e) Written Escrow Instructions;
(f) An Estoppel Certificate in substantially the form attached hereto
as Exhibit 9.02(f) duly executed by the lessor under the Ground Sublease and the
grantor under the Parking Agreement;
(g) An opinion of the General Counsel of Horizon in form and
substance reasonably acceptable to
Purchaser; and
(h) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals for which Seller is responsible under the terms of this
Agreement.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Hospital any and all plans and specifications with
respect to the Hospital Condominium Unit which may be in Seller's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Hospital
Condominium Unit in its filings with the United States Securities and Exchange
Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser, may be reasonably necessary to
assure, complete and evidence the full and effective transfer and conveyance of
Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of
Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title report or title insurance
commitment and/or survey of the Hospital Condominium Unit which Purchaser may
elect to obtain; provided, however, that Purchaser shall not have the right to
object to any of the Permitted Exceptions. If Seller refuses to correct some or
all of the title, survey or lien defects objected to by Purchaser within the
time period reflected in Paragraph 9.01(o) or to give Purchaser reasonable
assurances that the same will be corrected as of the Closing Date, Purchaser
shall have ten (10) days to advise Seller of its decision to close,
notwithstanding the defects, or of its election to terminate this Agreement, in
which case neither party shall have any further rights or obligations hereunder.
If Purchaser does not give notice of termination within this ten (10) day
period, it will be deemed to have waived its objections and to have accepted
such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and
Regulatory Approvals for which it is responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller
and Purchaser agree in writing in the Escrow Instructions to handle the same
outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The cash due at Closing pursuant to Paragraph 2.01;
(c) Duly executed Escrow Closing Instructions;
(d) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to
Seller;
(e) The duly executed Hospital Lease Assignment Agreement and
the duly executed Ground Lease
Assignment Agreement; and
(f) The duly executed Parking Assignment.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Hospital.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Hospital, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Hospital Condominium Unit, the
consent of which was not required as a condition to Closing but notice to which
is required or recommended after Closing.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings or other ownership interests
in Seller, with the Antitrust Division of the United States Department of
Justice and the Federal Trade Commission a Notification and Report Form in
accordance with the notification requirements of the HSR Act and to use its and
their best efforts to achieve the prompt termination or expiration of the
waiting period or any extension thereof provided for under the HSR Act as a
prerequisite to the consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets which are the subject of this
Agreement or the Other Agreements which either alone or in the aggregate, with
all such other sales or dispositions, would constitute the sale or disposition
of a "significant subsidiary" (as defined in Rule 1-02 of Regulation S-X of the
rules and regulations of the Commission), (ii) take any action, the consummation
of which cannot be conditioned on the consummation of the transactions
contemplated by this Agreement, where such action would have a material adverse
effect on Seller or (iii) take any action which either would have a material
adverse effect on the operations, business or financial condition of Seller or
would materially impair the value of the transaction contemplated herein to
Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or lease
the Hospital Condominium Unit from and after the Closing Date (the "Regulatory
Approvals"), and the consent of its lenders, lessors and other third parties to
the extent required under any loan documents, lease agreements, management
agreements or other instruments to which it is a party, including, but not
limited to, the consent of the lessor or licensor under the Ground Sublease and
the Parking Agreement if and to the extent required by the terms thereof (the
"Third Party Consents"), provided, however, that the consent of the holders of
the bonds issued by Purchaser's parent corporation under that Indenture dated as
of June 28, 1996 in the original principal amount of $50,000,000 and that
Indenture dated as of October 12, 1995 in the original principal amount of
$110,000,000 shall not be deemed to be a required Third Party Consent, it being
understood and agreed that Purchaser has represented that the transaction as
contemplated herein will not require the consent of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by
either party of any press release or any written statement with respect to this
Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined
below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof.
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, Seller shall not be
in default, where said default cannot be cured by the Closing Date, under any
mortgage, contract, lease or other agreement to which Seller is a party or by
which Seller is bound and which will affect or relate to the Seller's Assets
after the Closing.
(e) Subject to Purchaser ordering the same, an ALTA title insurance
policy providing for extended owner's coverage shall have been issued to
Purchaser with respect to the Hospital Condominium Unit subject only to the
Permitted Exceptions (the "Title Insurance Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Survey.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have
occurred.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date, of each of the
following conditions any one or more
of which may be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the landlord or licensor under the
Ground Sublease or the Parking Agreement has refused to release Seller from its
guarantee thereof or from primary liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have
occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following
conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date as the same may be extended in accordance with the terms of the
Other Purchase Agreements;
(e) By either party if the United States Department of Justice
or the Federal Trade Commission
requires any of the actions described in Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in the event that prior to the Closing Date a material
portion of any of the Hospital Condominium Unit or the Hospital is damaged or
destroyed by fire or other casualty or has been taken or condemned by any public
or quasi-public authority under the power or eminent domain; provided, however,
that in the event Purchaser fails to exercise its termination rights hereunder,
then it shall be conclusively deemed to have waived said right and Seller shall
assign to Purchaser all of its rights to any insurance proceeds or condemnation
award and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination
or pursue any other remedy referred to in Paragraph 13.01 on account of a breach
of a condition, covenant or warranty by the other, without first given such
other party written notice of such breach and not less than ten (10) days within
which to cure such breach. The Closing Date shall be postponed if necessary to
afford such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
INDEMNIFICATION
14.01. Seller shall indemnify and hold Purchaser harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of Seller's Assets prior to the Closing Date, whether or not the same
are covered by Seller's insurance, including, but not limited to, any
obligations under the Condominium Documents, the Ground Sublease, the Parking
Agreement or the Hospital Lease (if and to the extent they relate solely to the
period prior to the Closing Date);
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or
nonfulfillment of any agreement on the part of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers; and
(d) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
14.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of Seller's Assets from and
after the Closing Date including, but not limited to, any obligations under the
Condominium Documents, the Ground Sublease, the Parking Agreement or the
Hospital Lease (if and to the extent they relate solely to the period from and
after the Closing Date);
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or
nonfulfillment of any agreement on the part of Purchaser under this Agreement;
and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
14.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 14.01(b) and 14.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches hereunder or under that Purchase and Sale Agreement of
even date herewith between San Diego Rehab Limited Partnership, as Seller
("SDRLP"), and Regency Rehab Hospitals, as Purchaser, with respect to the right,
title and interest of SDRLP as lessee under the Hospital Lease, equals or
exceeds Fifty Thousand and no/100 Dollars ($50,000) (the "Representation and
Warranty Liability Threshold"). In the event the Representation and Warranty
Threshold is met, then the Non-Breaching Party shall be entitled to seek to
collect from the Breaching Party any and all damages, liabilities, losses, costs
or expenses suffered or incurred as a result of all such breaches of the
representations and warranties set forth herein on a first dollar basis and not
merely to recover damages in excess of the Representation and Warranty Liability
Threshold.
ARTICLE XV
MISCELLANEOUS
15.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Properties, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Properties, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
15.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its any or all of
Purchaser's rights and obligations hereunder effective at Closing to a real
estate investment trust (the "REIT") in connection with its financing of the
transaction provided for herein provided Seller first confirms to Purchaser
that, in its reasonable determination, such assignment will not have adverse
reimbursement consequences for Seller; and provided, further, that no such
assignment shall relieve Purchaser of its obligations hereunder. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns, including successors by
operation of law pursuant to any merger, consolidation or sale of assets
involving either party. In the event of an assignment of this Purchase Agreement
to a REIT, Purchaser shall advise Seller as to those documents and deliveries
contemplated by this Agreement which are to run in favor of the REIT rather than
Purchaser and those documents and deliveries contemplated by this Agreement
which will be delivered by the REIT rather than Purchaser, if any, it being
understood and agreed that in the event of such an assignment, the only right
which the REIT will assume is Purchaser's right to take title to the Seller's
Assets and the only obligation which the REIT will assume is Purchaser's
obligation to pay the purchase price in accordance with the terms hereof.
15.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
15.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
15.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
15.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
15.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
15.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
15.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
15.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
15.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
15.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
15.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 15.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 14.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
15.14. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
15.15. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
SAN DIEGO HEALTH ASSOCIATES
LIMITED PARTNERSHIP
By: SD Acquisition Corporation
Its: General Partner
By: ___________________________
Its: ____________________________
REGENCY REHAB PROPERTIES, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Properties, Inc. ("Purchaser") to
enter into the Purchase and Sale Agreement between San Diego Health Associates
Limited Partnership, as Seller and Purchaser dated November 19, 1996 (the
"Agreement"), hereby unconditionally, irrevocably and jointly and severally with
Seller, guarantees and promises to and for the benefit of Purchaser that (i) the
representations and warranties of Seller are true and correct as of the date of
execution of the Agreement and shall be true and correct as of the Closing Date
(as modified by any supplements to the Seller Disclosure Letter to reflect
events after the date hereof) and (ii) Seller shall perform all of its
obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 14, to be performed on its part under the
Agreement. If Seller defaults under the Agreement, Purchaser may proceed
immediately against Horizon or Seller or both to enforce any rights it has under
the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Seller will not survive beyond the periods
applicable thereto set forth in Paragraph 15.13 hereof and this Guaranty shall
not be construed to give Purchaser a claim or cause of action against Horizon
after the expiration of the applicable survival period for a breach by Seller of
any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment due
under the Agreement or acceptance
of partial payment from Seller;
(c) The acceptance or release by Purchaser of any additional
security for the performance of
Seller's obligations under the Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or
agreed to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of
this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the rejection
of the Agreement by Seller or by a trustee in bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for this
Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to San Diego Health Associates Limited Partnership
("Seller") to enter into the Purchase and Sale Agreement between Seller and
Regency Rehab Properties, Inc. ("Purchaser") dated November 19, 1996 (the
"Agreement"), hereby unconditionally, irrevocably and jointly and severally with
Purchaser, guarantees and promises to and for the benefit of Seller that (i) the
representations and warranties of Purchaser are true and correct as of the date
of execution of the Agreement and shall be true and correct as of the Closing
Date (as modified by any supplements to the Purchaser Disclosure Letter to
reflect events after the date hereof) and (ii) Purchaser shall perform all of
its obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 14, to be performed on its part under the
Agreement. If Purchaser defaults under the Agreement, Seller may proceed
immediately against Regency or Purchaser or both to enforce any rights it has
under the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Purchaser will not survive beyond the periods
applicable thereto set forth in Paragraph 15.13 hereof and this Guaranty shall
not be construed to give Seller a claim or cause of action against Regency after
the expiration of the applicable survival period for a breach by Purchaser of
any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment due
under the Agreement or acceptance
of partial payment from Purchaser;
(c) The acceptance or release by Seller of any additional
security for the performance of
Purchaser's obligations under the Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of Seller's
interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or
agreed to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject of
this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the
rejection of the Agreement by Purchaser or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for this
Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.08
PURCHASE AND SALE AGREEMENT
WESTERN NEUROLOGIC RESIDENTIAL CENTERS
This Agreement is made and entered into this 19th day of November, 1996
by and between Western Neurologic Residential Centers, a California corporation
("Seller") and Regency Rehab Hospitals, Inc., a California corporation
("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.01. On the terms and subject to the conditions set forth herein,
Seller does hereby agree to sell to Purchaser and Purchaser does hereby agree to
acquire from Seller all of Seller's right, title and interest in and to the
following:
(a) The real property situated in the State of California and more
particularly described in Exhibit 1.01(a) (the "Real Property") and the
improvements thereon and the furniture, fixtures and equipment therein that
comprise the following congregate living facilities (collectively, the
"Facilities").
(1) The 6 bed congregate living facility commonly known as Meridian
Neuro Care-Fresno and located at 6385 North Marks, Fresno, CA 93711;
(2) The 9 bed congregate living facility commonly known as Meridian
Neuro Care-La Habra Heights and located at 102 Avocado Road, La Habra Heights,
CA 90631;
(3) The 6 bed congregate living facility commonly known as Meridian
Neuro Care-Oxnard and located at 1540 Teal Club Road, Oxnard, CA 93030, which is
in the process of adding 3 additional beds;
(4) The 8 bed congregate living facility commonly known as Meridian
Neuro Care-Sacramento County and located at 7601 Jacinto Road, Elk Grove, CA
95758, which is in the process of adding 4 additional beds (the "Sacramento
Addition")
(5) The 8 bed congregate living facility commonly known as Meridian
Neuro Care - Cowan Heights, 10631 Cowan Heights Drive, Santa Ana, California
92705 (the "Cowan Heights Facility"); and
(6) The 9 bed congregate living facility commonly known as
Meridian Neuro Care - Escondido, 2960
Bernardo Avenue, Escondido, California 92020 (the "Escondido Facility")
(b) All equipment, furniture and fixtures located on or used in
connection with the operation of the Facilities leased by Seller under those
contracts and commitments described in Exhibit 1.01(f) (the "Leased Facility
Personal Property"), which Leased Personal Property is more fully described in
Exhibit 1.01(b).
(c) That Lease dated August 15, 1995 between The Integrity Fund, as
lessor, and Seller, as lessee and that Lease dated July 10, 1996 between The
Integrity Fund, as lessor, and Seller, as lessee (the "Dove Street Lease" or
simply the "Lease"), including, but not limited to, Seller's leasehold right,
title and interest in and to:
(1) The real property leased by Seller on under the terms of the Dove
Street Lease and situated in the State of California and more particularly
described in Exhibit 1.01(c)(1) (the "Leased Real Property") and the
improvements thereon that comprise an aggregate of 1,942 square feet of office
space at 1001 Dove Street, Newport, California (the "Dove Street Office");
(2) All equipment, furniture and fixtures located on or used in
connection with the operation of the Leased Real Property leased by Seller under
the terms of the Dove Street Lease or under those contracts and commitments
described in Exhibit 1.01(f) (the "Leased Dove Street Personal Property" and
together with the Leased Facility Personal Property "Leased Personal Property"),
which Leased Dove Street Personal Property is more fully described in Exhibit
1.01(c)(2); and
(3) All rights of first refusal, extension rights, and purchase options
set forth in the Dove Street Lease.
(d) The inventory, including linens, dietary supplies and housekeeping
supplies, food and other consumable inventories located at, or usable in the
operation of, the Facilities (the "Consumables").
(e) The furniture, fixtures, equipment and vehicles owned by Seller and
located on the Real Property or in the Facilities which is not the property of
the lessor under any lease described in Exhibit 1.01(f), (the "Owned Personal
Property") and which Owned Personal Property is more fully described in Exhibit
1.01(e).
(f) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by Seller
relating to the Facilities and all rights of Seller in and to (i) those
contracts and commitments relating to the Facilities as listed on Exhibit
1.01(f), true and correct copies of which contracts have been provided to
Purchaser by Seller as of the date hereof; (ii) the permits and licenses used or
held for use by Seller in the operation of the Facilities and (iii) any and all
warranties issued to Seller in connection with the construction of the
Sacramento Addition (the "Records and Rights").
(g) All of the Seller's right, title and interest in and to the trade
names "Meridian Neuro Care-Cowan Heights," "Meridian Neuro Care-Escondido,"
"Meridian Neuro Care-Fresno," "Meridian Neuro Care-La Habra Heights." "Meridian
Neuro Care-Oxnard," and Meridian Neuro Care-Sacramento County" and all other
trade names used exclusively at the Facilities and not used generally by
Continental Medical Systems, Inc., a Delaware corporation ("CMS") at its
facilities (the "Trade Names"); provided, however, that Purchaser shall have the
right to continue to use for a period of 60 days after Closing any signs located
at the Facilities or any pre-printed materials, such as admitting forms or
patient information materials, on which the CMS name or logo may appear.
Hereinafter Seller's rights, title and interest in and to the Real
Property, the Dove Street Lease, the Facilities, the Leased Personal Property,
the Owned Personal Property, the Consumables, the Records and Rights and the
Trade Names will sometimes be collectively referred to as the "Seller's Assets."
1.02. Notwithstanding anything in this Agreement to the contrary, the
Seller's Assets shall not include, and Seller shall retain as its property, the
following assets (the "Excluded Assets"):
(a) Seller's stock record books, tax returns and minute books;
(b) The items owned by Seller and listed on Exhibit 1.02(b);
(c) All of Seller's rights under this Agreement, including,
without limitation, the right of
Seller to receive the Purchase Price (as hereinafter defined);
(d) All refunds, whenever paid, relating to payments by or on behalf of
Seller prior to the Closing including, without limitation, any federal, state,
local or foreign taxes paid by Seller prior to the Closing Date;
(e) All bank accounts of Seller;
(f) All cash, cash equivalents and accounts receivable of Seller,
including any amounts due or which may, after the Closing, become due to the
Facilities from their participation in any third party payor programs for any
period prior to the Closing Date, and all of Seller's prepaid assets and
deposits;
(g) All computer hardware and software relating to the wide area
network of Horizon/CMS Healthcare Corporation ("Horizon") used for the operation
of the general ledger and accounts payable software applications, which computer
hardware and software is more fully described in Exhibit 1.02(g) (the "GL/AP
Hardware and Software");
(h) Seller's interest in the Straddle Patient Payments (as defined
below) for the services rendered and medicine, drugs and supplies provided prior
to the Closing Date, all in accordance with Paragraph 16.14 hereof;
(i) Seller's claims, if any, against third parties relating to or
arising from the acts or omissions of third parties prior to the Closing;
provided that Seller shall give notice to Purchaser before pursuing any claims
against a third party who continues to have any business relationship with the
Facilities after the Closing; and
(j) Seller's rights and interests in and to proprietary materials,
programs, manuals, promotional materials and other intangibles not included in
Paragraph 1.01; provided, however, that Seller hereby agrees to permit Purchaser
to continue to use, for a period of one hundred eighty (180) days after the
Closing, any of such proprietary assets as are reasonably necessary to the
continued licensure, certification and/or accreditation of the Facilities after
Closing.
1.03. Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge the following
liabilities and obligations (the "Assumed Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Dove Street Lease which relate to periods from
and after the Closing Date;
(b) The liability to make the equipment lease payments under the
equipment leases listed on Exhibit 1.01(f) (the "Equipment Leases") which relate
to periods from and after the Closing Date;
(c) The liability to make the payments and to perform any other
obligations under the contracts other than the Equipment Leases listed on
Exhibit 1.01(f) (other than those contracts indicated on Exhibit 1.01(f) as to
be terminated by Seller prior to Closing) which relate to periods from and after
the Closing Date;
(d) The liability to make the payment due under purchase orders placed
by Seller in the ordinary course of business prior to the Closing Date but which
are open as of the Closing Date for inventory and supplies to be delivered after
the Closing Date;
(e) The liability to pay when due the Accrued Benefits (as defined
below); and
(f) The liability of CMS under that Employment Agreement dated February
24, 1995 with Robert Buckley (the "Buckley Employment Agreement").
1.04. Except for the Assumed Liabilities, no obligation or liability of
Seller relating to or arising from the operation of the business of Seller or
the Seller's Assets prior to the Closing Date is to be assumed by Purchaser.
1.05. At Purchaser's request, Seller will use its best efforts to
obtain prior to Closing, at Purchaser's sole cost, software licenses in favor of
Purchaser to enable Purchaser to use all of the software presently being used by
Seller at the Facilities other than the software listed in Exhibit 1.05 and the
GL/AP Software described in Exhibit 1.02(g). At the Closing and subject to
Seller obtaining any necessary consents or approvals, Seller will assign to
Purchaser, and Purchaser will assume from Seller, all existing leases and
maintenance agreements listed on Exhibit 1.01(f) relating to any computer or
systems hardware which is a part of the Leased Personal Property and to all
computer software with respect to which Seller is able to secure a license in
favor of Purchaser pursuant to the immediately preceding sentence.
1.06. Seller will provide to Purchaser data processing services with
respect to the Hospital and the hospitals which are the subject of the Other
Agreements (as hereinafter defined) on the terms and for the cost specified in
Exhibit 1.06.
ARTICLE II
PURCHASE PRICE
2.01. The purchase price for the Seller's Assets shall be Two Million
and no/100 Dollars ($2,000,000) and shall be payable in cash at Closing, which
cash shall be subject to adjustment to reflect the costs, expenses and
prorations for which Seller and Purchaser are responsible under Paragraph 4
hereof.
ARTICLE III
CLOSING
3.01. Provided that all of the conditions to closing set forth in
Paragraphs 12.01 and 12.02 have been satisfied or waived, the purchase and sale
of the Seller's Assets shall be effective as of 12:01 a.m. on January 1, 1997
unless extended by mutual agreement of the parties (the "Outside Closing Date").
Closing shall occur at offices of Lawyers Title Insurance Company at 10:00 am or
at such other time and place as may be agreed upon by the parties in order to
ensure closing of the transactions provided for herein by the Outside Closing
Date. The actual date of Closing is referred to herein as the "Closing Date."
3.02. At Closing, Seller shall deliver fee title to the Real Property
and the Facilities, leasehold title to the Leased Real Property and the Leased
Personal Property and title to the Consumables, the Owned Personal Property, the
Records and Rights and the Trade Names free and clear of all liens and
encumbrances other than the following (collectively, the "Permitted
Exceptions"):
(a) Liens for real and personal property taxes which are not yet
due and payable;
(b) Liens and encumbrances affecting the fee simple title to
the Dover Street Real Property
created by the owner thereof;
(c) The Permitted Exceptions listed in Exhibit 3.02(c); and
(d) Such liens as may be approved or deemed approved by Purchaser
pursuant to Paragraph 10.01.
3.03. Title to the Seller's Assets shall be conveyed to Purchaser
at Closing by Seller's delivery
of the following documents:
(a) Seller shall deliver an Assignment of Lease in the form and
substance substantially the same as that attached hereto as Exhibit 3.03(a)
pursuant to which Seller shall convey to Purchaser Seller's right, title and
interest in and to the Dove Street Lease (the "Lease Assignment Agreement").
(b) Seller shall deliver a Bill of Sale in form and substance
substantially the same as that attached hereto as Exhibit 3.03(b) with respect
to the Consumables, the Owned Personal Property, if any, the Records and Rights
and the Trade Names (the "Bill of Sale").
(c) Seller shall deliver a separate Grant Deed in form and substance
substantially the same as that attached hereto as Exhibit 3.03(c) pursuant to
which Seller shall convey to Purchaser Seller's right, title and interest in and
to each of the Real Property and the Facilities (the "Grant Deeds").
(d) Such other documents or instruments as may be necessary to convey
title to the Seller's Assets to Purchaser in accordance with the terms hereof.
ARTICLE IV
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
of the Seller's Assets shall be allocated between Seller and Purchaser as
follows:
4.01. Seller and Purchaser shall share on a 50-50 basis any State and
County transfer or excise taxes due on the transfer of the Real Property, the
Facilities and Seller's leasehold interest in and to the Leased Real Property
and the Dove Street Office Lease to Purchaser.
4.02. Purchaser shall pay any sales tax due on the transfer of either
Seller's leasehold interest in and to the Leased Personal Property or title to
the Owned Personal Property to Purchaser.
4.03. Seller shall pay the base premium for standard ALTA owner's title
insurance policies, in the aggregate amount of $2,000,000, insuring Purchaser's
title to the Facilities as of Closing and Purchaser shall pay the cost of any
premiums for extended coverage which Purchaser may elect to secure, including
the cost of the ALTA survey required to obtain the same, any lender's coverage
which it elects or is required to secure in connection with its acquisition of
the Seller's Assets or financing thereof and any title endorsements which it
elects to obtain or is required to obtain to satisfy the requirements of its
lender.
4.04. Purchaser shall pay the cost of any environmental Phase I
assessment of the Facilities which Purchaser elects to secure prior to Closing.
4.05. Seller and Purchaser shall each pay their own attorneys fees
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transaction provided for herein.
4.06. Seller shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Seller's Assets in accordance with the terms
of this Agreement.
4.07. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of the Dove Street Lease
as a condition to securing consent to an assignment thereof which are necessary
to secure the consent of the lessor thereunder.
4.08. Purchaser shall pay any filing fees due with respect to the
transaction evidenced by this Agreement and those other Purchase and Sale
Agreements set forth in Exhibit 4.08 (the "Other Agreements") under the
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
4.09. Seller shall pay the cost of any repairs or renovations or other
work to the physical plant of the Facilities required to be undertaken by the
State of California in connection with any change of ownership survey which it
may elect to conduct as a condition to its review and, if applicable, approval
of the transaction which is the subject of this Agreement; provided, however,
that in the event the cost thereof, along with the cost of any repairs or
renovations or other work to the physical plant of the facilities which are the
subject of the Other Agreements, exceeds $250,000 (the "Licensure Cost Cap")
Seller shall have the right to terminate this Agreement in lieu of incurring
such costs in excess of the Licensure Cost Cap; and provided, further, that
Purchaser shall have the right to pay such costs in excess of the Licensure Cost
Cap in lieu of permitting Seller to terminate this Agreement.
4.10. Purchaser shall pay any filing or licensure fees due in
connection with the submission of any licensure applications which it is
required to file in order to secure the approval of the State of California of
the transaction which is the subject of this Agreement under applicable
licensure laws governing the operation of the Facilities, as well as the fees
and expenses of Davis Wright Tremaine or any other legal counsel retained or
utilized by Purchaser to assist it with such matters.
4.11. Seller shall pay any reasonable attorneys fees, processing fees
and other fees and expenses contemplated by the terms of that Amended and
Restated Credit Agreement dated September 26, 1995 between Seller and
NationsBank of Texas, N.A. (the "Seller's Credit Agreement"), as a condition to
securing consent to the sale of the Seller's Assets and Purchaser shall pay any
reasonable attorneys' fees, processing fees and other fees and expenses
contemplated by the terms of the Credit Agreement dated December 28, 1995
between Regency Health Services, Inc. and NationsBank of Texas, N.A.
ARTICLE V
POSSESSION
On the Closing Date, Purchaser shall be entitled to possession of the
Seller's Assets, subject only to the rights of the lessor under the Dove Street
Lease and the rights of the residents of the Facilities.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller hereby warrants and represents to Purchaser that, except as
otherwise specifically set forth in the disclosure letter addressed to Purchaser
and dated the date hereof (the "Seller Disclosure Letter"):
6.01. Status of Seller. Seller is a duly organized, validly
existing California corporation and is
in good standing under the laws thereof. Horizon is a duly organized, validly
existing Delaware corporation
and is in good standing under the laws thereof.
6.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to Seller obtaining
those Third Party Consents and Regulatory Approvals (as defined below) for which
it is responsible under the terms hereof, the execution of this Agreement and
the consummation of the transactions contemplated herein in accordance with the
terms hereof will not result in a breach of the terms and conditions of nor
constitute a default under or violation of Seller's Articles of Incorporation or
Bylaws or any law, regulation, court order, mortgage, note, bond, indenture,
agreement, license or other instrument or obligation to which Seller is now a
party or by which Seller or any of the Seller's Assets may be bound or affected
or any agreement, option, understanding or commitment or any or privilege
granted by Seller to any other party to purchase or otherwise acquire the
Seller's Assets or result in the acceleration of or an increase in the interest
rate payable under any indebtedness to which Seller is a party other than
indebtedness of Seller which does not relate to the Facilities or which is to be
discharged by Seller as of the Closing Date.
6.03. Authority. Subject to Seller obtaining those Third Party Consents
and Regulatory Approvals for which it is responsible under the terms hereof,
Seller has full corporate power and authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein. Seller further has full power and authority (i)
to own and/or lease the Seller's Assets and (ii) to conduct its business as the
same is now being conducted.
6.04. The Financials. True and correct copies of an unaudited balance
sheet and statement of operations of Seller with respect to the operation of the
Facilities as of the close of Seller's fiscal year ended May 31, 1996, and for
the four month period ended September 30, 1996 (collectively, the "Seller's
Financials") are attached hereto as Exhibit 6.04. All such financial statements
fairly represent the financial condition, and accurately set forth in all
material respects the results of the operations of, Seller at the Facilities for
the periods covered thereby subject to customary year end adjustments. Any
financial statements prepared by Seller subsequent to the date of the Seller
Financials or the date hereof will be prepared in a manner consistent with the
manner in which the Seller's Financials were prepared, will fairly represent the
financial condition, and will accurately set forth in all material respects the
results of the operations of Seller at the Facilities for the periods covered
thereby and will be provided to Purchaser within ten (10) days after the
completion thereof.
6.05. Absence of Adverse Change. Since the date of the most recent
Financials there has not been
any material adverse change in the financial condition, business, assets,
liabilities or results of operations
of the Facilities.
6.06. The Licenses. Seller has all material licenses, permits and
authorizations necessary for the lawful ownership and operation of the
Facilities as congregate living facilities (the "Seller Licenses"). True and
correct copies of all of the Seller Licenses are attached hereto as Exhibit
6.06. Seller has not received written or verbal notice of (A) any action or
proceeding which has been initiated or is proposed to be initiated by the
appropriate state or federal agency having jurisdiction thereof to revoke,
withdraw or suspend any of the Seller Licenses, (B) any judicial or
administrative agency judgement or decision not to renew any of the Seller
Licenses, (C) any action to limit or ban admissions to the Facilities or (D) any
licensure or certification action of any other type, which would have a material
adverse effect on the business, assets or financial condition of the Facilities.
The Facilities do not participate in Medicare or Medi-Cal and are not accredited
by the Joint Commission on Accreditation of Health Care Organizations or any
other accreditation body.
6.07. Compliance with Law.
(a) The Facilities and their current operation and use are in
substantial compliance with all applicable health and safety laws, regulations,
ordinances, standards and orders issued by any municipal, county, state or
federal agency having authority over the Facilities and with all municipal
health, building and zoning laws and regulations (including, without limitation,
the building, zoning and life safety codes) where the failure to comply
therewith would have a material adverse effect on the business, property,
condition (financial or otherwise) or operation thereof and there are no
outstanding cited deficiencies or work orders issued to Seller under any of the
foregoing which have not been corrected as of the date hereof or which will not
be corrected as of the Closing Date;
(b) Set forth in Exhibit 6.07(b) is a list of the most recent licensure
survey and the results of any complaint investigations conducted within the last
six months for the Facilities, copies of which have been made available to
Purchaser as of the date hereof. Seller has no knowledge, based on the results
of Facilities surveys or complaint investigations provided verbally or in
writing to the Facilities by the applicable supervising agency or authority and
after due inquiry of the Chief Executive Officer of the Facilities, that the
Facilities are not in substantial compliance with applicable licensure laws nor
has Seller received written or, to the best of Seller's knowledge, verbal notice
from any licensing or certifying agency requiring any or all of them to be
physically reworked or redesigned or to add furniture, fixtures, equipment or
inventory so as to conform to or comply with any existing licensure law, code or
standard except where the requirement either (i) has been fully satisfied prior
to the date hereof, (ii) will be satisfied by Seller prior to the Closing Date,
(iii) will be in the process of being satisfied in the ordinary course of
Seller's business pursuant to the terms of a Plan of Correction or other
documentation submitted to and approved by the appropriate authority or (iv)
will be the subject of a valid written waiver issued by the applicable licensing
or certifying agency;
(c) There are no pending or, to the best of Seller's knowledge after
due inquiry of the Chief Executive Officer of the Facilities, threatened
investigations of or claims by any governmental agency or instrumentality
against (i) the Facilities, (ii) any of the members of the medical staff, the
Board of Directors or employees of the Facilities.
6.08. Patients. There are no agreements not terminable at will with
patients or prospective patients of the Facilities which provide for the
provision of the care routinely provided at the Facilities for no consideration
nor will Seller enter into any such agreements between the date hereof and the
Closing Date.
6.09. Books and Records. To the best of Seller's knowledge after due
inquiry of the Chief Executive Officer and Medical Director of the Facilities,
all of the books and records of the Facilities, including patient records, are
true and correct in all material respects.
6.10. Title. Seller has, or in the case of the Cowan Heights and
Escondido Facilities will have, as of the Closing Date, title to all of the
Seller's Assets free and clear of all liens, charges and encumbrances other than
the Permitted Exceptions. Seller has not received notice of any pending or
threatened condemnation proceedings with respect to the Real Property. Seller
has good and marketable title to the Seller's Assets free and clear of all
liens, charges and encumbrances, other than the Permitted Exceptions.
6.11. Unions. There are no union contracts in effect between Seller, on
the one hand, and the employees of the Facilities, on the other hand. To the
best of Seller's knowledge, none of Seller's employees who are not currently
members of a labor union in connection with their work at the Facilities are
actively seeking the formation of a labor union at the Facilities. Seller is not
a party to any labor dispute, it being agreed that a claim for wrongful
termination shall not, for purposes of this Paragraph 6.11 be deemed to be a
labor dispute. Seller is not a party to any union contracts with respect to the
Facilities.
6.12. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed prior to date of
execution of this Agreement by Seller with respect to the Seller's Assets or
with respect to its operations at the Facilities have been properly completed
and timely filed, or extensions for the filing thereof have been timely secured,
with all such filings being in material compliance with all applicable
requirements and all taxes due with respect to the Seller's Assets and with
respect to the Seller's operations at the Facilities have been timely paid,
except to the extent that the same are being duly contested in good faith in
accordance with applicable law and adequate reserves therefor are reflected on
the Financials or will be reflected in any subsequent financials prepared in
accordance with the representations and warranties contained in this Agreement.
6.13. Environmental Issues.
(a) Except in accordance, and in compliance, with any and all
applicable local, state and federal governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to environmental
and occupational health and safety matters, and hazardous materials, substances
or wastes (as defined under any applicable Environmental Laws), Seller has (i)
not released into the environment or discharged, placed or disposed of any such
hazardous materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under any of
the Facilities and the Dove Street Office other than to the extent the same will
not have a material adverse affect on the condition, financial or otherwise, of
any of the Facilities or the Dove Street Office, (ii) not installed any
underground storage tanks and (iii) at all times operated the Facilities or the
Dove Street Office in compliance with all Environmental Laws, except where the
failure to so comply would not have a material adverse affect on the condition,
financial or otherwise, of any of the Facilities or the Dove Street Office.
(b) With respect to the Facilities and the Dove Street Office prior to
the date of the Seller's ownership or leasing thereof, to the best of Seller's
knowledge after due inquiry of the Director of Plant Operations at each of the
Facilities, (i) except to the extent permitted by applicable Environmental Laws,
no hazardous materials, substances or wastes were located on or at any of the
Facilities or the Dove Street Office or were released into the environment or
discharged, placed or disposed of in, on or under any of the Facilities or the
Dove Street Office, (ii) except to the extent permitted by applicable
Environmental Laws, no underground storage tanks are or were located at any of
the Facilities or the Dove Street Office, (iii) none of the Facilities or the
Dove Street Office are located on property which was used as a dump for waste
material, and (iv) the Facilities and the Dove Street Office have at all times
complied with, all Environmental Laws, except to the extent in each of the
foregoing clauses (i) through (iv) that any such non-compliance would not have a
material adverse effect on the Facilities. Seller has not received any written
notice from any governmental authority or any written complaint from any third
party with respect to its alleged noncompliance with, or potential liability
under, any Environmental Laws at any of the Facilities or the Dove Street Office
which remains unresolved as of the date hereof.
(c) Seller will use its reasonable efforts to provide to Purchaser any
written assessments prepared by or on behalf of Seller concerning the hazardous
waste conditions at the Facilities or the Dove Street Office which are currently
in the possession of Seller.
6.14. Necessary Action. Seller has duly and properly taken or obtained
or caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Seller (i) to enter into and to deliver this Agreement and any and
all documents and agreements executed by Seller in connection herewith or in
furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transaction contemplated herein and therein, which action shall include, but not
be limited to, obtaining the Third Party Consents and Regulatory Approvals for
which Seller is responsible hereunder. No other action by or on behalf of Seller
is or will be necessary to authorize the execution, delivery and performance of
this Agreement and any documents and agreements executed by Seller in connection
herewith or consummation of the transactions contemplated herein, other than
securing those Third Party Consents and Regulatory Approvals for which Seller is
responsible under the terms hereof. Seller represents and warrants that as of
the date of execution of this Agreement, it has secured the consent of its Board
of Directors and of the Board of Directors of Horizon to the execution of this
Agreement and of any documents and agreements necessary to carry out the terms
hereof and for the consummation of the transactions contemplated by this
Agreement. Nothing herein shall be construed as a guarantee by Seller that it
will be able to secure the Third Party Consents or Regulatory Approvals for
which it is responsible, but rather this paragraph shall be limited to Seller's
representation and warranty that it will use its best efforts to secure such
Third Party Consents and Regulatory Approvals, subject to the limitation on the
costs which Seller must incur in obtaining such consents being limited in the
manner set forth in Paragraph 4.09.
6.15. Litigation. Except as set forth in Exhibit 6.15, there is no, nor
has Seller received written or verbal notice of any, litigation, administrative
investigation or other proceeding pending or, to the best of Seller's knowledge
based on written notice with respect thereto, threatened by any governmental
authority having jurisdiction over Seller or the Facilities or by any other
party where the amount claimed exceeds $50,000 in any single action or $100,000
in the aggregate or which seeks to challenge Seller's title to the Seller's
Assets or the Seller's right or ability to consummate the transaction provided
for herein. Seller is not a party to nor is Seller or the Facilities bound by
any orders, judgments, injunctions, decrees or settlement agreements under which
it may have continuing obligations as of the date hereof or as of the Closing
Date and which are likely to materially restrict or affect the present business
operations of the Facilities. The right or ability of Seller to consummate the
transaction contemplated herein has not been challenged by any governmental
agency or any other person and Seller has no knowledge of the occurrence of any
event which would provide a reasonable basis for any such litigation,
investigation or other proceeding.
6.16. Sensitive Payments. Seller has no reason to believe that it has
(i) made any contributions, payments or gifts to or for the private use of any
governmental official, employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment. Seller has not filed any reports with any
governmental agency which disclose that it has participated in any of the
foregoing practices or acts giving rise to such practices.
6.17. The Facilities. Seller is duly licensed to operate the Facilities
under California law as congregate living facilities, with the number of beds
set forth opposite each Facility's name in Section 1.01. Each of the Facilities
is in good operating condition and repair and substantially all of the Personal
Property and all of the major mechanical systems located at or used in
connection with the operation of the Facilities are in good working order,
condition and repair. The roofs of the Facilities do not leak. The Personal
Property is all of the property necessary for the lawful operation of the
Facilities at their current occupancy levels.
6.18 Inventories. At Closing, each of the Facilities shall have an
inventory of non-perishable food, central supplies, linens, housekeeping
supplies, kitchen supplies, nursing supplies and other supplies, which will be
sufficient in condition and quantity to operate each of the Facilities at its
normal capacity and an inventory of perishable food at the levels normally
maintained by Seller at the Facilities.
6.19. Trade Names. Set forth in Exhibit 6.19 is a true and complete
list of the trade names under which Seller is doing business at the Facilities.
Seller has not sought protection for such names under state or federal trademark
or trade name laws except to the extent reflected in Exhibit 6.19. Seller has
not received any notice from any person challenging or questioning the right of
Seller to use any such trade names.
6.20. Employees/ERISA.
(a) Set forth in Exhibit 6.20 is an accurate and complete list of all
bonus, deferred compensation, hospitalization or other medical, pension, life or
other insurance, profit sharing, sick leave, vacation, post retirement health or
life benefit, and any other employee benefit plans (as such term is defined in
Section 3 of the Employee Retirement Insurance Security Act ("ERISA"),
arrangement or practice, whether formal or informal, written or not, of Seller
which relate to the Facilities or to any current or former employees at or of
the Facilities (the "Plan" or "Plans"). Except as set forth in Exhibit 6.20 and
except for stock purchase and stock options programs administered by Horizon and
for which Purchaser shall have no liability after Closing, Seller has not made
any commitment or representation to the current or former employees of the
Facilities to establish any additional Plan, arrangement or practice or to
modify or change any existing Plan, arrangement or practice. Exhibit 6.20 also
lists by Facility all employees of the Facilities as of the date of this
Agreement together with their positions and rates of pay and earned and accrued
vacation time, sick leave and holiday pay as the date specified therein, which
date shall be the most recent date to which such information is available to
Seller.
(b) Set forth in Exhibit 6.20 is a true and correct copy of all
employment contracts between Seller and any employee of the Facilities. Except
as otherwise set forth in Exhibit 6.20 all such contracts are terminable by
Seller prior to the Closing Date and, in the case of those contracts listed in
Exhibit 6.20A, will be terminated by Seller prior to the Closing Date if so
requested by Purchaser.
6.21. Operating Contracts. Set forth in Exhibit 1.01(f) is a true and
correct list of all supply, licensing and operating contracts, equipment leases,
contracts with affiliates of Seller, transfer agreements, contracts for or other
evidences of indebtedness (other than indebtedness to be discharged or released
at Closing), security agreements and other contracts and agreements, including
without limitation, all provider agreements with any third party payors and
consulting and service contracts to which Seller is a party in connection with
the Seller's operations at the Facilities (the "Operating Contracts"). Seller
has provided Purchaser with a true and correct copy of each of the Operating
Contracts. Each of the Operating Contracts is in full force and effect and none
of the Operating Contracts has been modified or amended except as set forth in
Exhibit 1.01(f). Seller is not in default of any of its obligations under the
Operating Contracts nor is Seller aware of any default or any action or omission
which, with the passage of time or the giving of notice or both, would
constitute a default under the Operating Contracts by any other party thereto.
Purchaser acknowledges and agrees that Seller shall not be in default of its
obligations under this Paragraph 6.21 in the event Exhibit 1.01(f) fails to list
or Seller fails to provide to Purchaser any Operating Contracts where the
payments remaining due thereunder are less than $25,000.
6.22. The Dove Street Lease. A true and correct copy of the Dove Street
Lease has been provided by Seller to Purchaser. The Dove Street Lease remains in
full force and effect and has not been amended or modified except as set forth
in Paragraph 1.01. Seller has not received from the landlord under the Dove
Street Lease any written notice that it is in default of its obligations under
the Dove Street Lease or that any guarantor thereof is in default of its
obligations under any Guaranty delivered in conjunction therewith nor does
Seller have knowledge after inquiry of the Chief Executive Officer of the
Facilities of any events which, with the passage of time or the giving of
notice, would constitute a material default thereunder. Except with respect to
any common area included in the Dove Street Lease, Seller enjoys exclusive,
peaceful and undisturbed possession under all real and personal property leases
to which it is a party in connection with the Facilities, including, but not
limited to, under the Dove Street Lease. Except as set forth in Exhibit 6.22,
there are no security deposits posted with respect to the Dove Street Lease.
6.23. Physician Contracts. Exhibit 1.01(f) lists each contract between
the Seller and the physicians providing services to the patients of the
Facilities, including contracts with any entity owned or controlled by any such
physicians, true and correct copies of which have been provided to Purchaser.
Seller represents and warrants that Seller has not received any notice that any
state or federal agency or any other party believes or is attempting to
determine whether any violation exists under any such physician contracts
relating to the requirements of State and federal law governing physician self
referral and "kickbacks" including but not limited to the provisions of "Stark
II" and the federal fraud and abuse laws.
6.24. Medical Staff. Attached hereto as Exhibit 6.24 is a true and
correct copy of the medical staff roster for the Facilities. Seller has made
available to Purchaser a copy of the medical staff bylaws currently in effect
with respect to the Facilities, including any and all current amendments and
modifications thereto.
6.25. Insurance. Set forth in Exhibit 6.25 is a list of all insurance
policies held by Seller or the Corporation with respect to the Facilities and
the other Corporation Assets and in effect as of the date of this Agreement,
including the types of coverage and amounts thereof and the amount of
deductibles thereunder. Seller has provided to Purchaser true and correct
certificates evidencing such insurance as well as copies of the current
property, professional liability and workers compensation insurance policies in
effect with respect to the Facilities. All monthly premium installments due with
respect to all of such insurance policies have been paid in full through the
date of this Agreement and will continue to be paid as and when due between the
date of this Agreement and the Closing Date.
6.26. Disclosure. No representation or warranty by or on behalf of
Seller contained in this Agreement, as those representations have been modified
by the terms of Seller's Disclosure Letter, if applicable, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements contained
herein in light of the circumstances under which they were made, not misleading.
ARTICLE VII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser hereby warrants and represents to Seller that, except as
otherwise specifically set forth in the letter from Purchaser to Seller dated
the date hereof (the "Purchaser Disclosure Letter"):
7.01. Status of Purchaser. Purchaser is a corporation duly
incorporated, validly existing and in
good standing under the laws of the State of California. Regency Health
Services, Inc. ("Regency") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
7.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Purchaser and do not and will not result
in a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Purchaser, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Purchaser is now a party or by which any
of its assets may be bound or affected, subject, however, to Purchaser obtaining
those Third Party Consents and Regulatory Approvals for which it is responsible
under the terms hereof.
7.03. Authority. Subject to obtaining the Third Party Consents and
Regulatory Approvals which it and/or Seller are required to use their best
efforts to secure, Purchaser has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein. Purchaser further has full power
and authority (i) to own the Seller's Assets and (ii) to conduct its business
from and after the Closing Date as the same is now being conducted.
7.04. Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (i) to enter into and to deliver this Agreement and any
and all documents and agreements executed by Purchaser in connection herewith or
in furtherance hereof and (ii) to carry out the terms hereof and thereof and the
transactions contemplated herein and therein, which action shall include, but
not be limited to, obtaining the Third Party Consents and Regulatory Approvals
for which Purchaser is responsible hereunder. No other action by or on behalf of
Purchaser is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements executed by
Purchaser in connection herewith or consummation of the transactions
contemplated herein, other than securing those Third Party Consents and
Regulatory Approvals for which Purchaser is responsible under the terms hereof.
Purchaser represents and warrants that as of the date of execution of this
Agreement, it has secured the consent of its Board of Directors and of the Board
of Directors of Regency to the execution of this Agreement and of any documents
and agreements necessary to carry out the terms hereof and for the consummation
of the transactions contemplated by this Agreement. Nothing herein shall be
construed as a guarantee by Purchaser that it will be able to secure the Third
Party Consents or Regulatory Approvals for which it is responsible, but rather
this paragraph shall be limited to Purchaser's representation and warranty that
it will use its best efforts to secure such Third Party Consents and Regulatory
Approvals.
7.05. Litigation. There is no, nor has Purchaser received written or
verbal notice of any, litigation, administrative investigation or other
proceeding pending or, to the best of Seller's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Purchaser or by any other party or which challenges
Purchaser's ability to consummate the transaction provided for herein. Purchaser
is not a party to or bound by any orders, judgments, injunctions, decrees or
settlement agreements under which it may have continuing obligations as of the
date hereof or as of the Closing Date and which are likely to materially
restrict or affect the business operations of Purchaser either before or after
the Closing. The right or ability of Purchaser to consummate the transaction
contemplated herein has not been challenged by any governmental agency or any
other person and Purchaser has no knowledge of the occurrence of any event which
would provide a reasonable basis for any such litigation, investigation or other
proceeding.
7.06. Sensitive Payments. Purchaser has no reason to believe that it
has (i) made any contributions, payments or gifts to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other forms of
remuneration in connection with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social Security Act,
42 USC Section 1320a-7b(b) or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
7.07. Taxes and Tax Returns. All tax and other related returns, reports
and filings of any kind or nature, required to be filed by Purchaser prior to
date of execution of this Agreement with respect to its operations have been
properly completed and timely filed, or extensions for the filing thereof have
been timely secured, with all such filings being in material compliance with all
applicable requirements and all taxes due with respect to Purchaser's operations
have been timely paid, except to the extent that the same are being duly
contested in good faith in accordance with applicable law and adequate reserves
therefor are reflected on Purchaser's financial statements or will be reflected
in any subsequent financials prepared by Purchaser.
7.08. Disclosure. No representation or warranty by or on behalf of
Purchaser contained in this Agreement, as those representations have been
modified by the terms of Purchaser's Disclosure Letter, if applicable, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the statements
contained herein in light of the circumstances under which they were made, not
misleading.
ARTICLE VIII
BROKER
Each party hereby represents, covenants, and warrants to the other that
it has employed no broker or finder in connection with the transaction
contemplated herein. Each party agrees to pay any commission or finder's fee
which may be due on account of the transaction contemplated herein to any other
broker or finder employed by it, and to indemnify the other party hereto against
any claim for any commission or finder's fee made by any other broker allegedly
employed by it and from and against any and all costs and expenses incurred in
connection therewith, including, but not limited to, reasonable attorneys fees
and costs.
ARTICLE IX
SELLER COVENANTS
9.01. Pre-Closing Date. Seller covenants that between the date
hereof and the Closing Date, except
as contemplated by this Agreement or with the consent of Purchaser, which
consent shall not be unreasonably
withheld, conditioned or delayed, Seller:
(a) Will operate the Facilities only in the ordinary course and with
due regard to the proper maintenance and repair of any real property or personal
property associated therewith, ordinary wear and tear excepted;
(b) Will take all reasonable action to preserve the goodwill and the
present occupancy levels of the Facilities, it being understood and agreed that
they shall not be required to undertake any action to preserve occupancy levels
other than continuing to engage in the routine marketing activities in which
they are currently engaged at the Facilities;
(c) Will not make any material change in the operation of the
Facilities nor, except in the ordinary course of business, sell or agree to sell
any items of machinery, equipment or other fixed assets of the Facilities,
including but not limited to assets and equipment used in connection with the
operation of the Facilities nor otherwise enter into any agreements materially
affecting the Facilities;
(d) Will use its reasonable efforts to retain the goodwill of the
employees of, medical staff of or physicians under contract with, Seller located
at or connected with the operation of the Facilities and will provide Purchaser
with notice in the event of any union organizing activities or contract
negotiations are commenced after the date hereof;
(e) Will not, except in the ordinary course of business, increase the
compensation or bonuses payable or to become payable to any of the employees
located at or connected with the operation of the Facilities, including
employees located at the Seller's corporate or regional offices who work
exclusively on matters related to the Facilities, or grant any severance
benefits to any such employees other than to the extent such bonuses or
severance payments impose no obligation on Purchaser after the Closing Date;
(f) Will not enter into any written employment agreements in connection
with the operation of the Facilities other than with physicians in the ordinary
course of business; provided, however, that Seller shall provide Purchaser with
copies of any such physician contracts;
(g) Will not, except in the ordinary course of business, enter into any
contract or commitment affecting any of the Seller's Assets or incur any
additional indebtedness or amend, extend or renew any current debt instruments,
whether in the ordinary course of business or otherwise, nor will Seller declare
or pay any dividend or other distribution with respect to any of the Seller
Assets nor pledge the accounts receivable of Seller as security for any
indebtedness or lease agreements executed, amended or extended by Seller after
the date hereof; provided, however, that nothing herein shall be construed as
prohibiting (i) Seller from incurring inter-company indebtedness to Horizon
and/or CMS and loaning the proceeds thereof to Seller or Seller from incurring
such indebtedness, (ii) Horizon and/or CMS from incurring debt, the proceeds of
which may be made available to Seller or (iii) Seller from executing any and all
documents necessary to amend any debt instruments under which Horizon and/or CMS
may be the borrower and Seller a guarantor;
(h) Will, during normal business hours, provide Purchaser and its
agents and employees with access on twenty-four (24) hours notice to the books
and records of Seller or the Facilities provided they do not interfere with the
operation thereof;
(i) Will operate each of the Facilities in substantial compliance with
all applicable municipal, county, state and federal laws, regulations,
ordinances, standards and orders as now in effect (including, without
limitation, the building, zoning and life safety codes as currently applied with
respect thereto) where the failure to comply therewith could have a material
adverse effect on the business, property, condition (financial or otherwise) or
operation thereof;
(j) Will take all reasonable action to achieve substantial compliance
with any laws, regulations, ordinances, standards and orders applicable to each
of the Facilities which are enacted or issued after execution of this Agreement
and become effective or require compliance prior to the Closing where the
failure to comply therewith could have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof;
(k) Will maintain the Seller's Assets in substantially the same
condition as they were in at the date hereof, ordinary wear and tear, casualty
loss and taking by eminent domain excepted;
(l) Will provide Purchaser with copies of the Seller's monthly
financial statements prepared in
the ordinary course of business;
(m) Will provide Purchaser with copies of all licensure or
certification surveys received by
Seller and the related Plans of Correction prepared by Seller, as applicable;
(n) Will pay as and when due the accounts payable which arise in the
ordinary course of business, except to the extent that the amount owing is being
duly contested by Seller and such contest does not materially affect Seller or
any of the Facilities;
(o) Will maintain in force the existing insurance coverage
with respect to the Facilities
described in Exhibit 6.25;
(p) Will file all returns, reports and filings of any kind or nature,
or to secure timely extensions for the filing thereof, required to be filed by
Seller, including, but not limited to, state and federal tax returns with
respect to the Facilities and will timely pay all taxes or other obligations
which are due and payable with respect thereto, except to the extent that the
same are being duly contested in good faith in accordance with applicable law
and such contest does not materially affect Seller or any of the Facilities;
(q) Will provide to Purchaser copies of all material documents which
relate to, and, upon request, with verbal or written updates concerning the
status of, any litigation filed as of the date hereof or filed from and after
the date hereof by or against Seller after the date of this Agreement but prior
to the Closing Date where the amount claimed or assessed by management of Seller
as likely to be claimed exceeds $500,000;
(r) Will not amend or permit the amendment of any of the
Medical Staff Bylaws described in
Paragraph 6.24;
(s) Unless specifically prohibited by law, Seller will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within Seller's control to be satisfied prior to the Outside
Closing Date and Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(t) Neither Seller nor any of its officers, directors, advisors or
others authorized to act on its behalf shall directly initiate or solicit
discussions relating to any alternative acquisition proposal or similar
transaction including, without limitation, a merger or other business
combination involving Seller, any of the Seller's Assets, or offer to acquire or
convey in any manner, directly or indirectly, all or substantially all of the
equity interests in, the voting securities of Seller, the Seller's Assets;
provided, however, that public announcements of the transaction contemplated by
this Agreement shall not be prohibited hereby;
(u) Seller will proceed with all due diligence to secure the
Regulatory Approvals and Third Party
Consents for which it is responsible under the terms hereof;
(v) Seller will cooperate with Purchaser, at Purchaser's cost and
expense, in any audits of the results of operations at the Facilities which
Purchaser elects to conduct in order to comply with any requirements applicable
to it under the federal securities laws; and
(w) Within ten (10) days after Seller's receipt of Purchaser's title,
UCC search and survey objections pursuant to Paragraph 10.01, Seller shall
advise Purchaser whether it intends to correct the defects to which Purchaser
has objected.
9.02. Closing Date. On the Closing Date, Seller will deliver the
following to Purchaser or to a
designated escrow agent in accordance with any written escrow instructions
executed by Seller and Purchaser:
(a) The Benefits Schedule (as defined in Paragraph 14.01);
(b) A certificate of Seller dated as of the Closing Date, certifying on
behalf of Seller in such detail as Purchaser may reasonably specify the
fulfillment of the conditions set forth in Paragraphs 12.02 (a) and (b) and
setting forth the incumbency of the officers executing documents on behalf of
Seller, a copy of the resolutions adopted by Seller's Board of Directors
authorizing the transaction provided for herein and the execution of this
Purchase Agreement and the other documents contemplated herein and attaching a
certificate of good standing with respect to Seller issued by the California
Secretary of State within no more than thirty (30) days prior to Closing;
(c) The duly executed Lease Assignment Agreement;
(d) Written Escrow Instructions;
(e) Evidence that Seller has secured all of the Regulatory Consents and
Third Party Approvals, including, but not limited to, the consent of the
landlord under the Dove Street Lease, which Seller is required to secure under
the terms of this Agreement;
(f) The duly executed Bill of Sale;
(g) An opinion of the General Counsel of Horizon in the form and
substance reasonably acceptable
to Purchaser;
(h) The duly executed Grant Deeds;
(i) An Assignment and Assumption Agreement with respect to the Buckley
Employment Agreement in substantially the form attached hereto as Exhibit
9.02(i) (the "Buckley Assumption Agreement"); and
(j) The original titles to any motor vehicles included within the
Owned Personal Property.
In addition, on the Closing Date, the Seller shall pay the closing
costs for which it is responsible under Article IV and shall cause to be made
available to Purchaser at the Facilities any and all plans and specifications
with respect to the Facilities which may be in Seller's possession.
9.03. Post-Closing. Seller covenants and agrees that after the
Closing Date it will:
(a) Cooperate with Purchaser in the event its parent corporation is
required to include audited financial statements with respect to the Facilities
in its filings with the United States Securities and Exchange Commission.
(b) Take such actions and properly execute and deliver to Purchaser
such further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser and Seller, may be reasonably
necessary to assure, complete and evidence the full and effective transfer and
conveyance of the Seller's Assets.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
(d) File any final cost reports for which it may be responsible under
applicable state and federal law within the time periods proscribed thereunder,
it being understood and agreed that the purpose of this provision is to ensure
that there is no adverse affect on the reimbursement paid to Purchaser with
respect to the operations at the Facilities after Closing.
ARTICLE X
PURCHASER COVENANTS
10.01. Pre-Closing Date. Purchaser covenants that between the
date hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of
Seller, which consent shall not be
unreasonably withheld, conditioned or delayed:
(a) Within ten (10) days after the date of this Agreement advise Seller
of its objections to any UCC Search Reports, title commitment and/or survey of
the Real Property and the Facilities which Purchaser may elect to obtain;
provided, however, that Purchaser shall not have the right to object to any
items reflected on the title commitment which are reflected in Exhibit 3.02(c).
If Seller refuses to correct some or all of the title, survey or lien defects
objected to by Purchaser within the time period reflected in Paragraph 9.01(w)
or to give Purchaser reasonable assurances that the same will be corrected as of
the Closing Date, Purchaser shall have ten (10) days to advise Seller of its
decision to close, notwithstanding the defects, or of its election to terminate
this Agreement, in which case neither party shall have any further rights or
obligations hereunder. If Purchaser does not give notice of termination within
this ten (10) day period, it will be deemed to have waived its objections and to
have accepted such title, survey or lien defects.
(b) Purchaser will proceed with all due diligence to obtain
the Third Party Consents and
Regulatory Approvals for which it is responsible under the terms hereof; and
(c) Unless specifically prohibited by law, Purchaser will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 12.01
and 12.02 which are within its control to be satisfied prior to the Outside
Closing Date and Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
10.02. Closing Date. On the Closing Date, Purchaser will deliver to
the Escrow Agent (unless Seller
and Purchaser agree in writing in the Escrow Instructions to handle the same
outside of escrow) the following:
(a) A certificate of a responsible officer of Purchaser dated as of the
Closing Date certifying on behalf of Purchaser in such detail as Seller may
reasonably specify the fulfillment of the conditions set forth in Paragraphs
12.01 (a) and (b) and setting forth the incumbency of the officers executing
documents on behalf of Purchaser, a copy of the resolutions adopted by
Purchaser's Board of Directors authorizing the transaction provided for herein
and the execution of this Purchase Agreement and the other documents
contemplated herein and attaching a certificate of good standing issued by the
California Secretary of State within no more than thirty (30) days prior to
Closing;
(b) The executed Buckley Assignment Agreement;
(c) The cash due at Closing pursuant to Paragraph 2.01;
(d) Duly executed Escrow Closing Instructions;
(e) An opinion of the General Counsel of Regency in form and
substance reasonably acceptable to
Seller; and
(f) The duly executed Lease Assignment Agreement.
10.03. Post-Closing. After the Closing Date, Purchaser will:
(a) Provide Seller with access during normal business hours to any
books or records which Seller may need to file or to defend tax returns or other
filings filed prior to or subsequent to the Closing Date which relate to the
period prior to the Closing Date or which Seller may require for any other
lawful purpose other than litigation commenced by Seller against Purchaser under
the terms of this Agreement and maintain all such books and records for a period
of one year after the Closing Date, at which time Purchaser shall give Seller
notice of Seller's right to remove such books and records from the Hospital.
Seller shall have a period of thirty (30) days after receipt of such notice to
advise Purchaser whether it intends to exercise its removal right and, in the
event Seller elects to do so, Seller shall have a period of thirty (30) days
thereafter in which to arrange, at its sole cost and expense, for the removal of
any or of such books and records from the Hospital, subject to Purchaser's right
to retain copies of any or all of such removed books and records.
(b) Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and evidence
the transaction provided for in this Agreement.
(c) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
(d) To the extent permitted by law, Seller and the staff physicians of
the Facilities employed by Seller prior to the Closing Date (but in the case of
such staff physicians only as necessary for the further care of their patients
and the defense of litigation) shall be entitled, after the Closing Date, during
normal business hours of the Facilities and on advance notice to Purchaser to
have access to and to make copies, at their sole cost and expense, of the
patient records, including the medical records and medical charts of any patient
admitted to the Facilities on or before the Closing Date. In addition, to the
extent permitted by law and to the extent required by law, Seller shall be
entitled to remove from the Facilities any such record or chart, but only for
the purposes of pending litigation involving a patient to whom such record or
chart refers, as certified in writing prior to removal by an officer of Seller
or counsel retained by Seller in connection with such litigation, and only prior
to making a copy thereof, at Seller's cost and expense, for retention at the
Facilities. Any record or chart so removed by Seller from the Facilities shall
be promptly returned to Purchaser following its use by Seller in accordance with
the terms hereof.
(e) Provide such notice as may be required after Closing to each
regulatory authority having jurisdiction over the Facilities, the consent of
which was not required as a condition to Closing but notice to which is required
or recommended after Closing.
ARTICLE XI
MUTUAL COVENANTS
11.01. General Covenants. Following the execution of this Agreement,
Seller and Purchaser agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
11.02. Hart-Scott-Rodino Filing. If and to the extent applicable:
(a) Purchaser and Seller agree to file, and to cause any other person
obligated to do so as a result of its shareholdings in Seller, with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission a Notification and Report Form in accordance with the
notification requirements of the HSR Act and to use its and their best efforts
to achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
(b) Nothing herein shall be construed as requiring Seller to (i) sell
or otherwise dispose of any of the Seller Assets which are the subject of this
Agreement or the Other Agreements which either alone or in the aggregate, with
all such other sales or dispositions, would constitute the sale or disposition
of a "significant subsidiary" (as defined in Rule 1-02 of Regulation S-X of the
rules and regulations of the Commission), (ii) take any action, the consummation
of which cannot be conditioned on the consummation of the transactions
contemplated by this Agreement, where such action would have a material adverse
effect on Seller or (iii) take any action which either would have a material
adverse effect on the operations, business or financial condition of Seller or
would materially impair the value of the transaction contemplated herein to
Seller or Purchaser.
(c) Nothing herein shall be construed as requiring Purchaser to (i)
sell or otherwise dispose of any of its assets which either alone or in the
aggregate, with all such other sales or dispositions, would constitute the sale
or disposition of a "significant subsidiary," (ii) take any action, the
consummation of which cannot be conditioned on the consummation of the
transactions contemplated by this Agreement, where such action would have a
material adverse effect on Purchase or (iii) take any action which either would
have a material adverse effect on the operations, business or financial
condition of Purchaser or would materially impair the value of the transaction
contemplated herein to Seller or Purchaser.
11.03. Third Party Consents/Regulatory Approval. Each of Purchaser and
Seller will use its best efforts to obtain prior to the Closing Date all
consents, approvals and licenses necessary to permit the consummation of the
transactions contemplated by this Agreement and the Other Agreements, including,
but not limited to, such licensure and certification approval in the State of
California as may be necessary to enable Purchaser to lawfully own and/or
operate the Facilities from and after the Closing Date (the "Regulatory
Approvals"), and the consent of its lenders, lessors and other third parties to
the extent required under any loan documents, lease agreements, management
agreements or other instruments to which it is a party, including, but not
limited to, the consent of the lessor under the Dove Street Lease (the "Third
Party Consents"), provided, however, that the consent of the holders of the
bonds issued by Purchaser's parent corporation under that Indenture dated as of
June 28, 1996 in the original principal amount of $50,000,000 and that Indenture
dated as of October 12, 1995 in the original principal amount of $110,000,000
shall not be deemed to be a required Third Party Consent, it being understood
and agreed that Purchaser has represented that the transaction as contemplated
herein will not require the consent of such bondholders.
11.04. Public Announcements. The parties shall consult with each
other prior to the issuance by
either party of any press release or any written statement with respect to this
Agreement or the transactions
contemplated hereby.
11.05. Costs. Except as otherwise specifically provided herein, each
party shall bear its own costs and expenses with respect to securing the Third
Party Consents and Regulatory Approvals, including complying with the
requirements of the HSR Act, for which it is responsible hereunder.
ARTICLE XII
CONDITIONS
12.01. Purchaser Conditions. All obligations of Purchaser under
this Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined
below), of each of the following
conditions any one or more of which may be waived in writing by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Seller shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof, including, but not limited to, if applicable, change of
ownership approval from the California Department of Health Services (the "CHOW
Approval").
(d) Other than with respect to a default identified in the Seller
Disclosure Letter as of the date of this Agreement or any defaults identified
after the date of this Agreement in any amendments to the Seller Disclosure
Letter, which amendments are not objected to by Purchaser, Seller shall not be
in default, where said default cannot be cured by the Closing Date, under any
mortgage, contract, lease or other agreement to which Seller is a party or by
which Seller is bound and which will affect or relate to the Real Property, the
Personal Property or the Facilities after the Closing Date.
(e) Subject to Purchaser ordering the same, a title insurance policy
providing for owners coverage shall have been issued to Purchaser with respect
to the Facilities subject only to the Permitted Encumbrances (the "Title
Insurance Policy").
(f) Subject to Purchaser ordering the same, Purchaser shall be
satisfied or, pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the Surveys.
(g) Subject to Purchaser ordering the same, Purchaser shall be
satisfied, or pursuant to Paragraph 10.01(a) shall be deemed to be satisfied,
with the results of the UCC Searches.
(h) If applicable, the filing and waiting period requirements under the
HSR Act shall have been complied with and shall have expired or terminated.
(i) The closing of the transactions which are the subject of
the Other Agreements shall have
occurred.
(j) The Sacramento Addition shall have been completed and shall have
been constructed in a good and workmanlike and lien free manner and Seller shall
have delivered to the Purchaser duly executed lien releases with respect
thereto.
12.02. Seller Conditions. All obligations of Seller under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date, of each of the
following conditions any one or more
of which may be waived by Seller in writing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Purchaser shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Purchaser and Seller shall have received the Third Party Consents
and Regulatory Approvals and shall have satisfied any and all conditions to the
effectiveness thereof; provided, however, that it shall not be a condition to
Seller's obligation to close hereunder that the landlord under the Dove Street
Lease has refused to release Seller from its guarantee thereof or from primary
liability thereunder.
(d) The closing of the transaction which are the subject of
the Other Agreements shall have
occurred.
ARTICLE XIII
TERMINATION
13.01. Termination. This Agreement may be terminated by
Purchaser or Seller upon the following
conditions:
(a) By mutual consent of the parties;
(b) By Purchaser if the conditions to Closing set forth in Paragraph
12.01 have not been satisfied through no fault of Purchaser or waived by
Purchaser by the Outside Closing Date;
(c) By Seller if the conditions to Closing set forth in Paragraph 12.02
have not been satisfied through no fault of Seller or waived by Seller by the
Outside Closing Date;
(d) By either party if the Closing has not occurred by the Outside
Closing Date or such later date as may be agreed upon in writing by Seller and
Purchaser; provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 12 have been satisfied or waived by the Outside
Closing Date other than the Purchaser's receipt of the CHOW Approval pursuant to
Paragraph 12.01(c), provided Purchaser is diligently pursuing the issuance of
the CHOW Approval by the California Department of Health, the Outside Closing
Date shall automatically be extended for such additional period of time as may
be necessary to permit Purchaser to secure the CHOW Approval; provided, further
that in the event Purchaser has not secured the same within thirty (30) days
after the Outside Closing Date, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights or
obligations hereunder.
(e) By either party if the United States Department of Justice
or the Federal Trade Commission
requires any of the actions described in Paragraph 11.02;
(f) By either party in the event of a material adverse change in the
information contained in the other party's Disclosure Letter as a result of the
updating thereof by such other party.
(g) By Purchaser in event that prior to the Closing Date a material
portion of the Real Property or the Facilities is damaged or destroyed by fire
or other casualty or has been taken or condemned by any public or quasi-public
authority under the power or eminent domain; provided, however, that in the
event Purchaser fails to exercise its termination rights hereunder, then it
shall be conclusively deemed to have waived said right and Seller shall assign
to Purchaser all of its rights to any insurance proceeds or condemnation award
and all claims in connection therewith.
13.02. Neither party to this Agreement may claim termination or pursue
any other remedy referred to in Paragraph 13.01 on account of a breach of a
condition, covenant or warranty by the other, without first given such other
party written notice of such breach and not less than ten (10) days within which
to cure such breach. The Closing Date shall be postponed if necessary to afford
such opportunity to cure.
13.03. In the event of the termination of this Agreement by Seller
under either Paragraph 13.01(c) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder or under the Other Agreements, Seller shall be entitled
either (A) to seek damages from Purchaser as a result of said breach or (B)
without the need to prove damages, to collect from Purchaser on written demand
the sum of Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000) as
liquidated damages in full and complete settlement of any and all claims which
Seller may have against Purchaser hereunder and under the Other Agreements as a
result of said breach by Purchaser, it being understood and agreed that the
amount provided for in this clause (B) is intended to compensate Seller for the
damages suffered by it as a result of said breach without resort to the courts
and is not intended to be a limitation on the damages which Seller would be able
to seek to recover in the event it elects to proceed under clause (A).
13.04. In the event of the termination of this Agreement by Purchaser
under either Paragraph 13.01(b) or Paragraph 13.01(d) where, in either case the
Closing has failed to occur as a result of a material breach by Seller of its
obligations hereunder or under the Other Agreements, Purchaser shall have the
right either (A) to seek specific performance of Seller's obligations hereunder
or (B) to seek damages suffered by it as a result of said breach.
13.05. In the event of the termination of this Agreement pursuant to
Paragraphs 13.01(a), (e), (f) or (g), neither party shall have any further
rights or obligations hereunder.
ARTICLE XIV
EMPLOYEE BENEFITS
14.01. On the Closing Date, Seller shall deliver to Purchaser a
schedule (the "Employee Schedule") which reflects among other things the
following: (i) the name of all employee of the Facilities as of the Closing
Date, (ii) their positions and rates of pay, (iii) a reasonable estimate as of
the Closing Date of all earned and accrued vacation, holiday and sick pay and
earned or accrued "EVA" bonuses due to and/or coming due to the employees of the
Facilities and the Dove Street Office as of the Closing Date (the "Estimated
Accrued Benefits"). On the Closing Date, Seller shall deliver to Purchaser an
amount equal to the Estimated Accrued Benefits reflected on the Employee
Schedule and Purchaser shall agree from and after the Closing Date, to pay the
Accrued Benefits, to the employees of the Facilities and the Dove Street Office
as and when due in accordance with Purchaser's personnel policies from and after
the Closing Date, it being agreed for the benefit of Seller that such policies
shall not result in a reduction of benefits accrued in favor of any employee as
of the Closing Date. In addition, on the Closing Date or as soon thereafter as
is required by California law, Seller shall pay to the employees of the
Facilities and the Dove Street Office any wages due to them as of the Closing
Date. Any benefits due to the employees of the Facilities and the Dove Street
Office for the period prior to the Closing Date and not included within the
Accrued Benefits paid to Purchaser at Closing shall be and remain the
responsibility of Seller after Closing. Within a reasonable period of time
following the Closing Date, which shall in no event be more than thirty (30)
days, Seller shall provide Purchaser with a schedule of the Accrued Benefits
which were earned or accrued as of the Closing Date (the "Actual Accrued
Benefits"). To the extent the Estimated Accrued Benefits exceeded the Actual
Accrued Benefits, Purchaser shall remit said difference to Seller within ten
(10) days after Purchaser's receipt of the Actual Accrued Benefits schedule. To
the extent the Estimated Accrued Benefits were less than the Actual Accrued
Benefits, Seller shall remit said difference to Purchaser along with the
schedule of Actual Accrued Benefits.
14.02. Purchaser shall offer to hire at Closing all of the employees of
Seller who, as of the Closing, work at the Facilities and the Dove Street Office
and have been employed on average for 20 hours or more per week. Such employees
who are offered employment by Purchaser shall be referred to as the "Retained
Employees." Any such offer of continued employment to a Retained Employee by
Purchaser shall be to perform comparable services, in a comparable position and
at substantially the same base salary as such Retained Employee enjoyed with
Seller prior to Closing. Seller or any of its affiliates shall have the right to
employ or offer to employ any Retained Employee who declines Purchaser's offer
of employment. The Retained Employees who elect to accept continued employment
with Seller shall hereinafter be referred to as the "Hired Employees") and as to
each of the Hired Employees, Purchaser shall recognize each such Hired Employees
original hire date and shall cause Seller to continue to employ each such Hired
Employee for a period of no less than ninety (90) days following the Closing
Date unless the employment of such Hired Employee is terminated in accordance
with Purchaser's personnel policies or as a result of such Hired Employee's
resignation.
14.03. Purchaser and Seller acknowledge and agree that the provisions
of Section 14.02 are designed solely to ensure that Seller is not required to
give notice to the employees of the Facilities of the "closure" thereof under
the Worker Adjustment and Retraining Notification Act (the "WARN Act") or under
any comparable California state law. Accordingly, Purchaser agrees to indemnify,
defend and hold harmless Seller from any liability which it may incur under the
WARN Act or under any comparable California State law in the event of a
violation by Purchaser of its obligations thereunder, including a violation
which results from allegations that Purchaser constructively terminated the
employees of the Facilities as a result of the terms and conditions of
employment offered by Purchaser. Nothing in Section 14.02 shall, however, create
any rights in favor of any person not a party hereto, including the employees of
the Facilities, or constitute an employment agreement or condition of employment
for any employee of Seller or any affiliate of Seller who is a Retained Employee
or a Hired Employee.
14.04. Seller shall offer and provide, as appropriate, group health
plan continuation coverage pursuant to the requirements of Section 601, et seq.
of ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
employees of the Facilities to whom it is required to offer the same under
applicable law. Seller acknowledges and agrees that Purchaser is not assuming
any of Seller's obligations to its employees under COBRA or otherwise, except as
specifically provided in this Article XIV. As of the Closing Date, all active
employees of Seller: (i) who participate as of the Closing Date in group health
insurance coverage sponsored by Seller and (ii) who remain employees of Seller
after the Closing Date, shall be eligible for participation in a group health
plan (as defined for purposes of Internal Revenue Code Section 4980B)
established and maintained by Purchaser for the general benefit of its employees
and their dependents and all such employees shall be covered without a waiting
period and without regard to any pre-existing condition unless (A) they are
under a waiting period with Seller at the time of Closing, in which case they
shall be required to complete their waiting period while under Purchaser's group
health plan or (B) they were subject to a pre-existing condition exclusion while
in Seller's employ, in which case they shall be subject to the same exclusion
while in Purchaser's employ, which exclusion shall, if applicable, be subject to
the same time limitation while in Purchaser's employ as was applicable thereto
while said employees were in Seller's employ, with the time limit calculated
from the date the same commenced while in Seller's employ. Seller and Purchaser
acknowledge and agree that it is the intent of this provision that Seller shall
not be required to provide continued health coverage under ERISA or Section 4980
of the Internal Revenue Code to any of such employees of Seller who are retained
after Closing or to any qualified beneficiary (as defined for purposes of
Section 4980B of the Internal Revenue Code) with respect to any such employees.
14.05. Seller agrees that the continued employment of the Hired
Employees of the Facilities will be important to the viability of Purchaser's
operations at the Facilities. Accordingly, Seller agrees that for a period of
one year after the Closing Date it will not directly or indirectly solicit the
employment of any of such Hired Employees nor shall it take any action to
directly or indirectly interfere with their employment relationship with
Purchaser or to induce them in any manner to terminate their employment
relationship with Purchaser. Seller acknowledges and agrees that Purchaser would
not be fully compensated by damages in the event of a breach or threatened
breach by Seller of this provision and accordingly agrees that Purchaser shall
be entitled, without the need to post a bond, to seek an injunction to restrain
such violation or threatened violation of this Paragraph 14.05.
ARTICLE XV
INDEMNIFICATION
15.01. Seller shall indemnify and hold Purchaser harmless from and
against any and all damages, liabilities, losses, costs or expenses which
Purchaser may incur as a result of:
(a) Except as otherwise provided in this Agreement, the leasing or
ownership of the Seller's Assets and the operation of the Facilities prior to
the Closing Date, whether or not the same are covered by Seller's insurance,
including, but not limited to any obligations under the Dove Street Lease, the
Operating Contracts and the Assumed Liabilities;
(b) Any misrepresentation or breach of warranty of Seller
set forth in this Agreement or
nonfulfillment of any agreement on the part of Seller under this Agreement;
(c) Any failure in connection with the transaction
contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers;
(d) Any claims against Seller, Purchaser, the Facilities, or the other
Seller's Assets under any applicable third party payor program (i) with respect
to the operation of the Facilities by Seller prior to the Closing Date, or (ii)
for repayment of any overpayments made to Seller under any applicable third
party payor program for services rendered at the Facilities prior to the Closing
Date, including, but not limited to, claims against Purchaser in the form of
offsets by such third party payor against their payments due to Purchaser on and
after the Closing Date;
(e) The Excluded Assets; and
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.02. Purchaser shall indemnify and hold Seller harmless from and
against any and all damages, liabilities, losses, costs or expenses which it may
incur as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the leasing or ownership of the Seller's Assets and the
operation of the Facilities from and after the Closing Date, including, but not
limited to, any obligations under the Dove Street Lease, the Operating Contracts
and the Assumed Liabilities (if and to the extent they relate solely to the
period from and after the Closing Date);
(b) Any misrepresentation or breach of warranty of Purchaser
set forth in this Agreement or
nonfulfillment of any agreement on the part of Purchaser under this Agreement;
and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
15.03. Notwithstanding the foregoing, neither Purchaser nor Seller (the
"Non-Breaching Party") shall be entitled to seek damages from the other party
(the "Breaching Party") under Paragraphs 15.01(b) and 15.02(b), respectively,
for the breach of a representation or warranty set forth in this Agreement
unless the amount of the damages, liabilities, losses, costs or expenses
incurred by the Non-Breaching Party individually or in the aggregate with any
and all prior breaches equals or exceeds Fifty Thousand and no/100 Dollars
($50,000) (the "Representation and Warranty Liability Threshold"). In the event
the Representation and Warranty Threshold is met, then the Non-Breaching Party
shall be entitled to seek to collect from the Breaching Party any and all
damages, liabilities, losses, costs or expenses suffered or incurred as a result
of all such breaches of the representations and warranties set forth herein on a
first dollar basis and not merely to recover damages in excess of the
Representation and Warranty Liability Threshold.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To Seller: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Purchaser: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder with respect to any Real Property and Personal Property included in
the Seller's Assets effective at Closing to a real estate investment trust (the
"REIT") in connection with its financing of the transaction provided for herein
provided Seller first confirms to Purchaser that, in its reasonable
determination, such assignment will not have adverse reimbursement consequences
for Seller; and provided, further, that no such assignment shall relieve
Purchaser of its obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including successors by operation of law pursuant to any
merger, consolidation or sale of assets involving either party. In the event of
an assignment of this Purchase Agreement to a REIT, Purchaser shall advise
Seller as to those documents and deliveries contemplated by this Agreement which
are to run in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the REIT
rather than Purchaser, if any, it being understood and agreed that in the event
of such an assignment, the only right which the REIT will assume is Purchaser's
right to take title to any Real or Personal Property included in the Seller's
Assets and the only obligation which the REIT will assume is Purchaser's
obligation to pay the purchase price in accordance with the terms hereof .
16.03 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of Seller and Purchaser
and the documents executed and delivered pursuant hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior negotiations, discussions, writings and agreements
between them.
16.04. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
16.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
16.06. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
16.07. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
16.08 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Purchaser has no knowledge of" or "Seller has no knowledge of"
or words or phrases of similar import, the same shall mean to the actual
knowledge of any of the corporate officers or directors of the party or its
subsidiaries making said representation or warranty after due and diligent
inquiry with respect thereto. To the extent that any of the representations and
warranties contained in this Agreement refer to verbal notice to a party such
notice shall be deemed to have been received if delivered to any officer of such
party or to an officer of one of its subsidiaries.
16.09. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
16.10. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
16.11. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
16.13. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing, other than the representation set forth in Paragraphs 6.12
and 6.13, which shall survive for the applicable statute of limitations;
provided, however, that in the event that, at anytime during that two year
period, any claim is made for a breach thereof, the same shall survive until a
final non-appealable resolution thereof. Nothing in this Paragraph 16.13 shall
be construed to limit the indemnity obligations of Seller and Purchaser under
Paragraph 15.01 which shall survive for as long as the matters to which they
relate survive by the terms of this Agreement or, if no such limitation is
provided for herein, which shall survive until the expiration of the applicable
statute of limitations with respect to the matters to which they relate.
16.14. Remittances and Receivables.
(a) All remittances, mail and other communications relating to the
Excluded Assets or liabilities other than the Assumed Liabilities received by
Purchaser at any time after the Closing shall be promptly remitted by Purchaser
to Seller and, pending such delivery, Purchaser shall have no interest in the
same and shall hold such remittances, mail and other communications in trust for
the benefit of Seller. All remittances, mail and other communications relating
to the Seller's Assets or the Assumed Liabilities received by Seller at any time
after the Closing shall be promptly remitted by Seller to Purchaser and, pending
such delivery, Seller shall have no interest in the same and shall hold such
remittances, mail and other communications in trust for the benefit of
Purchaser.
(b) Any payments received by Purchaser (or its successors in interest
or assigns) which relate solely to accounts receivable for services rendered and
medicines, drugs and supplies provided by Seller to patients of the Facilities
who are discharged prior to the Closing Date or otherwise not receiving such
goods or services as of the Closing Date (the "Receivables") whether from
patients, payors, clients, customer or others (collectively, the "Account
Parties") shall be paid by Purchaser to Seller weekly commencing on the first
Monday following the Closing and covering the seven day period ending on the
immediately preceding Saturday (or, in the case of the first such payment, the
period beginning on the Closing Date and ending on the next succeeding
Saturday). Within no more than ten (10) days after Closing, Seller shall deliver
to Purchaser a schedule of all such Receivables which are outstanding as of the
Closing Date, which schedule shall show (i) the amount due from each Account
Party and (ii) if possible, the portion thereof, if any, due from a third party
payor on behalf of an Account Party who is a patient. Any payments received by
Seller with respect to balances owing to Purchaser for services rendered or
medicines, drugs or supplies provided after the Closing Date shall be remitted
to Purchaser within five (5) business days after the receipt thereof. All
payments which are remitted by Purchaser to Seller shall be applied to the
oldest receivable reflected on the schedule provided by Seller to Purchaser
unless Purchaser in good faith determines that the same should be applied to a
more recent Receivable and so advises Seller at the time of the remittance
thereof to Seller.
(c) To compensate Seller for services rendered and medicines, drugs and
supplies provided to the Closing Date to patients who were admitted to the
Facilities before the Closing Date and discharged by the Facilities after the
Closing Date (the "Straddle Patients"), Seller shall prepare cut-off billings
for all Straddle Patients, as of the close of business on the day prior to the
Closing Date. All payments which are received by Purchaser (or its successors in
interest or assigns) after the Closing Date with respect to such Straddle
Patients to whom cut-off billings were provided shall constitute Excluded Assets
and shall be remitted to Seller within two (2) weeks after Purchaser's receipt
of such payments.
(d) Any payments in excess of One Hundred Thousand and no/100 Dollars
($100,000) owing from either party to the other under this Section 16.14 shall
be paid in immediately available funds. All other payments shall be paid by
check made payable to the party entitled to such payment in accordance with the
terms hereof. Any payment not paid when due hereunder or within thirty (30) days
thereafter (the "Overdue Date"), shall bear interest at the rate of 10% per
annum from the Overdue Date to the date paid in full.
(e) Seller acknowledges and agrees that Purchaser's obligations under
this Paragraph 16.14 shall be limited to remitting to Seller any payments
received by Purchaser which belong to Purchaser in accordance with the terms
hereof and that Purchaser shall not be obligated to attempt to bill for or to
collect Seller's Receivables, other than Seller's pro rata portion of any
payments owing from the Straddle Patients which are not the subject of cut off
billings or final cost reports. Accordingly, in order to facilitate Seller's
collection efforts, Purchaser agrees to cooperate with Seller and, to the extent
permitted by law, to provide access to records (both medical and financial)
during normal business hours and to a reasonable number of Seller's personnel
and representatives, to assist Seller in the collection, rebilling and auditing
(by Seller or its representatives, including its independent certified public
accountants) of the Receivables included in the Excluded Assets (including but
not limited to, any and all Receivables from Account Parties or amounts due to
Seller from any other payor). Without limiting the generality of the foregoing,
Purchaser agrees that (A) for a period of six months following the Closing Date,
(i) Seller may, at its sole cost and expense, locate an employee or
representative at the Hospital, without charge, in order to facilitate such
collection, rebilling and auditing efforts, (ii) Purchaser shall provide such
employee or representative, without charge, adequate space to facilitate the
performance of such duties and (iii) Purchaser shall provide reasonable
assistance of the employees of Purchaser, without charge; provided, however, in
each instance that Purchaser's obligations hereunder are subject to such
presence of Seller's employee or representative and such assistance of
Purchaser's employee not interfering with Purchaser's day to day operations at
the Facilities and (B) with respect to any Receivables for which collection has
not been received within one hundred and twenty (120) days following its due
date, to the extent Purchaser has not already provided the same to Seller's
employees or representatives under clause (A) hereof, Purchaser shall upon the
request of Seller promptly turn over to Seller all evidences of any such
Receivables and documents pertaining to the same that are in the possession of
Purchaser (or its successors in interest or assigns) and, to the extent it has
not already done so pursuant to clause (A), Seller shall be free to institute
such collection efforts, including without limitation, initiating such legal
proceedings, with respect thereto as Seller shall, in its sole discretion,
determine to be necessary or appropriate for the collection thereof.
(f) In the event any collection efforts are necessary with respect to
the Straddle Patient Payments, Seller and Purchaser shall cooperate in
determining the nature and extent of such collection efforts and shall share the
cost thereof on the same pro rata basis as the Straddle Patient Payments are
allocated between Seller and Purchaser in accordance with clause (c)(iii)
hereof.
16.15. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
16.16. Identification of Documents Provided. Any and all documents
provided by Seller to Purchaser which are listed on the exhibits hereto shall be
numbered using a Bates sequential numbering system in order to ensure that there
are no disputes concerning what documents were so provided.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
WESTERN NEUROLOGIC RESIDENTIAL CENTERS
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Purchaser") to enter
into the Purchase and Sale Agreement between Western Neurologic Residential
Centers, as Seller, and Purchaser dated November 19, 1996 (the "Agreement"),
hereby unconditionally, irrevocably and jointly and severally with Seller,
guarantees and promises to and for the benefit of Purchaser that (i) the
representations and warranties of Seller are true and correct as of the date of
execution of the Agreement and shall be true and correct as of the Closing Date
(as modified by any supplements to the Seller Disclosure Letter to reflect
events after the date hereof) and (ii) Seller shall perform all of its
obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 15, to be performed on its part under the
Agreement. If Seller defaults under the Agreement, Purchaser may proceed
immediately against Horizon or Seller or both to enforce any rights it has under
the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Seller will not survive beyond the periods
applicable thereto set forth in Paragraph 16.13 hereof and this Guaranty shall
not be construed to give Purchaser a claim or cause of action against Horizon
after the expiration of the applicable survival period for a breach by Seller of
any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Seller;
(c) The acceptance or release by Purchaser of any
additional security for the
performance of Seller's obligations under the Agreement;
(d) The failure during any period of time whatsoever of
Purchaser to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Purchaser's interest under the
Agreement (whether absolute or as collateral);
(f) The assertion by Purchaser against Seller of any rights or
remedies reserved or granted to Purchaser under the Agreement,
including the commencement by Purchaser of any proceedings against
Seller upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Purchaser and Seller;
whether or not Horizon shall have knowledge or have been notified of or agreed
to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Purchaser
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the
rejection of the Agreement by Seller or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Purchaser in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Purchaser hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Purchaser by operation of law or under the Agreement, and Purchaser may exercise
its remedies hereunder without the necessity of any notice to Seller or Horizon
of nonpayment, nonobservance, nonperformance or other default by Seller under
the Agreement other than such notice as may be specifically required by the
terms of the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Purchaser, Purchaser shall be
entitled to collect from Horizon, Purchaser's costs of collection, including,
without limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Purchaser by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Purchaser with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Purchaser.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Purchaser
in connection with a permitted assignment of the Agreement and shall inure to
the benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Western Neurologic Residential Centers ("Seller") to
enter into the Purchase and Sale Agreement between Seller and Regency Rehab
Hospitals, Inc. ("Purchaser") dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Purchaser,
guarantees and promises to and for the benefit of Seller that (i) the
representations and warranties of Purchaser are true and correct as of the date
of execution of the Agreement and shall be true and correct as of the Closing
Date (as modified by any supplements to the Purchaser Disclosure Letter to
reflect events after the date hereof) and (ii) Purchaser shall perform all of
its obligations, covenants and agreements, including, but not limited to, its
indemnity obligations under Paragraph 15, to be performed on its part under the
Agreement. If Purchaser defaults under the Agreement, Seller may proceed
immediately against Regency or Purchaser or both to enforce any rights it has
under the Agreement or this Guaranty. Notwithstanding the foregoing, the
representations and warranties of Purchaser will not survive beyond the periods
applicable thereto set forth in Paragraph 16.13 hereof and this Guaranty shall
not be construed to give Seller a claim or cause of action against Regency after
the expiration of the applicable survival period for a breach by Purchaser of
any representation or warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Purchaser or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Purchaser;
(c) The acceptance or release by Seller of any
additional security for the performance
of Purchaser's obligations under the Agreement;
(d) The failure during any period of time whatsoever of Seller
to attempt to collect any amount due under the Agreement or to exercise
any remedy available thereunder or any other security instrument given
as security for performance of the same, in the event of a default in
the performance by Purchaser in its obligations thereunder;
(e) Any assignment or successive assignments of
Seller's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Seller against Purchaser of any rights or
remedies reserved or granted to Seller under the Agreement, including
the commencement by Seller of any proceedings against Purchaser upon
the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Seller and Purchaser;
whether or not Regency shall have knowledge or have been notified of or agreed
to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Purchaser with respect to any notice required to be provided by Seller
under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Purchaser in bankruptcy or the
rejection of the Agreement by Purchaser or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Purchaser under the Purchase Agreement to
the extent Regency is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Seller in the exercise of any right
or remedy hereunder shall operate as a waiver thereof. All remedies of Seller
hereunder shall be in addition to, and exercisable consecutively or concurrently
in any combination with, any and all remedies available to Seller by operation
of law or under the Agreement, and Seller may exercise its remedies hereunder
without the necessity of any notice to Purchaser or Regency of nonpayment,
nonobservance, nonperformance or other default by Purchaser under the Agreement
other than such notice as may be specifically required by the terms of the
Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Seller, Seller shall be entitled to
collect from Regency, Seller's costs of collection, including, without
limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Seller by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Purchaser for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Seller with its
quarterly and annual financial statements as soon as the same are available and
with any other financial statements as may be reasonably requested by Seller.
This Guaranty shall not be assignable by Regency or by Seller but shall
be binding upon the successors of Regency and Seller.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Purchaser's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.09
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
WESTERN NEUROLOGIC RESIDENTIAL CENTERS
This Amendment is made and entered into this ___ day of December, 1996
by and between Western Neurologic Residential Centers, a California corporation
("Seller") and Regency Rehab Hospitals, Inc., a California corporation
("Purchaser").
RECITALS
A. Seller and Purchaser are parties to that Purchase and Sale Agreement
dated November 19, 1996 (the "Meridian Purchase Agreement") pursuant to which
Seller agreed to sell to Purchaser and Purchaser agreed to purchase from Seller
certain assets related to the ownership and operation by Seller of six
congregate living facilities in California.
B. After execution of the Meridian Purchase Agreement, Seller and
Purchaser determined that there is one home health care license held by Seller
(the "HHA License") which should be included in the description of the Seller's
Assets contained in the Meridian Purchase Agreement.
C. The Meridian Purchase Agreement provides that it may be
amended by written instrument signed
by Seller and Purchaser.
D. Purchaser and Seller are interested in amending the Meridian
Purchase Agreement to include
the HHA License in the Seller's Assets.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
AGREEMENT
1. Section 1.01(f) is hereby deleted in its entirety and the
following inserted instead:
(f) All patient medical records, employment records, medical staff
rosters and files and other intangible personal property owned by
Seller relating to the Facilities and all rights of Seller in and to
(i) those contracts and commitments relating to the Facilities as
listed on Exhibit 1.01(f), true and correct copies of which contracts
have been provided to Purchaser by Seller as of the date hereof; (ii)
the permits and license used or held for use by Seller in the operation
of the Facilities, including, but not limited to, the two home health
licenses held by Seller and described in Exhibit 6.06, and (iii) any
and all warranties issued to Seller in connection with the construction
of the Sacramento Addition (the "Records and Rights").
2. Exhibit 6.06 is hereby deleted in its entirety and the revised
Exhibit 6.06 which is attached
to this Amendment is inserted in lieu thereof.
3. Except as specifically set forth herein, the Meridian Purchase
Agreement shall remain in full force and effect as originally executed by Seller
and Purchaser.
4. This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, but all of which taken together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereby execute this Amendment as of the
day and year first set forth above.
WESTERN NEUROLOGIC RESIDENTIAL CENTERS
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
Exhibit 2.10
REGIONAL OFFICE AGREEMENT
This Agreement is made and entered into this 19th day of November, 1996
by and between Continental Medical Systems, Inc., a Delaware corporation ("CMS")
and Regency Rehab Hospitals, Inc., a California corporation ("Regency").
RECITALS
A. CMS and Regency and their affiliates are parties to a series of
Purchase and Sale Agreement pursuant to which CMS and its affiliates have agreed
to sell and Regency and its affiliates have agreed to purchase certain
rehabilitation hospitals, congregate living facilities and outpatient
rehabilitation clinics or the interests therein owned by CMS and its affiliates
(the "Purchase Transaction").
B. In connection with the Purchase Transaction, Regency has agreed to
hire certain employees located at CMS's California regional office and to assume
CMS obligations under the lease with respect to its regional office.
C. CMS and Regency are interested in documenting the terms and
conditions with respect to the
foregoing.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS
FOLLOWS:
ARTICLE I
ASSIGNMENT AND ASSUMPTION
1.01. Assignment and Assumption of Lease. On the Closing Date (as
defined below), CMS shall sell, assign, transfer and convey to Regency and
Regency shall acquire, accept and assume from CMS, all of CMS's right, title and
interest in and to the following (the "Regional Office Assets"):
(a) That Lease Agreement dated March 24, 1993 between Willow Creek
Plaza Associates Limited Partnership, as lessor, and CMS, as lessee (the
"Regional Office Lease"), including, but not limited to, CMS' leasehold right,
title and interest in and to:
(i) The real property leased by CMS under the terms of the
Regional Office Lease and situated in the State of California and more
particularly described or shown in Exhibit 1.01 (a)(i) (the "Regional
Office Real Property") and the improvements thereon that comprise that
3,637 square foot office (the "Regional Office").
(ii) All equipment, furniture and fixtures located on or used
in connection with the operation of the Regional Office Real Property
whether owned by CMS (the "Owned Regional Office Personal Property") or
leased by CMS either under the Regional Office Lease or under those
contracts and commitments described in Exhibit 1.02(b) (the "Leased
Regional Office Personal Property"), which Leased Regional Office
Personal Property and Owned Regional Office Personal Property is more
fully described in Exhibit 1.02(a)(ii).
(iii) All rights of first refusal, extension rights, and
purchase options set forth in the Regional Office Lease.
1.02. Regency does not assume any liabilities of CMS with respect to
the Regional Office Assets, other than the following (the "Assumed
Liabilities"):
(a) The liability to make the lease and other payments and to perform
any other obligations under the Regional Office Lease which relate to the
periods on and after the Closing Date;
(b) The liability to make the equipment lease and other contract
payments under the contracts and commitments listed on Exhibit 1.02(b) (the
"Assumed Contracts") which relate to the periods on and after the Closing Date;
and
(c) The liability to pay when due the Accrued Benefits (as defined
below).
ARTICLE II
CLOSING
2.01. The assignment and assumption of the Regional Office Assets
shall be effective as of 12:01
a.m. on January 1, 1997 unless extended by mutual agreement of the parties (the
"Outside Closing Date").
2.02. At Closing, CMS shall deliver title to the Regional Office Assets
free and clear of all liens and encumbrances.
2.03. Title to the Regional Office Assets shall be conveyed to
Regency at Closing by CMS's delivery
of the following documents:
(a) CMS shall deliver an Assignment Agreement in form and substance
substantially the same as that attached hereto as Exhibit 2.03(a) pursuant to
which CMS shall convey to Regency CMS's right, title and interest in and to the
Regional Office Lease (the "Assignment Agreement").
(b) A Bill of Sale in form and substance substantially the same as that
attached hereto as Exhibit 2.03(b) pursuant to which CMS shall convey to Regency
CMS' right, title and interest in and to the Owned Regional Office Personal
Property.
(c) Such other documents or instruments as may be necessary to convey
title to the Regional Office Assets to Regency in accordance with the terms
hereof.
ARTICLE III
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
of the Regional Office Assets shall be allocated between CMS and Regency as
follows:
3.01. CMS and Regency shall share on a 50-50 basis any State and County
transfer or excise taxes due on the transfer of the Regional Office Assets to
Regency.
3.02. Regency shall pay any sales tax due on the transfer of the
Regional Office Assets to Regency.
3.03. CMS shall pay the cost of obtaining and recording any releases
necessary to deliver title to the Regional Office Assets in accordance with the
terms of this Agreement.
3.04. CMS shall pay any reasonable attorneys fees, processing fees and
other fees and expenses contemplated by the terms of the Regional Office Lease
and the Assumed Contracts.
3.05. CMS shall pay any reasonable attorneys fees, processing fees and
other fees and expenses contemplated by the terms of that Amended and Restated
Credit Agreement dated September 26, 1995 between CMS and NationsBank of Texas,
N.A. (the "CMS's Credit Agreement") and Regency shall pay any reasonable
attorneys' fees, processing fees and other fees and expenses contemplated by the
terms of the Credit Agreement dated December 29, 1995 between Regency Health
Services, Inc. and NationsBank of Texas, N.A.
ARTICLE IV
POSSESSION
On the Closing Date, Regency shall be entitled to possession of the
Regional Office Assets.
ARTICLE V
CMS'S REPRESENTATIONS AND WARRANTIES
CMS hereby warrants and represents to Regency that:
5.02. Validity and Conflicts. This Agreement is valid, binding and
enforceable against CMS in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Subject to CMS obtaining
consent of the landlord under the Regional Office Lease, if applicable, the
execution of this Agreement and the consummation of the transactions
contemplated herein in accordance with the terms hereof will not result in a
breach of the terms and conditions of nor constitute a default under or
violation of CMS's Articles of Incorporation or Bylaws or any law, regulation,
court order, mortgage, note, bond, indenture, agreement, license or other
instrument or obligation to which CMS is now a party or by which any of the
Regional Office Assets may be bound or affected or any agreement, option,
understanding or commitment or any privilege granted by CMS to any other party
to purchase or otherwise acquire the Regional Office Assets or result in the
acceleration of or an increase in the interest rate payable under any
indebtedness to which is a party other than indebtedness of CMS which does not
relate to the Regional Office Assets or indebtedness which is to be discharged
by CMS as of the Closing Date.
5.02. Authority. Subject to CMS obtaining the consent of the landlord
under the Office Lease and the consent of any third parties to the Assumed
Contracts, if applicable. CMS has full corporate power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein.
5.03 The Regional Office Lease. A true and correct copy of the Regional
Office Lease has been provided by CMS to Regency. The Regional Office Lease
remains in full force and effect and has not been amended or modified. CMS has
not received from the landlord under the Regional Office Lease any written
notice that it is in default of its obligations under the Regional Office Lease
or that any guarantor thereof is in default of its obligations under any
Guaranty delivered in conjunction therewith nor does CMS have knowledge of any
events which, with the passage of time or the giving of notice, would constitute
a material default thereunder. Except as set forth in the Regional Office Lease
with respect to any common areas, CMS enjoys exclusive, peaceful and undisturbed
possession under the Regional Office Lease. There are no security deposits
posted with respect to the Regional Office Lease.
5.04. Necessary Action. CMS has duly and properly taken or obtained or
caused to be taken or obtained, or prior to Closing will have duly and properly
taken or obtained or caused to be taken or obtained, all action necessary for
CMS (i) to enter into and to deliver this Agreement and any and all documents
and agreements executed by CMS in connection herewith or in furtherance hereof
and (ii) to carry out the terms hereof and thereof and the transaction
contemplated herein, which action shall include, but not be limited to,
obtaining the consent of the landlord under the Regional Office Lease, if
required by the terms thereof. No other action by or on behalf of CMS is or will
be necessary to authorize the execution, delivery and performance of this
Agreement and any documents and agreements executed by CMS in connection
herewith or consummation of the transactions contemplated herein. CMS represents
and warrants that as of the date of execution of this Agreement, it has secured
the consent of its Board of Directors and of the Board of Directors of Horizon
to the execution of this Agreement and of any documents and agreements necessary
to carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement. Nothing herein shall be construed as a guarantee
by CMS that it will be able to secure the consent of the landlord under the
Regional Office Lease and of any third parties under the Assumed Contracts, if
applicable, but rather this paragraph shall be limited to CMS's representation
and warranty that it will use its best efforts to secure the same subject to the
limitations on the costs which CMS must incur in obtaining such consents being
limited in the manner set forth in Paragraph 3.04.
5.05. EVA Bonus. The EVA bonuses to be paid pursuant to Section 12.01
shall be calculated by CMS in a manner consistent with past practices and in
accordance with the terms of the EVA Bonus Plan (the "EVA Calculation"). The EVA
Calculation when prepared shall be true, correct and complete in all material
respects and all bonus payments reflected in said EVA Calculation will be paid
in accordance with Section 12.01.
5.06. Disclosure. No representation or warranty by or on behalf of CMS
contained in this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material facts which are
necessary in order to make the statements contained herein in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
REGENCY REPRESENTATIONS AND WARRANTIES
Regency hereby warrants and represents to CMS that:
6.01. Validity and Conflicts. This Agreement is valid, binding and
enforceable against Regency in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein have been
approved by the Board of Directors of Regency and do not and will not result in
a breach of the terms and conditions of nor constitute a default under or
violation of the Articles of Incorporation or Bylaws of Regency, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other instrument or obligation to which Regency is now a party or by which any
of its assets may be bound or affected.
6.02. Authority. Regency has full corporate power and authority to
execute and to deliver this Agreement and all related documents, and to carry
out the transactions contemplated herein and therein. Regency further has full
power and authority (i) to own the Interests and (ii) to conduct its business
from and after the Closing Date as the same is now being conducted.
6.03. Necessary Action. Regency has such Third Party Consents and
Regulatory Approvals and has duly and properly taken or obtained or caused to be
taken or obtained, or prior to Closing will have duly and properly taken or
obtained or caused to be taken or obtained, all action necessary for Regency (i)
to enter into and to deliver this Agreement and any and all documents and
agreements executed by Regency in connection herewith or in furtherance hereof
and (ii) to carry out the terms hereof and thereof and the transactions
contemplated herein. No other action by or on behalf of Regency is or will be
necessary to authorize the execution, delivery and performance of this Agreement
and any documents and agreements executed by Regency in connection herewith or
consummation of the transactions contemplated herein. Regency represents and
warrants that as of the date of execution of this Agreement, it has secured the
consent of its Board of Directors and of the Board of Directors of Regency to
the execution of this Agreement and of any documents and agreements necessary to
carry out the terms hereof and for the consummation of the transactions
contemplated by this Agreement.
ARTICLE VII
CMS COVENANTS
7.01. Pre-Closing Date. CMS covenants that between the date hereof
and the Closing Date, except as
contemplated by this Agreement or with the consent of Regency, which consent
shall not be unreasonably
withheld, conditioned or delayed, CMS:
(a) Will operate the Regional Office only in the ordinary course and
with due regard to the proper maintenance and repair of any real property or
personal property associated therewith, ordinary wear and tear excepted;
(b) Will not, except in the ordinary course of business, increase the
compensation or bonuses payable or to become payable to any of the employees
located at or connected with the operation of the Regional Office, or grant any
severance benefits to any such employees other than to the extent such bonuses
or severance payments impose no obligation on Regency after the Closing Date;
(c) Will, during normal business hours, provide Regency and its agents
and employees with access on twenty-four (24) hours notice to the books and
records of CMS with respect to the Regional Office provided they do not
interfere with the operation thereof;
(d) Will proceed with all due diligence to secure the consent of the
landlord under the Regional Office Lease and by any third parties under the
terms of the Assumed Contracts, if required by the terms thereof;
(e) Will not amend or modify the Regional Office Lease or the
Assumed Contracts;
(f) Will comply with its obligations under the Regional Office
Lease or the Assumed Contracts.
7.02. Closing Date. On the Closing Date, CMS will deliver the following
to Regency or to a designated
escrow agent in accordance with any written escrow instructions executed by CMS
and Regency:
(a) The Benefits Schedule (as defined in Paragraph 14.01).
(b) A duly executed original of the Assignment and Assumption
Agreement with respect to the
Regional Office Lease.
(c) The duly executed Bill of Sale.
In addition, on the Closing Date, the CMS shall pay the closing costs
for which it is responsible under Article IV.
7.03. Post-Closing. CMS covenants and agrees that after the Closing
Date it will:
(a) Take such actions and properly execute and deliver to Regency such
further instruments of assignment, conveyance and transfer as, in the reasonable
opinion of counsel for Regency and CMS, may be reasonably necessary to assure,
complete and evidence the full and effective transfer and conveyance of the
Regional Office Assets.
(b) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms hereof or which, by agreement
of the parties, have not been fully performed as of the Closing Date and the
performance of which, by written agreement of the parties, has been extended
until after the Closing Date.
ARTICLE VIII
REGENCY COVENANTS
8.01. Pre-Closing Date. Regency covenants that between the date
hereof and the Closing Date,
except as contemplated by this Agreement or with the consent of CMS, which
consent shall not be unreasonably
withheld, conditioned or delayed:
(a) Unless specifically prohibited by law, Regency will use its best
efforts to cause all of the conditions to Closing set forth in Paragraphs 10.01
and 10.02 which are within its control to be satisfied prior to the Outside
Closing Date and Regency will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement.
8.02. Closing Date. On the Closing Date, Regency will deliver to
the Escrow Agent (unless CMS and
Regency agree in writing in the Escrow Instructions to handle the same outside
of escrow) the executed Office
Lease Assignment Agreement.
8.03. Post-Closing. After the Closing Date, Regency will:
(a) Take such actions and properly execute and deliver such further
instruments as CMS may reasonably request to assure, complete and evidence the
transaction provided for in this Agreement.
(b) Fulfill any obligations which it may have under this Agreement
which survive Closing in accordance with the terms thereof or which, by
agreement of the parties, have not been fully performed as of the Closing Date
and the performance of which, by written agreement of the parties, has been
extended until after the Closing Date.
ARTICLE IX
MUTUAL COVENANTS
9.01. General Covenants. Following the execution of this Agreement,
CMS and Regency agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions to
the obligations of any party hereto to consummate the transactions contemplated
by this Agreement, to use its or their reasonable efforts to cure the same as
expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement;
(c) To deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the transactions contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen could
have, a material adverse effect on such party or which would cause or constitute
a material breach of any of the representations, warranties or covenants of such
party contained herein; and
(e) To promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal governmental entity
in connection with this Agreement or the transactions contemplated hereby.
ARTICLE X
CONDITIONS
10.01. Regency Conditions. All obligations of Regency under this
Agreement are subject to the
fulfillment, prior to or as of the Outside Closing Date (as defined below), of
each of the following
conditions any one or more of which may be waived in writing by Regency:
(a) The representations and warranties of CMS contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) CMS shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Regency and CMS shall have received the consent of the
landlord under the Regional Office
Lease, if applicable.
(d) The closing of the transactions which are the subject of the
agreements described in Exhibit 10.01(d) (the "Other Agreements") shall have
occurred.
10.02. CMS Conditions. All obligations of CMS under this Agreement are
subject to the fulfillment, prior to or as of the Outside Closing Date, of each
of the following conditions any one or more of which may be waived by CMS in
writing:
(a) The representations and warranties of Regency contained in this
Agreement shall be true and correct at and as of the Closing Date as though such
representations and warranties were then again made, other than any
representations or warranties which specifically relate to an earlier period,
which shall have been true as of the date thereof.
(b) Regency shall have performed all of its obligations under this
Agreement that are to be performed by it prior to or as of the Closing Date.
(c) Regency and CMS shall have received the consent of the landlord
under the Regional Office Lease, if required by the terms thereof.
(d) The closing of the transaction which are the subject of the
Other Agreements shall have
occurred.
ARTICLE XI
TERMINATION
This Agreement may only be terminated in the event of a termination of
the Other Agreements.
ARTICLE XII
EMPLOYEE BENEFITS
12.01. On the Closing Date, CMS shall deliver to Regency a schedule
(the "Employee Schedule") which reflects among other things the following with
respect to the following employees located at the regional office, Bill Pegler,
Donald Kreitz, Donna Wolf, Kevin Hogge, Michael Ellis, Julie Wright, Sharlene
Kopol and Judy Williams (the "Regional Offices"): (i) their positions and rates
of pay, (iii) a reasonable estimate as of the Closing Date of all earned and
accrued vacation, holiday and sick pay and earned or accrued "EVA" bonuses due
to and/or coming due to the Regional Office Employees (the "Estimated Accrued
Benefits"). Regency shall agree from and after the Closing Date, pay the Actual
Accrued Benefits to the Regional Office as and when due in accordance with
Regency's personnel policies from and after the Closing Date, it being agreed
for the benefit of CMS that such policies shall not be modified by Regency after
Closing with the intent or result being a reduction of benefits accrued in favor
of any of the Regional Office Employee as of the Closing Date. Within a
reasonable period of time following the Closing Date, which shall in no event be
more than thirty (30) days, CMS shall provide Regency with a schedule of the
Accrued Benefits which were earned or accrued as of the Closing Date (the
"Actual Accrued Benefits"). Regency acknowledges and agrees that in the event
the "accrued" EVA bonus due to an employee is more than the EVA bonus shown to
be due to such employee under the terms of the EVA Calculation, CMS shall pay
the EVA bonus amount reflected on the EVA Calculation.
12.02. Regency shall retain all of the Regional Office Employees on
terms which require said Regional Office Employees to perform comparable
services, in a comparable position and at substantially the same base salary as
such Regional Office Employees enjoyed with CMS prior to Closing. CMS or any of
its affiliates shall have the right to employ or offer to employ any Regional
Office Employee who declines to continue employment with Regency. The Regional
Office Employees who elect to accept continued employment with Regency shall
hereinafter be referred to as the "Hired Employees") and as to each of the Hired
Employees, Regency shall recognize each such Hired Employees original hire date
and shall continue to employ each such Hired Employee for a period of no less
than ninety (90) days following the Closing Date unless the employment of such
Hired Employee is terminated in accordance with Regency's personnel policies or
as a result of such Hired Employee's resignation.
12.03. Regency and CMS acknowledge and agree that the provisions of
Section 12.02 are designed solely to ensure that CMS is not required to give
notice to the Regional Office Employees of the "closure" thereof under the
Worker Adjustment and Retraining Notification Act (the "WARN Act") or under any
comparable California state law. Accordingly, Regency agrees to indemnify,
defend and hold harmless CMS from any liability which it may incur under the
WARN Act or under comparable California State law in the event of a violation by
Regency of its obligations thereunder, including a violation which results from
allegations that Regency constructively terminated the Regional Office Employees
as a result of the terms and conditions of employment offered by Regency.
Nothing in Section 12.02 shall, however, create any rights in favor of any
person not a party hereto, including the Regional Office Employees, or
constitute an employment agreement or condition of employment for any employee
of CMS or any affiliate of CMS who is a Retained Employee or a Hired Employee.
12.04. CMS shall offer and provide, as appropriate, group health plan
continuation coverage pursuant to the requirements of Section 601, et seq. of
ERISA and Section 498B of the Internal Revenue Code ("COBRA") to all of the
Regional Office Employees to whom it is required to offer the same under
applicable law. CMS acknowledges and agrees that Regency is not assuming any of
CMS's obligations to its employees under COBRA or otherwise, except as
specifically provided in this Article XIV. As of the Closing Date, all active
Regional Office Employees: (i) who participate as of the Closing Date in group
health insurance coverage sponsored by CMS and (ii) who remain employees of
Regency after the Closing Date, shall be eligible for participation in a group
health plan (as defined for purposes of Internal Revenue Code Section 4980B)
established and maintained by Regency for the general benefit of its employees
and their dependents and all such employees shall be covered without a waiting
period and without regard to any pre-existing condition unless (A) they are
under a waiting period with CMS at the time of Closing, in which case they shall
be required to complete their waiting period while under Regency's group health
plan or (B) they were subject to a pre-existing condition exclusion while under
CMS's group health plan, in which case they shall be subject to the same
exclusion while in Regency's group health plan, which exclusion shall, if
applicable, be subject to the same time limitation while in Regency's employ as
was applicable thereto while said employees were in CMS's employ, with the time
limit calculated from the date the same commenced while in CMS's employ. CMS and
Regency acknowledge and agree that it is the intent of this provision that CMS
shall not be required to provide continued health coverage under ERISA or
Section 4980 of the Internal Revenue Code to any of such employees of the
Corporation who are retained after Closing or to any qualified beneficiary (as
defined for purposes of Section 4980B of the Internal Revenue Code) with respect
to any such employees.
12.05. CMS agrees that the continued employment of the Hired Employees
will be important to the viability of Regency's operations. Accordingly, CMS
agrees that for a period of one year after the Closing Date it will not directly
or indirectly solicit the employment of any of such Hired Employees nor shall it
take any action to directly or indirectly interfere with their employment
relationship with Regency or to induce them in any manner to terminate their
employment relationship with Regency. CMS acknowledges and agrees that Regency
would not be fully compensated by damages in the event of a breach or threatened
breach by CMS of this provision and accordingly agrees that Regency shall be
entitled, without the need to post a bond, to seek an injunction to restrain
such violation or threatened violation of this Paragraph 12.05.
ARTICLE XIII
INDEMNIFICATION
13.01. CMS shall indemnify and hold Regency harmless from and against
an amount equal to any and all damages, liabilities, losses, costs or expenses
(the "Losses") which Regency may incur as a result of the following):
(a) Except as otherwise provided in this Agreement, any obligations
under the Regional Office Lease or related to the Regional Office Assets with
respect to the period prior to the Closing Date;
(b) Any misrepresentation or breach of warranty of CMS set
forth in this Agreement or
nonfulfillment of any agreement on the part of CMS under this Agreement;
(f) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
13.02. Regency shall indemnify and hold CMS harmless from and against
any and all damages, liabilities, losses, costs or expenses which it may incur
as a result of:
(a) Except as otherwise provided in this Agreement, any and all
obligations relating to the Regional Office Lease and the Regional Office Assets
from and after the Closing Date;
(b) Any misrepresentation or breach of warranty by Regency
set forth in this Agreement or
nonfulfillment of any agreement on the part of Regency under this Agreement; and
(c) Any and all actions, suits, proceedings, demands, assessments,
judgements, reasonable costs and other reasonable expenses, including, but not
limited to, reasonable attorney's fees, incident to the foregoing.
ARTICLE XIV
MISCELLANEOUS
14.01. Notices. Any notice, request or other communication to be
given by any party hereunder shall
be in writing and shall be sent by registered or certified mail,
postage prepaid, by overnight delivery, hand
delivery or facsimile transmission to the following address:
To CMS: c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Attn: Neal Elliott
Telephone No.: 505-878-6350
Facsimile No.: 505-881-6100
With copy to: Scot Sauder, Esq.
c/o Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E.
Albuquerque, NM 87110
Telephone No.: 505-878-6356
Facsimile No.: 505-881-6100
To Regency: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: Bruce Broussard
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
with copy to: Regency Rehab Hospitals, Inc.
2742 Dow Avenue
Tustin, CA 92680
Attn: David Grant
Telephone No.: 714-544-4443
Facsimile No.: 714-544-2441
and with copy to: Randi S. Nathanson, Esq.
1411 Fourth Avenue
Suite 905
Seattle, WA 98101
Telephone No.: 206-623-6239
Facsimile No.: 206-623-1738
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
14.02 Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by instrument in writing signed by the parties
hereto. This Agreement, the Disclosure Letter of each of CMS and Regency and the
documents executed and delivered pursuant hereto constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior negotiations, discussions, writings and agreements between
them.
14.03. Captions. The captions of this Agreement are for convenience
of reference only and shall not
define or limit any of the terms or provisions hereof.
14.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
of the State of California.
14.05. Severability. Should any one or more of the provisions of
this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality and
enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
14.06. Counterparts. This Agreement may be executed in any number
of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
14.07 Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement are limited by the phrases "to the
knowledge of" or "Regency has no knowledge of" or "CMS has no knowledge of" or
words or phrases of similar import, the same shall mean to the actual knowledge
of any of the corporate officers or directors of the party or its subsidiaries
making said representation or warranty after due and diligent inquiry with
respect thereto. To the extent that any of the representations and warranties
contained in this Agreement refer to verbal notice to a party such notice shall
be deemed to have been received if delivered to any officer of such party or to
an officer of one of its subsidiaries.
14.08. Expenses. Each party shall bear its own costs and
expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
14.09. Third Party Beneficiary. Nothing in this Agreement express or
implied is intended to and shall not be construed to confer upon or create in
any person (other than the parties hereto and their successors and permitted
assigns) any rights or remedies under or by reason of this Agreement, including
without limitation, any right to enforce this Agreement.
14.10. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
14.11. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation." The period covered by the
phrase "from and after the Closing Date" shall include the Closing Date.
14.12. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing for a period of two years
after the Closing; provided, however, that in the event that, at anytime during
that two year period, any claim is made for a breach thereof, the same shall
survive until a final non-appealable resolution thereof. Nothing in this
Paragraph 14.12 shall be construed to limit the indemnity obligations of CMS and
Regency under Paragraphs 13.01 and 13.02 which shall survive for as long as the
matters to which they relate survive by the terms of this Agreement or, if no
such limitation is provided for herein, which shall survive until the expiration
of the applicable statute of limitations with respect to the matters to which
they relate.
14.13. Effectiveness of Agreement. This Agreement shall be of no
effect unless and until each of
the Other Agreements has been executed and delivered by the parties hereto or
thereto.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
CONTINENTAL MEDICAL SYSTEMS, INC.
By: ___________________________
Its: ____________________________
REGENCY REHAB HOSPITALS, INC.
By: ____________________________
Its: ____________________________
<PAGE>
HORIZON GUARANTY
Horizon/CMS Healthcare Corporation, a Delaware corporation ("Horizon")
as a material inducement to Regency Rehab Hospitals, Inc. ("Regency") to enter
into the Regional Office Agreement between Continental Medical Systems, Inc. and
Regency dated November 19, 1996 (the "Agreement"), hereby unconditionally,
irrevocably and jointly and severally with Seller, guarantees and promises to
and for the benefit of Regency that (i) the representations and warranties of
Seller are true and correct as of the date of execution of the Agreement and
shall be true and correct as of the Closing Date (as modified by any supplements
to the Seller Disclosure Letter to reflect events after the date hereof) and
(ii) Seller shall perform all of its obligations, covenants and agreements,
including, but not limited to, its indemnity obligations under Paragraph 13, to
be performed on its part under the Agreement. If Seller defaults under the
Agreement, Regency may proceed immediately against Horizon or Seller or both to
enforce any rights it has under the Agreement or this Guaranty. Notwithstanding
the foregoing, the representations and warranties of Seller will not survive
beyond the periods applicable thereto set forth in Paragraph 14.12 thereof and
this Guaranty shall not be construed to give Regency a claim or cause of action
against Horizon after the expiration of the applicable survival period for a
breach by Seller of any representation or warranty.
The liability of Horizon hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Horizon) or a release or limitation of the liability of
Seller or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Seller;
(c) The acceptance or release by Regency of any
additional security for the performance
of Seller's obligations under the Agreement ;
(d) The failure during any period of time whatsoever of
Regency to attempt to collect any amount due under the Agreement or to
exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Seller in its obligations
thereunder;
(e) Any assignment or successive assignments of
Regency's interest under the Agreement
(whether absolute or as collateral);
(f) The assertion by Regency against Seller of any rights or
remedies reserved or granted to Regency under the Agreement , including
the commencement by Regency of any proceedings against Seller upon the
occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Regency and Seller;
whether or not Horizon shall have knowledge or have been notified of or
agreed to any of the foregoing.
Horizon hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Horizon on its own behalf or on behalf of
Seller with respect to any notice required to be provided by Regency
under the terms of the Agreement ;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Seller in bankruptcy or the
rejection of the Agreement by Seller or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Horizon of
any of the defenses available to the Seller under the Purchase Agreement to the
extent Horizon is lawfully entitled to raise the same as a defense to its
obligations hereunder.
No delay or omission on the part of Regency in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Regency hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to Regency
by operation of law or under the Agreement , and Regency may exercise its
remedies hereunder without the necessity of any notice to Seller or Horizon of
nonpayment, nonobservance, nonperformance or other default by Seller under the
Agreement other than such notice as may be specifically required by the terms of
the Agreement prior to the exercising of such right or remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Regency, Regency shall be entitled
to collect from Horizon, Regency's costs of collection, including, without
limitation, reasonable attorneys' fees.
Horizon shall not be subrogated to any of the rights of Regency by
reason of any of the provisions of this Guaranty or by reason of the performance
by Guarantor of any of its obligations hereunder and Horizon shall look solely
to Seller for recoupment of any costs or expenses incurred by Horizon in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Horizon shall, upon request, provide Regency with
its quarterly and annual financial statements as soon as the same are available
and with any other financial statements as may be reasonably requested by
Regency.
This Guaranty shall not be assignable by Horizon but shall be binding
upon the successors of Horizon. This Guaranty shall be assignable by Regency in
connection with a permitted assignment of the Agreement and shall inure to the
benefit of its successors and assigns.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Seller's Parent:
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation
By: ______________________________
Neal M. Elliott
President
<PAGE>
REGENCY GUARANTY
Regency Health Services, Inc., a Delaware corporation ("Regency") as a
material inducement to Continental Medical Systems, Inc. ("Continental") to
enter into the Regional Office Agreement between Continental and Regency Rehab
Hospitals, Inc. ("Regency") dated November 19, 1996 (the "Agreement"), hereby
unconditionally, irrevocably and jointly and severally with Regency, guarantees
and promises to and for the benefit of Continental that (i) the representations
and warranties of Regency are true and correct as of the date of execution of
the Agreement and shall be true and correct as of the Closing Date (as modified
by any supplements to the Regency Disclosure Letter to reflect events after the
date hereof) and (ii) Regency shall perform all of its obligations, covenants
and agreements, including, but not limited to, its indemnity obligations under
Paragraph 15, to be performed on its part under the Agreement. If Regency
defaults under the Agreement, Continental may proceed immediately against
Regency or Regency or both to enforce any rights it has under the Agreement or
this Guaranty. Notwithstanding the foregoing, the representations and warranties
of Regency will not survive beyond the periods applicable thereto set forth in
Paragraph 16.13 hereof and this Guaranty shall not be construed to give
Continental a claim or cause of action against Regency after the expiration of
the applicable survival period for a breach by Regency of any representation or
warranty.
The liability of Regency hereunder shall not be affected by:
(a) The renewal, extension, modification or termination of the
Agreement by lapse of time or otherwise (all of which are hereby
authorized by Regency) or a release or limitation of the liability of
Regency or its estate in any bankruptcy or insolvency proceeding;
(b) Any extension in the time for making any payment
due under the Agreement or
acceptance of partial payment from Regency;
(c) The acceptance or release by Continental of any
additional security for the
performance of Regency's obligations under the Agreement;
(d) The failure during any period of time whatsoever of
Continental to attempt to collect any amount due under the Agreement or
to exercise any remedy available thereunder or any other security
instrument given as security for performance of the same, in the event
of a default in the performance by Regency in its obligations
thereunder;
(e) Any assignment or successive assignments of
Continental's interest under the
Agreement (whether absolute or as collateral);
(f) The assertion by Continental against Regency of any rights
or remedies reserved or granted to Continental under the Agreement,
including the commencement by Continental of any proceedings against
Regency upon the occurrence of a default thereunder; or
(g) Any dealings, transactions or other matter occurring
between Continental and Regency;
whether or not Regency shall have knowledge or have been notified of or
agreed to any of the foregoing.
Regency hereby expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment, demand, notice of dishonor, protest and
notice of protest, and all other notices whatsoever, including, without
limitation, notice of any event or matter described in the first
paragraph hereof; provided, however, that nothing herein shall be
construed as a waiver by Regency on its own behalf or on behalf of
Regency with respect to any notice required to be provided by
Continental under the terms of the Agreement;
(c) Any and all claims or defenses based upon lack of
diligence in:
(i) collection of any amount, the payment of which is
guaranteed hereby;
(ii) protection of any collateral or other security for
the obligations which are the
subject of this Guaranty;
(iii) realization upon any other security given for the
obligations which are the subject
of this Guaranty; or
(iv) the discharge, liquidation or reorganization of
Regency in bankruptcy or the
rejection of the Agreement by Regency or by a trustee in
bankruptcy;
(d) Any and all defenses of suretyship; and
(e) Any defense based on the lack of consideration for
this Guaranty.
Nothing herein shall be construed, however, as a waiver by Regency of
any of the defenses available to the Regency under the Agreement to the extent
Regency is lawfully entitled to raise the same as a defense to its obligations
hereunder.
No delay or omission on the part of Continental in the exercise of any
right or remedy hereunder shall operate as a waiver thereof. All remedies of
Continental hereunder shall be in addition to, and exercisable consecutively or
concurrently in any combination with, any and all remedies available to
Continental by operation of law or under the Agreement, and Continental may
exercise its remedies hereunder without the necessity of any notice to Regency
or Regency of nonpayment, nonobservance, nonperformance or other default by
Regency under the Agreement other than such notice as may be specifically
required by the terms of the Agreement prior to the exercising of such right or
remedy.
Notwithstanding any provision of this Guaranty to the contrary, in the
event of the enforcement of this Guaranty by Continental, Continental shall be
entitled to collect from Regency, Continental's costs of collection, including,
without limitation, reasonable attorneys' fees.
Regency shall not be subrogated to any of the rights of Continental by
reason of any of the provisions of this Guaranty or by reason of the performance
by Regency of any of its obligations hereunder and Regency shall look solely to
Regency for recoupment of any costs or expenses incurred by Regency in
performing its obligations hereunder.
For so long as any of the obligations which are the subject of this
Guaranty remain outstanding Regency shall, upon request, provide Continental
with its quarterly and annual financial statements as soon as the same are
available and with any other financial statements as may be reasonably requested
by Continental.
This Guaranty shall not be assignable by Regency or by Continental but
shall be binding upon the successors of Regency and Continental.
If any term, restriction or covenant of this Guaranty is deemed illegal
or unenforceable, all other terms, restrictions and circumstances subject hereto
shall remain unaffected to the extent permitted by law; and if any application
of any term, restriction or covenant to any person or circumstances is deemed
illegal, the application of such term, restriction or covenant to other persons
and circumstances shall remain unaffected to the extent permitted by law.
Regency's Parent:
REGENCY HEALTH SERVICES, INC.
a Delaware corporation
By: ______________________________
Richard Matros
President
Exhibit 2.11
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 20, 1996
AMONG
REGENCY HEALTH SERVICES, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
NATIONSBANC CAPITAL MARKETS, INC.,
as Arranger,
and
NATIONSBANK OF TEXAS, N.A.,
as Agent
<PAGE>
REGENCY HEALTH SERVICES, INC.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS................................................ 2
1.1 Certain Defined Terms...................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement............................... 28
1.3 Other Definitional Provisions and Rules of Construction.... 28
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS................. 28
2.1 Commitments; Making of Loans; Notes........................ 28
2.2 Interest on the Loans...................................... 31
2.3 Fees....................................................... 36
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments............................. 38
2.5 Use of Proceeds............................................ 41
2.6 Special Provisions Governing Eurodollar Rate Loans......... 41
2.7 Increased Costs; Taxes; Capital Adequacy................... 43
2.8 Obligation of Lenders and Issuing Lenders to Mitigate...... 48
2.9 Substitution of Lenders.................................... 48
Section 3. LETTERS OF CREDIT.......................................... 49
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein..................................... 49
3.2 Letter of Credit Fees...................................... 51
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of
Credit..................................................... 52
3.4 Obligations Absolute....................................... 54
3.5 Indemnification; Nature of Issuing Lenders' Duties......... 55
3.6 Existing Letters of Credit................................. 57
3.7 Increased Costs and Taxes Relating to Letters of Credit.... 57
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT.................. 58
4.1 Conditions to Initial Extensions of Credit................. 58
4.2 Conditions to Loans........................................ 62
4.3 Conditions to Letters of Credit............................ 64
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES................... 65
5.1 Organization, Powers, Qualification, Good Standing, Business
and Subsidiaries........................................... 65
5.2 Authorization of Borrowing, etc............................ 66
5.3 Financial Condition........................................ 67
5.4 No Material Adverse Change; No Restricted Junior Payments.. 67
5.5 Title to Properties; Liens................................. 67
5.6 Litigation; Adverse Facts.................................. 68
5.7 Payment of Taxes........................................... 68
5.8 Performance of Agreements; Materially Adverse Agreements... 68
5.9 Governmental Regulation.................................... 69
5.10 Securities Activities...................................... 69
5.11 Employee Benefit Plans..................................... 69
5.12 Certain Fees............................................... 70
5.13 Environmental Protection................................... 70
5.14 Employee Matters........................................... 71
5.15 Solvency................................................... 71
5.16 Matters Relating to Collateral............................. 71
5.17 Disclosure................................................. 72
5.18 Regulatory Compliance...................................... 73
5.19 Existing Letters of Credit................................. 74
Section 6. COMPANY'S AFFIRMATIVE COVENANTS............................ 75
6.1 Financial Statements and Other Reports..................... 75
6.2 Corporate Existence, etc................................... 79
6.3 Payment of Taxes and Claims; Tax Consolidation............. 80
6.4 Maintenance of Properties; Insurance....................... 80
6.5 Inspection Rights; Audits of Accounts Receivable........... 81
6.6 Compliance with Laws, etc.................................. 82
6.7 Preservation of Licenses, etc.............................. 82
6.8 Environmental Disclosure................................... 82
6.9 Execution of Subsidiary Guaranty and Personal Property
Collateral Documents by Certain Subsidiaries and Future Subsidiaries......... 83
6.10 Officer's Certificate Regarding Restricted Junior Payments. 84
6.11 Employee Stock Discount Program............................ 84
Section 7. COMPANY'S NEGATIVE COVENANTS............................... 84
7.1 Indebtedness............................................... 84
7.2 Liens and Related Matters.................................. 86
7.3 Investments; Joint Ventures................................ 88
7.4 Contingent Obligations..................................... 89
7.5 Restricted Junior Payments................................. 91
7.6 Financial Covenants........................................ 92
7.7 Restriction on Fundamental Changes; Asset Sales and
Acquisitions............................................... 93
7.8 Consolidated Capital Expenditures.......................... 95
7.9 Fiscal Year................................................ 96
7.10 Sales and Lease-Backs...................................... 96
7.11 Sale or Discount of Receivables............................ 96
7.12 Transactions with Shareholders and Affiliates.............. 97
7.13 Disposal of Subsidiary Stock............................... 97
7.14 Conduct of Business........................................ 97
7.15 Amendments of Documents Relating to Subordinated
Indebtedness............................................... 98
Section 8. EVENTS OF DEFAULT.......................................... 98
8.1 Failure to Make Payments When Due.......................... 98
8.2 Default in Other Agreements................................ 98
8.3 Breach of Certain Covenants................................ 99
8.4 Breach of Warranty......................................... 99
8.5 Other Defaults Under Loan Documents........................ 99
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc....... 99
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.........100
8.8 Judgments and Attachments..................................100
8.9 Dissolution................................................100
8.10 Employee Benefit Plans.....................................101
8.11 Material Adverse Effect....................................101
8.12 Change in Control..........................................101
8.13 Invalidity of Subsidiary Guaranties; Failure of Security;
Repudiation of Obligations.................................101
8.14 Loss of Licenses, etc......................................102
Section 9. AGENT......................................................103
9.1 Appointment................................................103
9.2 Powers and Duties; General Immunity........................103
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness..............................105
9.4 Right to Indemnity.........................................105
9.5 Successor Agent............................................105
9.6 Collateral Documents and Subsidiary Guaranties.............106
Section 10. MISCELLANEOUS..............................................107
10.1 Assignments and Participations in Loans and Letters of
Credit.....................................................107
10.2 Expenses...................................................109
10.3 Indemnity..................................................110
10.4 Set-Off....................................................111
10.5 Ratable Sharing............................................112
10.6 Amendments and Waivers.....................................113
10.7 Independence of Covenants..................................114
10.8 Notices....................................................114
10.9 Survival of Representations, Warranties and Agreements.....114
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative......115
10.11 Marshalling; Payments Set Aside............................115
10.12 Severability...............................................115
10.13 Obligations Several; Independent Nature of Lenders' Rights.115
10.14 Headings...................................................116
10.15 Applicable Law.............................................116
10.16 Successors and Assigns.....................................116
10.17 Consent to Jurisdiction and Service of Process.............116
10.18 Waiver of Jury Trial.......................................117
10.19 Confidentiality............................................118
10.20 Counterparts; Effectiveness................................118
Signature pages S-1
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF NOTE
V FORM OF COMPLIANCE CERTIFICATE
VI-A FORM OF OPINION OF COMPANY'S OUTSIDE COUNSEL
VI-B FORM OF OPINION OF COMPANY'S GENERAL COUNSEL
VII FORM OF OPINION OF O'MELVENY & MYERS
VIII FORM OF ASSIGNMENT AGREEMENT
IX FORM OF COLLATERAL ACCOUNT AGREEMENT
X FORM OF COMPANY PLEDGE AGREEMENT
XI FORM OF COMPANY SECURITY AGREEMENT
XII FORM OF SUBSIDIARY GUARANTY
XIII FORM OF SUBSIDIARY PLEDGE AGREEMENT
XIV FORM OF SUBSIDIARY SECURITY AGREEMENT
XV FORM OF AMENDMENT AND CONFIRMATION OF COLLATERAL ACCOUNT
AGREEMENT, COMPANY PLEDGE AGREEMENT,
AND COMPANY SECURITY AGREEMENT
XVI FORM OF AMENDMENT AND CONFIRMATION OF SUBSIDIARY GUARANTY,
SUBSIDIARY PLEDGE AGREEMENT AND
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SCHEDULES
1 CERTAIN CMS TRANSACTIONS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
5.6 LITIGATION
5.11 EMPLOYEE BENEFIT PLANS
5.13 HAZARDOUS WASTE
5.19 EXISTING LETTERS OF CREDIT
7.1 EXISTING INDEBTEDNESS
7.2 EXISTING LIENS
7.2A EXISTING LIENS ON COLLATERAL
7.3 EXISTING INVESTMENTS
7.4 CONTINGENT OBLIGATIONS
7.7 PENDING TRANSACTIONS
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
<PAGE>
This AMENDED AND RESTATED CREDIT AGREEMENT is dated as of
December 20, 1996 and entered into by and among REGENCY HEALTH SERVICES, INC., a
Delaware corporation ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and
collectively as "Lenders"), NATIONSBANC CAPITAL MARKETS, INC. ("NCMI"), as
arranger (in such capacity, "Arranger"), and NATIONSBANK OF TEXAS, N.A.
("NationsBank"), as agent for Lenders (in such capacity, "Agent").
R E C I T A L S
WHEREAS, Company, Arranger, Agent and the financial
institutions party thereto entered into that certain Credit Agreement dated as
of December 28, 1995, as amended by the First Amendment and Waiver to Credit
Agreement dated as of April 22, 1996, and the Second Amendment to Credit
Agreement and Approval dated as of June 20, 1996 (as so amended, the "Existing
Credit Agreement") which extends certain credit facilities to Company for
working capital and other general corporate purposes, including without
limitation to finance Acquisitions;
WHEREAS, all of the Obligations under the Existing Credit
Agreement are secured by a first priority lien on certain of Company's personal
property, including a pledge of all of the capital stock of each of its
subsidiaries and the grant of a security interest in accounts receivable and
certain notes receivable;
WHEREAS, all of the subsidiaries of Company guaranteed the
obligations under the Existing Credit Agreement and secured their guaranties by
granting to Agent, on behalf of Lenders, a first priority lien on certain of
their respective personal property, including a pledge of all of the capital
stock of each of their respective subsidiaries and the grant of a security
interest in accounts receivable and certain notes receivable; and
WHEREAS, Company, Arranger, Agent and the Lenders desire to
amend and restate the Existing Credit Agreement in order to, among other things,
increase the commitments and add additional lenders as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Lenders,
Arranger and Agent agree that effective as of the Closing Date (as defined
below), the Existing Credit Agreement shall be amended and restated in its
entirety as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms.1 Certain Defined TermsCertain Defined Terms.
The following terms used in this Agreement shall have the
following meanings:
"Accounts Receivable" means all "accounts" as defined in the
UCC and any other accounts receivable pledged as Collateral.
"Acquisition" means any transaction pursuant to which Company
or any Subsidiary of Company, (i) whether by means of a capital contribution or
purchase or other acquisition of stock or other securities or other equity
participation or interest, (A) acquires an equity interest in any Person
pursuant to a solicitation by Company or such Subsidiary of tenders of equity
securities of such Person, or through one or more negotiated block, market,
private or other transactions not involving a tender offer, or a combination of
any of the foregoing, which in each case has the effect of making such Person a
Subsidiary of Company or such Subsidiary, or (B) purchases securities issued by
a Subsidiary of Company from third-party holders of such securities or (C) makes
any corporation a Subsidiary of Company, or causes any corporation, other than a
Subsidiary of Company, to be merged into Company or any Subsidiary of Company,
or (ii) purchases all or substantially all of the business or assets of any
Person or any operating division, facility or group of facilities of any Person;
provided that any such transaction shall involve a Person or assets primarily
related to or engaged in, as the case may be, the healthcare business.
"Acquisition Consideration" means the consideration given by
Company or any Subsidiary for an Acquisition, including but not limited to the
fair market value of any cash, property, stock or services given, and the amount
of any Indebtedness and Operating Lease Obligation assumed or incurred.
"Adjusted Consolidated Net Worth" means, as at any date of
calculation, the sum of (i) Consolidated Net Worth plus (ii) the Refinancing
Charge, provided that the purchase and issuance of Company Common Stock pursuant
to the Employee Stock Discount Program, including without limitation any
discounts in the purchase price payable by employees, shall not be deemed to
affect Adjusted Consolidated Net Worth (other than through charges to the
Company's net income arising from transactions related to the Employee Stock
Discount Program) for so long as shares purchased in connection with the
Employee Stock Discount Program are issued to employees within 60 days of the
purchase thereof.
"Adjusted Eurodollar Rate" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar Rate
Loan, the rate per annum obtained by dividing (i) the offered quotation (rounded
upward to the nearest 1/16 of one percent) to first class banks in the London
interbank market by NationsBank for U.S. dollar deposits of amounts in same day
funds comparable to the principal amount of the Eurodollar Rate Loan of
NationsBank for which the Adjusted Eurodollar Rate is then being determined with
maturities comparable to such Interest Period as of approximately 11:00 A.M.
(London time) on such Interest Rate Determination Date by (ii) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) applicable on such Interest Rate Determination Date to any
member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D (or any successor category of
liabilities under Regulation D).
"Affected Lender" has the meaning assigned to that term in
subsection 2.6C.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor Agent
appointed pursuant to subsection 9.5.
"Agreement" means this Amended and Restated Credit Agreement
dated as of December 20, 1996, as it may be amended, supplemented or otherwise
modified from time to time.
"Arranger" has the meaning assigned to that term in the
introduction to this Agreement.
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit VIII annexed hereto.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Level of Cash" means, on any date of calculation, the
greater of (a) $25,000,000 or (b) an amount equal to 5% of net operating revenue
(as it appears on Company's consolidated statements of operations) for the
four-Fiscal Quarter period ending as of the last day of the Fiscal Quarter for
which the related Compliance Certificate is being delivered, determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"Base Rate" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Margin" has the meaning assigned to such term in
subsection 2.2A.
"Base Rate Loans" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.2A.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Texas or of the State of
California or is a day on which banking institutions located in such state are
authorized or required by law or other governmental action to close, and (ii)
with respect to all notices, determinations, fundings and payments in connection
with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day that is
a Business Day described in clause (i) above and that is also a day for trading
by and between banks in Dollar deposits in the London interbank market.
"Capital Lease", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means, as at any date of calculation, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Services ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or its Affiliate
or by any commercial bank organized under the laws of the United States of
America or any state thereof or the District of Columbia that (a) is at least
"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $500,000,000; (v) shares of any money market mutual fund that
(a) has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of not
less than $500,000,000, and (c) has the highest rating obtainable from either
S&P or Moody's, and (vi) any other similar investments which may be approved in
writing by Agent, which approval shall not be unreasonably withheld.
"Certificate re Non-Bank Status" means a certificate in form
and substance satisfactory to Agent delivered by a Lender to Agent pursuant to
subsection 2.7B(iii) pursuant to which such Lender certifies that it is not a
"bank" as such term is defined in Section 881(c)(3) of the Internal Revenue
Code; (ii) a 10% shareholder of Company within the meaning of Section
871(h)(3)(B) or 881(c)(3)(B) of the Internal Revenue Code; or (iii) a
"controlled" foreign corporation related to Company within the meaning of
Section 864(d)(4) of the Internal Revenue Code.
"Closing Date" means the date on which all of the conditions
precedent set forth in subsection 4.1 have been satisfied or waived by Agent or
Requisite Lenders.
"CMS Transactions" means certain transactions involving
Continental Medical Systems, Inc., a Delaware corporation and its subsidiaries,
as set forth on Schedule 1 annexed hereto.
"Collateral" means, collectively, all of the personal property
(including capital stock) in which Liens are purported to be granted pursuant to
the Collateral Documents as security for the Obligations.
"Collateral Account" has the meaning assigned to that term in
the Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement executed and delivered by Company and Agent on the Existing Credit
Agreement Closing Date, substantially in the form of Exhibit IX annexed hereto,
as such Collateral Account Agreement will be confirmed and amended on the
Closing Date pursuant to the Company Amendment and Confirmation, and as it may
thereafter be further amended, supplemented or otherwise modified from time to
time.
"Collateral Documents" means the Company Pledge Agreement, the
Company Security Agreement, the Collateral Account Agreement, the Subsidiary
Pledge Agreements, the Subsidiary Security Agreements and all other instruments
or documents delivered by any Loan Party pursuant to the Existing Credit
Agreement and this Agreement, or pursuant to any of the other Loan Documents in
order to grant to Agent, on behalf of Lenders, a Lien on certain personal
property of that Loan Party as security for the Obligations.
"Commitment" means the commitment of a Lender to make Loans to
Company pursuant to subsection 2.1A, and "Commitments" means such commitments of
all Lenders in the aggregate.
"Commitment Fee Percentage" has the meaning assigned to that
term in subsection 2.3A.
"Commitment Termination Date" means the five-year anniversary
of the Closing Date, as such Commitment Termination Date may be extended
pursuant to subsection 2.1E.
"Company" has the meaning assigned to that term in the
introduction to this Agreement.
"Company Amendment and Confirmation" means the Amendment and
Confirmation of Collateral Account
Agreement, Company Pledge Agreement and Company Security Agreement,
substantially in the form of Exhibit XV
annexed hereto.
"Company Common Stock" means the common stock of Company, par
value $.01 per share.
"Company Pledge Agreement" means the Company Pledge Agreement
executed and delivered by Company on the Existing Credit Agreement Closing Date,
substantially in the form of Exhibit X annexed hereto, as such Company Pledge
Agreement will be confirmed and amended on the Closing Date pursuant to the
Company Amendment and Confirmation, and as it may thereafter be further amended,
supplemented or otherwise modified from time to time.
"Company Security Agreement" means the Company Security
Agreement executed and delivered by Company on the Existing Credit Agreement
Closing Date, substantially in the form of Exhibit XI annexed hereto, as such
Company Security Agreement will be confirmed and amended on the Closing Date
pursuant to the Company Amendment and Confirmation, and as it may thereafter be
further amended, supplemented or otherwise modified from time to time.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit V annexed hereto delivered to Agent and Lenders by Company
from time to time pursuant to subsection 6.1(iii).
"Consolidated Adjusted Leverage Ratio" means, on any date of
calculation, the ratio of (i) the Consolidated Total Funded Debt, determined as
of the last day of the Fiscal Quarter for which the related Compliance
Certificate is being delivered, to (ii) Consolidated EBITDAR, for the four
Fiscal Quarters ending as of the last day of the Fiscal Quarter for which the
related Compliance Certificate is being delivered; provided that to the extent
that during such period Company or any Subsidiary of Company has acquired or
disposed of any operations in an amount for any transaction or series of related
transactions exceeding $1,000,000, such calculations shall be made as if such
acquisition or disposition took place on the first day of such period (on a pro
forma basis for the portion of such period prior to the date of such acquisition
or disposition and on an actual basis for the portion of such period after the
date of such acquisition or disposition).
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries but excluding any such expenditures which constitute Acquisition
Consideration.
"Consolidated EBITDAR" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) Consolidated Rental
Payments, (vii) non-cash charges related to minority interests and (viii) other
non-cash items reducing Consolidated Net Income less non-cash items increasing
Consolidated Net Income and any dividends (other than stock dividends) paid by
non-wholly-owned Subsidiaries to Persons other than Company or its wholly-owned
Subsidiaries, all of the foregoing as determined on a consolidated basis for
Company and its Subsidiaries in conformity with GAAP; provided that to the
extent that during such period Company or any Subsidiary of Company has acquired
or disposed of any operations in an amount for any transaction or series of
related transactions exceeding $1,000,000, such calculations shall be made as if
such acquisition or disposition took place on the first day of such period (on a
pro forma basis for the portion of such period prior to the date of such
acquisition or disposition and on an actual basis for the portion of such period
after the date of such acquisition or disposition).
"Consolidated Fixed Charges" means, for any period, the sum
(without duplication) of the amounts for such period of (i) Consolidated
Interest Expense, (ii) scheduled principal payments on Consolidated Total Funded
Debt (but specifically excluding principal payments in the amount of $3,400,000
made in connection with Company's acquisition of SCRS & Communicology of Ohio,
Inc., dba Southcoast Rehabilitation Services, which acquisition occurred on or
before July 6, 1996), and (iii) Consolidated Rental Payments; provided that to
the extent that during such period Company or any Subsidiary of Company has
acquired or disposed of any operations in an amount for any transaction or
series of related transactions exceeding $1,000,000, such calculations shall be
made as if such acquisition or disposition took place on the first day of such
period (on a pro forma basis for the portion of such period prior to the date of
such acquisition or disposition and on an actual basis for the portion of such
period after the date of such acquisition or disposition).
"Consolidated Funded Debt" means, for any period, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Indebtedness" means, for any period, all
Indebtedness of Company and its
Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" means, for any period, the
excess, if any, of total interest expense (including that portion attributable
to Capital Leases in accordance with GAAP and capitalized interest) of Company
and its Subsidiaries with respect to all outstanding Indebtedness of Company and
its Subsidiaries over the total amount of interest income during such period,
each as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net
income (or loss) of Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
Person (other than a Subsidiary of Company) in which any other Person (other
than Company or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to
Company or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of its
Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (iv) any
after-tax gains or losses attributable to sales of assets or returned surplus
assets of any Pension Plan, and (v) (to the extent not included in clauses (i)
through (iv) above) any after-tax net extraordinary or non-recurring gains or
after-tax net extraordinary or non-recurring losses outside the Ordinary Course
of Business as determined by Company and approved in writing by Agent, which
approval shall not be unreasonably withheld.
"Consolidated Net Worth" means, as at any date of calculation,
(i) the sum of the capital stock and additional paid-in capital plus retained
earnings (or minus accumulated deficits) of Company and its Subsidiaries minus
(ii) treasury stock of Company and its Subsidiaries, each as determined on a
consolidated basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the
aggregate amount of all rents paid or payable by Company and its Subsidiaries on
a consolidated basis during that period under all Operating Leases to which
Company or any of its Subsidiaries is a party as lessee (net of sublease
income); provided that to the extent that during such period Company or any
Subsidiary of Company has acquired or disposed of any operations in an amount
for any transaction or series of related transactions exceeding $1,000,000, such
calculations shall be made as if such acquisition or disposition took place on
the first day of such period (on a pro forma basis for the portion of such
period prior to the date of such acquisition or disposition and on an actual
basis for the portion of such period after the date of such acquisition or
disposition).
"Consolidated Senior Debt" means, as at any date of
calculation, an amount equal to Consolidated Total Funded Debt minus the
aggregate outstanding principal amount of Subordinated Indebtedness; provided
that to the extent that during such period Company or any Subsidiary of Company
has acquired or disposed of any operations in an amount for any transaction or
series of related transactions exceeding $1,000,000, such calculations shall be
made as if such acquisition or disposition took place on the first day of such
period (on a pro forma basis for the portion of such period prior to the date of
such acquisition or disposition and on an actual basis for the portion of such
period after the date of such acquisition or disposition).
"Consolidated Total Funded Debt" means, as at any date of
calculation, the sum of (i) Consolidated Funded Debt plus (ii) Operating Lease
Obligation.
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) the net nominal unmatured exposure of that Person under Hedge
Agreements on a marked-to-market basis as determined in good faith by the
counterparty of any such Hedge Agreement. Contingent Obligations shall include,
without limitation, (a) the direct or indirect guaranty, endorsement (otherwise
than for collection or deposit in the Ordinary Course of Business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (Y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(X) or (Y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited. Notwithstanding the foregoing, any liability constituting
Indebtedness of a Person shall not be deemed to be a Contingent Obligation of
such Person.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"Deposit Account" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Dollars" and the sign "$" mean the lawful money of the United
States of America.
"Eligible Assignee" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies; and (B) any Lender and any Affiliate of any
Lender; provided that no Affiliate of Company shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or contributed to by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
"Employee Stock Discount Program" means the employee stock
discount program to be implemented by Company prior to October 31, 1997,
pursuant to which Company will purchase shares of its Common Stock to be held as
treasury stock and shall reissue or resell to employees of Company or any of its
Subsidiaries at a discount not exceeding 15% from the lower of the purchase
price or the market price at the time of such reissuance or resale to such
employees.
"Environmental Claim" means any investigation, notice, notice
of violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future
statutes, ordinances, orders, rules, regulations, guidance documents which carry
the weight of law, judgments, Governmental Authorizations, or any other
requirements of governmental authorities relating to (i) environmental matters,
including those relating to any Hazardous Materials Activity, (ii) the
generation, use, storage, transportation or disposal of Hazardous Materials, or
(iii) occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner applicable
to Company or any of its Subsidiaries or any Facility, including the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss.
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. ss. 136 et seq.), the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.), the Oil Pollution Act (33 U.S.C. ss. 2701 et seq) and the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss. 11001 et
seq.), each as amended or supplemented, any analogous present or future state or
local statutes or laws, and any regulations promulgated pursuant to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Company or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of Company
or such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Company or such Subsidiary and with
respect to liabilities arising after such period for which Company or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Internal Revenue Code) or the failure to make by its due date a
required installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by Company, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or
the termination of any such Pension Plan in either case resulting in liability
pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which is reasonably expected to constitute grounds under ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan;
(vi) the imposition of liability on Company, any of its Subsidiaries or any of
their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA
or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
liability therefor, or the receipt by Company, any of its Subsidiaries or any of
their respective ERISA Affiliates of notice from any Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or
that it intends to terminate or has terminated under Section 4041A or 4042 of
ERISA; (viii) the occurrence of an act or omission which is reasonably expected
to give rise to the imposition on Company, any of its Subsidiaries or any of
their respective ERISA Affiliates of fines, penalties, taxes or related charges
under Chapter 43 of the Internal Revenue Code or under Section 409, Section
502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the assertion of a material claim (other than routine claims for
benefits) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof, or against Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in connection with any Employee Benefit Plan; (x)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Eurodollar Rate Margin" has the meaning assigned to such term
in subsection 2.2A.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in
Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Excluded Person" means the Smith Management Group, comprised
of Energy Management Corporation,
Woodstead Associates, L.P., The Durian Trust, SEGA Associates, Smith Management
Company, Randall D. Smith, John
W. Adams, Jeffrey A. Smith and Gary M. Smith.
"Existing Credit Agreement" shall have the meaning given to it
in the first Recital to this Agreement.
"Existing Credit Agreement Closing Date" means the Closing
Date, as defined in the Existing
Credit Agreement.
"Existing Lenders" shall mean the Lenders, as defined in the
Existing Credit Agreement.
"Existing Letters of Credit" means those certain letters of
credit issued for the benefit of Company or its Subsidiaries under the Existing
Credit Agreement and outstanding as of the Closing Date.
"Existing Notes" shall mean the Notes (as defined in the
Existing Credit Agreement) previously delivered to the Existing Lenders under
the Existing Credit Agreement.
"Facilities" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now or hereafter owned, leased, operated or used by Company or any of
its Subsidiaries or Joint Ventures or any of their respective predecessors.
"FDA" means the United States Food and Drug Administration.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by Agent from three Federal funds brokers of
recognized standing selected by Agent.
"Financial Plan" has the meaning assigned to that term in
subsection 6.1(xiii).
"First Priority" means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral and (ii) such Lien is
the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to
subsection 7.2) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its
Subsidiaries ending on December 31 of each calendar year.
"Funding and Payment Office" means (i) the office of Agent
located at 901 Main Street, Dallas, Texas 75202, or (ii) such other office of
Agent as may from time to time hereafter be designated as such in a written
notice delivered by Agent to Company and each Lender; provided that if such
other office is in a State other than Texas or California, the definition of
"Business Day" shall be deemed amended by adding the name of such State in
clause (i) thereof.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date or period for which the calculation is being made.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any governmental or regulatory
authority, agency or court or any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Governmental Authorization" means any permit, license,
authorization, plan, directive, franchise, right, certification, accreditation,
consent order or consent decree of or from, any Governmental Authority.
"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", acutely hazardous waste", "radioactive waste", "biohazardous waste",
"pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste",
"infectious waste", "toxic substances", or any other term or expression intended
to define, list or classify substances by reason of properties harmful to
health, safety or the indoor or outdoor environment (including harmful
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws); (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substances or explosives; (v) any radioactive materials; (vi)
any asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or which may or could pose a hazard to
the health and safety of the owners, occupants or any Persons in the vicinity of
any Facility or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current,
proposed or threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, possession, storage, holding,
presence, existence, location, Release, threatened Release, discharge,
placement, generation, transportation, processing, construction, treatment,
abatement, removal, remediation, disposal, disposition or handling of any
Hazardous Materials, and any corrective action or response action with respect
to any of the foregoing.
"HCFA" means the Health Care Financing Administration, a
division of the United States
Department of Health and Human Services.
"Hedge Agreement" means an Interest Rate Agreement or a
Currency Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"Inactive Subsidiary" means any Subsidiary of Company that
does not engage in any significant business activity and is designated as such
on Schedule 5.1 annexed hereto; provided, however, that no Inactive Subsidiary
shall own assets with a fair market value in excess of $100,000 or generate
annual revenues in excess of $100,000 and that all Inactive Subsidiaries in the
aggregate shall not own assets with an aggregate fair market value in excess of
$500,000 and shall not generate aggregate annual revenues in excess of $500,000;
and provided further that no Inactive Subsidiary shall have any Subsidiary other
than an Inactive Subsidiary.
"Incurrence Date" has the meaning assigned to that term in
subsection 4.2B(vii)(b).
"Indebtedness", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person; provided, however that the amount of any such
non-recourse indebtedness shall be limited to the lesser of the outstanding
principal amount thereof or the fair market value of the property or asset
securing such indebtedness. Unmatured Obligations under Hedge Agreements
constitute Contingent Obligations and not Indebtedness.
"Indemnitee" has the meaning assigned to that term in
subsection 10.3.
"Interest Payment Date" means (i) with respect to any Base
Rate Loan, each March 31, June 30, September 30 and December 31 of each year,
commencing on March 31, 1997, and (ii) with respect to any Eurodollar Rate Loan,
the last day of each Interest Period applicable to such Loan; provided that in
the case of each Interest Period of longer than three months, "Interest Payment
Date" shall also include the date that is three months after the commencement of
such Interest Period.
"Interest Period" has the meaning assigned to that term in
subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement to which Company or any of its Subsidiaries is
a party.
"Interest Rate Determination Date" means, with respect to any
Interest Period, the second Business Day prior to the first day of such Interest
Period.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter, and any
successor statute.
"Investment" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than purchases of
securities issued by any such Person from third party holders of securities of
such Person that prior to such purchase or acquisition was, or in an Acquisition
becomes, a Subsidiary of Company), (ii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the Ordinary Course of Business) or
capital contribution by Company or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Company), including all accounts
receivable from that other Person that did not arise from sales or services to
that other Person in the Ordinary Course of Business, and (iii) Interest Rate
Agreements or Currency Agreements not constituting Hedge Agreements. The amount
of any equity Investment shall be the original cost of such Investment plus the
cost of all additions thereto and the amount of any debt Investment shall be the
outstanding principal amount thereof, in each case without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Issuing Lender" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any Subsidiary of any Person be considered to be
a Joint Venture to which such Person is a party.
"Knowledge of Company" or words of similar import means the
knowledge of Company's chief executive officer, chief financial officer, senior
vice president - development, general counsel, senior vice president - pharmacy,
senior vice president - professional services, vice president - human resources
and executive vice president - operations, or such other officers, however
designated, as have primary responsibility at the corporate level for the
financial, accounting, treasury, legal, health care regulatory compliance, human
resources, management and operational functions of the Company and its
Subsidiaries.
"Lender" and "Lenders" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to subsection 10.1.
"Letter of Credit" or "Letters of Credit" means the Standby
Letters of Credit issued or to be issued by Issuing Lenders for the account of
Company pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of calculation,
the sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then outstanding
plus (ii) the aggregate amount of all drawings under Letters of Credit honored
by Issuing Lenders and not theretofore reimbursed by Company (including any such
reimbursement out of the proceeds of Loans pursuant to subsection 3.3B).
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means the Loans made by Lenders to Company
pursuant to subsection 2.1A and any extensions, renewals or replacements
thereof, including extensions pursuant to subsection 2.1E.
"Loan Documents" means this Agreement, the Notes, the Letters
of Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of an Issuing Lender
relating to, the Letters of Credit), the Subsidiary Guaranty and the Collateral
Documents and any amendments and modifications thereto executed in connection
with the Loan or the Loans.
"Loan Exposure" means, with respect to any Lender as of any
date of calculation (i) prior to the termination of the Commitments, that
Lender's Commitment and (ii) after the termination of the Commitments, the sum
of (a) the aggregate outstanding principal amount of the Loans of that Lender
plus (b) in the event that Lender is an Issuing Lender, the aggregate Letter of
Credit Usage in respect of all Letters of Credit issued by that Lender other
than Cash Collateralized Letters of Credit (in each case net of any
participations purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit.
"Loan Party" means each of Company and any of Company's
Subsidiaries from time to time executing a Loan Document, and "Loan Parties"
means all such Persons, collectively.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company and its Subsidiaries, taken as a whole, or
(ii) the impairment of the ability of any Loan Party to perform the Obligations
in any material respect, or (iii) the impairment of the ability of Agent or
Lenders to enforce the Obligations.
"Material Subsidiary" means (i) any Subsidiary of Company that
generates revenues in excess of $5,000,000 annually and (ii) any group of
Subsidiaries of Company that in the aggregate generate revenues in excess of
$5,000,000 annually.
"Minority Interest Dispositions" has the meaning assigned to
that term in subsection 7.7(xii).
"Multiemployer Plan" means any Employee Benefit Plan which is
a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NationsBank" has the meaning assigned to that term in the
introduction to this Agreement.
"NCMI" has the meaning assigned to that term in the
introduction to this Agreement.
"Necessary Authorizations" means any Governmental
Authorizations necessary to enable Company or any Subsidiary to maintain and
operate its business and properties.
"New Subsidiaries" means Regency-North Carolina, Inc. and
Regency-Tennessee, Inc.
"1996 Subordinated Notes" means the $50,000,000 in original
principal amount of Subordinated Notes due 2003, issued by the Company pursuant
to the 1996 Subordinated Notes Indenture, as in effect on the Closing Date and
as amended from time to time to the extent permitted pursuant to subsection 7.15
of this Agreement.
"1996 Subordinated Notes Indenture" means the Indenture, dated
as of June 28, 1996, entered
into by and among the Company, certain of the subsidiaries of the Company and
U.S. Trust Company of California,
N.A., as trustee, pursuant to which the 1996 Subordinated Notes were issued.
"9-7/8% Subordinated Notes" means the $110,000,000 in original
aggregate principal amount of 9-7/8% Senior Subordinated Notes due October 15,
2002 issued by Company under the 9-7/8% Subordinated Note Indenture.
"9-7/8% Subordinated Note Indenture" means the indenture dated
as of October 12, 1995 between Company and U.S. Trust Company of California,
N.A., as in effect on the Existing Credit Agreement Closing Date and as amended
from time to time to the extent permitted pursuant to subsection 7.15 of this
Agreement.
"Non-Guarantor CMS Subsidiaries" means San Bernardino
Rehabilitation Hospital, a California general partnership, and San Joaquin
Valley Rehabilitation Hospital, a Delaware limited parntership.
"Non-Guarantor Subsidiaries" means the Non-Guarantor CMS
Subsidiaries, Harborview Group Homes, Inc., Hampshire Insurance Company and
Regency High School, Inc., the Inactive Subsidiaries and any other
non-wholly-owned Subsidiaries of Company created or existing after the date
hereof in compliance with subsections 7.1(iv)(c), 7.3(vi), 7.4(iv)(b) and
7.7(xi).
"Non-Guarantor Non-CMS Subsidiary Contingent Obligations" has
the meaning assigned to such term in subsection 7.4(iv)(b).
"Non-Guarantor Non-CMS Subsidiary Investments" has the meaning
assigned to such term in subsection 7.3(vi).
"Non-Guarantor Non-CMS Subsidiary Indebtedness" has the
meaning assigned to such term in subsection 7.1(iv).
"Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1D on the Closing Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Commitments and Loans of any Lenders, in each
case, substantially in the form of Exhibit IV annexed hereto, as they may be
amended, supplemented or otherwise modified from time to time.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit I annexed hereto delivered by Company to Agent pursuant to subsection
2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit II annexed hereto delivered by Company to
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice
substantially in the form of Exhibit III annexed hereto delivered by Company to
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.
"Obligations" means all obligations of every nature of each
Loan Party from time to time owed to Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its chairman of the
board (if an officer) or its president or one of its vice presidents and by its
chief financial officer or its treasurer unless otherwise specifically stated
herein; provided that every Officers' Certificate with respect to the compliance
with a condition precedent to the making of any Loans hereunder shall include
(i) a statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"Operating Lease Obligation" means an amount equal to the
product of annual Consolidated Rental Payments multiplied by eight.
"Ordinary Course of Business" means, in respect of any
transaction involving Company or any of its Subsidiaries, the ordinary course of
such Person's business, as conducted by any such Person in accordance with past
practice (including, without limitation, such Person's past practice of
consultation with legal counsel) and undertaken by such Person in good faith and
not for purposes of evading any covenant or restriction in any Loan Document.
"OSHA" means the United States Occupational Safety and Health
Administration.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Encumbrances" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA, any such Lien relating to or imposed in
connection with any Environmental Claim, and any such Lien expressly prohibited
by any applicable terms of any of the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges
or claims the payment of which is
not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks
and rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each case
incurred in the Ordinary Course of Business (a) for amounts not yet overdue or
(b) for amounts that are overdue and that (in the case of any such amounts
overdue for a period in excess of 5 days) are being contested in good faith by
appropriate proceedings, so long as (1) such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall exist for any such
contested amounts, and (2) in the case of a Lien with respect to any portion of
the Collateral, such contest proceedings conclusively operate to stay the sale
of any portion of the Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the Ordinary Course
of Business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money), so long as no foreclosure, sale or similar proceedings have been
commenced with respect to any portion of the Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an
Event of Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not interfering in any
material respect with the ordinary conduct of the business of Company or any of
its Subsidiaries or resulting in a material diminution in the value of any
Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments,
and other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries or result in a material
diminution in the value of any Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under
leases permitted by this Agreement, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in the preceding clause (b), so long as
the holder of such restriction or encumbrance agrees to recognize the rights of
such lessee or sublessee under such lease;
(viii) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;
(x) any zoning or similar law or right reserved to or
vested in any governmental office or
agency to control or regulate the use of any real property;
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the Ordinary Course of Business
of Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the Ordinary
Course of Business and not interfering in any material respect with the ordinary
conduct of the business of Company or such Subsidiary.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Pledged Collateral" means, collectively, the "Pledged
Collateral" as defined in the Company
Pledge Agreement and the Subsidiary Pledge Agreements.
"Potential Event of Default" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.
"Prime Rate" means the rate that NationsBank announces from
time to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. NationsBank or any other Lender may
make commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"Pro Rata Share" means, with respect to each Lender, the
percentage obtained by dividing (x) the Loan Exposure of that Lender by (y) the
aggregate Loan Exposure of all Lenders, as such percentage may be adjusted by
assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of
each Lender is set forth opposite the name of that Lender in Schedule 2.1
annexed hereto.
"Redemption" means the redemption for cash by the Company of
the 6-1/2% Convertible Debentures not converted into shares of Company Common
Stock with the net proceeds of the 1996 Subordinated Notes (and with such
additional cash as may be necessary to fund such redemption).
"Refinancing Charge" means the extraordinary item in the
amount of $1,193,000 net of tax as set forth in the financial statements of
Company for the fiscal quarter ended September 30, 1996.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), including the movement of any Hazardous Materials through the air,
soil, surface water or groundwater.
"Requisite Lenders" means (i) Lenders having or holding more
than 66-2/3% of the aggregate Loan Exposure of all Lenders or (ii) at least
three Lenders having or holding more than 50% of the aggregate Loan Exposure of
all Lenders.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company or any shares of any class of stock or other equity interests of a
non-wholly-owned Subsidiary of Company (other than on account of stock or other
equity interests owned by Company or another wholly-owned Subsidiary of Company)
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Company or any shares of any
class of stock or other equity interests of a non-wholly-owned Subsidiary of
Company (other than on account of stock or other equity interests owned by
Company or another wholly-owned Subsidiary of Company) now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Company or any shares of any class of stock or other equity
interests of a non-wholly-owned Subsidiary of Company (other than on account of
stock or other equity interests owned by Company or another wholly-owned
Subsidiary of Company) now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated Indebtedness;
provided, however, that Restricted Junior Payment shall not include the
Redemption.
"Restricted Subsidiary" means Harborview Group Homes, Inc.,
Hampshire Insurance Company and
Regency High School, Inc.
"Securities" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"6-1/2% Convertible Debentures" means the $50,000,000 in
original aggregate principal amount of 6-1/2% Convertible Subordinated
Debentures due July 15, 2003 issued by Company under the 6-1/2% Convertible
Debenture Indenture.
"6-1/2% Convertible Debenture Indenture" means the indenture
dated as of March 23, 1993 between Company and Chemical Trust Company of
California, as in effect on the Existing Credit Agreement Closing Date and as
amended from time to time to the extent permitted pursuant to subsection 7.15 of
the Existing Credit Agreement and of this Agreement.
"Solvent" means, with respect to any Person, that as of the
date of determination both (A) (i) the then fair saleable value of the property
of such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing alternatives
and potential asset sales reasonably available to such Person; (ii) such
Person's capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit
or similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of Company or any of its Subsidiaries, (ii) the
obligations of third party insurers of Company or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring third party
insurers, (iii) obligations with respect to Capital Leases or Operating Leases
of Company or any of its Subsidiaries, (iv) performance, payment, deposit or
surety obligations of Company or any of its Subsidiaries, in any case if
required by law or governmental rule or regulation or in accordance with custom
and practice in the industry and (v) other obligations of Company and its
Subsidiaries incurred for general corporate purposes; provided that Standby
Letters of Credit may not be issued for the purpose of supporting (a) trade
payables or (b) any Indebtedness constituting "antecedent debt" (as that term is
used in Section 547 of the Bankruptcy Code).
"Subordinated Indebtedness" means (i) Company's 9-7/8%
Subordinated Notes, (ii) the 1996 Subordinated Notes and (iii) any other
Indebtedness of Company subordinated in right of payment to the Obligations
pursuant to documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, association, joint venture
or other business entity (i) of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Person or Persons
(whether directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the management
and policies thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) of which such Person directly or through one or
more of its Subsidiaries owns at least 50% of the capital stock or other equity
interests and over which such Person or one or more of its Subsidiaries
exercises management control, in each case to the extent that such Subsidiary is
required to be a member of the consolidated group of such Person under GAAP.
"Subsidiary Amendment and Confirmation" means the Amendment
and Confirmation of Subsidiary
Guaranty, Subsidiary Pledge Agreement and Subsidiary Security Agreement,
substantially in the form of Exhibit XVI
annexed hereto.
"Subsidiary Guarantor" means any Subsidiary of Company that
executed and delivered a counterpart of the Subsidiary Guaranty on the Existing
Credit Agreement Closing Date or from time to time thereafter executed and
delivered or executes and delivers such counterpart pursuant to subsection 6.9.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed
and delivered by existing Subsidiaries of Company (other than Harborview Group
Homes, Inc., Hampshire Insurance Company and Regency High School, Inc. and the
Inactive Subsidiaries) on the Existing Credit Agreement Closing Date
substantially in the form of Exhibit XII annexed hereto (as such Subsidiary
Guaranty will be confirmed and amended on the Closing Date pursuant to the
Subsidiary Amendment and Confirmation), and to be executed and delivered by
additional Subsidiaries of Company from time to time thereafter in accordance
with subsection 6.9, and as each such Subsidiary Guaranty may hereafter be
further amended, supplemented or otherwise modified from time to time.
"Subsidiary Pledge Agreement" means each Subsidiary Pledge
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Existing Credit Agreement Closing Date substantially in the form of Exhibit XIII
annexed hereto (as such Subsidiary Pledge Agreement will be confirmed and
amended on the Closing Date pursuant to the Subsidiary Amendment and
Confirmation), and to be executed and delivered by any additional Subsidiary
Guarantor from time to time thereafter in accordance with subsection 6.9, and as
each such Subsidiary Pledge Agreement may be further amended, supplemented or
otherwise modified from time to time, and "Subsidiary Pledge Agreements" means
all such Subsidiary Pledge Agreements, collectively.
"Subsidiary Security Agreement" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Existing Credit Agreement Closing Date, substantially in the form of Exhibit XIV
annexed hereto (as such Subsidiary Security Agreement will be confirmed and
amended on the Closing Date pursuant to the Subsidiary Amendment and
Confirmation), and to be executed and delivered by any additional Subsidiary
Guarantor from time to time thereafter in accordance with subsection 6.9, and as
each such Subsidiary Pledge Agreement may be further amended, supplemented or
otherwise modified from time to time, and "Subsidiary Security Agreements" means
all such Subsidiary Security Agreements, collectively.
"Target" means the Person to be acquired, or the Person whose
assets are to be acquired, in any
Acquisition.
"Tax" or "Taxes" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "Tax on the overall net income" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person is organized or in which that Person's principal office (and/or, in
the case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"Total Utilization of Commitments" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Loans plus (ii) the Letter of Credit Usage.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement.2 Accounting
Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii) and
(xiii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect
at the time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(iv)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements referred to in subsection 5.3.
1.3 Other Definitional Provisions and Rules of Construction.
A. Any of the terms defined herein may, unless the
context otherwise requires, be used in
the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be
to Sections and subsections,
respectively, of this Agreement unless otherwise specifically provided.
C. The use herein of the word "include" or "including", when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
D. The use herein of "wholly-owned Subsidiaries" shall
include direct and indirect
wholly-owned Subsidiaries.
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes.1
A. Commitments. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, each Lender hereby severally agrees to make the Loans described in this
subsection 2.1A. Each Lender severally agrees, subject to the limitations set
forth below with respect to the maximum amount of Loans permitted to be
outstanding from time to time, to lend to Company from time to time during the
period from the Closing Date to but excluding the Commitment Termination Date an
aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the
Commitments to be used for the purposes identified in subsection 2.5A. The
original amount of each Lender's Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate original amount of the Commitments
is $100,000,000; provided that the Commitment of each applicable Lender shall be
adjusted to give effect to any assignments of the Commitments pursuant to
subsection 10.1B; and provided, further that the amount of the Commitments shall
be reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4A and 2.4B. Subject to the provisions of subsection
2.1E, each Lender's Commitment shall expire on the Commitment Termination Date
and all Loans and all other amounts owed hereunder with respect to the Loans and
the Commitments shall be paid in full no later than that date; provided that
each Lender's Commitment shall expire immediately and without further action on
December 31, 1996 if the Closing Date has not occurred on or before that date.
Amounts borrowed under this subsection 2.1A may be repaid and reborrowed to but
excluding the Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Loans and the Commitments shall be subject to the
limitation that in no event shall the Total Utilization of Commitments at any
time exceed the Commitments then in effect.
B. Borrowing Mechanics. Loans made on any Funding Date (other than
Loans made pursuant to subsection 3.3B for the purpose of reimbursing any
Issuing Lender for the amount of a drawing under a Letter of Credit issued by
it) shall be in an aggregate minimum amount of $500,000 and integral multiples
of $100,000 in excess of that amount; provided that Loans made on any Funding
Date as Eurodollar Rate Loans with a particular Interest Period shall be in an
aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in
excess of that amount. Whenever Company desires that Lenders make Loans it shall
deliver to Agent a Notice of Borrowing no later than 11:00 A.M. (Dallas, Texas
time) at least three Business Days in advance of the proposed Funding Date (in
the case of a Eurodollar Rate Loan) or on the proposed Funding Date (in the case
of a Base Rate Loan). The Notice of Borrowing shall specify, (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount of Loans
requested, (iii) whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, and (iv) in the case of any Loans requested to be made as Eurodollar Rate
Loans, the initial Interest Period requested therefor. Loans may be continued as
or converted into Base Rate Loans and Eurodollar Rate Loans in the manner
provided in subsection 2.2D.
Notwithstanding anything contained herein to the contrary,
during the period commencing on (and including) the Closing Date and ending on
the earlier of (i) the two-month anniversary of the Closing Date and (ii) the
date Agent sends a notice to Company indicating that Lenders' primary
syndication has been concluded, (a) Company may only request Base Rate Loans or
Eurodollar Rate Loans with an Interest Period of one month, (b) no Loan may be
converted into a Eurodollar Rate Loan having an Interest Period of longer than
one month and (c) the last day of the Interest Period applicable to any
Eurodollar Rate Loan shall be the one-month anniversary or the two-month
anniversary of the date on which the first Eurodollar Rate Loan is made under
this Agreement.
Company shall notify Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Borrowing for a Eurodollar Rate Loan shall be irrevocable on
and after the related Interest Rate Determination Date, and Company shall be
bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Loans under this Agreement shall be made
by Lenders simultaneously and proportionately to their respective Pro Rata
Shares, it being understood that no Lender shall be responsible for any default
by any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender be increased or decreased as a
result of a default by any other Lender in that other Lender's obligation to
make a Loan requested hereunder. Promptly after receipt by Agent of a Notice of
Borrowing pursuant to subsection 2.1B, Agent shall notify each Lender of the
proposed borrowing. Each Lender shall make the amount of its Loan available to
Agent not later than 12:00 Noon (Dallas, Texas time) on the applicable Funding
Date in same day funds in Dollars at the Funding and Payment Office. Except as
provided in subsection 3.3B with respect to Loans used to reimburse any Issuing
Lender for the amount of a drawing under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections 4.1
(in the case of Loans made on the Closing Date) and 4.2 (in the case of all
Loans), Agent shall make the proceeds of such Loans available to Company on the
applicable Funding Date by causing an amount of same day funds in Dollars equal
to the proceeds of all such Loans received by Agent from Lenders to be credited
to the account of Company at the Funding and Payment Office.
Unless Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Agent the amount of such Lender's Loan requested on such Funding
Date, Agent may assume that such Lender has made such amount available to Agent
on such Funding Date and Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Agent, at the customary rate
set by Agent for the correction of errors among banks for three Business Days
and thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Agent's demand therefor, Agent shall promptly notify
Company and Company shall immediately pay such corresponding amount to Agent
together with interest thereon, for each day from such Funding Date until the
date such amount is paid to Agent, at the rate payable under this Agreement for
Base Rate Loans; provided, however, that nothing herein shall obligate Company
to pay to Agent compensation under subsection 2.6D in the event any such amount
represents a Eurodollar Rate Loan. Nothing in this subsection 2.1C shall be
deemed to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Company may have against any Lender as
a result of any default by such Lender hereunder.
D. Notes. Company shall execute and deliver on the Closing Date
to each Lender (or to Agent for
that Lender) a Note substantially in the form of Exhibit IV annexed hereto to
evidence that Lender's Loans, in
the principal amount of that Lender's Commitment and with other appropriate
insertions, and such Notes shall
replace and supersede the Existing Notes held by such Lenders.
E. Extension of Commitments. On or before the date that is ninety (90)
days prior to the second anniversary of the Closing Date, the Company may
request that the Lenders extend the availability of the Commitments for one
additional period of one year. The Agent shall promptly notify the Lenders of
such a request. On or before the date that is sixty (60) days prior to the
second anniversary of the Closing Date, the Lenders shall have the right, in
their sole discretion, to consent to the extension of the Commitments on terms
and conditions satisfactory to the Lenders or to reject such extension request.
If any Lender rejects the extension of the Commitments, the Commitments shall
terminate on the then scheduled Commitment Termination Date and all Loans shall
be repaid in accordance with the terms of this Agreement. If the Agent has not
responded in writing to the Company by the date that is sixty (60) days prior to
the second anniversary of the Closing Date, the Lenders shall be deemed to have
rejected the extension of the Commitments.
If the Lenders consent to the extension of the Commitments for
a one-year period, the Commitment Termination Date and each scheduled commitment
reduction date as set forth in subsection 2.4A of this Agreement shall be
automatically extended by such one-year period without any further action by the
Company, the Agent or the Lenders and the Company shall execute such documents,
agreements and instruments, and perform such acts as the Agent may request, to
effect such extension on the terms and conditions agreed to by the Lenders.
2.2 Interest on the Loans.2 Interest on the LoansInterest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate or the Adjusted Eurodollar Rate. The
applicable basis for determining the rate of interest with respect to any Loan
shall be selected by Company initially at the time a Notice of Borrowing is
given with respect to such Loan pursuant to subsection 2.1B, and the basis for
determining the interest rate with respect to any Loan may be changed from time
to time pursuant to subsection 2.2D. If on any day a Loan is outstanding with
respect to which notice has not been delivered to Agent in accordance with the
terms of this Agreement specifying the applicable basis for determining the rate
of interest, then for that day that Loan shall bear interest determined by
reference to the Base Rate.
Subject to the provisions of subsections 2.6 and 2.7, the
Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the
Base Rate plus the applicable
margin set forth for Base Rate Loans (the "Base Rate Margin") in the table below
opposite Company's Consolidated Adjusted Leverage Ratio; or
(b) if a Eurodollar Rate Loan, then at the sum
of the Adjusted Eurodollar Rate
plus the applicable margin set forth for Eurodollar Rate Loans (the "Eurodollar
Rate Margin") in the table below opposite Company's Consolidated Adjusted
Leverage Ratio:
Margin for Margin
Consolidated Adjusted Leverage Eurodollar for Base
Ratio Rate Loans Rate Loans
Less than 3.25:1.00 0.75% 0.00%
Equal to or greater than 3.25:1.00 1.00% 0.00%
but less than 3.75:1.00
Equal to or greater than 3.75:1:00 1.25% 0.00%
but less than 4.25:1.00
Equal to or greater than 4.25:1.00 1.50% 0.00%
but less than 4.75:1.00
Equal to or greater than 4.75:1.00 1.75% 0.25%
but less than 5.25:1.00
Equal to or greater than 5.25:1.00 2.00% 0.50%
The initial Base Rate Margin and the initial
Eurodollar Rate Margin, until adjusted as
hereinafter provided for in this subsection 2.2A, shall be 0.25% per annum and
1.75% per annum, respectively. Commencing with the Compliance Certificate
delivered for the Fiscal Quarter ending December 31, 1996, effective as of the
fifth day following Agent's receipt of each Compliance Certificate and the
accompanying financial statements pursuant to subsection 6.1, the Base Rate
Margin and the Eurodollar Rate Margin shall automatically be adjusted in
accordance with the Consolidated Adjusted Leverage Ratio as of the last day of
the Fiscal Quarter for which the Compliance Certificate is being delivered and
the table set forth above; provided that, in the event that Company fails to
deliver a Compliance Certificate and the accompanying financial statements by
the fifth day following the date required in accordance with the provisions of
subsection 6.1, the Base Rate Margin and the Eurodollar Rate Margin shall
automatically be adjusted to 0.50% per annum and 2.00% per annum, respectively,
effective upon such fifth day until such date as such Compliance Certificate and
the accompanying financial statements are actually delivered; provided that
nothing in this paragraph shall be deemed to be a waiver of Company's
obligations to comply with subsection 6.1.
B. Interest Periods. In connection with each Eurodollar Rate
Loan, Company may, pursuant to the
applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case
may be, select an interest
period (each an "Interest Period") to be applicable to such Loan, which Interest
Period shall be, at Company's
option, either a one, two, three or six month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan converted to
a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on the
day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would otherwise
expire on a day that is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
clause (v) of this subsection 2.2B, end on the last Business Day of a calendar
month;
(v) no Interest Period with respect to any portion of the
Loans shall extend beyond the
Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the
Loans shall extend beyond the date on which a permanent reduction of the
Commitments is scheduled to occur unless the sum of (a) the aggregate principal
amount of Loans that are Base Rate Loans plus (b) the aggregate principal amount
of Loans that are Eurodollar Rate Loans with Interest Periods expiring on or
before such date plus (c) the excess of the Commitments then in effect over the
Total Utilization of Commitments equals or exceeds the permanent reduction of
the Commitments that is scheduled to occur on such date;
(vii) there shall be no more than ten Interest Periods
outstanding at any time; and
(viii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection
2.2E, interest on each Loan shall
be payable in arrears on and to each Interest Payment Date applicable to that
Loan, upon any prepayment of that
Loan (to the extent accrued on the amount being prepaid) and at maturity
(including final maturity); provided
that in the event any Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B(i), interest accrued
on such Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert all or any part of its
outstanding Loans from Loans bearing interest at a rate determined by reference
to one basis to Loans bearing interest at a rate determined by reference to an
alternative basis or (ii) to continue all or any portion of a Eurodollar Rate
Loan as a Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan
may only be so converted or continued on the expiration date of the Interest
Period applicable thereto and in amounts equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount.
Company shall deliver a Notice of Conversion/Continuation to
Agent no later than 11:00 A.M. (Dallas, Texas time) on the proposed conversion
date (in the case of a conversion to a Base Rate Loan) and at least three
Business Days in advance of the proposed conversion/continuation date (in the
case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice
of Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount
and type of the Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case
of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Company may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Agent shall
promptly transmit such notice by telefacsimile or telephone to each Lender.
Neither Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Company or for otherwise acting in good
faith under this subsection 2.2D, and upon conversion or continuation of the
applicable basis for determining the interest rate with respect to any Loans in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected a conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of,
a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.
E. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed,
(i) in the case of Base Rate Loans, on the basis of a 365-day/366-day year, as
the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of
a 360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan, as
the case may be, shall be excluded; provided that if a Loan is repaid on the
same day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.3 FeesFees.
A. Commitment Fees. Company agrees to pay to Agent, for distribution to
each Lender in proportion to that Lender's Pro Rata Share, commitment fees for
the period from and including November 13, 1996 to and excluding the Closing
Date equal to the amount of the Commitments multiplied by 0.25%, such commitment
fees to be calculated on the basis of a 360-day year and the actual number of
days elapsed and to be payable on the Closing Date. Company also agrees to pay
to Agent, for distribution to each Lender in proportion to that Lender's Pro
Rata Share, commitment fees for the period from and including the Closing Date
to and excluding the Commitment Termination Date equal to the average of the
daily excess of the Commitments over the Total Utilization of Commitments
multiplied by the applicable Commitment Fee Percentage set forth in the table
below (the "Commitment Fee Percentage"), such commitment fees to be calculated
on the basis of a 360-day year and the actual number of days elapsed and to be
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on March 31, 1997, and on the Commitment Termination
Date.
The applicable Commitment Fee Percentage is set forth in the
table below opposite Company's Consolidated Adjusted Leverage Ratio:
Consolidated Adjusted Leverage Commitment
Ratio Fee Percentage
Less than 3.25:1.00 0.20%
Equal to or greater than 3.25:1.00 0.25%
but less than 3.75:1.00
Equal to or greater than 3.75:1:00 0.25%
but less than 4.25:1.00
Equal to or greater than 4.25:1.00 0.3125%
but less than 4.75:1.00
Equal to or greater than 4.75:1.00 0.375%
but less than 5.25:1.00
Equal to or greater than 5.25:1.00 0.375%
The initial Commitment Fee Percentage, until adjusted
as hereinafter provided for in
this subsection 2.3A, shall be 0.375% per annum. Commencing with the Compliance
Certificate delivered for the Fiscal Quarter ending December 31, 1996, effective
as of the fifth day following Agent's receipt of each Compliance Certificate and
accompanying financial statements pursuant to subsection 6.1, the Commitment Fee
Percentage shall automatically be adjusted in accordance with the Consolidated
Adjusted Leverage Ratio as of the last day of the Fiscal Quarter for which the
Compliance Certificate is being delivered and the table set forth above;
provided that, in the event that Company fails to deliver a Compliance
Certificate and the accompanying financial statements by the fifth day following
the date required in accordance with the provisions of subsection 6.1, the
Commitment Fee Percentage shall automatically be adjusted to 0.375% per annum,
effective upon such fifth day until such date as such Compliance Certificate and
the accompanying financial statements are actually delivered; provided that
nothing in this paragraph shall be deemed to be a waiver of Company's
obligations under subsection 6.1.
B. Annual Administrative Fee. Company agrees to pay to Agent an
annual administrative fee in such
amount and at such times as separately agreed in writing upon between Company
and Agent.
C. Other Fees. Company agrees to pay to Agent for the account of
the Lenders such other fees in
the amounts and at the times separately agreed in writing upon among Company and
Agent.
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments.4
Repayments, Prepayments and Reductions in Commitments; General Provisions
Regarding Payments.
A. Scheduled Reductions of Commitments. Subject to the
provisions of subsection 2.1E, the
aggregate Commitments of the Lenders shall be permanently reduced on the dates
and in the amounts set forth below:
Scheduled Reduction of
Date Commitments
December 20, 1999 $25,000,000
December 20, 2000 $25,000,000
December 20, 2001 $50,000,000
and the Commitment of each Lender shall be reduced by such Lender's Pro
Rata Share of such reduction in the aggregate Commitments; provided that the
scheduled reductions of the Commitments set forth above shall be reduced in
connection with any voluntary reductions of the Commitments in accordance with
subsection 2.4B(iv).
B. Prepayments and Reductions in Commitments.
(i) Voluntary Prepayments. Company may, upon not less than two
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days' prior written or telephonic notice, in the case
of Eurodollar Rate Loans, in each case given to Agent by 12:00 Noon (Dallas,
Texas time) on the date required and, if given by telephone, promptly confirmed
in writing to Agent (which original written or telephonic notice Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any time and
from time to time prepay any Loans on any Business Day in whole or in part in an
aggregate minimum amount of $100,000 and integral multiples thereof in excess of
that amount; provided, however, that a Eurodollar Rate Loan may only be prepaid
on the expiration of the Interest Period applicable thereto. Notice of
prepayment having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as specified
in subsection 2.4B(iv).
(ii) Voluntary Reductions of Commitments. Company may, upon
not less than ten Business Days' prior written or telephonic notice confirmed in
writing to Agent (which original written or telephonic notice Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any time and
from time to time terminate in whole or permanently reduce in part, without
premium or penalty, the Commitments in an amount up to the amount by which the
Commitments exceed the Total Utilization of Commitments at the time of such
proposed termination or reduction; provided that any such partial reduction of
the Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $100,000 in excess of that amount. Company's notice to
Agent shall designate the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial reduction, and such
termination or reduction of the Commitments shall be effective on the date
specified in Company's notice and shall reduce the Commitment of each Lender
proportionately to its Pro Rata Share. Any such voluntary reduction of the
Commitments shall be applied as specified in subsection 2.4B(iv).
(iii) Mandatory Prepayments and Reductions in Commitments.
(a) Company shall from time to time prepay the
Loans to the extent necessary so
that the Total Utilization of Commitments shall not at any time exceed the
Commitments then in effect, all such prepayments to be applied as provided in
subsection 2.4B(iv).
(b) The Commitments shall be permanently reduced
and the Company shall prepay the
Loans to the extent required pursuant to subsection 7.7(vii).
(iv) Application of Prepayments and Unscheduled Reductions
of Commitments.
(a) Application of Prepayments to Base Rate
Loans and Eurodollar Rate Loans. Any
prepayment of the Loans shall be applied first to Base Rate Loans to the full
extent thereof before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to be made by Company
pursuant to subsection 2.6D.
(b) Application of Unscheduled Reductions of
Commitments. Any voluntary reduction
of the Commitments pursuant to subsection 2.4B(ii) shall be applied to reduce
the scheduled reductions of the Commitments set forth in subsection 2.4A in such
manner as may be selected by Company. Any mandatory reduction of Commitments set
forth in subsection 2.4B(iii)(b) shall be applied to scheduled reductions of the
Commitments set forth in subsection 2.4A pro rata among such scheduled
reductions.
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the Notes
shall be made in Dollars in same day funds, without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to Agent not
later than 12:00 Noon (Dallas, Texas time) on the date due at the Funding and
Payment Office for the account of Lenders or Issuing Lender, as the case may be.
Funds received by Agent after that time on such due date shall be deemed to have
been paid by Company on the next succeeding Business Day. Company hereby
authorizes Agent to charge its accounts with Agent in order to cause timely
payment to be made to Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for that
purpose).
(ii) Application of Payments to Principal and Interest. Except
as provided in subsection 2.2C, all payments in respect of the principal amount
of any Loan shall include payment of accrued interest on the principal amount
being repaid or prepaid, and all such payments shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
interest payments in respect of Loans shall be apportioned among all outstanding
Loans to which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Agent shall promptly distribute to each Lender, at
its primary address set forth below its name on the appropriate signature page
hereof or at such other address as such Lender may request, its Pro Rata Share
of all such payments received by Agent and the commitment fees of such Lender
when received by Agent pursuant to subsection 2.3. Notwithstanding the foregoing
provisions of this subsection 2.4C(iii), if, pursuant to the provisions of
subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its
Pro Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Except as otherwise provided
in subsection 2.2B(iii), whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, such payment shall be made
on the next succeeding Business Day and such extension of time shall be included
in the computation of the payment of interest hereunder or of the commitment
fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all Loans
evidenced by that Note and all principal payments previously made thereon and of
the date to which interest thereon has been paid; provided that the failure to
make (or any error in the making of) a notation of any Loan made under such Note
shall not limit or otherwise affect the obligations of Company hereunder or
under such Note with respect to any Loan or any payments of principal or
interest on such Note.
Use of Proceeds.Proceeds.5 Use of Proceeds
A. Loans. The proceeds of the Loans shall be applied by Company
first to repay all outstanding
Loans under the Existing Credit Agreement, and all accrued and unpaid interest
thereon and any fees and penalties
in connection therewith, and thereafter for working capital and general
corporate purposes, including, without
limitation, the financing of Acquisitions and making of intercompany loans to
any of Company's Subsidiaries in
accordance with subsection 7.1(iv) for working capital and general corporate
purposes.
B. Margin Regulations. No portion of the proceeds of any
borrowing under this Agreement shall be
used by Company or any of its Subsidiaries in any manner that might cause the
borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board or to violate
the Exchange Act, in each case as
in effect on the date or dates of such borrowing and such use of proceeds.
Special Provisions Governing Eurodollar Rate Loans.te Loans.6 Special Provisions
Governing Eurodollar Rate Loans
Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to Eurodollar Rate
Loans as to the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 11:00 A.M. (Dallas, Texas time) on each Interest Rate Determination Date,
Agent shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) the interest rate that shall
apply to the Eurodollar Rate Loans for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to Company and each
Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Agent shall have determined (which determination, absent manifest error, shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances affecting the London interbank market adequate and fair
means do not exist for ascertaining the interest rate applicable to such Loans
on the basis provided for in the definition of Adjusted Eurodollar Rate, Agent
shall on such date give notice (by telefacsimile or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, continued as or converted to, Eurodollar Rate Loans until
such time as Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice
of Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the
event that on any date any Lender shall have determined (which determination,
absent manifest error, shall be final and conclusive and binding upon all
parties hereto but shall be made only after consultation with Company and Agent)
that the making, maintaining or continuation of its Eurodollar Rate Loans (i)
has become unlawful as a result of compliance by such Lender in good faith with
any law, treaty, governmental rule, regulation, guideline or order having the
force of law (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date of this Agreement which materially and
adversely affect the London interbank market or the position of such Lender in
that market, then, and in any such event, such Lender shall be an "Affected
Lender" and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company and Agent of such determination (which notice
Agent shall promptly transmit to each other Lender). Thereafter (a) the
obligation of the Affected Lender to make Loans as, or to convert Loans to,
Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by
the Affected Lender, (b) to the extent such determination by the Affected Lender
relates to a Eurodollar Rate Loan then being requested by Company pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender
shall make such Loan as (or convert such Loan to, as the case may be) a Base
Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans (the "Affected Loans") shall be terminated at the earlier
to occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Agent of such rescission on the date on
which the Affected Lender gives notice of its determination as described above
(which notice of rescission Agent shall promptly transmit to each other Lender).
Except as provided in the immediately preceding sentence, nothing in this
subsection 2.6C shall affect the obligation of any Lender other than an Affected
Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate
Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth in reasonable detail the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by that Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by that Lender in connection with the liquidation or
re-employment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of any Eurodollar Rate
Loan does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including without limitation any prepayment pursuant to
subsection 2.4B(i)) or other principal payment or any conversion of any of its
Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar
Rate Loans is not made on any date specified in a notice of prepayment given by
Company, or (iv) as a consequence of any other default by Company in the
repayment of its Eurodollar Rate Loans when required by the terms of this
Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry
or transfer Eurodollar Rate Loans
at, to, or for the account of any of its branch offices or the office of an
Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy
A. Compensation for Increased Costs and Taxes. Subject to the
provisions of subsection 2.7B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of such Lender)
with respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that are
reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Company shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender in its sole discretion shall determine) as may be necessary to compensate
such Lender for any such increased cost or reduction in amounts received or
receivable hereunder with respect to Eurodollar Rate Loans. Such Lender shall
deliver to Company (with a copy to Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Lender under this subsection 2.7A, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net income
of any Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United States
of America or any other jurisdiction from or to which a payment is made by or on
behalf of Company or by any federation or organization of which the United
States of America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person
is required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Agent or any Lender under any of
the Loan Documents:
(a) Company shall notify Agent of any such
requirement or any change in any such
requirement as soon as Company becomes aware of it;
(b) Company shall pay any such Tax before the
date on which penalties attach
thereto, such payment to be made (if the liability to pay is imposed on Company)
for its own account or (if that liability is imposed on Agent or such Lender, as
the case may be) on behalf of and in the name of Agent or such Lender;
(c) the sum payable by Company in respect of
which the relevant deduction,
withholding or payment is required shall be increased to the extent necessary to
ensure that, after the making of that deduction, withholding or payment, Agent
or such Lender, as the case may be, receives on the due date a net sum equal to
what it would have received had no such deduction, withholding or payment been
required or made; and
(d) within 30 days after paying any sum from
which it is required by law to make
any deduction or withholding, and within 30 days after the due date of payment
of any Tax which it is required by clause (b) above to pay, Company shall
deliver to Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to
any Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that in
effect at the date of this Agreement or at the date of such Assignment
Agreement, as the case may be, in respect of payments to such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws
of any jurisdiction other than
the United States or any state or other political subdivision thereof (for
purposes of this subsection 2.7B(iii), a "Non-US Lender") shall deliver to Agent
for transmission to Company, on or prior to the Closing Date (in the case of
each Lender listed on the signature pages hereof) or on or prior to the date of
the Assignment Agreement pursuant to which it becomes a Lender (in the case of
each other Lender), and at such other times as may be necessary in the
determination of Company or Agent (each in the reasonable exercise of its
discretion), two original copies of Internal Revenue Service Form 1001 or 4224
(or any successor forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Lender of principal, interest,
fees or other amounts payable under any of the Loan Documents or (2) if such
Lender is not a "bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that such Lender
is not subject to deduction or withholding of United States federal income tax
with respect to any payments to such Lender of interest payable under any of the
Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with
respect to United States federal income tax withholding matters pursuant to
subsection 2.7B(iii)(a) hereby agrees, from time to time after the initial
delivery by such Lender of such forms, certificates or other evidence, whenever
a lapse in time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, that such Lender
shall promptly (1) deliver to Agent for transmission to Company two new original
copies of Internal Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as
the case may be, properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to payments to such Lender
under the Loan Documents or (2) notify Agent and Company of its inability to
deliver any such forms, certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US
Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed
to satisfy the requirements of clause (a) or (b)(1) of this subsection
2.7B(iii); provided that if such Lender shall have satisfied the requirements of
subsection 2.7B(iii)(a) on the Closing Date (in the case of each Lender listed
on the signature pages hereof) or on the date of the Assignment Agreement
pursuant to which it became a Lender (in the case of each other Lender), nothing
in this subsection 2.7B(iii)(c) shall relieve Company of its obligation to pay
any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to withholding as
described in subsection 2.7B(iii)(a).
C. Capital Adequacy Adjustment. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Agent) a written statement,
setting forth in reasonable detail the basis of the calculation of such
additional amounts, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate
Each Lender and Issuing Lender agrees that, as promptly as
practicable after the officer of such Lender or Issuing Lender responsible for
administering the Loans or Letters of Credit of such Lender or Issuing Lender,
as the case may be, becomes aware of the occurrence of an event or the existence
of a condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender or Issuing Lender to receive payments under subsection
2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use commercially reasonable efforts (i) to make, issue, fund or
maintain the Commitments of such Lender or the affected Loans or Letters of
Credit of such Lender or Issuing Lender through another lending or letter of
credit office of such Lender or Issuing Lender, or (ii) take such other measures
as such Lender or Issuing Lender may deem commercially reasonable, if as a
result thereof the circumstances which would cause such Lender to be an Affected
Lender would cease to exist or the additional amounts which would otherwise be
required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7
or subsection 3.6 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters of Credit through such other
lending or letter of credit office or in accordance with such other measures, as
the case may be, would not otherwise materially adversely affect such
Commitments or Loans or Letters of Credit or the interests of such Lender or
Issuing Lender; provided that such Lender or Issuing Lender will not be
obligated to utilize such other lending or letter of credit office pursuant to
this subsection 2.8 unless Company agrees to pay all incremental expenses
incurred by such Lender or Issuing Lender as a result of utilizing such other
lending or letter of credit office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Company pursuant to
this subsection 2.8 (setting forth in reasonable detail the basis for requesting
such amount) submitted by such Lender or Issuing Lender to Company (with a copy
to Agent) shall be conclusive absent manifest error.
2.9 Substitution of Lenders.9 Substitution of LendersSubstitution of
Lenders.
If any Lender requests compensation from Company under
subsection 2.7, Company shall have the right, with the assistance of Agent, to
seek one or more Eligible Assignees (which may be one or more of the Lenders)
reasonably satisfactory to Agent and Company to purchase the Loans and assume
the Commitment of such Lender, and Company, Agent, such Lender, and such
Eligible Assignees shall execute and deliver an appropriately completed
Assignment Agreement pursuant to subsection 10.1B hereof to effect the
assignment of rights to and the assumption of obligations by such Eligible
Assignees; provided that (i) such requesting Lender shall be entitled to
compensation under subsection 2.7 for any costs incurred by or otherwise due to
it prior to its replacement, (ii) no Event of Default or Potential Event of
Default has occurred and is continuing, (iii) Company has satisfied all of its
obligations under the Loan Documents relating to such Lender, including without
limitation obligations, if any, under subsection 2.7, and (iv) Company shall
have paid Agent a $3,000 processing and recordation fee.
Section 3. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein
A. Letters of Credit. In addition to Company requesting that Lenders
make Loans pursuant to subsection 2.1A, Company may request, in accordance with
the provisions of this subsection 3.1, from time to time during the period from
the Closing Date to but excluding the Commitment Termination Date, that one or
more Lenders issue Letters of Credit for the account of Company for the purposes
specified in the definition of Standby Letters of Credit. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, any one or more Lenders may, but (except
as provided in subsection 3.1B(ii)) shall not be obligated to, issue such
Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization
of Commitments would exceed the Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit
Usage would exceed $35,000,000;
(iii) any Letter of Credit having an expiration date later
than the earlier of (a) the Commitment Termination Date and (b) the date which
is one year from the date of issuance of such Letter of Credit; provided that
the immediately preceding clause (b) shall not prevent any Issuing Lender from
agreeing that a Letter of Credit will automatically be extended for one or more
successive periods not to exceed one year each unless such Issuing Lender elects
not to extend for any such additional period; provided, further that such
Issuing Lender shall elect not to extend such Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing (and has not
been waived in accordance with subsection 10.6) at the time such Issuing Lender
must elect whether or not to allow such extension, and in no event will any such
extensions extend beyond the Commitment Termination Date; and
(iv) any Letter of Credit denominated in a currency other
than Dollars.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance
of a Letter of Credit, it shall deliver to Agent a Notice of Issuance of Letter
of Credit substantially in the form of Exhibit III annexed hereto no later than
11:00 A.M. (Dallas, Texas time) at least three Business Days, or such shorter
period as may be agreed to by the Issuing Lender in any particular instance, in
advance of the proposed date of issuance. The Notice of Issuance of Letter of
Credit shall specify (a) the proposed date of issuance (which shall be a
Business Day), (b) the face amount of the Letter of Credit, (c) the expiration
date of the Letter of Credit, (d) the name and address of the beneficiary, and
(e) either the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any documents
to be presented by the beneficiary which, if presented by the beneficiary prior
to the expiration date of the Letter of Credit, would require the Issuing Lender
to make payment under the Letter of Credit; provided that the Issuing Lender, in
its reasonable discretion, may require changes in the text of the proposed
Letter of Credit or any such documents; and provided, further that no Letter of
Credit shall require payment against a conforming draft to be made thereunder on
the same business day (under the laws of the jurisdiction in which the office of
the Issuing Lender to which such draft is required to be presented is located)
that such draft is presented if such presentation is made after 10:00 A.M. (in
the time zone of such office of the Issuing Lender) on such business day.
Company shall notify the applicable Issuing Lender
(and Agent, if Agent is not such
Issuing Lender) prior to the issuance of any Letter of Credit in the event that
any of the matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit is no longer true and correct as of the
proposed date of issuance of such Letter of Credit, and upon the issuance of any
Letter of Credit Company shall be deemed to have re-certified, as of the date of
such issuance, as to the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by Agent of
a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i)
requesting the issuance of a Letter of Credit, in the event Agent elects to
issue such Letter of Credit, Agent shall promptly so notify Company, and Agent
shall be the Issuing Lender with respect thereto. In the event that Agent, in
its sole discretion, elects not to issue such Letter of Credit, Agent shall
promptly so notify Company, whereupon Company may request any other Lender to
issue such Letter of Credit by delivering to such Lender a copy of the
applicable Notice of Issuance of Letter of Credit. Any Lender so requested to
issue such Letter of Credit shall promptly notify Company and Agent whether or
not, in its sole discretion, it has elected to issue such Letter of Credit, and
any such Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender with respect thereto. In the event that all other Lenders shall
have declined to issue such Letter of Credit, notwithstanding the prior election
of Agent not to issue such Letter of Credit, Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect to such
Letter of Credit and with respect to all other Letters of Credit issued by
Agent, when aggregated with Agent's outstanding Loans, may exceed Agent's
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or
waiver (in accordance with subsection 10.6) of the conditions set forth in
subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit on
or before the proposed issuance date in accordance with the Issuing Lender's
standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter
of Credit the applicable Issuing Lender shall promptly notify Agent (if the
Issuing Lender is not Agent) and each other Lender of such issuance, which
notice shall be accompanied by a copy of such Letter of Credit. Promptly after
receipt of such notice (or, if Agent is the Issuing Lender, together with such
notice), Agent shall notify each Lender of the amount of such Lender's
respective participation in such Letter of Credit, determined in accordance with
subsection 3.1C.
C. Lenders' Purchase of Participations in Letters of Credit.
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
3.2 Letter of Credit Fees.2 Letter of Credit FeesLetter of Credit Fees.
Company agrees to pay the following amounts with respect to
Letters of Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to the applicable Issuing Lender for its own account, equal to
0.125% per annum of the face amount of such Letter of Credit payable quarterly
in advance, with the first payment due on the date of issuance and thereafter
with the payment due on every three-month anniversary of such date and (b) a
letter of credit fee, payable to Agent for the account of Lenders, equal to the
then applicable Eurodollar Rate Margin set forth in subsection 2.2A hereof for
Eurodollar Rate Loans multiplied by the daily maximum amount available to be
drawn under such Letter of Credit, payable in arrears on and to (but excluding)
each March 31, June 30, September 30 and December 31 of each year, commencing
December 31, 1996, both such fees to be computed on the basis of a 360-day year
for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of
each Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges payable directly to the applicable Issuing Lender for its own
account in accordance with such Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or payment,
as the case may be.
Promptly upon receipt by Agent of any amount described in clause (i)(b) of this
subsection 3.2, Agent shall distribute to each Lender its Pro Rata Share of such
amount.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Company and
Agent, and Company shall reimburse such Issuing Lender on the Business Day
immediately following the date on which such drawing is honored (the
"Reimbursement Date") in an amount in Dollars and in same day funds equal to the
amount of such honored drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Agent and such Issuing Lender prior to 11:00 A.M. (Dallas, Texas time)
on the date such drawing is honored that Company intends to reimburse such
Issuing Lender for the amount of such honored drawing with funds other than the
proceeds of Loans, Company shall be deemed to have given a timely Notice of
Borrowing to Agent requesting Lenders to make Loans that are Base Rate Loans on
the Reimbursement Date in an amount in Dollars equal to the amount of such
honored drawing and (ii) subject to satisfaction or waiver of the conditions
specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make
Loans that are Base Rate Loans in the amount of such honored drawing, the
proceeds of which shall be applied directly by Agent to reimburse such Issuing
Lender for the amount of such honored drawing; and provided, further that if for
any reason proceeds of Loans are not received by such Issuing Lender on the
Reimbursement Date in an amount equal to the amount of such honored drawing,
Company shall reimburse such Issuing Lender, on demand, in an amount in same day
funds equal to the excess of the amount of such honored drawing over the
aggregate amount of such Loans, if any, which are so received. Nothing in this
subsection 3.3B shall be deemed to relieve any Lender from its obligation to
make Loans on the terms and conditions set forth in this Agreement, and Company
shall retain any and all rights it may have against any Lender resulting from
the failure of such Lender to make such Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters
of Credit.
(i) Payment by Lenders. In the event that Company shall fail
for any reason to reimburse any Issuing Lender as provided in subsection 3.3B
(including the failure to reimburse such Issuing Lender with the proceeds of
Loans) in an amount equal to the amount of any drawing honored by such Issuing
Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly
notify each other Lender of the unreimbursed amount of such honored drawing and
of such other Lender's respective participation therein based on such Lender's
Pro Rata Share. Each Lender shall make available to such Issuing Lender an
amount equal to its respective participation, in Dollars and in same day funds,
at the office of such Issuing Lender specified in such notice, not later than
12:00 Noon (Dallas, Texas time) on the first business day (under the laws of the
jurisdiction in which such office of such Issuing Lender is located) after the
date notified by such Issuing Lender. In the event that any Lender fails to make
available to such Issuing Lender on such business day the amount of such
Lender's participation in such Letter of Credit as provided in this subsection
3.3C, such Issuing Lender shall be entitled to recover such amount on demand
from such Lender together with interest thereon at the rate customarily used by
such Issuing Lender for the correction of errors among banks for three Business
Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from any Issuing Lender
any amounts made available by such Lender to such Issuing Lender pursuant to
this subsection 3.3C in the event that it is determined by the final judgment of
a court of competent jurisdiction that the payment with respect to a Letter of
Credit by such Issuing Lender in respect of which payment was made by such
Lender constituted gross negligence or willful misconduct on the part of such
Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Company. In the event any Issuing Lender shall have been reimbursed by other
Lenders pursuant to subsection 3.3C(i) for all or any portion of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such honored drawing such
other Lender's Pro Rata Share of all payments subsequently received by such
Issuing Lender from Company in reimbursement of such honored drawing when such
payments are received. Any such distribution shall be made to a Lender at its
primary address set forth below its name on the appropriate signature page
hereof or at such other address as such Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to
each Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by such Issuing Lender in
respect of each such honored drawing from the date such drawing is honored to
but excluding the date such amount is reimbursed by Company (including any such
reimbursement out of the proceeds of Loans pursuant to subsection 3.3B) at a
rate equal to (a) for the period from the date such drawing is honored to but
excluding the Reimbursement Date, the rate then in effect under this Agreement
with respect to Loans that are Base Rate Loans and (b) thereafter, a rate which
is 2% per annum in excess of the rate of interest otherwise payable under this
Agreement with respect to Loans that are Base Rate Loans. Interest payable
pursuant to this subsection 3.3D(i) shall be computed on the basis of a 365/366
day year for the actual number of days elapsed in the period during which it
accrues and shall be payable on demand or, if no demand is made, on the date on
which the related drawing under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest pursuant
to subsection 3.3D(i) with respect to a drawing honored under a Letter of Credit
issued by it, (a) such Issuing Lender shall distribute to each other Lender, out
of the interest received by such Issuing Lender in respect of the period from
the date such drawing is honored to but excluding the date on which such Issuing
Lender is reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of Loans pursuant to subsection 3.3B), the
amount that such other Lender would have been entitled to receive in respect of
the letter of credit fee that would have been payable in respect of such Letter
of Credit for such period pursuant to subsection 3.2 if no drawing had been
honored under such Letter of Credit, and (b) in the event such Issuing Lender
shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for
all or any portion of such honored drawing, such Issuing Lender shall distribute
to each other Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such honored drawing such other Lender's Pro Rata Share
of any interest received by such Issuing Lender in respect of that portion of
such honored drawing so reimbursed by other Lenders for the period from the date
on which such Issuing Lender was so reimbursed by other Lenders to but excluding
the date on which such portion of such honored drawing is reimbursed by Company.
Any such distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such other address
as such Lender may request.
3.4 Obligations Absolute.4 Obligations AbsoluteObligations Absolute.
The obligation of Company to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any Loans
made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under
subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, set-off, defense or other
right which Company or any Lender may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of its
Subsidiaries and the beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter
of Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations,
properties, assets, condition
(financial or otherwise) or prospects of Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan
Document by any party thereto;
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the
foregoing; or
(viii) the fact that an Event of Default or a Potential
Event of Default shall have occurred
and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
Indemnification; Nature of Issuing Lenders' Duties.' Duties.5 Indemnification;
Nature of Issuing Lenders' Duties
A. Indemnification. In addition to amounts payable as provided
in subsection 3.6, Company hereby
agrees to protect, indemnify, pay and save harmless each Issuing Lender from
and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable fees, expenses and
disbursements of counsel) which such Issuing Lender may incur or be subject to
as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender,
other than as a result of (a) the
gross negligence or willful misconduct of such Issuing Lender as determined by a
final judgment of a court of
competent jurisdiction or (b) subject to the following clause (ii), the wrongful
dishonor by such Issuing Lender
of a proper demand for payment made under any Letter of Credit issued by it or
(ii) the failure of such Issuing
Lender to honor a drawing under any such Letter of Credit as a result of any act
or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including without limitation any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection 3.5B,
any action taken or omitted by any Issuing Lender under or in connection with
the Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted in good faith, shall not put such Issuing Lender
under any resulting liability to Company.
Notwithstanding anything to the contrary contained in this
subsection 3.5, Company shall retain any and all rights it may have against any
Issuing Lender for any liability arising out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.
Existing Letters of Credit.f Credit.6 Existing Letters of Credit
Notwithstanding anything to the contrary herein, as of the
Closing Date, all of the Existing Letters of Credit shall be deemed to be
Letters of Credit issued hereunder and shall be subject to all of the terms and
provisions of this Agreement, including all terms and provisions applicable to
Letters of Credit under this Agreement. Each Lender agrees that its obligations
with respect to Letters of Credit pursuant to subsection 3.3C shall, as of the
Closing Date, include the Existing Letters of Credit.
3.7 Increased Costs and Taxes Relating to Letters of Credit
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall determine (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto)
that any law, treaty or governmental rule, regulation or order, or any change
therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by any
Issuing Lender or Lender with any guideline, request or directive issued or made
after the date hereof by any central bank or other governmental or
quasi-governmental authority (whether or not having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than any Tax on
the overall net income of such Issuing Lender or Lender) with respect to the
issuing or maintaining of any Letters of Credit or the purchasing or maintaining
of any participations therein or any other obligations under this Section 3,
whether directly or by such being imposed on or suffered by any particular
Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing Lender or
participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter of
Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Issuing Lender or Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
This Agreement shall become fully effective pursuant to
subsection 10.20 on the Closing Date upon the satisfaction of, and the
obligations of Lenders to make Loans and the issuance of Letters of Credit
hereunder are subject to, the following conditions.
4.1 Conditions to Initial Extensions of Credit
The obligations of Lenders to make the initial credit
extensions are, in addition to the conditions precedent specified in subsections
4.2 and 4.3, subject to prior or concurrent satisfaction of the following
conditions:
A. Loan Party Documents. On or before the Closing Date, Company
shall, and shall cause each other
Loan Party to, deliver to Lenders (or to Agent for Lenders with sufficient
originally executed copies, where
appropriate, for each Lender and its counsel) the following with respect to
Company or such Loan Party, as the
case may be, each, unless otherwise noted, dated the Closing Date:
(i) (a) In the case of Company and the New Subsidiaries,
certified copies of the Certificate or Articles of Incorporation of such Person,
together with a good standing certificate from the Secretary of State of its
jurisdiction of incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority of
each of such jurisdictions, each dated a recent date prior to the Closing Date
and (b) in the case of each other Loan Party, an Officer's Certificate
certifying that each of the documents specified in (a) above with respect to
such Person was delivered on the Existing Credit Agreement Closing Date, and
that since the Existing Credit Agreement Closing Date, there have been no
amendments to such Person's Certificate or Articles of Incorporation, and no
event has occurred that would cause any of the good standing certificates so
delivered to cease to be in full force and effect;
(ii) (a) In the case of Company and the New Subsidiaries,
copies of the Bylaws of such Person, certified as of the Closing Date by such
Person's corporate secretary or an assistant secretary and (b) in the case of
each other Loan Party, an Officer's Certificate certifying that true and correct
Bylaws of such Person were delivered on the Existing Credit Agreement Closing
Date and that there have been no amendments thereto since such date;
(iii) Resolutions of the Board of Directors of such Person
confirming such Person's obligations under the Loan Documents executed and
delivered by it on or before the Existing Credit Agreement Closing Date, and
authorizing the execution, delivery and performance of the Loan Documents to
which it is a party to be executed and delivered on the Closing Date, certified
as of the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers
of such Person executing the
Loan Documents to be delivered on the Closing Date to which it is a party;
(v) Executed originals of the Loan Documents to be delivered
on the Closing Date to which such Person is a party, including without
limitation execution of this Agreement, the Notes, and the Company Amendment and
Confirmation by Company, execution and delivery by the New Subsidiaries and the
Subsidiary Guarantors of the Subsidiary Amendment and Confirmation; and
(vi) Such other documents as Agent may reasonably request.
B. No Material Adverse Effect. Since June 30, 1996 no Material
Adverse Effect (in the reasonable
opinion of Agent) shall have occurred.
C. Repayment of Obligations Under Existing Credit Agreement. All
outstanding Loans, if any, under the Existing Credit Agreement, together with
all accrued and unpaid interest and any and all fees under the Existing Credit
Agreement, including, without limitation, all commitment fees, letter of credit
fees, and any fees, if any, under Section 2.6D of the Existing Credit Agreement,
accrued and unpaid to the Closing Date shall have been paid and satisfied in
full.
D. Security Interests in Personal Property. Agent shall have received
evidence satisfactory to it that Company and Subsidiary Guarantors shall have
taken or caused to be taken all such actions, executed and delivered or caused
to be executed and delivered all such agreements, consents, documents and
instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii) and (iv)
below) that may be necessary or, in the opinion of Agent, desirable in order to
create or confirm in favor of Agent, for the benefit of Lenders, a valid and
(upon such filing and recording) perfected First Priority security interest in
the entire personal property Collateral. Such actions shall include, without
limitation, the following:
(i) Schedules to Collateral Documents. Delivery to Agent of
accurate and complete schedules to all of the applicable Collateral Documents,
or an Officer's Certificate certifying that the schedules to all of the
applicable Collateral Documents delivered on the Existing Credit Agreement
Closing Date remain accurate and complete on the Closing Date.
(ii) Stock Certificates and Instruments. Delivery to Agent of
(a) certificates (which certificates shall be accompanied by irrevocable undated
stock powers, duly endorsed in blank and otherwise satisfactory in form and
substance to Agent) representing all capital stock and (if applicable)
partnership interests of all of Company's Subsidiaries pledged pursuant to the
Company Pledge Agreement and the Subsidiary Pledge Agreements and (b) all
promissory notes or other instruments (duly endorsed in blank and in form and
substance satisfactory to Agent) evidencing any Collateral, or (c) an Officer's
Certificate certifying that the stock certificates, promissory notes and other
instruments delivered to Agent on the Existing Credit Agreement Closing Date or
thereafter constitute all of the capital stock and (if applicable) partnership
interests of all of Company's Subsidiaries pledged pursuant to the Company
Pledge Agreement and the Subsidiary Pledge Agreements and all of the promissory
notes or other instruments evidencing any Collateral;
(iii) Lien Searches and UCC Termination Statements. To the
extent not delivered on the Existing Credit Agreement Closing Date or required
to be delivered as a result of events occurring after such date, delivery to
Agent of (a) the results of a recent search, by a Person satisfactory to Agent,
of all effective UCC financing statements and fixture filings and all judgment
and tax lien filings which may have been made with respect to any personal
property of any Loan Party, together with copies of all such filings disclosed
by such search, and (b) UCC termination statements duly executed by all
applicable Persons for filing in all applicable jurisdictions as may be
necessary to terminate any effective UCC financing statements disclosed in such
search (other than any such financing statements in respect of Liens permitted
to remain outstanding pursuant to the terms of the Existing Credit Agreement as
amended and restated by this Agreement); provided that with respect to UCC
financing statements disclosed in such search relating to Indebtedness of the
New Subsidiaries which has been paid in full, Company shall provide evidence
satisfactory to Agent of such payment within 30 days of the Closing Date and
with respect to such UCC financing statements relating to repaid Indebtedness
and all other Liens disclosed in such search not permitted to remain outstanding
pursuant to the terms of this Agreement, Company shall provide evidence
satisfactory to Agent of the termination or release of such UCC financing
statements and Liens within 90 days of the Closing Date; and
(iv) UCC Financing Statements. To the extent not delivered on
the Existing Credit Agreement Closing Date or required to be delivered as a
result of events occurring after such date, delivery to Agent of UCC financing
statements, duly executed by each applicable Loan Party with respect to all
personal property Collateral of such Loan Party, for filing in all jurisdictions
as may be necessary or, in the opinion of Agent, desirable to perfect or
continue the perfected status of the security interests created in such
Collateral pursuant to the Collateral Documents.
E. Evidence of Insurance. Agent shall have received a certificate from
Company's insurance broker or other evidence satisfactory to it that all
insurance required to be maintained pursuant to subsection 6.4 is in full force
and effect and that Agent on behalf of Lenders has been named as additional
insured thereunder to the extent required under subsection 6.4.
F. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of David A. Grant, Company's General Counsel, and of Sidley &
Austin, outside counsel for Loan Parties, in form and substance reasonably
satisfactory to Agent and its counsel, dated as of the Closing Date and setting
forth substantially the matters in the opinions designated in Exhibit VI annexed
hereto and as to such other matters as Agent acting on behalf of Lenders may
reasonably request.
G. Opinions of Agent's Counsel. Lenders shall have received
originally executed copies of one or
more favorable written opinions of O'Melveny & Myers LLP, counsel to Agent,
dated as of the Closing Date,
substantially in the form of Exhibit VII annexed hereto.
H. Fees. Company shall have paid to Agent and Arranger the fees
payable on the Closing Date
referred to in subsection 2.3.
I. Representations and Warranties; Performance of Agreements. Company
shall have delivered to Agent an Officers' Certificate, in form and substance
satisfactory to Agent, to the effect that the representations and warranties in
Section 5 hereof are true, correct and complete in all material respects on and
as of the Closing Date to the same extent as though made on and as of that date
(or, to the extent such representations and warranties specifically relate to an
earlier date, that such representations and warranties were true, correct and
complete in all material respects on and as of such earlier date) and that
Company shall have performed in all material respects all agreements and
satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Closing Date except as otherwise disclosed to
and agreed to in writing by Agent and Requisite Lenders.
J. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and substance
to Agent and such counsel, and Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as Agent may
reasonably request.
K. Notice of Prepayment. Agent shall have received a Notice of
Prepayment meeting the requirements under Section 2.4B(i) of the Existing Credit
Agreement in respect of the Loans outstanding under the Existing Credit
Agreement on the Closing Date which Loans will be prepaid on the Closing Date
with the proceeds of the Loans made hereunder.
L. Updated Projections and Pro Forma Financial Information. On or
before the Closing Date, Lenders shall have received from Company projections
and pro forma financial information in form and substance satisfactory to
Lenders which updates the October, 1996 projections and pro forma financial
information previously delivered to Lenders.
4.2 Conditions to Loans.2 Conditions to LoansConditions to Loans.
The obligations of Lenders to make Loans on each Funding Date
are subject to the following further conditions precedent:
A. Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing, in each case signed by the chief financial officer of Company or
by any executive officer of Company designated by the above-described officer on
behalf of Company in a writing delivered to Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall have been true, correct and complete in all material respects
on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied in all material respects all conditions
which this Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date
shall not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System;
(vi) There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed by
Company in writing pursuant to subsection 5.6 or 6.1(ix) prior to the making of
the last preceding Loans (or, in the case of the initial Loans, prior to the
execution of this Agreement), and there shall have occurred no development not
so disclosed in any such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, is reasonably expected to have
a Material Adverse Effect; and
(vii) In the event that after giving effect to the making of
the Loans requested on such Funding Date or the issuance of the Letters of
Credit requested on such issuance date, the aggregate amount of Loans
outstanding plus the Letter of Credit Usage with respect to Letters of Credit
issued for the purposes described in clauses (iii)-(v) of the definition of
"Standby Letter of Credit" exceeds $40,000,000, the following statements shall
be true and correct and the Company shall be deemed to represent and warrant as
of such Funding Date as follows:
(a) such requested Loans or Letters of Credit
are permitted "Indebtedness" (as
such term is defined in the 9-7/8% Subordinated Notes Indenture and the 1996
Subordinated Notes Indenture) under the 9-7/8% Subordinated Note Indenture and
the 1996 Subordinated Note Indenture;
(b) (1) upon the making of each requested Loan
or the issuance of each requested
Letter of Credit (each, an "Incurrence Date"), (A) no Default or Event of
Default (each as defined in the 9-7/8% Subordinated Notes Indenture and the 1996
Subordinated Notes Indenture) shall have occurred and be continuing at the time
of, or would occur after giving effect on a pro forma basis to, such incurrence
of "Indebtedness" and (B) if the aggregate principal amount of all outstanding
Loans plus the Letter of Credit Usage (other than Letter of Credit Usage (i)
with respect to Letters of Credit issued for purposes described in clauses (i)
and (ii) of the definition of "Standby Letter of Credit" and (ii) with respect
to Letters of Credit issued to support "Refinancing Indebtedness" (as defined in
the 9-7/8% Subordinated Notes Indenture and the 1996 Subordinated Notes
Indenture) permitted pursuant to Section 4.11(d) of each of the 9-7/8%
Subordinated Notes Indenture and the 1996 Subordinated Notes Indenture) after
the making of such Loan or issuance of such Letter of Credit would exceed
$40,000,000, the Consolidated Interest Coverage Ratio (as defined in the 9-7/8%
Subordinated Notes Indenture and the 1996 Subordinated Notes Indenture) of
Company for the Reference Period (as defined in the 9-7/8% Subordinated Notes
Indenture and the 1996 Subordinated Notes Indenture) immediately preceding each
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such "Indebtedness" and, to the extent set forth in the definition of
Consolidated Interest Coverage Ratio in the 9-7/8% Subordinated Notes Indenture
and the 1996 Subordinated Notes Indenture, the use of proceeds thereof shall be
at least (x) 2.0 to 1.0 if the Incurrence Date occurs on or before September 30,
1997, or (y) 2.25 to 1.00 if such Incurrence Date occurs at any time thereafter,
and (2) the Notice of Borrowing or Notice of Issuance of Letter of Credit
presented by Company in respect of such Incurrence Date shall set forth
calculations establishing that requirements set forth in clause (1)(B) will be
satisfied;
(c) all Loans and Letters of Credit under this
Agreement are "Senior Debt" as
defined in the 9-7/8% Subordinated Notes Indenture and the 1996 Subordinated
Notes Indenture; and
(d) (1) at least $40,000,000 of the Obligations
under this Agreement are entitled
to the benefits of being "Senior Debt" as defined under clause (i) of the
definition of "Senior Debt" in the 9-7/8% Subordinated Notes Indenture and (2)
at least $50,000,000 of the Obligations under this Agreement are entitled to the
benefits of being "Senior Debt" as defined under clause (ii) of the definition
of "Senior Debt" in the 1996 Subordinated Notes Indenture.
4.3 Conditions to Letters of Credit.3 Conditions to Letters of Credit
Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of such Letter of Credit, Agent
shall have received, in accordance with the provisions of subsection 3.1B(i), an
originally executed Notice of Issuance of Letter of Credit, in each case signed
by the chief financial officer of Company or by any executive officer of Company
designated by the above-described officer on behalf of Company in a writing
delivered to Agent, together with all other information specified in subsection
3.1B(i) and such other documents or information as the applicable Issuing Lender
may reasonably require in connection with the issuance of such Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to
make the Loans, to induce Issuing Lenders to issue Letters of Credit and to
induce other Lenders to purchase participations therein, Company represents and
warrants to each Lender, on the date of this Agreement, on each Funding Date and
on the date of issuance of each Letter of Credit, that the following statements
are true, correct and complete:
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries
A. Organization and Powers. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents to which it is a party and to carry
out the transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged only
in the business of providing health care services consisting of skilled, acute,
subacute and intermediate nursing care, rehabilitative services, outpatient
clinics, home health services and other specialized health care services, and
pharmaceutical products and services.
D. Subsidiaries. All of the Subsidiaries of Company are identified in
Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time
to time pursuant to the provisions of subsection 6.1(xvi). The capital stock of
each of the corporate Subsidiaries of Company identified in Schedule 5.1 annexed
hereto (as so supplemented) is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. The
partnership interests of each of the partnership Subsidiaries of Company
identified in Schedule 5.1 annexed hereto (as so supplemented) are duly
authorized and validly issued. Each of the Subsidiaries of Company identified in
Schedule 5.1 annexed hereto (as so supplemented) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization set forth therein, has all requisite
corporate or partnership power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be conducted,
and is qualified to do business and in good standing in every jurisdiction where
its assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such corporate power and authority has not had and will
not have a Material Adverse Effect. Schedule 5.1 annexed hereto (as so
supplemented) correctly sets forth the ownership interest of Company and each of
its Subsidiaries in each of the Subsidiaries of Company identified therein.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents have
been duly authorized by all necessary corporate action on the part of each Loan
Party that is a party thereto.
B. No Conflict. The execution, delivery and performance by Loan
Parties of the Loan Documents and
the consummation of the transactions contemplated by the Loan Documents do not
and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries,
including without limitation any Necessary Authorizations, the Certificate or
Articles of Incorporation or Bylaws
of Company or any of its Subsidiaries or any order, judgment or decree of any
court or other agency of government
binding on Company or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in
favor of Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of
any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Lenders.
C. Governmental Consents. The execution, delivery and
performance by Loan Parties of the Loan
Documents and the consummation of the transactions contemplated by the
Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state
or other governmental authority or regulatory body.
D. Binding Obligation. Each of the Loan Documents has been duly
executed and delivered by each
Loan Party that is a party thereto and is the legally valid and binding
obligation of such Loan Party,
enforceable against such Loan Party in accordance with its respective terms,
except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights
generally or by equitable principles relating to enforceability.
E. Valid Issuance of Company Common Stock. All issued and
outstanding shares of Company Common
Stock have been duly and validly issued, and are fully paid and nonassessable.
5.3 Financial Condition.3 Financial ConditionFinancial Condition.
Company has heretofore delivered to Lenders, at Lenders'
request, the following financial statements and information: (i) the audited
consolidated balance sheet of Company and its Subsidiaries as at December 31,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows of Company and its Subsidiaries for the Fiscal Year then ended
and (ii) the unaudited consolidated balance sheet of Company and its
Subsidiaries as at June 30, 1996 and the related unaudited consolidated
statements of income, stockholders' equity and cash flows of Company and its
Subsidiaries for the six months then ended. All such statements were prepared in
conformity with GAAP and fairly present, in all material respects, the financial
position on a consolidated basis of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows on a consolidated basis of the entities described therein for each of
the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments.
5.4 No Material Adverse Change; No Restricted Junior Payments.4 No Material
Adverse Change; No Restricted Junior PaymentsNo Material Adverse Change; No
Restricted Junior Payments.
Since June 30, 1996, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Since June 30, 1996, neither Company nor any of its Subsidiaries has
directly or indirectly declared, ordered, paid or made, or set apart any sum or
property for, any Restricted Junior Payment or agreed to do so except as
permitted by subsection 7.5.
5.5 Title to Properties; Liens
To the extent necessary to operate their business in the
manner heretofore conducted, Company and its Subsidiaries have (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other personal
property), all of their respective properties and assets reflected in the
financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of such financial statements in the
Ordinary Course of Business or as otherwise permitted under subsection 7.7.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
5.6 Litigation; Adverse Facts
Except as set forth in Schedule 5.6 annexed hereto, which may
be amended from time to time with the consent of Requisite Lenders, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that are pending or, to
the knowledge of Company, threatened against or affecting Company or any of its
Subsidiaries or any property of Company or any of its Subsidiaries and that,
individually or in the aggregate, is reasonably expected to result in a Material
Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation
of any applicable laws (including Environmental Laws), or (ii) is subject to or
in default with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that in the case of the foregoing clauses (i) and (ii),
individually or in the aggregate, is reasonably expected to result in a Material
Adverse Effect.
5.7 Payment of Taxes.7 Payment of TaxesPayment of Taxes.
Except to the extent permitted by subsection 6.3, all tax
returns and reports of Company and its Subsidiaries required to be filed by any
of them have been timely filed or timely extensions for filing secured, and all
taxes shown on such tax returns to be due and payable and all assessments, fees
and other governmental charges upon Company and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Company knows of no proposed
tax assessment against Company or any of its Subsidiaries which is not being
actively contested by Company or such Subsidiary in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been
made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements
A. Neither Company nor any of its Subsidiaries is in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default, except where the consequences, direct or
indirect, of such default or defaults, if any, would not have a Material Adverse
Effect.
B. Neither Company nor any of its Subsidiaries is a
party to or is otherwise subject to
any agreements or instruments or any charter or other internal restrictions
which, individually or in the
aggregate, is reasonably expected to result in a Material Adverse Effect.
5.9 Governmental Regulation.9 Governmental RegulationGovernmental
Regulation.
Neither Company nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable.
5.10 Securities Activities.10 Securities ActivitiesSecurities Activities.
A. Neither Company nor any of its Subsidiaries is
engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin
Stock.
B. Following application of the proceeds of each Loan, not
more than 25% of the value of the assets (either of Company only or of Company
and its Subsidiaries on a consolidated basis) subject to the provisions of
subsection 7.2 or 7.7 or subject to any restriction contained in any agreement
or instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 Employee Benefit Plans.11 Employee Benefit PlansEmployee Benefit
Plans.
A. Company, each of its Subsidiaries and each of their
respective ERISA Affiliates are in compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their obligations under each Employee Benefit Plan. Each Employee Benefit Plan
which is intended to qualify under Section 401(a) of the Internal Revenue Code
is so qualified.
B. No ERISA Event has occurred or is reasonably expected
to occur.
C. Except to the extent required under Section 4980B of the
Internal Revenue Code or except as set forth in Schedule 5.11 annexed hereto, no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employee of Company, any of
its Subsidiaries or any of their respective ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan,
the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $500,000.
E. As of the most recent valuation date for each Multiemployer
Plan for which the actuarial report is available, the potential liability of
Company, its Subsidiaries and their respective ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of
ERISA), when aggregated with such potential liability for a complete withdrawal
from all Multiemployer Plans, based on information available pursuant to Section
4221(e) of ERISA, does not exceed $500,000.
5.12 Certain Fees.12 Certain FeesCertain Fees.
No broker's or finder's fee or commission will be payable with
respect to this Agreement or any of the transactions contemplated hereby (other
than fees due to Agent or Arranger under the terms hereof), and Company hereby
indemnifies Lenders against, and agrees that it will hold Lenders harmless from,
any claim, demand or liability for any such broker's or finder's fees alleged to
have been incurred in connection herewith or therewith and any expenses
(including reasonable fees, expenses and disbursements of counsel) arising in
connection with any such claim, demand or liability.
5.13 Environmental Protection
(i) neither Company nor any of its Subsidiaries nor any of
their respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to (a)
any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous
Materials Activity that, individually or in the aggregate, is reasonably
expected to have a Material Adverse Effect;
(ii) neither Company nor any of its Subsidiaries has received
any letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9604) or
any comparable state law relating to any conditions, occurrences, events or
other matters that, individually or in the aggregate, are reasonably expected to
have a Material Adverse Effect;
(iii) to Company's knowledge there are and have been no
conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim against
Company or any of its Subsidiaries that, individually or in the aggregate, is
reasonably expected to have a Material Adverse Effect;
(iv) neither Company nor any of its Subsidiaries nor, to
Company's knowledge, any predecessor of Company or any of its Subsidiaries has
filed any notice under any Environmental Law indicating past or present
treatment of Hazardous Materials at any Facility relating to any conditions,
occurrences, events or other matters that, individually or in the aggregate, are
reasonably expected to have a Material Adverse Effect, and except as set forth
in Schedule 5.13 annexed hereto, none of Company's or any of its Subsidiaries'
operations involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any
state equivalent;
(v) compliance with all current or reasonably foreseeable
future requirements pursuant to or under Environmental Laws will not,
individually or in the aggregate, have a reasonable possibility of giving rise
to a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the
contrary, no event or condition has occurred or is occurring with respect to
Company or any of its Subsidiaries relating to any Environmental Law, any
Release of Hazardous Materials, or any Hazardous Materials Activity which
individually or in the aggregate has had or is reasonably expected to have a
Material Adverse Effect.
5.14 Employee Matters.14 Employee MattersEmployee Matters.
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that is reasonably expected to have
a Material Adverse Effect.
5.15 Solvency.15 SolvencySolvency.
Each Loan Party is and, upon the incurrence of any Obligations
by such Loan Party on any date on which this representation is made, will be,
Solvent.
5.16 Matters Relating to Collateral
A. Creation, Perfection and Priority of Liens. The execution and
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 4.1D, and
6.9 and (ii) the delivery to Agent of any Pledged Collateral not delivered to
Agent at the time of execution and delivery of the applicable Collateral
Document (all of which Pledged Collateral has been so delivered) are effective
to create in favor of Agent for the benefit of Lenders, as security for the
respective Secured Obligations (as defined in the applicable Collateral Document
in respect of any Collateral), a valid and perfected First Priority Lien on all
of the Collateral, and all filings and other actions necessary or desirable to
perfect and maintain the perfection and First Priority status of such Liens have
been duly made or taken and remain in full force and effect, other than the
filing of any UCC financing statements delivered to Agent on the Closing Date
for filing (but not yet filed) and the periodic filing of UCC continuation
statements in respect of UCC financing statements filed by or on behalf of
Agent.
B. Absence of Third-Party Filings. Except for those filed in
favor of Agent as contemplated by
subsection 5.16A, no effective UCC financing statement, fixture filing or other
instrument similar in effect
covering all or any part of the Collateral is on file in any filing or recording
office.
C. Margin Regulations. The pledge of the Pledged Collateral
pursuant to the Collateral Documents
does not violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
D. Information Regarding Collateral. All information supplied to
Agent by or on behalf of any
Loan Party with respect to any of the Collateral (in each case taken as a whole
with respect to any particular
Collateral) is accurate and complete in all material respects.
E. Accounts Receivable Collateral. The Accounts Receivable and
any related reimbursement
contracts with the payor of such Accounts Receivable have not been satisfied,
subordinated or rescinded in any
manner (other than settlements in the Ordinary Course of Business with payors of
such Accounts Receivable reached
to facilitate collection); such Accounts Receivable were created through the
provision of services or merchandise
supplied by either (a) Company and its Subsidiaries and the related charges were
usual, customary and reasonable,
or (b) a Target of an Acquisition prior to such Acquisition and Company
believes, after due investigation, that
the related charges were usual, customary and reasonable; such Accounts
Receivable are owned by Company and its
Subsidiaries free and clear of any adverse claim other than reimbursement and
recoupment claims resulting from
audits of the cost reports or other claims for reimbursement submitted by
Company and its Subsidiaries, and
Company and its Subsidiaries have the right to assign and transfer such Accounts
Receivable, subject, however, to
such limits as may be imposed by state or federal law on the right of Lenders to
exercise their rights with
respect to said assignment and transfer upon the occurrence of an Event of
Default; and there are no procedures
or investigations pending or threatened before any Governmental Authority
seeking a determination or ruling that
might affect the validity or enforceability of a material portion of such
Accounts Receivable subject to the
review or jurisdiction of such Governmental Authority.
5.17 Disclosure.17 DisclosureDisclosure.
No representation or warranty of Company or any of its
Subsidiaries contained in any Loan Document or in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to Company, in the case of any document
not furnished by it) necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made. The August, 1996 projections and pro forma financial information (as
updated by the October, 1996 projections and pro forma financial information)
contained in such materials delivered by Company to Agent are based upon good
faith estimates and assumptions believed by Company to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results,
and that Company has no obligation to update said projections as a condition to
any funding under this Agreement. There are no facts known (or which should upon
the reasonable exercise of diligence be known) to Company (other than matters of
a general economic nature) that, individually or in the aggregate, are
reasonably expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
5.18 Regulatory Compliance.18 Regulatory ComplianceRegulatory Compliance.
A. All Necessary Authorizations, which if not obtained are
reasonably expected to have a Material Adverse Effect, have been duly obtained,
and are in full force and effect without any known conflict with the rights of
others and free from any unduly burdensome restrictions. Company and its
Subsidiaries are and will continue to be in compliance in all material respects
with all provisions thereof. No circumstance exists which might impair the
utility of the Necessary Authorizations or the right to renew such Necessary
Authorizations, the effect of which is reasonably expected to have a Material
Adverse Effect. No Necessary Authorizations, which if suspended, canceled or
revoked are reasonably expected to have a Material Adverse Effect, are the
subject of any pending or, to the best of Company's knowledge, threatened
challenge, suspension, cancellation or revocation.
B. Company and its Subsidiaries, and, to the knowledge of
Company and its Subsidiaries after reasonable inquiry, their respective officers
and directors, have been and are in material compliance with federal Medicare
and Medicaid statutes, 42 U.S.C. ss.ss. 1320a-7, 1320a-7(a), 1320a-7b and
1395nn, as amended, and the regulations promulgated thereunder or related state
and local statutes and regulations, and have not at anytime:
(i) knowingly and willfully made or caused to be made a
false statement or representation
of a material fact in any application for any benefit or payment;
(ii) knowingly and willfully made or caused to be made any
false statement or
representation of a material fact for use in determining rights to any benefit
or payment;
(iii) presented or caused to be presented a claim for
reimbursement for services under Medicare or Medicaid, or other state health
care programs that is for an item or service that is known or should be known to
be (a) not provided as claimed, or (b) false or fraudulent;
(iv) failed to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent fraudulently
to secure such benefit or payment;
(v) knowingly and willfully illegally offered, paid, solicited
or received any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (a) in return
for referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or other state health care programs, or (b) in
return for purchasing, leasing or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid or other state
health care programs;
(vi) knowingly and willfully made or caused to be made or
induced or sought to induce the making of any false statement or representation
(or omitted to state a fact required to be stated therein or necessary to make
the statements contained therein not misleading) of a material fact with respect
to (a) the conditions or operations of a facility in order that the facility may
qualify for Medicare or Medicaid or other state health care program
certification, or (b) information required to be provided under ss. 1124A of the
Social Security Act (42 U.S.C. ss. 1320a-3); or
(vii) knowingly and willfully (a) charged for any Medicaid
service, money or other consideration at a rate in excess of the rates
established by the state, or (b) for services covered (in whole or in part) by
Medicaid, charged, solicited, accepted or received, in addition to amounts paid
by Medicaid, any gift, money, donation or other consideration (other than a
charitable, religious or philanthropic contribution from an organization or from
a person unrelated to the patient) (y) as a precondition of treating the
patient, or (z) as a requirement for the patient's continued treatment;
such that the actions or inactions in the foregoing clauses (i) through (vii),
individually or in the aggregate, are reasonably expected to have a Material
Adverse Effect.
5.19 Existing Letters of Credit.19 Existing Letters of CreditExisting
Letters of Credit.
All Existing Letters of Credit are described on Schedule 5.19 annexed
hereto.
Section 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Agent and Lenders:
(i) Quarterly Financials: as soon as available and in any
event within 50 days after the end of each Fiscal Quarter, the consolidated
balance sheet of Company and its Subsidiaries as of the end of such Fiscal
Quarter and the related consolidated statements of income, stockholders' equity
and cash flows of Company and its Subsidiaries (which statements in any event
shall include (x) such information on a regional basis as Company customarily
reports in the Ordinary Course of Business and (y) a report on the aging of
Accounts Receivable) for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the Financial Plan for the current Fiscal Year, all in reasonable detail
and certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company and its
Subsidiaries as of the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments;
(ii) Year-End Financials: as soon as available and in any
event within 95 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Company and its Subsidiaries as of the end of such Fiscal Year
and the related consolidated statements of income, stockholders' equity and cash
flows of Company and its Subsidiaries for such Fiscal Year, setting forth in
each case in comparative form the corresponding figures for the previous Fiscal
Year and the corresponding figures from the Financial Plan for the Fiscal Year
covered by such financial statements, all in reasonable detail and certified by
the chief financial officer of Company that they fairly present, in all material
respects, the financial condition of Company and its Subsidiaries as of the
dates indicated and the results of their operations and their cash flows for the
periods indicated and (b) in the case of such consolidated financial statements,
a report thereon of Arthur Andersen LLP or other independent certified public
accountants of recognized national standing selected by Company and satisfactory
to Agent, which report shall be unqualified, shall express no doubts about the
ability of Company and its Subsidiaries to continue as a going concern, and
shall state that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of Company and its
Subsidiaries as of the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Compliance Certificate: together with each delivery of
financial statements of Company and its Subsidiaries pursuant to subdivisions
(i) and (ii) above, a Compliance Certificate, which shall be duly executed by
the chief financial officer or chief accounting officer of Company,
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in Section 7, in
each case to the extent compliance with such restrictions is required to be
tested at the end of the applicable accounting period;
(iv) Reconciliation Statements: if, as a result of any change
in accounting principles and policies from those used in the preparation of the
audited financial statements referred to in subsection 5.3, the consolidated
financial statements of Company and its Subsidiaries delivered pursuant to
subdivisions (i), (ii) or (xiii) of this subsection 6.1 will differ in any
material respect from the consolidated financial statements that would have been
delivered pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first delivery of
financial statements pursuant to subdivision (i), (ii) or (xiii) of this
subsection 6.1 following such change, consolidated financial statements of
Company and its Subsidiaries for (y) the current Fiscal Year to the effective
date of such change and (z) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and (b) together
with each delivery of financial statements pursuant to subdivision (i), (ii) or
(xiii) of this subsection 6.1 following such change, a written statement of the
chief accounting officer or chief financial officer of Company setting forth the
differences (including without limitation any differences that would affect any
calculations relating to the financial covenants set forth in subsection 7.6)
which would have resulted if such financial statements had been prepared without
giving effect to such change;
(v) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant to
subdivision (ii) above, a letter from Company's public accountants certifying
that, although no special procedures were performed with respect to such
matters, during the course of performing their customary procedures in
connection with their examination and report on Company's financial statements,
no Event of Default was detected during such examination of Company and its
Subsidiaries, and authorizing Company to deliver such financial statements and
opinion thereon to Agent and Lenders pursuant to this Agreement;
(vi) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in connection
with each annual, interim or special audit of the financial statements of
Company and its Subsidiaries made by such accountants, including, without
limitation, any comment letter submitted by such accountants to management in
connection with their annual audit;
(vii) SEC Filings and Press Releases: promptly upon their
becoming publicly available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by Company to its
security holders or by any Subsidiary of Company to its security holders other
than Company or another Subsidiary of Company, (b) all regular and periodic
reports and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority, and (c) all press releases and
other statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company or any
of its Subsidiaries;
(viii) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Lender has given any notice (other than to Agent) or taken any other action with
respect to a claimed Event of Default or Potential Event of Default, (b) that
any Person has given any notice to Company or any of its Subsidiaries or taken
any other action with respect to a claimed default or event or condition of the
type referred to in subsection 8.2, (c) of any condition or event that would be
required to be disclosed in a current report filed by Company with the
Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such
Form as in effect on the date hereof) if Company were required to file such
reports under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event of Default,
Potential Event of Default, default, event or condition, and what action Company
has taken, is taking and proposes to take with respect thereto;
(ix) Litigation or Other Proceedings: promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against or
affecting Company or any of its Subsidiaries or any property of Company or any
of its Subsidiaries (collectively, "Proceedings") not previously disclosed in
writing by Company to Lenders or (Y) any material development in any Proceeding
that, in the case of either clause (X) or (Y):
(1) if adversely determined, has a reasonable
possibility of giving rise to a
Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any
damages or obtain relief as a result of, the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company and may be disclosed by Company without losing
any attorney-client protection to enable Lenders and their counsel to evaluate
such matters;
(x) Health Care Compliance: promptly upon any officer of
Company obtaining knowledge of any material claim, complaint, notice or request
for information received by Company or any of its Subsidiaries with respect to
compliance with health care regulatory requirements relating to the delivery of
health care services of the type provided by Company and payment therefor
(excluding malpractice claims and routine license and certification surveys
unless such surveys include a recommendation that the Medicare or Medicaid
certification or license of a Facility should be terminated, revoked or
suspended), including, but not limited to, any violation or alleged violation of
any federal, state or local statute, regulation, or ordinance relating to the
delivery of medical services and payment therefor, including, but not limited
to, the requirements set forth under federal Medicare and Medicaid statutes, 42
U.S.C. ss.ss. 1320a-7, 1320a-7a, 1320a-7b and 1395nn, and the regulations
promulgated thereunder and related state or local statutes or regulations;
(xi) ERISA Events: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Company, any of its Subsidiaries or
any of their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto;
(xii) ERISA Notices: with reasonable promptness, upon the
reasonable request of Agent, copies of (a) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by Company, any of
its Subsidiaries or any of their respective ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan; (b) all notices received by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates
from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of
such other documents or governmental reports or filings relating to any Employee
Benefit Plan as Agent shall request;
(xiii) Financial Plans: as soon as practicable and in any
event no later than 30 days after the beginning of each Fiscal Year commencing
with Fiscal Year 1998, a consolidated and consolidating plan and financial
forecast for such Fiscal Year (the "Financial Plan" for such Fiscal Year),
including without limitation a forecasted consolidated balance sheet and
forecasted consolidated statements of income and cash flows of Company and its
Subsidiaries for such Fiscal Year;
(xiv) Insurance: as soon as practicable and in any event by
the last day of each Fiscal Year, a report in form and substance reasonably
satisfactory to Agent outlining all material insurance coverage maintained as of
the date of such report by Company and its Subsidiaries and all material
insurance coverage planned to be maintained by Company and its Subsidiaries in
the immediately succeeding Fiscal Year;
(xv) Board of Directors: with reasonable promptness,
written notice of any change in the
Board of Directors of Company;
(xvi) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company and (b)
all of the data required to be set forth in Schedule 5.1 annexed hereto with
respect to all Subsidiaries of Company (it being understood that such written
notice shall be deemed to supplement Schedule 5.1 annexed hereto for all
purposes of this Agreement); and
(xvii) Other Information: with reasonable promptness, such
other information and data with
respect to Company or any of its Subsidiaries as from time to time may be
reasonably requested by Agent.
6.2 Corporate Existence, etc.
Except as permitted under subsection 7.7, Company will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate (or in respect to Subsidiaries that are
partnerships, its partnership) existence and all rights and franchises material
to its business, including without limitation, all Necessary Authorizations;
provided, however that neither Company nor any of its Subsidiaries shall be
required to preserve any such right or franchise if the Board of Directors of
Company or such Subsidiary shall determine that the preservation thereof is no
longer desirable in the conduct of the business of Company or such Subsidiary,
as the case may be, and that the loss thereof is not disadvantageous in any
material respect to Company, such Subsidiary or Lenders.
6.3 Payment of Taxes and Claims; Tax Consolidation
A. Company will, and will cause each of its Subsidiaries to,
pay all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, so long as (1) such reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor and (2) in the case of a charge or claim
which has or may become a Lien against any of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such charge or claim.
B. Company will not, nor will it permit any of its
Subsidiaries to, file or consent to
the filing of any consolidated income tax return with any Person (other than
Company or any of its Subsidiaries).
Maintenance of Properties; Insurance.nsurance
A. Maintenance of Properties. Company will, and will cause
each of its Subsidiaries to, maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used in the business of Company and its Subsidiaries and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof.
B. Insurance. Company will maintain or cause to be maintained,
with financially sound and reputable insurers, such medical malpractice
insurance, public liability insurance, third party property damage insurance,
business interruption insurance and casualty insurance and any other insurance
with respect to liabilities, losses or damage in respect of the assets,
properties and businesses of Company and its Subsidiaries as may customarily be
carried or maintained under similar circumstances by corporations of established
reputation and of similar size engaged in similar businesses, in each case in
such amounts (giving effect to self-insurance), with such deductibles, covering
such risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. If so required by Requisite
Lenders, each such policy of insurance with respect to Collateral shall (a) name
Agent for the benefit of Lenders as an additional insured thereunder as its
interests may appear and (b) provide for at least 30 days prior written notice
to Agent of any modification or cancellation of such policy.
Inspection Rights; Audits of Accounts Receivable
A. Inspection Rights. Company shall, and shall cause
each of its Subsidiaries to, permit
any authorized representatives designated by Agent to visit and inspect any of
the properties of Company or of
any of its Subsidiaries, to inspect and copy from its and their financial and
accounting records, and to discuss
its and their affairs, finances and accounts with its and their officers and
independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
any such discussion and provided
further that all such inspections and duplicating shall be subject to applicable
laws governing the rights of
patients served by Company or its Subsidiaries), all upon reasonable notice and
at such reasonable times and for
such reasonable purpose as may be specified by Agent during normal business
hours and as often as may reasonably
be requested.
B. Accounts Receivable; Audits of Accounts Receivable.
(i) Company and its Subsidiaries will submit all
necessary documentation and
supply all necessary information for payment of all Accounts Receivable (other
than settlements in the Ordinary Course of Business with payors of such Accounts
Receivable reached to facilitate collection to the payor for each of such
Accounts Receivable); will not, except as otherwise expressly permitted herein,
subordinate or rescind any of the Accounts Receivable; and will notify Agent
promptly if any procedures or investigations are pending or threatened before
any Governmental Authority seeking a determination or ruling that might
materially and adversely affect the validity or enforceability of a material
portion of such Accounts Receivable subject to the review or jurisdiction of
such Governmental Authority.
(ii) Upon the request of Agent, Company shall,
and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by Agent to
conduct an audit of all Accounts Receivable annually, each such audit to be in
scope and substance satisfactory to Agent, all upon reasonable notice and at
reasonable times during normal business hours; provided that Agent shall in any
event be entitled to conduct one or more audits upon and any time after the
occurrence of an Event of Default; and provided further that all such audits
shall be at the sole expense of Company, which expense shall be reasonably
agreed upon by Company and Agent.
6.6 Compliance with Laws, etc..6 Compliance with Laws, etc.Compliance
with Laws, etc.
Company shall, and shall cause each of its Subsidiaries to,
comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or foreign
(including all Environmental Laws), in respect of (a) the conduct of its
business, including, without limitation, the statutes, regulations and orders
referred to in subsection 5.13 herein, and (b) the ownership of its property,
except with respect to each of the foregoing such noncompliances as are not
reasonably expected, in the aggregate, to have a Material Adverse Effect.
Preservation of Licenses, etc.ses, etc.7 Preservation of Licenses, etc
Company shall, and shall cause each of its Subsidiaries to,
preserve and maintain, or timely obtain and thereafter preserve and maintain,
their respective Necessary Authorizations, the loss of which is reasonably
expected to have a Material Adverse Effect.
Environmental Disclosure.sclosure.8 Environmental Disclosure
A. Company shall, and shall cause each of its Subsidiaries to,
and shall use its reasonable efforts to cause (i) their respective employees,
agents, contractors and subcontractors, (ii) all tenants under any leases or
occupancy agreements affecting any portion of the Facilities and (iii) all other
Persons on or occupying such property, to comply with all Environmental Laws,
where the failure to do so, individually or in the aggregate, is reasonably
expected to have a Material Adverse Effect.
B. Company shall promptly advise Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Materials required to be
reported to any federal, state or local governmental or regulatory agency under
any applicable Environmental Laws that is reasonably expected to have a Material
Adverse Effect, (ii) any remedial action taken by Company or, to the extent
Company or any of its Subsidiaries has any knowledge, any other Person in
response to (x) any Hazardous Materials on, under or about any Facility, the
existence of which is reasonably expected to result in a Material Adverse Effect
or (y) any Environmental Claim that is reasonably expected to result in a
Material Adverse Effect, and (iii) any request for information from any
governmental agency that suggests such agency is investigating whether Company
or any of its Subsidiaries may be potentially responsible for a Release of
Hazardous Materials which is reasonably expected to have a Material Adverse
Effect.
C. Company shall, at its own expense, provide copies to
Agent of such documents or
information in the possession of Company or any of its Subsidiaries as Agent or
Requisite Lenders may reasonably
request in relation to any matters disclosed pursuant to this subsection 6.8.
6.9 Execution of Subsidiary Guaranty and Personal Property Collateral Documents
by Certain Subsidiaries and Future Subsidiaries.9 Execution of Subsidiary
Guaranty and Personal Property Collateral Documents by Certain Execution of
Subsidiary Guaranty and Personal Property Collateral Documents by Certain
Subsidiaries and Future Subsidiaries.
A. Execution of Subsidiary Guaranty and Personal Property
Collateral Documents. In the event that any Person becomes a Subsidiary of
Company after the date hereof, Company will promptly notify Agent of that fact
and will no later than five Business Days after such Person becomes a Subsidiary
(i) deliver to Agent the instruments and documents comparable to those described
in subsection 4.1D as may be necessary or, in the opinion of Agent, desirable to
create in favor of Agent, for the benefit of Lenders, a valid and perfected
First Priority Lien in Company's ownership interest in such Subsidiary; and (ii)
cause such Subsidiary to execute and deliver to Agent a counterpart of the
Subsidiary Guaranty, a Subsidiary Security Agreement and, if applicable, a
Subsidiary Pledge Agreement and to take all such further actions and execute all
such further documents and instruments (including without limitation actions,
documents and instruments comparable to those described in subsection 4.1D) as
may be necessary or, in the opinion of Agent, desirable to create in favor of
Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on
all of the personal property assets of such Subsidiary described in the
applicable forms of Collateral Documents; provided that the provisions of this
subsection 6.9A(ii) shall not apply to the Non-Subsidiary Guarantors.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Company
shall deliver to Agent, together with such Loan Documents (if applicable), (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation
or partnership agreement, together with a good standing certificate from the
Secretary of State of the jurisdiction of its incorporation or formation and
each other state in which such Person is qualified as a foreign corporation or
partnership to do business and, to the extent generally available, a certificate
or other evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such
jurisdictions, each to be dated a recent date prior to their delivery to Agent,
(ii) a copy of such Subsidiary's Bylaws (if such Subsidiary is a corporation),
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Agent, (iii) a certificate executed by the
secretary or an assistant secretary of such Subsidiary as to (a) the fact that
the attached resolutions of the Board of Directors (or similar body) of such
Subsidiary approving and authorizing the execution, delivery and performance of
such Loan Documents are in full force and effect and have not been modified or
amended and (b) the incumbency and signatures of the officers of such Subsidiary
executing such Loan Documents, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Agent and its counsel, as to
(a) the due incorporation or formation, valid existence and good standing of
such Subsidiary, (b) the due authorization, execution and delivery by such
Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents
against such Subsidiary, (d) such other matters (including without limitation
matters relating to the creation and perfection of Liens in any Collateral
pursuant to such Loan Documents) as Agent may reasonably request, all of the
foregoing to be satisfactory in form and substance to Agent and its counsel;
provided that the provisions of clauses (iii) and (iv) of this subsection 6.9B
shall not apply to the Non-Guarantor CMS Subsidiaries.
6.10 Officer's Certificate Regarding Restricted Junior Payments.10 Officer's
Certificate Regarding Restricted
Junior PaymentsOfficer's Certificate Regarding Restricted Junior Payments.
Company shall deliver to Agent the Officer's Certificates
required pursuant to subsection 7.5(ii) prior to making any permitted Restricted
Junior Payment thereunder.
6.11 Employee Stock Discount Program
Company shall deliver to Agent a certified copy of the
Employee Stock Discount Program within 3 Business Days after the date of its
effectiveness.
Section 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
7.1 Indebtedness.1 IndebtednessIndebtedness.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company may become and remain liable with respect to
the Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness arising from the maturity of Contingent Obligations
permitted by subsection 7.4 in an amount not to exceed the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases (other than
Acquisition Consideration characterized as Capital Leases under GAAP) in an
aggregate amount not to exceed $7,000,000 at any one time outstanding;
(iv) (a) Company may become and remain liable with respect to
Indebtedness to any of its Subsidiary Guarantors, (b) any wholly-owned
Subsidiary Guarantors may become and remain liable with respect to Indebtedness
to Company or any other wholly-owned Subsidiary Guarantors, and (c) any
non-wholly-owned Subsidiary Guarantor and any Non-Guarantor Subsidiary may
become and remain liable with respect to Indebtedness to Company or any
wholly-owned Subsidiary Guarantors; provided that (w) all such intercompany
Indebtedness shall be evidenced by promissory notes, (x) all such intercompany
Indebtedness owed by Company to any of its Subsidiary Guarantors shall be
subordinated in right of payment to the payment in full of the Obligations
pursuant to the terms of the applicable promissory notes or an intercompany
subordination agreement, it being understood that nothing contained herein shall
prohibit Company from making any payments under the applicable promissory notes
prior to the occurrence of any Event of Default or a Potential Event of Default,
(y) any payment by any Subsidiary Guarantor of Company under any guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
intercompany Indebtedness owed by such Subsidiary Guarantor to Company or to any
of its Subsidiary Guarantors for whose benefit such payment is made, and (z) in
the case of (c), the aggregate amount of Indebtedness owed by non-wholly-owned
Subsidiary Guarantors and Non-Guarantor Subsidiaries (other than Indebtedness
referred to in clause (xii) below) to Company or to its wholly-owned Subsidiary
Guarantors, together with (without duplication) the amount of Investments and
Contingent Obligations made under subsections 7.3(vi) and 7.4(iv)(b),
respectively, shall not exceed $15,000,000 in the aggregate outstanding at any
time; provided that at no time shall the portion of such Indebtedness consisting
of Indebtedness of Non-Guarantor Subsidiaries (other than the CMS Non-Guarantor
Subsidiaries) to Company or its wholly-owned Subsidiary Guarantors
(collectively, the "Non-Guarantor Non-CMS Subsidiary Indebtedness"), together
with (without duplication) the Non-Guarantor Non-CMS Subsidiary Investments, the
Non-Guarantor Non-CMS Subsidiary Contingent Obligations and the Minority
Interest Dispositions made under subsections 7.3(vi), 7.4(iv)(b) and 7.7(xii),
respectively, exceed $5,000,000 in the aggregate at any time.
(v) Company may remain liable with respect to the 9-7/8%
Subordinated Notes;
(vi) Company may become and remain liable with respect to
the 1996 Subordinated Notes;
(vii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness incurred in connection with Acquisitions
occurring after the Closing Date; provided that (x) the Acquisition is permitted
under subsection 7.3(iv) and subsection 7.7(viii), (y) such Indebtedness existed
immediately prior to the time of such Acquisition (and was not incurred in
contemplation of such acquisition), constitutes Indebtedness owed to the seller
or sellers of the stock or assets acquired in such Acquisition or constitutes
Indebtedness secured by real property acquired in such Acquisition and (z) the
aggregate principal amount of all such Indebtedness (excluding Indebtedness
related to Capital Leases otherwise permitted under clauses (iii), (iv) and (ix)
of this Section 7.1) does not exceed $5,000,000 for each such transaction or
$15,000,000 in the aggregate at any time outstanding;
(viii) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7.1 annexed hereto and
any renewals, replacements or refinancings thereof; provided that any renewal,
replacement or refinancing of any such Indebtedness shall be for an amount not
exceeding the principal amount of such Indebtedness and with a maturity no
earlier than such Indebtedness and if such original Indebtedness was secured,
such renewal, refinancing or replacement Indebtedness is secured only by the
property theretofore securing such Indebtedness;
(ix) Company and its Subsidiaries may become and remain liable
with respect to accounts payable incurred in the Ordinary Course of Business
even after such accounts payable become Indebtedness under the terms hereof;
(x) Company may become and remain liable with respect to
subordinated Indebtedness incurred after the date hereof, including without
limitation for the purpose of the replacement or refinancing of subordinated
Indebtedness referred to in subsections 7.1(v) and (vi); provided that such
proposed subordinated Indebtedness does not have any scheduled or mandatory
principal or sinking fund payments due and payable prior to one year after the
Commitment Termination Date, the terms and conditions of such proposed
subordinated Indebtedness shall have been approved by Agent and Requisite
Lenders, which approval shall not be unreasonably withheld, and no Event of
Default or Potential Event of Default shall exist prior to or as a result of the
incurrence of such subordinated Indebtedness;
(xi) Company and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount at any time
outstanding not to exceed an amount equal to 2% of the total assets of Company
and its Subsidiaries as of the last day of the Fiscal Quarter immediately
preceding the date of the incurrence of such Indebtedness, determined on a
consolidated basis in accordance with GAAP; and
(xii) Company and its Subsidiaries (including any CMS
Non-Guarantor Subsidiaries) may become and remain liable with respect to
Indebtedness described in Schedule 1 annexed hereto incurred in connection with
the CMS Transactions.
7.2 Liens and Related Matters
A. Prohibition on Liens. Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents,
including Liens granted to Lenders to secure Company's obligations in respect of
Lender Interest Rate Agreements (as defined in the Company Pledge Agreement) up
to a maximum notional amount of $150,000,000;
(iii) Liens described in Schedule 7.2 annexed hereto on assets
other than the Collateral securing the Indebtedness permitted pursuant to
subsection 7.1(viii);
(iv) Liens securing Indebtedness permitted by subsections
7.1(iii) and (vii); provided that
such Liens shall not extend to any of the Collateral;
(v) Liens on assets other than Collateral created by lease
agreements to secure the payment of rental amounts and other sums (x) not yet
due thereunder or (y) due thereunder; provided that the aggregate amount of such
rental amounts and other sums due thereunder shall not exceed $2,000,000 at any
one time;
(vi) Other Liens on assets other than the Collateral
securing Indebtedness permitted
pursuant to subsection 7.1(xi);
(vii) Liens on the Collateral described in Schedule 7.2A
provided the value of the Collateral subject to such Liens shall not exceed
$5,000,000 at any time.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific
property encumbered to secure
payment of particular Indebtedness or as may be provided for in the 9-7/8%
Subordinated Note Indenture or the
1996 Subordinated Notes Indenture or any refinancing thereof permitted by
subsection 7.1(x), neither Company nor
any of its Subsidiaries (other than the Non-Guarantor Subsidiaries) shall enter
into any agreement prohibiting
the creation or assumption of any Lien upon any of its properties or assets,
whether now owned or hereafter
acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein or as may be provided for in the 9-7/8%
Subordinated Note Indenture or the 1996 Subordinated Notes Indenture or any
refinancing thereof permitted by subsection 7.1(x), Company will not, and will
not permit any of its Subsidiaries (other than the Non-Guarantor Subsidiaries)
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends or make any other distributions on any of such
Subsidiary's capital stock or other equity interests owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to Company or any other Subsidiary of Company, or (iv) transfer any of
its property or assets to Company or any other Subsidiary of Company.
7.3 Investments; Joint Ventures
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of
the Existing Credit Agreement Closing Date in any Subsidiaries of Company;
(iii) Company and its Subsidiaries may make intercompany
loans to the extent permitted under
subsection 7.1(iv);
(iv) Company and its Subsidiaries may create or acquire
new Subsidiaries to the extent
permitted under subsection 7.7(viii);
(v) Company and its Subsidiaries may continue to own the
Investments owned by them and
described in Schedule 7.3 annexed hereto;
(vi) Company and its Subsidiaries may make and own Investments
in non-wholly-owned Subsidiary Guarantors and Non-Guarantor Subsidiaries;
provided that the aggregate amount of such Investments (other than those
referred to in clause (ix) below), together with (without duplication) the
amount of Indebtedness and Contingent Obligations made under subsection
7.1(iv)(c) and 7.4(iv)(b), respectively, shall not exceed $15,000,000 in the
aggregate outstanding at any time; provided further that at no time shall the
portion of such Investments consisting of Investments made by Company in
Non-Guarantor Subsidiaries (other than the CMS Non-Guarantor Subsidiaries)
(collectively, the "Non-Guarantor Non-CMS Subsidiary Investments"), together
with (without duplication) the Non-Guarantor Non-CMS Subsidiary Indebtedness,
the Non-Guarantor Non-CMS Subsidiary Contingent Obligations and the Minority
Interest Dispositions permitted under subsections 7.1(iv)(c), 7.4(iv)(b) and
7.7(xii), respectively, exceed $5,000,000 in the aggregate at any time.
(vii) Accounts receivable that originally arose in the
Ordinary Course of Business which have been converted to a note receivable or
other long term receivable, provided that any such note receivable has been
delivered to Agent under the Company Pledge Agreement or the Subsidiary Pledge
Agreement, as the case may be;
(viii) Company and its Subsidiaries may make and own other
Investments in Persons which operate primarily in the healthcare business which
are not Subsidiaries of Company in an aggregate amount not to exceed at any time
$10,000,000; and
(ix) Company and its Subsidiaries may make and own Investments
described in Schedule 1 annexed hereto in connection with the CMS Transactions.
7.4 Contingent Obligations.4 Contingent ObligationsContingent
Obligations.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable
with respect to Contingent
Obligations in respect of the Subsidiary Guaranty;
(ii) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit in an aggregate amount
not to exceed at any time $35,000,000;
(iii) Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations in respect of Indebtedness of Company
permitted pursuant to subsections 7.1(v) and 7.1(vi) pursuant to guarantees
entered into by any Subsidiary of Company; provided that any such guarantee
entered into after the Closing Date shall be in the form of such guarantee as in
effect on the Closing Date and any such Subsidiary is also a Subsidiary
Guarantor under this Agreement;
(iv) (a) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of any Indebtedness of
Company or any of its wholly-owned Subsidiary Guarantors permitted by subsection
7.1; and (b) Company and its wholly-owned Subsidiary Guarantors may become and
remain liable with respect to Contingent Obligations in respect of any
Indebtedness of any of Company's non-wholly-owned Subsidiary Guarantors and
Non-Guarantor Subsidiaries permitted by subsection 7.1 provided that the
aggregate amount of liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations (other than those
referred to in clause (xi) below), together with (without duplication) the
amount of Indebtedness and Investments made under subsections 7.1(iv)(c) and
7.3(vi), respectively, shall not exceed $15,000,000 in the aggregate at any time
outstanding; provided further that at no time shall such Contingent Obligations
consisting of Contingent Obligations of the Non-Guarantor Subsidiaries (other
than the CMS Non-Subsidiary Guarantors) (collectively, the "Non-Guarantor
Non-CMS Subsidiary Contingent Obligations"), together with (without duplication)
the Non-Guarantor Non-CMS Subsidiary Indebtedness, the Non-Guarantor Non-CMS
Subsidiary Investments and the Minority Interest Dispositions made under
subsections 7.1(iv)(c), 7.3(vi) and 7.7(xii), respectively, exceed in the
aggregate $5,000,000 at any time.
(v) Company and its Subsidiaries, as applicable, may
become and remain liable with respect
to Contingent Obligations described in Schedule 7.4 annexed hereto;
(vi) Company and its Subsidiaries, as applicable, may become
and remain liable with respect to Contingent Obligations arising from
transactions constituting asset sales permitted under Section 7.7, in addition
to those listed on Schedule 7.4, in an aggregate amount not to exceed at any
time $5,000,000;
(vii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of rental obligations
under leases of Subsidiaries permitted by the terms hereof;
(viii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements entered into with one or
more Lenders with respect to Indebtedness, which Interest Rate Agreements are in
form and substance reasonably satisfactory to Agent;
(ix) Company and its Subsidiaries may become and remain
liable with respect to endorsements
in the Ordinary Course of Business of negotiable instruments for deposit or
collection;
(x) Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Company and its Subsidiaries in
respect of all such other Contingent Obligations shall at no time exceed
$5,000,000; and
(xi) Company and its wholly-owned Subsidiary Guarantors may
become and remain liable with respect to Contingent Obligations described in
Schedule 1 annexed hereto incurred in connection with the CMS Transactions.
<PAGE>
7.5 Restricted Junior Payments.5 Restricted Junior PaymentsRestricted
Junior Payments.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that so long as no Event of
Default or Potential Event of Default shall have occurred and be continuing or
occurs as a result thereof, (i) Company may make payments of regularly scheduled
interest in respect of the 9-7/8% Subordinated Notes and the 1996 Subordinated
Notes or any refinancing thereof permitted by subsection 7.1(x), in each case in
accordance with the terms of, and to the extent required by, and subject to the
subordination provisions contained in, the 9-7/8% Subordinated Note Indenture
and the 1996 Subordinated Notes Indenture respectively or any refinancing
thereof permitted by subsection 7.1(x), (ii) Company's non-wholly-owned
Subsidiaries may pay dividends and distributions in respect of any fiscal year
to Persons other than Company and its wholly-owned Subsidiaries to the extent of
such Person's pro-rata share of cash of any non-wholly-owned Subsidiary to the
extent of such Subsidiary's positive cash flow as of such fiscal year end if (x)
all Indebtedness of such Subsidiary (including Indebtedness owing to banks,
joint venture partners or Company and its Subsidiaries) has been paid, (y) such
Subsidiary has sufficient cash to pay all income taxes, all non-recurring
expenditures and all repayments to Medicare estimated to be due, in each case in
respect of such fiscal year and (z) such Subsidiary has a working capital
reserve of $300,000, (iii) Company may purchase Company Common Stock, options or
warrants held by officers or employees (including former officers and employees)
of Company in an aggregate amount not to exceed $2,000,000, (iv) Company may
repurchase its Common Stock pursuant to a stock repurchase plan approved by its
Board of Directors in an aggregate amount for all such repurchases not to exceed
$10,000,000 from and after the Existing Credit Agreement Closing Date, and (v)
Company may purchase shares of its Common Stock and, within 60 days after such
purchase, reissue or resell such Common Stock to employees of Company or its
Subsidiaries in accordance with the terms and provisions of the Employee Stock
Discount Program.
7.6 Financial Covenants.6 Financial CovenantsFinancial Covenants.
A. Minimum Fixed Charge Coverage Ratio. Company shall not permit
the ratio of (i) Consolidated
EBITDAR to (ii) Consolidated Fixed Charges for any four-Fiscal Quarter period
ending during any of the periods
set forth below to be less than the correlative ratio indicated:
Minimum Fixed
Period Charge Coverage Ratio
Closing Date through and including
December 31, 1999 1.50:1.00
Fiscal Year 2000 1.75:1.00
Fiscal Year 2001 and thereafter 2.00:1.00
B. Maximum Adjusted Leverage Ratio. Company shall not permit the
Consolidated Adjusted Leverage
Ratio during any of the periods set forth below to exceed the correlative ratio
indicated:
Maximum Adjusted
Period Leverage Ratio
Closing Date through and including
December 31, 1997 5.75:1.00
Fiscal Year 1998 5.50:1.00
Fiscal Year 1999 5.25:1.00
Fiscal Year 2000 and thereafter 5.00:1.00
C. Maximum Adjusted Senior Debt Ratio. Company shall not permit
the ratio of (i) Consolidated
Senior Debt as of the last day of any Fiscal Quarter occurring during any of the
periods set forth below to
(ii) Consolidated EBITDAR for the four-Fiscal Quarter period ending on such date
to exceed the correlative ratio
indicated:
Maximum Adjusted
Period Senior Debt Ratio
Closing Date through and including
December 31, 1997 4.00:1.00
Fiscal Year 1998 3.75:1.00
Fiscal Year 1999 3.50:1.00
Fiscal Year 2000 3.25:1.00
Fiscal Year 2001 and thereafter 3.00:1.00
D. Minimum Adjusted Consolidated Net Worth. Company shall not permit
Adjusted Consolidated Net Worth at any time to be less than the sum of (i)
$76,702,000 plus (ii) on a cumulative basis for each Fiscal Quarter, commencing
with the Fiscal Quarter ending September 30, 1996, an amount equal to 75% of
positive GAAP consolidated net income, if any, for such Fiscal Quarter, plus
(iii) 100% of the net proceeds from the issuance of any common equity Securities
of Company after June 30, 1996; provided that (y) for purposes of clause (iii)
above, there shall not be included in the net proceeds from the issuance of
common equity securities of Company any net proceeds from the reissue or resale
of shares of Common Stock to employees pursuant to the Employee Stock Discount
Program to the extent that the price at which such shares of Common Stock are
resold is lower than the price at which Company purchased such shares.
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions
Company shall not, and shall not permit any of its
Subsidiaries to, alter the corporate, capital or legal structure of Company or
any of its Subsidiaries, or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or
sublessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all of the business, property or fixed assets of, or any operating
division or facility of, or stock or other evidence of beneficial ownership of,
any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Company or any wholly-owned Subsidiary
Guarantor; provided that, in the case of such a merger, Company or such
wholly-owned Subsidiary Guarantor shall be the continuing or surviving
corporation;
(ii) Company and its Subsidiaries may dispose of obsolete,
worn out or surplus property in
the Ordinary Course of Business;
(iii) Company and its Subsidiaries may sell or otherwise
dispose of inventory in the
Ordinary Course of Business;
(iv) Company and its Subsidiaries may consummate the
transactions described in Schedule
7.7(iv) annexed hereto;
(v) in addition to the sale and other dispositions permitted
under clause (vii) of this subsection 7.7, Company and its Subsidiaries may sell
or otherwise dispose of assets; provided that the aggregate fair market value of
all such assets does not exceed $5,000,000 in any Fiscal Year;
(vi) Company may liquidate, wind-up or dissolve the
Inactive Subsidiaries;
(vii) Company and its Subsidiaries may make asset sales, or
assign or sublet leased properties; provided that the aggregate book value of
all such assets, leasehold interests and leasehold improvements sold, assigned
or sublet pursuant to this clause (vii) after the date hereof does not exceed 5%
of the total assets of Company and its Subsidiaries as of the last day of the
most recently ended Fiscal Quarter, determined on a consolidated basis in
accordance with GAAP; provided further that the book value of leasehold
interests for the purposes of the immediately preceding proviso shall be equal
to the annual rents paid or payable by Company or its Subsidiary under the
related lease multiplied by eight; and provided further that (x) the
consideration received for such assets or leasehold interests shall be in an
amount at least equal to the fair market value thereof; (y) the consideration
received shall be cash, secured promissory notes, properties similar to the
assets or properties sold, assigned or subleased, or any combination thereof and
(z) the cash received in connection with such sale, assignment or sublease (net
of expenses in connection therewith) shall (except to the extent the assets so
sold, assigned or subleased secure specific Indebtedness, or such Indebtedness
is secured by a letter of credit, and the terms of such Indebtedness require
that such cash be applied to repay such Indebtedness) within 180 days of receipt
thereof (A) be applied to the permanent reduction of the Commitments (and the
prepayment of the Loans to the extent that the Total Utilization of the
Commitments would exceed the Commitments as so reduced), or (B) be invested in
assets or properties (other than bonds, notes, obligations and securities) used
in the operation of the businesses permitted pursuant to subsection 7.14;
(viii) Company and its Subsidiaries may make Acquisitions;
provided that no Event of Default or Potential Event of Default shall have
occurred and be continuing or shall occur as a result thereof and, (x) if the
Acquisition Consideration therefor equals or exceeds $20,000,000, Company shall
deliver to Agent (1) a Compliance Certificate, setting forth on a pro-forma
basis, taking into account the proposed Acquisition for the four-Fiscal Quarters
immediately preceding the date of calculation, the financial covenant
calculations in subsection 7.6, which calculations shall reflect compliance with
such covenants and be certified by the chief financial officer of the Company
not less than 10 Business Days before the consummation of such proposed
Acquisition, and (2) within 10 Business Days following the consummation of such
Acquisition, the documents required by subsection 6.9, and (y) if the
Acquisition Consideration therefor equals or exceeds $30,000,000, Company shall
obtain the consent of Requisite Lenders prior to the consummation of such
transaction, which consent shall not be unreasonably withheld, and shall deliver
to Agent the documents and information referred to in (x) above in the manner
provided therein; provided further that in the case of an acquisition of stock,
the acquired Person shall be a Subsidiary of Company; and provided further that
the aggregate amount of Acquisition Consideration in connection with such
Acquisitions (other than the Acquisition set forth on Schedule 7.7 (viii)
annexed hereto shall not exceed $55,000,000 in any Fiscal Year;
(ix) Company and its Subsidiaries may engage in
sale/leaseback transactions permitted under
subsection 7.10;
(x) Company and its Subsidiaries may make the
Acquisitions which are part of the CMS
Transactions;
(xi) Company may make the purchases, reissuances and resales
of shares of its Common Stock to the extent permitted under subsection 7.5(v)
and the definition of Employee Stock Discount Program; and
(xii) Company and its wholly-owned Subsidiary Guarantors may
sell or otherwise transfer minority ownership interests in wholly-owned
Subsidiary Guarantors to any Person other than Company and its Subsidiaries
(collectively, the "Minority Interest Dispositions") and such wholly-owned
Subsidiary Guarantors shall be released from the Subsidiary Guaranty and cease
to be Subsidiary Guarantors upon the closing of such sale or transfer and shall
thereupon become a Non-Guarantor Subsidiary; provided that, (w) Agent shall
continue to have a valid and perfected first priority security interest in the
portion of the ownership interests in such Non-Guarantor Subsidiary not sold or
transferred, (x) all such sales or transfers shall be at arms-length and for
fair consideration, (y) the aggregate book value of gross assets represented by
the pro rata share therein of such transferred ownership interests in respect of
all such sales or transfers after the date hereof, together with (without
duplication) the Non-Guarantor Non-CMS Subsidiary Indebtedness, the
Non-Guarantor Non-CMS Subsidiary Contingent Obligations and Non-Guarantor
Non-CMS Subsidiary Investments permitted under subsections 7.1(iv)(c),
7.4(iv)(b) and 7.3(vi), respectively, shall not exceed $5,000,000 in the
aggregate at any time, and (z) ownership interests in no more than five
Subsidiaries shall be sold or transferred pursuant to this subsection 7.7(xii).
Consolidated Capital Expenditures.nditures.8Consolidated Capital Expenditures
Company shall not, and shall not permit its Subsidiaries to,
make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated
below, in an aggregate amount in excess of the corresponding amount set forth
below opposite such Fiscal Year:
Maximum Consolidated
Fiscal Year Capital Expenditures
Fiscal Year 1996 $15,000,000
Fiscal Year 1997 $19,000,000
Fiscal Year 1998 $21,000,000
Fiscal Years 1999, 2000 and 2001 and
each Fiscal Year thereafter $22,000,000
7.9 Fiscal Year.9 Fiscal YearFiscal Year
Company shall not change its Fiscal Year-end from December 31.
7.10 Sales and Lease-Backs.10 Sales and Lease-BacksSales and Lease-Backs.
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease, whether an Operating
Lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (i) which Company or any of its
Subsidiaries has, substantially contemporaneously with becoming liable with
respect to such lease or as part of the same transaction, sold or transferred or
is to sell or transfer to any other Person (other than Company or any of its
Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use
for substantially the same purpose as any other property which has been or is to
be sold or transferred by Company or any of its Subsidiaries to any Person
(other than Company or any of its Subsidiaries) in connection with such lease;
provided that notwithstanding the foregoing prohibitions, Company and its
Subsidiaries may become and remain liable with respect to such lease or leases
involving assets with an aggregate fair market value not exceeding $5,000,000
annually; provided, further that the aggregate fair market value of all assets
which are the subject of all such leases shall not exceed $15,000,000; and
provided further that with respect to each proposed lease, Company shall deliver
to Agent a Compliance Certificate, setting forth on a pro forma basis, taking
into account such lease for the four-Fiscal Quarters immediately preceding the
date of calculation, the financial covenant calculations in subsection 7.6,
which calculations shall reflect compliance with such covenants and be certified
by the chief financial officer of Company not less than 10 Business Days before
the consummation of such lease transaction.
7.11 Sale or Discount of Receivables
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes receivable
or Accounts Receivable, where the aggregate principal amount thereof exceeds
$1,000,000 in any Fiscal Year; provided that nothing contained in this
subsection 7.11 shall be construed as prohibiting Company or any of its
Subsidiaries from writing off such notes receivable or accounts receivable to
the extent determined to be bad debts under GAAP and thereafter compromising,
selling or discounting such receivables.
7.12 Transactions with Shareholders and Affiliates
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder of 5%
or more of any class of equity Securities of Company or with any Affiliate of
Company or of any such holder, on terms that are less favorable to Company or
that Subsidiary, as the case may be, than those that might be obtained at the
time from Persons who are not such a holder or Affiliate; provided that the
foregoing restriction shall not apply to (i) any transaction between Company and
any of its Subsidiaries or between any of its Subsidiaries, (ii) reasonable and
customary fees paid to members of the Boards of Directors of Company and its
Subsidiaries or (iii) any transaction described in Schedule 7.12 annexed hereto.
7.13 Disposal of Subsidiary Stock
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity Securities of
any of its Subsidiaries, except to qualify directors if required by applicable
law or in connection with a transaction permitted under subsection 7.7(iv) -
(vii); or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity interests of any of its Subsidiaries (including such
Subsidiary), except to Company, another Subsidiary of Company, or to qualify
directors if required by applicable law or in connection with a transaction
permitted under subsection 7.7(iv) - (vii); provided that, (y) Company may make
the purchases, reissuances and resales of shares of its Common Stock to the
extent permitted under subsection 7.5(v) and the definition of Employee Stock
Discount Program and (z) Company and its wholly-owned Subsidiary Guarantors may
make the sales or transfers of their ownership interests in wholly-owned
Subsidiary Guarantors to the extent permitted by subsection 7.7(xii).
7.14 Conduct of Business.14 Conduct of BusinessConduct of Business.
From and after the Closing Date, Company shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than (i) the
businesses referred to in subsection 5.1C and (ii) such other lines of business
as may be consented to by Requisite Lenders, which consent shall not be
unreasonably withheld.
7.15 Amendments of Documents Relating to Subordinated Indebtedness
Company shall not, and shall not permit any of its
Subsidiaries to, amend or otherwise change the terms of any Subordinated
Indebtedness, or make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon
which payments of principal or interest are due thereon, change any event of
default or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
Section 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur:
8.1 Failure to Make Payments When Due
---------------------------------
Failure by Company to pay any installment of principal of or
interest on any Loan when due, whether at stated maturity, by acceleration, by
notice of voluntary prepayment, by mandatory prepayment or otherwise and such
failure, in the case of interest payments, is not cured within one (1) Business
Day (it being understood that there shall be no cure period for the failure to
pay any installment of principal when due); failure by Company to pay (including
payment with the proceeds of a Loan made pursuant to subsection 3.3B) when due
any amount payable to an Issuing Lender in reimbursement of any drawing under a
Letter of Credit; or failure by Company to pay any fee or any other amount due
under this Agreement within five days after the date due; or
8.2 Default in Other Agreements
(i) Failure of Company or any of its Subsidiaries to pay when
due any principal of or interest on or any other amount payable in respect of
one or more items of Indebtedness (other than Indebtedness referred to in
subsection 8.1), Operating Leases or Capital Leases or Contingent Obligations
(or any combination of the foregoing) having, in the case of Indebtedness,
Capital Leases and Contingent Obligations, an aggregate principal amount of
$2,000,000 or more and having, in the case of Operating Leases, annual
Consolidated Rental Payments of $2,000,000 or more, in each case beyond the end
of any grace period provided therefor; or (ii) breach or default by Company or
any of its Subsidiaries with respect to any other material term of (a) one or
more items of Indebtedness or Contingent Obligations in the aggregate principal
amounts referred to in clause (i) above or (b) any loan agreement, mortgage,
indenture or other agreement relating to such item(s) of Indebtedness or
Contingent Obligation(s), if the effect of such breach or default is to cause,
or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse of
time, both, or otherwise); or
8.3 Breach of Certain Covenants
Failure of Company to perform or comply with any term or
condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 Breach of Warranty
Any representation, warranty, certification or other statement
made by Company or any of its Subsidiaries in any Loan Document or in any
statement or certificate at any time given by Company or any of its Subsidiaries
in writing pursuant hereto or thereto or in connection herewith or therewith
shall be false in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents
Any Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the earlier of (i) Knowledge of Company of such default or (ii)
receipt by Company and such Loan Party of notice from Agent or any Lender of
such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Company or any of its Material
Subsidiaries in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal or state law; or (ii) an involuntary case
shall be commenced against Company or any of its Subsidiaries under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Company or any of its Subsidiaries, or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Company or any
of its Subsidiaries for all or a substantial part of its property; or a warrant
of attachment, execution or similar process shall have been issued against any
substantial part of the property of Company or any of its Subsidiaries, and any
such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Company or any of its Material Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or Company or any of its
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
Company or any of its Subsidiaries shall be unable, or shall fail generally, or
shall admit in writing its inability, to pay its debts as such debts become due;
or the Board of Directors of Company or any of its Subsidiaries (or any
committee thereof) shall adopt any resolution or otherwise authorize any action
to approve any of the actions referred to in clause (i) above or this clause
(ii); or
8.8 Judgments and Attachments
Any money judgment, writ or warrant of attachment or similar
process involving in any individual case an amount in excess of $2,000,000 or in
the aggregate an amount in excess of $5,000,000 (excluding amounts covered by
insurance as to which a solvent and unaffiliated insurance company has
acknowledged coverage) shall be entered or filed against Company or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or
8.9 Dissolution
Any order, judgment or decree shall be entered against Company
or any of its Material Subsidiaries decreeing the dissolution or split up of
Company or that Subsidiary and such order shall remain undischarged or unstayed
for a period in excess of, in the case of Company or any of its Material
Subsidiaries, 30 days, or in the case of all other Subsidiaries, 60 days; or
8.10 Employee Benefit Plans
There shall occur one or more ERISA Events which individually
or in the aggregate results in or is reasonably expected to result in liability
of Company, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $500,000 during the term of this Agreement; or there shall exist an
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $500,000; or
8.11 Material Adverse Effect
Any event or change shall occur that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect; or
8.12 Change in Control
(i) Any sale, merger or consolidation with or into any Person
or any transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after giving
effect to such transaction, any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) other than an Excluded Person is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power in the
aggregate normally entitled to vote in the election of directors, managers, or
trustees, as applicable, of the transferee or surviving entity, (ii) any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) other than an Excluded
Person is or becomes the "beneficial owner," directly or indirectly, of more
than 50% of the total voting power in the aggregate of all classes of capital
stock of Company then outstanding normally entitled to vote in elections of
directors, or (iii) during any period of 12 consecutive months after the Closing
Date, individuals who at the beginning of any such 12-month period constituted
the Board of Directors of Company (together with any new directors whose
election by such Board or whose nomination for election by the shareholders of
Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitutes a majority of the Board of Directors of Company then in
office; or
8.13 Invalidity of Subsidiary Guaranties; Failure of Security; Repudiation
of Obligations
At any time after the execution and delivery thereof, (i) the
Subsidiary Guaranty for any reason, other than the satisfaction in full of all
Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void, (ii) any
Collateral Document shall cease to be in full force and effect (other than by
reason of a release of Collateral thereunder in accordance with the terms hereof
or thereof, the satisfaction in full of the Obligations or any other termination
of such Collateral Document in accordance with the terms hereof or thereof) or
shall be declared null and void, or Agent shall not have or shall cease to have
a valid and perfected First Priority Lien in any Collateral purported to be
covered thereby having a fair market value individually or in the aggregate
exceeding $1,000,000, in each case for any reason other than the failure of
Agent or any Lender to take any legally permitted action within its control, or
(iii) any Loan Party shall contest the validity or enforceability of any Loan
Document in writing or deny in writing that it has any further liability,
including without limitation with respect to future advances by Lenders, under
any Loan Document to which it is a party: or
Loss of Licenses, etc.
Any Governmental Authority shall finally revoke or fail to
renew any material Necessary Authorizations of Company or any of its
Subsidiaries; or any proceedings shall in any way be brought challenging the
validity or enforceability of any material Necessary Authorizations or seeking
the revocation, suspension or cancellation of any material Necessary
Authorizations and such proceeding is not contested in good faith by appropriate
proceedings; or Company or any of its Subsidiaries shall for any reason lose any
material Necessary Authorizations; or Company or any of its Subsidiaries shall
suffer the imposition of any restraining order, escrow, suspension or impound of
funds in connection with any proceeding (judicial or administrative) with
respect to any material Necessary Authorizations; or Company or any of its
Subsidiaries shall be in material default of any material Necessary
Authorizations beyond any applicable grace period, which event is reasonably
expected to have a Material Adverse Effect on the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
and its Subsidiaries taken as a whole:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Agent to issue any Letter of Credit and the right of any Lender to
issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon
the occurrence and during the continuation of any other Event of Default, Agent
shall, upon the written request or with the written consent of Requisite
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) through (c) above to be, and the same shall forthwith
become, immediately due and payable, and the obligation of each Lender to make
any Loan, the obligation of Agent to issue any Letter of Credit and the right of
any Lender to issue any Letter of Credit hereunder shall thereupon terminate;
provided that the foregoing shall not affect in any way the obligations of
Lenders under subsection 3.3C(i).
Any amounts described in clause (b) above, when received by
Agent, shall be held by Agent pursuant to the terms of the Collateral Account
Agreement and shall be applied as therein provided.
Section 9. AGENT
9.1 Appointment.1 AppointmentAppointment. NationsBank is hereby appointed Agent
hereunder and under the other Loan Documents and each Lender hereby authorizes
Agent to act as its agent in accordance with the terms of this Agreement and the
other Loan Documents. Agent agrees to act upon the express conditions contained
in this Agreement and the other Loan Documents, as applicable. The provisions of
this Section 9 are solely for the benefit of Agent and Lenders and Company shall
have no rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, Agent shall act solely
as an agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or for
Company or any of its Subsidiaries. NCMI as Arranger shall have no duties or
responsibilities under this Agreement or any other Loan Document.
9.2 Powers and Duties; General Immunity
A. Powers; Duties Specified. Each Lender irrevocably authorizes Agent
to take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to Agent by the terms hereof and thereof, together with
such powers, rights and remedies as are reasonably incidental thereto. Agent
shall have only those duties and responsibilities that are expressly specified
in this Agreement and the other Loan Documents. Agent may exercise such powers,
rights and remedies and perform such duties by or through its agents or
employees. Agent shall not have, by reason of this Agreement or any of the other
Loan Documents, a fiduciary relationship in respect of any Lender; and nothing
in this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as expressly
set forth herein or therein.
B. No Responsibility for Certain Matters. Agent shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Agent to Lenders or by or on behalf of
Company to Agent or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, Agent
shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.
C. Exculpatory Provisions. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by Agent under or in connection with any of the Loan Documents except
to the extent caused by Agent's gross negligence or willful misconduct. Agent
shall be entitled to refrain from any act or the taking of any action (including
the failure to take an action) in connection with this Agreement or any of the
other Loan Documents or from the exercise of any power, discretion or authority
vested in it hereunder or thereunder unless and until Agent shall have received
instructions in respect thereof from Requisite Lenders (or such other Lenders as
may be required to give such instructions under subsection 10.6) and, upon
receipt of such instructions from Requisite Lenders (or such other Lenders, as
the case may be), Agent shall be entitled to act or (where so instructed)
refrain from acting, or to exercise such power, discretion or authority, in
accordance with such instructions. Without prejudice to the generality of the
foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Company and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against Agent
as a result of Agent acting or (where so instructed) refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders (or such other Lenders as may be required to
give such instructions under subsection 10.6).
D. Agent Entitled to Act as Lender. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent in its individual capacity as a Lender hereunder. With
respect to its participation in the Loans and the Letters of Credit, Agent shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not performing the duties and functions delegated to
it hereunder, and the term "Lender" or "Lenders" or any similar term shall,
unless the context clearly otherwise indicates, include Agent in its individual
capacity. Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Company or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Company for services in connection with this Agreement and otherwise without
having to account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and Agent shall not have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 Right to Indemnity
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify Agent, to the extent that Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent in exercising its powers, rights and remedies or
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as Agent in any way relating to or arising out of this Agreement
or the other Loan Documents; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. If any indemnity furnished to Agent for any
purpose shall, in the opinion of Agent, be insufficient or become impaired,
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
9.5 Successor Agent
Agent may resign at any time by giving 30 days' prior written
notice thereof to Lenders and Company, and Agent may be removed at any time with
or without cause by an instrument or concurrent instruments in writing delivered
to Company and Agent and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to, and with the approval of, Company (which approval
shall not be unreasonably withheld) to appoint a successor Agent. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, that
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent and the
retiring or removed Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Agent's resignation or
removal hereunder as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
9.6 Collateral Documents and Subsidiary Guaranties
Each Lender hereby further authorizes Agent, on behalf of and
for the benefit of Lenders, to enter into each Collateral Document as secured
party and to be the agent for and representative of Lenders under the Subsidiary
Guaranty, and each Lender agrees to be bound by the terms of each Collateral
Document and the Subsidiary Guaranty; provided that Agent shall not (i) enter
into or consent to any material amendment, modification, termination or waiver
of any provision contained in any Collateral Document or the Subsidiary Guaranty
or (ii) release any Collateral (except as otherwise expressly permitted or
required pursuant to the terms of this Agreement or the applicable Collateral
Document), in each case without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Lenders, Agent may
execute any documents or instruments necessary to (a) release any Lien
encumbering any item of Collateral that is the subject of a sale or other
disposition of assets permitted by this Agreement or to which Requisite Lenders
have otherwise consented or (b) release any Subsidiary Guarantor from the
Subsidiary Guaranty if all of the capital stock of such Subsidiary Guarantor is
sold to any Person (other than an Affiliate of Company) pursuant to a sale or
other disposition permitted hereunder or to which Requisite Lenders have
otherwise consented. Anything contained in any of the Loan Documents to the
contrary notwithstanding, Company, Agent and each Lender hereby agree that (X)
no Lender shall have any right individually to realize upon any of the
Collateral under any Collateral Document or to enforce the Subsidiary Guaranty,
it being understood and agreed that all rights and remedies under the Collateral
Documents and the Subsidiary Guaranty may be exercised solely by Agent for the
benefit of Lenders in accordance with the terms thereof, and (Y) in the event of
a foreclosure by Agent on any of the Collateral pursuant to a public or private
sale, Agent or any Lender may be the purchaser of any or all of such Collateral
at any such sale and Agent, as agent for and representative of Lenders (but not
any Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Agent at such sale.
Section 10. MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit
A. General. Subject to subsection 10.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Commitment and the Loans of the Lender effecting such sale, assignment, transfer
or participation. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or any
granting of participations in, all or any part of its Commitments or the Loans,
the Letters of Credit or participations therein, or the other Obligations owed
to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan,
Letter of Credit or participation therein, or other Obligation may (a) be
assigned in any amount to another Lender, or to an Affiliate of the assigning
Lender or another Lender, with the giving of notice to Company and Agent or (b)
be assigned in an aggregate amount of not less than $10,000,000 (or such lesser
amount as shall constitute the aggregate amount of the Commitments, Loans,
Letters of Credit and participations therein, and other Obligations of the
assigning Lender) to any other Eligible Assignee with the consent of Company and
Agent (which consent of Company and Agent shall not be unreasonably withheld or
delayed); provided that any such assignment in accordance with either clause (a)
or (b) above shall effect a pro rata assignment (based on the respective
principal amounts thereof then outstanding or in effect) of both the Commitment
and the Loans of the assigning Lender. To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender shall be
relieved of its obligations with respect to its Commitments, Loans, Letters of
Credit or participations therein, or other Obligations or the portion thereof so
assigned. The parties to each such assignment shall execute and deliver to
Agent, for its acceptance, an Assignment Agreement, together with a processing
and recordation fee of $3,000 and such forms, certificates or other evidence, if
any, with respect to United States federal income tax withholding matters as the
assignee under such Assignment Agreement may be required to deliver to Agent
pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery acceptance
and recordation, from and after the effective date specified in such Assignment
Agreement, (y) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which survive
the termination of this Agreement under subsection 10.9B) and be released from
its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto; provided that, anything contained in any of the Loan Documents to the
contrary notwithstanding, if such Lender is the Issuing Lender with respect to
any outstanding Letters of Credit such Lender shall continue to have all rights
and obligations of an Issuing Lender with respect to such Letters of Credit
until the cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments hereunder shall
be modified to reflect the Commitment of such assignee and any remaining
Commitment of such assigning Lender and, if any such assignment occurs after the
issuance of the Notes hereunder, the assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as practicable,
surrender its Notes to Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and/or to the assigning Lender, substantially in the form
of Exhibit IV annexed hereto, with appropriate insertions, to reflect the new
Commitments of the assignee and/or the assigning Lender.
(ii) Acceptance by Agent. Upon its receipt of an Assignment
Agreement executed by an assigning Lender and an assignee representing that it
is an Eligible Assignee, together with the processing and recordation fee
referred to in subsection 10.1B(i) and any forms, certificates or other evidence
with respect to United States federal income tax withholding matters that such
assignee may be required to deliver to Agent pursuant to subsection
2.7B(iii)(a), Agent and Company shall, if Agent and Company have consented to
the assignment evidenced thereby (in each case to the extent such consent is
required pursuant to subsection 10.1B(i)), accept such Assignment Agreement by
executing a counterpart thereof as provided therein (which acceptance shall
evidence any required consent of Agent and Company to such assignment). Agent
shall maintain a copy of each Assignment Agreement delivered to and accepted by
it as provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the Commitment Termination Date or (ii)
a reduction of the principal amount of or the rate of interest payable on any
Loan allocated to such participation, and all amounts payable by Company
hereunder (including without limitation amounts payable to such Lender pursuant
to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not
sold such participation. Company and each Lender hereby acknowledge and agree
that, solely for purposes of subsections 10.4 and 10.5, (a) any participation
will give rise to a direct obligation of Company to the participant and (b) the
participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit to
take any action hereunder.
E. Information. Each Lender may furnish any information
concerning Company and its Subsidiaries
in the possession of that Lender from time to time to assignees and participants
(including prospective assignees
and participants), subject to subsection 10.19.
F. Representations of Lenders. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 Expenses
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and any consents,
amendments, waivers or other modifications thereto; (ii) all the costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder) and of
Company's performance of and compliance with all agreements and conditions on
its part to be performed or complied with under this Agreement and the other
Loan Documents including, without limitation, with respect to confirming
compliance with environmental, insurance and solvency requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Agent and Arranger in
connection with the negotiation, preparation, execution and administration of
the Loan Documents and any consents, amendments, waivers or other modifications
thereto and any other documents or matters requested by Company; (iv) all the
actual costs and reasonable expenses of creating and perfecting Liens in favor
of Agent on behalf of Lenders pursuant to any Collateral Document, including
without limitation filing and recording fees, expenses and taxes, stamp or
documentary taxes, search fees, title insurance premiums (if applicable),
reasonable fees, expenses and disbursements of counsel to Agent and of counsel
providing any opinions that Agent or Requisite Lenders may request in respect of
the Collateral Documents or the Liens created pursuant thereto; (v) all the
actual costs and reasonable expenses (including without limitation the
reasonable fees, expenses and disbursements of any auditors, accountants or
appraisers and any environmental or other consultants, advisors and agents
employed or retained by Agent and Arranger or their counsel) of obtaining and
reviewing any audits or reports provided for under subsection 6.5B with respect
to Accounts Receivable; (vi) the custody or preservation of any of the
Collateral; (vii) all other actual and reasonable costs and expenses incurred by
Agent and Arranger in connection with the negotiation, preparation and execution
of the Loan Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (viii)
after the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including the allocated costs of in-house counsel)
and costs of settlement, incurred by Agent, Arranger and Lenders in enforcing
any Obligations of or in collecting any payments due from any Loan Party
hereunder or under the other Loan Documents by reason of such Event of Default
(including, without limitation, in connection with the sale of, collection from,
or other realization upon any of the Collateral or the enforcement of the
Subsidiary Guaranty) or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
"work-out" or pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity
In addition to the payment of expenses pursuant to subsection
10.2, whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (subject to Indemnitees' selection of counsel with the
approval of Company, which approval shall not be unreasonably withheld),
indemnify, pay and hold harmless Agent, Arranger and Lenders, and the officers,
directors, employees, agents and affiliates of Agent, Arranger and Lenders
(collectively called the "Indemnitees"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that Company shall
not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise from
the gross negligence or willful misconduct of that Indemnitee as determined by a
final judgment of a court of competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively,
any and all liabilities, obligations, losses, damages (including natural
resource damages), penalties, actions, judgments, suits, claims (including
Environmental Claims), costs (including the costs of any investigation, study,
sampling, testing, abatement, cleanup, removal, remediation or other response
action necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including Lenders' agreement to
make the Loans hereunder or the use or intended use of the proceeds thereof or
the issuance of Letters of Credit hereunder or the use or intended use of any
thereof, or any enforcement of any of the Loan Documents (including any sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Subsidiary Guaranty, (ii) the statements contained in the
commitment letter delivered by any Lender to Company with respect thereto, or
(iii) any Environmental Claim or any Hazardous Materials Activity relating to or
arising from, directly or indirectly, any past or present activity, operation,
land ownership, or practice of Company or any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay
and hold harmless set forth in this subsection 10.3 may be unenforceable in
whole or in part because they are violative of any law or public policy, Company
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.
10.4 Set-Off
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by Company
at any time or from time to time, without notice to Company or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender to or for the credit or
the account of Company against and on account of the obligations and liabilities
of Company to that Lender under this Agreement, the Letters of Credit and
participations therein and the other Loan Documents, including, but not limited
to, all claims of any nature or description arising out of or connected with
this Agreement, the Letters of Credit and participations therein or any other
Loan Document, irrespective of whether or not (i) that Lender shall have made
any demand hereunder or (ii) the principal of or the interest on the Loans or
any amounts in respect of the Letters of Credit or any other amounts due
hereunder shall have become due and payable pursuant to Section 8 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured.
10.5 Ratable Sharing
Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with the terms of this Agreement), by realization
upon security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
them; provided that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Company or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Company to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 Amendments and Waivers
No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, and no consent to any departure by
Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that any such amendment,
modification, termination, waiver or consent which: increases the amount of any
of the Commitments or reduces the principal amount of any of the Loans;
increases the maximum amount of Letters of Credit; changes in any manner the
definition of "Pro Rata Share" or the definition of "Requisite Lenders"; changes
in any manner any provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of all Lenders; postpones the scheduled
final maturity date of any of the Loans; postpones the date or reduces the
amount of any scheduled reduction of the Commitments; postpones the date on
which any interest or any fees are payable; decreases the interest rate borne by
any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any
fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; releases any Lien granted in
favor of Agent with respect to all or substantially all of the Collateral;
releases any Subsidiary Guarantor from its obligations under the Subsidiary
Guaranty, in each case other than in accordance with the terms of the Loan
Documents; or changes in any manner the provisions contained in subsection 8.1
or this subsection 10.6 shall be effective only if evidenced by a writing signed
by or on behalf of all Lenders. In addition, (i) any amendment, modification,
termination or waiver of any of the provisions contained in Section 4 shall be
effective only if evidenced by a writing signed by or on behalf of Agent and
Requisite Lenders, (ii) no amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
Lender which is the holder of that Note, and (iii) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Agent shall be effective without the written concurrence of
Agent. Agent may, but shall have no obligation to, with the concurrence of any
Lender, execute amendments, modifications, waivers or consents on behalf of that
Lender. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. No notice to or demand on
Company in any case shall entitle Company to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 10.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Company, on Company.
10.7 Independence of Covenants
All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
10.8 Notices
Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agent shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Company and Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Agent.
10.9 Survival of Representations, Warranties and Agreements
A. All representations, warranties and agreements made
herein shall survive the execution
and delivery of this Agreement and the making of the Loans and the issuance of
the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by
law to the contrary, the agreements of Company set forth in subsections 2.6D,
2.7, 3.5A, 3.7, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement; provided that
with respect to the agreements of Company set forth in subsections 2.6D, 2.7,
3.5A and 3.7 only, the survival period for unasserted claims thereunder shall be
limited to 18 months after the termination of this Agreement and payment of all
Obligations.
C. Notwithstanding the existence of any contingent liabilities
under subsection 10.9B, Agent, upon payment of the Loans and all other
Obligations of the Loan Parties not referred to in subsection 10.9B, shall
return or release the Collateral.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 Marshalling; Payments Set Aside
Neither Agent nor any Lender shall be under any obligation to
marshal any assets in favor of Company or any other party or against or in
payment of any or all of the Obligations. To the extent that Company makes a
payment or payments to Agent or Lenders (or to Agent for the benefit of
Lenders), or Agent or Lenders enforce any security interests or exercise their
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor or related thereto, shall be revived
and continued in full force and effect as if such payment or payments had not
been made or such enforcement or setoff had not occurred.
10.12 Severability
In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.13 Obligations
Several; Independent Nature of Lenders' RightsObligations Several; Independent
Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no action
taken by Lenders pursuant hereto or thereto, shall be deemed to constitute
Lenders as a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.
10.14 Headings
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.15 Applicable Law
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (INCLUDING WITHOUT
LIMITATION SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.16 Successors and Assigns
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of Lenders (it being understood
that Lenders' rights of assignment are subject to subsection 10.1). Neither
Company's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Company without the prior written consent of all
Lenders.
10.17 Consent to Jurisdiction and Service of Process
ALL JUDICIAL PROCEEDINGS BROUGHT BY OR AGAINST COMPANY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, COUNTY AND CITY OF LOS
ANGELES. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, AGENT AND EACH OF THE LENDERS IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH
COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING
IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY
LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION
410.40 OR OTHERWISE.
10.18 Waiver of Jury Trial.18 Waiver of Jury TrialWaiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR
THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship,
that each has already relied on this waiver in entering into this Agreement, and
that each will continue to rely on this waiver in their related future dealings.
Each party hereto further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
10.19 Confidentiality
Each Lender, participant and assignee shall hold all
non-public information obtained pursuant to the requirements of this Agreement
which has been identified as confidential by Company in accordance with such
Lender's customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices, it being
understood and agreed by Company that in any event a Lender may make (i)
disclosures to Affiliates of such Lender in connection with the transactions
which are the subject of this Agreement, (ii) disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participations therein or (iii) disclosures required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; provided, further that (i) in no event shall any Lender be
obligated or required to return any materials furnished by Company or any of its
Subsidiaries; and (ii) any Lender may make disclosures to its Affiliates
authorized to purchase securities with the prior consent of Company, which
consent shall not be unreasonably withheld. Each participant shall agree in
writing to be bound by the provisions of this Section 10.19.
10.20 Counterparts; Effectiveness
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall be deemed executed and delivered upon
the execution of a counterpart hereof by each of the parties hereto and receipt
by Company and Agent of written or telephonic notification of such execution and
authorization of delivery thereof. This Agreement (except for the provisions of
Sections 9 and 10 hereof and related definitions) shall not become effective and
the Existing Credit Agreement shall remain in place until the time at which the
conditions set forth in Section 4.1 have been satisfied or otherwise waived on
the Closing Date, at which time this Agreement shall become fully effective and
replace the Existing Credit Agreement, which shall be deemed to be completely
amended and restated hereby at such time. At such time this Agreement (including
the Schedules and Exhibits attached hereto) shall constitute the entire
agreement among the parties hereto and with respect to the subject matter hereof
and supersede all prior agreements, understandings and negotiations, both
written and oral, among the parties with respect to such subject matter,
including, but not limited to, the Existing Credit Agreement. If the Closing
Date has not occurred by December 31, 1996, then this Agreement shall terminate
on such date and the Existing Credit Agreement shall remain in place in
accordance with its terms.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
REGENCY HEALTH SERVICES, INC.
By:
Title:
Notice Address:
2742 Dow Avenue
Tustin, California 92680
Attn: Chief Financial Officer
<PAGE>
AGENT, ARRANGER AND LENDERS:
NATIONSBANK OF TEXAS, N.A.,
individually and as Agent
By:
Title:
Notice Address for Letters of Credit and Funding Requests:
NationsBank of Texas, N.A.
901 Main Street, 13th Floor
Dallas, Texas 75202
Attn: Marie Lancaster
Notice Address for All Other Purposes:
NationsBank of Texas, N.A.
444 South Flower Street
Suite 4100
Los Angeles, California 90071
Attn: Brad DeSpain
<PAGE>
NATIONSBANC CAPITAL MARKETS, INC.,
as Arranger
By:
Title:
Notice Address:
NationsBanc Capital Markets, Inc.
901 Main Street
Dallas, Texas 75202
Attn: Gary Kahn
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By:
Title:
Notice Address:
1301 Avenue of the Americas
New York, New York 10019
Attn: Martin Golden
<PAGE>
BANQUE PARIBAS
By:
Title:
Notice Address:
2029 Century Park East
Suite 3900
Los Angeles, California 90067
Attn: Sean Conlon
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY
By:
Title:
Notice Address:
350 South Grand Avenue
Suite 3000
Los Angeles, California 90071
Attn: Takaomi Tomioka
<PAGE>
THE SUMITOMO BANK, LIMITED
By:
Title:
Notice Address:
777 South Figueroa Street
Suite 2600
Los Angeles, California 90017
Attn: Al Galluzzo
<PAGE>
SCHEDULE 2.1
LENDERS' COMMITMENTS AND PRO RATA SHARES
Lender Loan Commitment Pro Rata Share
- ------------------------------------------ ----------------- ------------------
NationsBank of Texas, N.A. $30,000,000 30.0%
Credit Lyonnais 25,000,000 25.0
Banque Paribas 15,000,000 15.0
The Long-Term Credit Bank of Japan, Ltd. 15,000,000 15.0
The Sumitomo Bank, Limited 15,000,000 15.0
TOTAL $100,000,000 100%
AMENDMENT AND CONFIRMATION
OF
COLLATERAL ACCOUNT AGREEMENT,
COMPANY PLEDGE AGREEMENT
AND
COMPANY SECURITY AGREEMENT
This AMENDMENT AND CONFIRMATION OF COLLATERAL AMOUNT
AGREEMENT, COMPANY PLEDGE AGREEMENT AND COMPANY SECURITY AGREEMENT (this
"Amendment and Confirmation") is dated as of December 20, 1996 and is made by
REGENCY HEALTH SERVICES, INC., a Delaware corporation ("Company"), in favor of
NATIONSBANK OF TEXAS, N.A., as agent for and representative of (in such capacity
herein called "Secured Party") the financial institutions ("Lenders") party to
the Amended and Restated Credit Agreement referred to below.
RECITALS
WHEREAS, Company, Secured Party and certain of the Lenders
have entered into a Credit Agreement dated as of December 28, 1995 (said Credit
Agreement, as amended by the First Amendment and Waiver to Credit Agreement
dated as of April 22, 1996, and the Second Amendment to Credit Agreement and
Approval dated as of June 20, 1996, the "Existing Credit Agreement");
WHEREAS, in connection with the Existing Credit Agreement,
Company executed and delivered in favor of Secured Party (i) that certain
Collateral Account Agreement (the "Collateral Account Agreement"), (ii) that
certain Company Pledge Agreement dated as of December 25, 1995 (as amended, the
"Company Pledge Agreement") and (iii) that certain Company Security Agreement
dated as of December 25, 1995 (as amended, the "Company Security Agreement";
and, together with the Collateral Account Agreement and Company Pledge
Agreement, the "Company Collateral Documents");
WHEREAS, Company, Secured Party and Lenders will enter into
that certain Amended and Restated Credit Agreement dated as of the date hereof
which increases the Commitments from $50,000,000 to $100,000,000 and amends and
restates the Existing Credit Agreement in its entirety (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Amended and
Restated Credit Agreement");
WHEREAS, Company and Secured Party desire to enter into this
Amendment and Confirmation in order to, among other things, amend the Company
Collateral Documents and confirm the continuation of Company's obligations under
the Company Collateral Documents in respect of the Obligations (including,
without limitation, Obligations in respect of the increased Commitments) under
the Amended and Restated Credit Agreement;
WHEREAS, it is a condition precedent to the initial extensions
of credit by Lenders under the Amended and Restated Credit Agreement that
Company shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce Lenders to make Loans and issue Letters of Credit under the Amended
and Restated Credit Agreement and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Company hereby agrees
with Secured Party as follows:
SECTION 1. Definitions. Unless otherwise indicated or the
context clearly requires otherwise, capitalized terms used in this Amendment and
Confirmation without definition shall have the respective meanings given thereto
in the Amended and Restated Credit Agreement.
SECTION 2. Amendments to the Company Collateral Documents.
2.1. Collateral Account Agreement. Paragraph A of the
Preliminary Statements of the
Collateral Account Agreement is hereby amended by deleting such paragraph in its
entirety and substituting
therefor the following:
"A. Secured Party and Lenders have entered into
a Credit Agreement dated as of
December 28, 1995, as amended by the First Amendment and Waiver to Credit
Agreement dated as of April 22, 1996, and the Second Amendment to Credit
Agreement and Approval dated as of June 20, 1996, as amended and restated in
full by the Amended and Restated Credit Agreement dated as of December 20, 1996
(said Credit Agreement, as so amended and restated and as it may hereafter be
amended, amended and restated, supplemented or otherwise modified from time to
time, being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Pledgor and
NationsBanc Capital Markets, Inc., as Arranger, pursuant to which Lenders have
made certain commitments, subject to the terms and conditions set forth in the
Credit Agreement, to extend certain credit facilities to Pledgor."
2.2. Company Pledge Agreement.
A. Preliminary Statements. Paragraphs B and C of the
Preliminary Statements of the Company
Pledge Agreement are hereby amended by deleting such paragraphs in their
entirety and substituting therefor the
following:
"B. Secured Party, NationsBanc Capital Markets, Inc.,
as Arranger, and Lenders have entered into a Credit Agreement dated as
of December 28, 1995, as amended by the First Amendment and Waiver to
Credit Agreement dated as of April 22, 1996, and the Second Amendment
to Credit Agreement and Approval dated as of June 20, 1996, as amended
and restated in full by the Amended and Restated Credit Agreement dated
as of December 20, 1996 (said Credit Agreement, as so amended and
restated and as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined) with Pledgor pursuant to which
Lenders have made certain commitments, subject to the terms and
conditions set forth in the Credit Agreement, to extend certain credit
facilities to Pledgor.
C. Pledgor may from time to time enter into one
or more Hedge Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more Lenders
(in such capacity, collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the obligations of
Pledgor under the Lender Interest Rate Agreements, including without limitation
the obligation of Pledgor to make payments thereunder in the event of early
termination thereof, together with all obligations of Pledgor under the Credit
Agreement and the other Loan Documents, be secured hereunder."
B. Additional Pledged Collateral. Schedule I
of the Company Pledge Agreement is
hereby amended by adding thereto the following Pledged Stock (as defined in the
Company Pledge Agreement):
Class of Stock/ Stock Number of Shares
Stock Issuer Par Value Certificate Nos. (% of Outstanding)
Regency - Common Stock/ 1,000
North Carolina, Inc. No Par Value 1 100%
Regency - Tennesee, Inc. Common Stock/ 100
No Par Value 1 100%
2.3. Company Security Agreement. Paragraphs A and B of the
Preliminary Statements of the
Company Security Agreement are hereby amended by deleting such paragraphs in
their entirety and substituting
therefor the following:
"A. Secured Party, NationsBanc Capital Markets, Inc.,
as Arranger, and Lenders have entered into a Credit Agreement dated as
of December 28, 1995, as amended by the First Amendment and Waiver to
Credit Agreement dated as of April 22, 1996, and the Second Amendment
to Credit Agreement and Approval dated as of June 20, 1996, and as
amended and restated in full by the Amended and Restated Credit
Agreement dated as of December 20, 1996 (said Credit Agreement, as so
amended and restated, and as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being
the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Grantor
pursuant to which Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend
certain credit facilities to Grantor.
B. Grantor may from time to time enter into one
or more Hedge Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more Lenders
(in such capacity, collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the obligations of
Grantor under the Lender Interest Rate Agreements, including without limitation
the obligation of Grantor to make payments thereunder in the event of early
termination thereof, together with all obligations of Grantor under the Credit
Agreement and the other Loan Documents, be secured hereunder."
SECTION 3. Confirmation. Company hereby acknowledges that it
has reviewed the terms and provisions of the Amended and Restated Credit
Agreement, the Company Collateral Documents and this Amendment and Confirmation
and fully understands the ramifications of this Amendment and Confirmation.
Company hereby confirms that the Collateral Account Agreement, Company Security
Agreement and Company Pledge Agreement will continue to secure to the fullest
extent possible the payment and performance of all "Secured Obligations," as
defined in the Collateral Account Agreement, Company Security Agreement and
Company Pledge Agreement, and that all such "Secured Obligations" shall include,
without limitation, all Obligations (including, without limitations, all
Obligations in respect of the increased Commitments) under the Amended and
Restated Credit Agreement.
Company acknowledges and agrees that each Company Collateral
Document shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of the Amended and Restated Credit Amendment
or this Amendment and Confirmation.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on Company Collateral Documents. On
and after the date hereof, each reference in the Collateral Account Agreement,
Company Pledge Agreement or the Company Security Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to the
Collateral Account Agreement, Company Pledge Agreement or the Company Security
Agreement, and each reference in the other Loan Documents to the Collateral
Account Agreement, Company Pledge Agreement or the Company Security Agreement,
or "thereunder," "thereof" or words of like import referring to the Collateral
Account Agreement, Company Pledge Agreement or the Company Security Agreement
shall mean and be a reference to the Collateral Account Agreement, Company
Pledge Agreement or the Company Security Agreement, as applicable, as amended
and confirmed by this Amendment and Confirmation.
B. Fees and Expenses. Company acknowledges that all reasonable
costs, fees and expenses as described in subsection 11.2 of the Existing Credit
Agreement incurred by Administrative Agent and its counsel with respect to this
Amendment and Confirmation and the documents and transactions contemplated
hereby shall be for the account of Company.
C. Headings. Section and subsection headings in this
Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
and Confirmation for any other
purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT AND CONFIRMATION AND
THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts; Effectiveness. This Amendment and
Confirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Amendment and
Confirmation shall become effective upon the execution and delivery of a
counterpart hereof by Company and upon the Closing of the Amended and Restated
Credit Agreement.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Company has caused this Amendment and
Confirmation to be duly executed and delivered by its officers thereunto duly
authorized as of the date first written above.
REGENCY HEALTH SERVICES, INC.,
as Pledgor under the Collateral Account
Agreement and Company Pledge Agreement
and as Grantor under the Company
Security Agreement
By: __________________________
Title:
Agreed and Accepted:
NATIONSBANK OF TEXAS, N.A.,
as Secured Party under the
Collateral Account Agreement,
Company Pledge Agreement and
Company Security Agreement
By: __________________________
Title:
Exhibit 2.13
AMENDMENT AND CONFIRMATION
OF
SUBSIDIARY GUARANTY,
SUBSIDIARY PLEDGE AGREEMENT
AND
SUBSIDIARY SECURITY AGREEMENT
This AMENDMENT AND CONFIRMATION OF SUBSIDIARY GUARANTY,
SUBSIDIARY PLEDGE AGREEMENT AND SUBSIDIARY SECURITY AGREEMENT (this "Amendment
and Confirmation") is dated as of December 20, 1996 and is made by THE
UNDERSIGNED (each a "Subsidiary Guarantor"), in favor of NATIONSBANK OF TEXAS,
N.A., as agent for and representative of (in such capacity herein called
"Secured Party") the financial institutions ("Lenders") party to the Amended and
Restated Credit Agreement referred to below.
RECITALS
WHEREAS, Regency Health Services, Inc., a Delaware corporation
and parent of the Subsidiary Guarantors (the "Company"), Secured Party and
certain of the Lenders have entered into a Credit Agreement dated as of December
28, 1995 (said Credit Agreement, as amended by the First Amendment and Waiver to
Credit Agreement dated as of April 22, 1996, and the Second Amendment to Credit
Agreement and Approval dated as of June 20, 1996, the "Existing Credit
Agreement");
WHEREAS, in connection with the Existing Credit Agreement, the
Subsidiary Guarantors (other than the New Subsidiaries) executed and delivered
in favor of Secured Party (i) that certain Subsidiary Guaranty dated as of
December 25, 1995 (as amended, the "Subsidiary Guaranty"), (ii) that certain
Subsidiary Pledge Agreement dated as of December 25, 1995 (as amended, the
"Subsidiary Pledge Agreement") and (iii) that certain Subsidiary Security
Agreement dated as of December 25, 1995 (as amended, the "Subsidiary Security
Agreement"; and, together with the Subsidiary Guaranty and Subsidiary Pledge
Agreement, the "Subsidiary Guaranty and Collateral Documents");
WHEREAS, Company, Secured Party and Lenders will enter into
that certain Amended and Restated Credit Agreement dated as of the date hereof
which increases the Commitments from $50,000,000 to $100,000,000 and amends and
restates the Existing Credit Agreement in its entirety (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Amended and
Restated Credit Agreement");
WHEREAS, Subsidiary Guarantors and Secured Party desire to
enter into this Amendment and Confirmation in order to, among other things,
amend the Subsidiary Guaranty and Collateral Documents, add the New Subsidiaries
as parties to the Subsidiary Guaranty and Collateral Documents and confirm the
continuation of Subsidiary Guarantors' obligations under the Subsidiary Guaranty
and Subsidiary Documents in respect of the Obligations (including, without
limitation, Obligations in respect of the increased Commitments) under the
Amended and Restated Credit Agreement;
WHEREAS, it is a condition precedent to the initial extensions
of credit by Lenders under the Amended and Restated Credit Agreement that
Subsidiary Guarantors shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce Lenders to make Loans and issue Letters of Credit under the Amended
and Restated Credit Agreement and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Subsidiary Guarantors
hereby agree with Secured Party as follows:
SECTION 1. Definitions. Unless otherwise indicated or the
context clearly requires otherwise, capitalized terms used in this Amendment and
Confirmation without definition shall have the respective meanings given thereto
in the Amended and Restated Credit Agreement.
SECTION 2. Amendments to Subsidiary Guaranty and Subsidiary
Collateral Documents.
2.1. Subsidiary Guaranty.
A. Recitals. Paragraphs A and B of the Recitals of the
Subsidiary Guaranty are hereby
amended by deleting such paragraphs in their entirety and substituting therefor
the following:
"A. Regency Health Service, Inc., a Delaware
corporation ("Company"), has entered into that certain Credit
Agreement dated as of December 28, 1995 with Guarantied Party,
NationsBanc Capital Markets, Inc., as Arranger, and Lenders,
as amended by the First Amendment and Waiver to Credit
Agreement dated as of April 22, 1996, and the Second Amendment
to Credit Agreement and Approval dated as of June 20, 1996, as
amended and restated in full by the Amended and Restated
Credit Agreement dated as of December 20,1996 (said Credit
Agreement as so amended and restated and as it may hereafter
be amended, amended and restated, supplemented or otherwise
modified from time to time, being the "Credit Agreement";
capitalized terms defined therein and not otherwise defined
herein being used herein as therein defined).
B. Company may from time to time enter, or
may from time to time have entered, into one or more Hedge
Agreements (collectively, the "Lender Interest Rate
Agreements") with or one or more Lenders (in such capacity,
collectively, "Interest Rate Exchangers") in accordance with
the terms of the Credit Agreement, and it is desired that the
obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of
Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest
Rate Obligations"), together with all obligations of Company
under the Credit Agreement and the other Loan Documents, be
guarantied hereunder."
B. Additional Guarantors. By execution hereof, the New
Subsidiaries each hereby becomes
a party to and a "Guarantor" under the Subsidiary Guaranty, as amended by this
Amendment and Confirmation and
shall be bound by the terms and provisions thereof.
2.2. Subsidiary Pledge Agreement.
A. Preliminary Statements. Paragraphs B, C and D of the
Preliminary Statements of the
Subsidiary Pledge Agreement are hereby amended by deleting such paragraphs in
their entirety and substituting
therefor the following:
"B. Secured Party, NationsBanc Capital Markets, Inc.,
as Arranger, and Lenders have entered into a Credit Agreement dated as
of December 28, 1995, as amended by the First Amendment and Waiver to
Credit Agreement dated as of April 22, 1996, and the Second Amendment
to Credit Agreement and Approval dated as of June 20, 1996, as amended
and restated in full by the Amended and Restated Credit Agreement dated
as of December 20, 1996 (said Credit Agreement, as so amended and
restated and as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined) with Regency Health Services,
Inc., a Delaware corporation ("Company") pursuant to which Lenders have
made certain commitments, subject to the terms and conditions set forth
in the Credit Agreement, to extend certain credit facilities to
Company.
C. Company may from time to time enter, or may from
time to time have entered, into one or more Hedge Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more
Lenders (in such capacity, collectively, "Interest Rate Exchangers").
D. Pledgors have executed and delivered that certain
Subsidiary Guaranty dated as of December 28, 1995, as amended by the
Amendment and Confirmation of Subsidiary Guaranty, Subsidiary Pledge
Agreement and Subsidiary Security Agreement dated as of December 20,
1996 (said Subsidiary Guaranty as so amended and as it may hereafter be
amended, supplemented or otherwise modified from time to time, being
the "Guaranty") in favor of Secured Party for the benefit of Lenders
and any Interest Rate Exchangers, pursuant to which Pledgors have
guarantied the prompt payment and performance when due of all
obligations of Company under the Credit Agreement and all obligations
of Company under the Lender Interest Rate Agreements, including without
limitation the obligation of Company to make payments thereunder in the
event of early termination thereof."
B. Additional Pledgors and Pledged Collateral.
By execution hereof, each of the
New Subsidiaries hereby becomes party to and a "Pledgor" under the Subsidiary
Pledge Agreement and shall be bound by the terms and provisions thereof.
2.3. Subsidiary Security Agreement.
A. Preliminary Statements. Paragraphs A, B and C of the
Preliminary Statements of the
Subsidiary Security Agreement are hereby amended by deleting such paragraphs in
their entirety and substituting
therefor the following:
"A. Secured Party, NationsBanc Capital Markets, Inc.,
as Arranger, and Lenders have entered into a Credit Agreement dated as
of December 28, 1995, as amended by the First Amendment and Waiver to
Credit Agreement dated as of April 22, 1996, and the Second Amendment
to Credit Agreement and Approval dated as of June 20, 1996, and as
amended and restated in full by the Amended and Restated Credit
Agreement dated as of December 20, 1996 (said Credit Agreement, as so
amended and restated, and as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being
the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Regency
Health Services, Inc., a Delaware corporation ("Company") pursuant to
which Lenders have made certain commitments, subject to the terms and
conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company.
B. Company may from time to time enter, or may from
time to time have entered, into one or more Hedge Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more
Lenders (in such capacity, collectively, "Interest Rate Exchangers").
C. Grantors have executed and delivered that certain
Subsidiary Guaranty dated as of December 28, 1995, as amended by the
Amendment and Confirmation of Subsidiary Guaranty, Subsidiary Pledge
Agreement and Subsidiary Security Agreement dated as of December 20,
1996 (said Subsidiary Guaranty, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the
"Guaranty") in favor of Secured Party for the benefit of Lenders and
any Interest Rate Exchangers, pursuant to which Grantors have
guarantied the prompt payment and performance when due of all
obligations of Company under the Credit Agreement and the other Loan
Documents and all obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of Company to
make payments thereunder in the event of early termination thereof."
B. Additional Grantors. By execution hereof, each
of the New Subsidiaries hereby
becomes party to and a "Grantor" under the Subsidiary Security Agreement and
shall be bound by the terms and
provisions thereof.
C. Amendment to Schedule 1. Schedule 1 of the
Subsidiary Security Agreement is hereby
amended by adding thereto the following information:
52. REGENCY-NORTH CAROLINA, INC.
Corporate Name: Regency-North Carolina, Inc.
Trade Name(s): Regency-North Carolina, Inc.
Chief Executive Office: 2742 Dow Avenue, Tustin,
California 92680
-----------------------
Jurisdiction(s) in which
Grantor is Doing Business:North Carolina
53. REGENCY-TENNESSEE, INC.
Corporate Name: Regency-Tennessee, Inc.
Trade Name(s): Regency-Tennessee, Inc.
Chief Executive Office: 2742 Dow Avenue, Tustin,
California 92680
-----------------------
Jurisdiction(s) in which
Grantor is Doing Business:Tennessee
SECTION 3. Confirmation. Each Subsidiary Guarantor hereby
acknowledges that it has reviewed the terms and provisions of the Amended and
Restated Credit Agreement, the Subsidiary Guaranty and Collateral Documents and
this Amendment and Confirmation and fully understands the ramifications of this
Amendment and Confirmation. Each Subsidiary Guarantor hereby confirms that the
Subsidiary Guaranty and the Subsidiary Security Agreement and Subsidiary Pledge
Agreement will continue to guaranty and secure, as the case may be, to the
fullest extent possible the payment and performance of all "Guarantied
Obligations," as defined in the Subsidiary Guaranty, and the "Secured
Obligations," as defined in the Subsidiary Security Agreement and the Subsidiary
Pledge Agreement, and that all such "Guarantied Obligations" and "Secured
Obligations" shall include, without limitation, all Obligations (including,
without limitations, all Obligations in respect of the increased Commitments)
under the Amended and Restated Credit Agreement.
Each Subsidiary Guarantor acknowledges and agrees that the
Subsidiary Guaranty and each Subsidiary Collateral Document shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of the Amended and Restated Credit Amendment or this Amendment and
Confirmation.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on Subsidiary Guaranty and
Collateral Documents. On and after the date hereof, each reference in the
Subsidiary Guaranty, Subsidiary Pledge Agreement or Subsidiary Security
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Subsidiary Guaranty, Subsidiary Pledge Agreement or
Subsidiary Security Agreement, and each reference in the other Loan Documents to
the Subsidiary Guaranty, Subsidiary Pledge Agreement or Subsidiary Security
Agreement, or "thereunder," "thereof" or words of like import referring to the
Subsidiary Guaranty, Subsidiary Pledge Agreement or Subsidiary Security
Agreement shall mean and be a reference to the Subsidiary Guaranty, Subsidiary
Pledge Agreement or Subsidiary Security Agreement, as applicable, as amended and
confirmed by this Amendment and Confirmation.
B. Headings. Section and subsection headings in this
Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
and Confirmation for any other
purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND CONFIRMATION AND
THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts; Effectiveness. This Amendment and
Confirmation may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Amendment and
Confirmation shall become effective upon the execution and delivery of a
counterpart hereof by Subsidiary Guarantors and upon the Closing of the Amended
and Restated Credit Agreement.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Amendment and Confirmation to be duly executed and delivered by its officers
thereunto duly authorized as of the date first written above.
BRITANNY REHABILITATION CENTER
CARMICHAEL REHABILITATION CENTER
CASA DE VIDA REHABILITATION CENTER
COALINGA REHABILITATION CENTER
COVINA REHABILITATION CENTER
EVERGREEN REHABILITATION CENTER
FAIRFIELD REHABILITATION CENTER
FULLERTON REHABILITATION CENTER
GLENDORA REHABILITATION CENTER
GRAND TERRACE REHABILITATION CENTER
HARBOR VIEW REHABILITATION CENTER
HERITAGE REHABILITATION CENTER
HUNTINGTON BEACH CONVALESCENT HOSPITAL
JACKSON REHABILITATION CENTER, INC.
LINDA-MAR REHABILITATION CENTER
MEADOWBROOK REHABILITATION CENTER
MEADOWVIEW REHABILITATION CENTER
NEWPORT BEACH REHABILITATION CENTER
PARADISE REHABILITATION CENTER, INC.
PASO ROBLES REHABILITATION CENTER
ROSE REHABILITATION CENTER
ROSEWOOD REHABILITATION CENTER, INC.
SHANDIN HILLS REHABILITATION CENTER
HAWTHORNE REHABILITATION CENTER
STOCKTON REHABILITATION CENTER, INC.
VISTA KNOLL REHABILITATION CENTER, INC.
WILLOWVIEW REHABILITATION CENTER
NORTH STATE HOME HEALTH CARE, INC.
FIRST CLASS PHARMACY, INC.,
each as Guarantor
By: _______________________
Title: Secretary of each of the above
listed Subsidiaries
Notice Address: 2742 Dow Avenue
Tustin, California 92680
Attention: Chief Financial Officer
[Signatures continued on next page]
OASIS MENTAL HEALTH TREATMENT
CENTER, INC.
HALLMARK HEALTH SERVICES, INC.
RHS MANAGEMENT CORPORATION
BRASWELL ENTERPRISES, INC.
SCRS & COMMUNICOLOGY, INC. OF OHIO
CARE ENTERPRISES, INC.
GLENVILLE HEALTH CARE CORP.
CIRCLEVILLE HEALTH CARE CORP.
MARION HEALTH CARE CORP.
NEW LEXINGTON HEALTH CARE CORP.
AMERICARE MIDWEST, INC.
CARE FINANCE, INC.
HEALTHCARE NETWORK
AMERICARE HOME CARE, INC.
AMERICARE OF WEST VIRGINIA, INC.
DUNBAR HEALTH CARE CORP.
PUTNAM COUNTY HEALTH CARE CORP.
SALEM HEALTH CARE CORP.
BECKLEY HEALTH CARE CORP.
CARE ENTERPRISES WEST
BREL, INC.
CARE HOME HEALTH SERVICES, INC.
REGENCY - NORTH CAROLINA, INC.
REGENCY - TENNESSEE, INC.,
each as Guarantor
By: _______________________
Title: Secretary of each of the above
listed Subsidiaries
Notice Address: 2742 Dow Avenue
Tustin, California 92680
Attention: Chief Financial Officer
<PAGE>
Agreed and Accepted:
NATIONSBANK OF TEXAS, N.A.,
as Guarantied Party under the
Subsidiary Guaranty and
Secured Party under the
Subsidiary Pledge Agreement and
Subsidiary Security Agreement
By: __________________________
Title:
