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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (date of earliest event reported): December 31, 1998
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MHM SERVICES, INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 1-12238 52-1223048
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
</TABLE>
8000 TOWERS CRESCENT DRIVE
SUITE 810
VIENNA, VIRGINIA 22182
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 749-4600
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 1998, MHM Services, Inc. through its wholly-owned
subsidiary, MHM Extended Care Services, Inc.(the "Extended Care Services
Division"), (collectively, the "Company"), completed a series of transactions
which resulted, with one exception, in the total divestiture of all the
business units in which the Extended Care Services Division has operated. These
transactions were undertaken to execute management's strategy to focus upon its
correctional services business and eliminate those business units which were
unprofitably operating. As a result of these transactions, the Company's sole
remaining operations in the Extended Care Services Division consist of a
capitated contract to provide services to Medicaid beneficiaries residing in
Georgia nursing homes. The Company intends to retain this contract. The
operations of the business units, which were divested accounted for
approximately $11.5 million in revenue for the fiscal year ended September 30,
1998.
Effective December 16, 1998, the Extended Care Services Division
entered into an agreement with Paradigm Health Services, Inc.("Paradigm"),
whereby the Company agreed to transfer certain assets related to the delivery
of mental health services to patients of extended care facilities in the States
of Tennessee and Georgia, except those provided under the Company's capitated
Medicaid contract with the State of Georgia Department of Medical Assistance.
These assets primarily include contracts for the provision of health care
services and contracts with treating clinicians. The transfer of the assets is
to occur when Paradigm receives new certifications and provider numbers for
participation in the Medicare and Medicaid programs. Pending the transfer,
Paradigm is managing the business in which the assets it is purchasing are
employed under an Interim Management Agreement. The financial risks associated
with the operations of the business have been assumed by Paradigm under this
management agreement. Paradigm has not paid, nor will it pay, any
consideration of a material nature in connection with its acquisition from the
Company. The Company, however, by virtue of this transaction was relieved of
its obligations to continue to manage and operate the business.
On December 31, 1998, the Company executed and closed an agreement with
Arbour Elder Services, Inc. d/b/a Arbour Seniorcare to sell the operations
which the Extended Care Services Division maintained in the State of
Massachusetts. These assets included outpatient clinics, contracts to provide
behavioral health care services to extended care facilities such as nursing
homes and schools, equipment and agreements with treating clinicians. The
assets principally comprise those assets which the Company initially acquired
from National Mentor, Inc., Liberty Bay Colony Health Services, Inc. and
Liberty Management Group, Inc. related to the delivery of outpatient mental
health services and services to patients of extended care facilities in
Massachusetts. These assets were sold for a current payment of $850,000 which
was paid at closing.
Also on December 31, 1998, the Company closed an agreement with BHG of
Pennsylvania, LLC ("BHG") to sell certain assets related to the delivery of
mental health
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services to patients of extended care facilities in the States of Pennsylvania
and New Jersey. These assets included contracts to provide mental health
services to nursing homes and other contractual rights and other intangible
assets used in the operations being sold. The total consideration for this
transaction was $170,000 of which $20,000 was paid at closing. The remaining
$150,000 is payable in accordance with a promissory note, payable in its
entirety, on March 30, 1999. The assets purchased will not transfer until BHG
secures provider numbers to participate in the Medicare and Medicaid programs.
Until these numbers are obtained, BHG is operating the business in which the
assets being purchased are employed under an Interim Management Agreement. The
financial risks associated with the operations of the business have been
assumed by BHG under this management agreement. Integrated Health Options, LLC,
BHG, Inc. and Illiana Behavioral Management, Inc. have guaranteed BHG's
performance under the outstanding agreements including the note. The guaranty
of Integrated Health Options, LLC is also secured under a Security Agreement.
The description of this series of transactions contained herein is
qualified in its entirety by reference to the agreements relating thereto,
which are appended hereto as exhibits to this Form 8-K, and incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS.
(a) Financial statements of business acquired.
(b) Not applicable.
(b) Pro forma financial information.
As of date of this Form 8-K, it is impracticable for the
Company to file the required pro forma financial information required
by this item. The Company intends to file such required information
as soon as the pro forma financial information becomes available, but
in any event not later than March 16, 1999.
(c) Exhibits:
10.1 Asset Purchase Agreement by and between Paradigm Health Services,
Inc. and MHM Extended Care Services, Inc. (filed herewith).
10.2 Interim Management Agreement by and between Paradigm Health
Services, Inc. and MHM Extended Care Services, Inc. (filed
herewith).
10.3 Asset Purchase Agreement by and among Arbour Elder Services,
Inc., d/b/a Arbour Seniorcare and MHM Extended Care Services,
Inc. and MHM Services, Inc. (filed herewith)
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10.4 Asset Purchase Agreement by and between BHG of Pennsylvania, LLC
and MHM Extended Care Services, Inc. (filed herewith).
10.5 Interim Management Agreement by and between BHG of Pennsylvania,
LLC and MHM Extended Care Services, Inc. (filed herewith).
10.6 Term Promissory Note of BHG of Pennsylvania, LLC, issued to MHM
Extended Care Services, Inc. (filed herewith).
10.7 Guaranty Agreement by and among Integrated Health Options, LLC,
BHG, Inc., and Illiana Behavioral Management, Inc., for the
benefit of MHM Extended Care Services, Inc. (filed herewith)
10.8 Security Agreement by and between Integrated Health Options, LLC
and MHM Extended Care Services, Inc. (filed herewith).
99.1 Press Release of the Company dated January 11, 1999 (filed
herewith).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MHM SERVICES, INC.
(Registrant)
Date: January 15, 1999 By:
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Cleveland E. Slade
Chief Financial Officer
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Exhibit No. 10-2
ACQUISITION AGREEMENT
PARADIGM HEALTH SERVICES, INC. ("Buyer") and MHM EXTENDED CARE SERVICES, INC.
("Seller") hereby agree as follows:
Buyer desires to purchase and Seller desires to sell to Buyer certain assets and
business related to Seller's delivery of mental health services to patients of
nursing homes within the States of Tennessee and Georgia, except those provided
under Seller's PASARR contract with the State of Georgia Department of Medical
Assistance (the "Operations"), all on the terms and subject to the conditions
set forth in this Agreement.
1. ACQUIRED ASSETS. The assets to be conveyed shall include, to the
extent assignable, all contracts with nursing homes in the States of Tennessee
and Georgia (the "States") for provision of mental health services, all customer
lists of the Operations, all employment and independent contracts with
clinicians in the States providing such services, all rights under covenants not
to compete or similar agreements relating to the Operations, all Management
Agreements and other contractual rights Seller may have with professional
corporations in the States and related to the Operations, and all other
intangibles related to the Operations (collectively, the Acquired Assets").
Seller will transfer to Buyer at time of purchase all billing information and
other files (paper or software) having to do with the Company's Operations,
including correspondence and communications with regulatory agencies, except as
to billing records needed to collect accounts receivable retained by Seller (to
which records each party shall have full access). Subject to the terms and
conditions of this Agreement, Buyer agrees to purchase and Seller agrees to
sell, assign and deliver to Buyer as of Closing, as defined in Section 10.1 of
this Agreement, all of Seller's right, title and interest in, to and under the
Acquired Assets, free and clear of any mortgage, pledge, hypothecation, claim,
security interest, encumbrance, right or interest of others, lease, license,
easement, encroachment, covenant, title defect, lien, option or right of first
refusal (collectively, "Liens"). The Acquired Assets shall not include, and
Seller shall retain, all cash, cash equivalents, and accounts receivable arising
from the provision of services in the States prior to the Closing Date, all
assets of business operations similar to the Operations conducted by Seller in
States other than the States of Tennessee and Georgia, and all business
operations and assets related thereto, conducted by Seller under the Georgia
PASARR contract.
2. CONSIDERATION.
2.1 Consideration. The consideration for the Acquired Assets will be
payment to Seller by Buyer of the sum of ten dollars ($10.00) (the "Purchase
Price"). At Closing, Buyer will pay the Purchase Price to Seller in cash.
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2.2 Commissions and Finders Fees. Buyer and Seller warrant and
represent to each other that no broker or finder has acted for it in connection
with this transaction and that no brokerage, commissions or similar fees will be
due to any person at Closing.
3. ASSUMPTION OF LIABILITIES. At closing Buyer will not assume or become
responsible for any liabilities and obligations (including without limitation
any obligations to Apogee, Inc.) of Seller relating to the Operations prior to
Closing except: (a) Buyer will assume the Employment Agreement dated as of March
1, 1997, as amended between Seller, Psychiatric Specialty Group, P.C. and
Gilbert Katz, M.D., and thereafter will be responsible for all liabilities
thereunder; (b) all obligations arising after Closing under those contracts with
nursing homes being assumed by Buyer, provided, however, that nothing herein
shall be construed as an assumption by Buyer of any liabilities as to post
payment reviews, malpractice claims, payroll, personnel expenses, or earn-outs
arising from or related to services provided prior to closing.
4. SUBLEASE. As of Closing, Buyer shall sublease from Seller on a
month-to-month basis one-half of the office space being leased by Seller at 1808
Westend Avenue, Suite 511, Nashville, Tennessee 37203. Rent under said sublease
shall be payable monthly in advance in an amount equal to one-half the rent paid
by Seller to its landlord, plus one-half the utility bills paid by Seller for
the space.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as expressly set forth
to the contrary in a Schedule hereto, Seller represents and warrants to Buyer
as follows:
5.1 Corporate Action. As of Closing, Seller and its Board of Directors
will have taken all action required by its Articles of incorporation, Bylaws,
and otherwise to authorize the execution and consummation of this Agreement.
This Agreement will constitute the valid and legally binding obligation of
Seller, enforceable in accordance with its terms, except that enforceability
may be limited by applicable equitable principles or bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally, or
hospital licensing requirements.
5.2 No Conflict With Other Agreements or Laws. The execution and
consummation by Seller of this Agreement, and the other agreements and documents
contemplated hereby, will not (a) violate the terms of Seller's Articles of
Incorporation, Bylaws or any instrument, agreement, mortgage, judgment, decree,
commitment or understanding, written or oral, to which Seller is a party, or by
which Seller or any of its property is bound, (b) conflict with, result in a
breach of, constitute (with giving of notice or lapse of time or both) a default
under or give any person any right to terminate, modify, accelerate or otherwise
change the existing obligations of Seller under any such instrument, agreement,
mortgage, judgment, decree, commitment or
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understanding, (c) result in the creation or imposition of any Lien upon Seller
or its property or assets, or (d) violate any applicable law.
5.3 Organization and Qualification. Seller is organized, validly
existing and in good standing under the laws of Delaware. Seller has full power
and authority to carry on its business as it is now being conducted, to own and
lease the properties and assets which it now owns or leases and to consummate
the Seller's Agreements. Seller is not in violation of any of the provisions of
their Partnership Agreements.
5.4 Taxes.
(a) With respect to all amounts in respect of taxes relating to
the Operations and imposed on the Seller for which the Seller is or could be
liable, whether to taxing authorities (as, for example, under tax allocation
agreements) or other persons or agencies, with respect to all taxable periods
or other portions of periods ending on or before the Closing Date (defined
below), all applicable tax laws and agreements have been or by Closing will
have been fully complied with, and all such amounts required to be paid by the
Seller to taxing authorities or others on or before the date hereof have been
or by Closing will have been paid.
5.5 Personal Property. Schedule 5.5 hereto sets forth a true and
correct list of any items of furniture, fixtures, equipment and other personal
property included among the Acquired Assets, all of which are conveyed "as is"
with no warranties, express or implied, as to the condition of such assets.
5.6 Title to Properties; Encumbrances. At Closing Seller will have
good and marketable title to all of the Acquired Assets, free and clear of any
Liens.
5.7 Consents and Approvals. At Closing, no waiver, consent or
approval from or filing with any person or agency (governmental or otherwise)
will be required for Seller to consummate this Agreement, and the other
agreements contemplated hereby, without creating a default or liability.
5.8 Disclosure. No representation or warranty by Sellers contained in
this Agreement, and no statement contained in any certificate, exhibit, list or
other instrument furnished by the Sellers to Buyer pursuant to the provisions
hereof contains or will contain any untrue statement of material fact or omits
or will omit to state a material fact necessary in order to make the statement
contained herein or therein not misleading.
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SCHEDULE 5.5
2-DESKS
2-SMALL UTILITY TABLES
1-PRINTER CART
1-BOOKCASE
6-TALL FILE CABINETS
2-SHORT FILE CABINETS
2-END TABLES
1-EXECUTIVE CHAIR
2-LARGE CHAIRS
2-DESK CHAIRS
2-LAMPS
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6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Sellers as follows:
6.1 Corporate Action. Buyer has taken all action required to authorize
the execution and consummation of this Agreement. This Agreement constitutes
the valid and legally binding obligations of Buyer enforceable in accordance
with its terms, except that enforceability may be limited by applicable
equitable principles or bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally.
6.2 No Conflict With Other Agreements or Laws. The execution and
consummation by Buyer of this Agreement, and the other agreements and documents
contemplated hereby, will not (a) violate the terms of any instrument,
agreement, judgment or decree to which Buyer is a party, or by which Buyer or
any of its properties is bound, (b) be in conflict with, result in a breach of
or constitute (with giving of notice or lapse of time or both) a default under
any such instrument, agreement, judgment or decree, (c) result in the creation
or imposition of any Lien upon Buyer or its properties or assets, or (d)
violate any applicable federal, state, local or foreign law, regulation or
order.
6.3 Organization and Qualification. Buyer is duly organized, validly
existing and in good standing. Buyer has full power and authority to execute
and consummate the Agreements.
6.4 Financial Standing. Buyer has the financial resources to
consummate the transaction contemplated in this Agreement.
7. PRE-CLOSING COVENANTS. The parties covenant and agree as follows:
7.1 Condition of Assets Prior to Closing. Until the Closing, and
unless Buyer otherwise consents in writing, Seller will operate the Acquired
Assets and the Operations substantially in their current condition.
7.2 Notification of Material Adverse Changes. Sellers will promptly
notify Buyer in writing of the occurrence of any material adverse change to the
Acquired Assets or Operations occurring on or after the date of this Agreement
and on or prior to the Closing Date.
7.3 Other Transactions. During the term of this Agreement, the parties
will deal exclusively and in good faith with each other regarding a sale of all
or a material portion of the Acquired Assets. Seller will not, and will direct
Sellers' officers, directors, financial advisors, accountants, agents and
counsel not to: (i) solicit submission of offers from any person relating to a
the Acquired Assets, (ii) participate in any
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discussions or negotiations regarding, or furnish any nonpublic information to
any person regarding purchase of the Acquired Assets by any person other than
Buyer, or (iii) enter into any agreement or understanding, whether oral or
written, that would have the effect of preventing consummation of this
Agreement.
7.4 Consents, Waivers and Approvals. Prior to Closing, Seller will
obtain all consents, waivers, approvals, and releases necessary for Seller to
effect the transactions contemplated herein, free and clear of any and all
liens. All such consents, waivers, releases and approvals will be in writing
and in form and substance satisfactory to Buyer in its discretion as reasonably
exercised by Buyer.
7.5 Supplemental Disclosure. Seller will have the continuing
obligation up to and including the Closing Date to supplement promptly or amend
the Schedules hereto with respect to any matter subsequently arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or listed in the Schedules.
7.6 Conditions Precedent. The parties will use their best efforts in
good faith to satisfy the conditions set forth in Sections 8 and 9 hereof.
7.7 Consents, Regulatory Approvals and Licenses. Buyer acknowledges
that certain of Seller's contracts with nursing homes or clinicians may not be
assignable, may be terminable upon no or minimal notice, or may consist of
arrangements not embodied in binding contractual relationships. Buyer further
acknowledges that Seller makes no warranties or representations as to the
existence or availability of any assignments, consents, approvals, regulatory
licenses, or certifications, including as to nursing home contracts, as may be
necessary for any use of the Acquired Assets as Buyer may intend. Seller agrees
that it shall make such inquiry as to such matters during the Due Diligence
Period as it believes appropriate, and that thereafter consummation of the
transaction contemplated hereby shall not be contingent in any way upon the
existence of or Buyer obtaining any such assignments, consents or regulatory
approvals, licenses, or certifications.
7.8 Unless approved in advance by the other party, neither Buyer nor
Seller shall not issue any press release or written statement for general or
public circulation relating to the transactions contemplated hereby, except as
required by law in the reasonable opinion of Buyer's counsel. Each party agrees
to use good faith efforts to
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obtain the other's approval of the text of any public report, statement or
release prepared.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligation
of Buyer to consummate this Agreement will be subject to the satisfaction, on or
before the Closing Date, or such other date as may be specified, of the
following conditions, any of which may be waived by Buyer in writing.
8.1 Representations. The representations and warranties made by Seller
in Section 5 hereof will be true and correct on the Closing Date as though such
representations and warranties had been made on such date and Seller will
deliver to Buyer a certificate dated as of the Closing Date to the foregoing
effect.
8.2 Covenants. Seller will have duly performed all of the covenants,
acts and undertakings to be performed by it on or prior to the Closing Date,
and Sellers will deliver to Buyer a certificate dated as of the Closing Date to
the foregoing effect.
8.3 No Injunction, Etc. No proceeding, investigation, or legislation
will have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, or prohibit, or to obtain
substantial damages in respect of this Agreement, or which materially affects
title to, or the existence or priority of liens on, the Acquired Assets.
8.4 Incumbency. Seller will have delivered a certificate of incumbency
executed by the president and secretary of Seller listing each officer and
director of Seller and the persons authorized to execute this Agreement and the
other documents contemplated hereby.
8.5 Material Adverse Change. No material adverse change to the
Acquired Assets shall have occurred on or after the date of this Agreement and
on or prior to the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation
of Seller to consummate this Agreement will be subject to the satisfaction, on
or before the Closing Date, of the following conditions, any of which may be
waived by Sellers in writing.
9.1 Representations. The representations and warranties made by Buyer
in Section 6 hereof will be true and correct in all material respects on the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such date and Buyer will deliver to
Seller a certificate dated as of the Closing Date to the foregoing effect for
Buyer.
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9.2 Covenants. Buyer will have duly performed all of the covenants,
acts or undertakings to be performed by it on or before the Closing Date, and
Buyer will deliver to Seller certificates dated as of the Closing Date to the
foregoing effect.
9.3 Certified Resolutions. Buyer will have delivered to Sellers
certificates executed by duly authorized officers and containing true and
correct copy of resolutions duly adopted by Buyer's Board of Directors
approving and authorizing this Agreement and its consummation. Such officers
will also certify that such resolutions have not been revoked or modified and
remain in full force and effect.
9.4 No Injunction, Etc. No proceeding, investigation or legislation
will have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement.
9.5 Incumbency. Buyer will have delivered a certificate of incumbency
executed by its president or a vice president and the secretary or an assistant
secretary listing the persons authorized to execute this Agreement, and the
other documents contemplated hereby.
10. MUTUAL COVENANTS. Each of the parties hereto will refrain from taking
any action which would render any representation or warranty contained in
Sections 5 or 6 of this Agreement inaccurate as of the Closing Date. Each party
will promptly notify the other of any action or proceeding that is instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Each party will take
such further action as may reasonably be requested by another party to evidence
the consummation of this Agreement.
11. CLOSING.
11.1 Time and Place. The closing ("Closing") will be held at the offices
of seller at 8000 Towers Crescent Drive, Vienna, Virginia on December 16, 1998.
11.2 Transactions at the Closing. At Closing, each of the following
transactions will occur subject to paragraph 11.3:
(a) Sellers will deliver to Buyer the following:
(i) such bills of sale, endorsements, assignments and
other instruments of transfer as are necessary to vest in Buyer all of Sellers'
right, title and interest in, to and under the Acquired Assets, free and clear
of all Liens other than Permitted Encumbrances;
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(ii) all such certificates, dated as of the Closing Date, as
Buyer may reasonably request to evidence the fulfillment by Seller, or other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement; and
(iii) an opinion of Seller's counsel, in form and substance
reasonably satisfactory to Buyer, that Seller is duly organized, validly
existing, and in good standing under the laws of the State of Delaware, that
Seller has full power and authority to own and convey the Acquired Assets, and
this Agreement constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except that enforceability may be
limited by applicable equitable principles of bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
(b) Buyer will deliver to Seller the following:
(i) the Purchase Price required under Section 2;
(ii) a certificate of good standing of Buyer from the
Secretary of State of its state of incorporation as of the most recent
practicable date;
(iii) all such certificates, dated as of the Closing Date,
as Seller may reasonably request to evidence the fulfillment by Buyer, or other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement; and
(iv) an opinion of Buyer's counsel in form and substance
reasonably satisfactory to Seller, that Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of its State of Florida;
that Buyer has full power and authority to purchase and own the Acquired
Assets, that all action has been taken as required to authorize the execution
and consummation of this Agreement by Buyer, and this Agreement constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its
terms, except that enforceability may be limited by applicable equitable
principles of bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.
11.3 Optional Effective Date. It is acknowledged that it may take some
period of time for Buyer to obtain on behalf of the Operations new
certifications and provider numbers for participation in the Medicare ad
Medicaid programs. At the option of Buyer, the effective date of transfer to
Buyer of the Acquired Assets may be postponed after Closing to the earlier to
occur either of Buyer obtaining such certifications and provider numbers,
Buyer's cancellation of the Management Agreement described below, or six months
from the date of closing (hereafter the "Effective Date." At Closing Buyer shall
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deliver the purchase price in full to Seller, the parties will execute the
Management Agreement attached hereto as Exhibit __ which shall appoint Buyer as
manager of the Operations on behalf of Seller on the terms and conditions set
forth and until the Effective Date, and Seller will deliver to the Escrow Agent
such documents transferring and conveying the Acquired Assets to Buyer as
otherwise would have been delivered to Buyer at Closing. Seller shall instruct
the Escrow Agent to deliver said documents to Buyer on the Effective Date.
Notwithstanding an election by Buyer of the Optional Effective Date provided in
this paragraph, Closing shall occur at the time and place otherwise provided,
and neither Closing nor the Effective Date shall in any way be postponed or
contingent for any reason, including obtaining certifications or provider
numbers.
12. COVENANT NOT TO COMPETE. For a period of one year after Closing, without
the prior written consent of Buyer, Seller and its affiliates, and officers or
directors of Seller or its affiliates shall not: (a) engage in the
establishment or operation of any business for the delivery of mental health
services to patients at nursing homes within the States, other than pursuant to
the PASARR contract, (b) hire or solicit for hire any employee of the
Operations, or recommend, directly or indirectly to any such employee that he
or she obtain employment elsewhere. Without in any way limiting the foregoing,
it is acknowledged that this covenant does not extend to the provision of
mental health services at prisons, jails, or other correctional facilities or
under the Georgia PASARR contract. Buyer expressly acknowledges that Seller may
be continuing to provide services under the PASARR contracts to patients at
nursing homes at which Buyer will be providing services after Closing.
13. ACCOUNTS RECEIVABLE AND PROVIDER NUMBERS. In order to assure collection
by Seller of accounts receivable arising from services provided prior to the
date of Closing (which accounts receivable are excluded from the Acquired
Assets (the "Excluded Receivables")), Buyer shall bill for services provided by
it after Closing under its own provider numbers or other appropriate billing
information, of Buyer. Seller shall retain the sole right to bill for and
collect the Excluded Receivables together with the sole right, subject to the
Interim Management Agreement, if any, to utilize the provider numbers and other
billing identification which Seller has utilized in connection with the
Operations. In the event proceeds of accounts receivable are collected by
either party which include proceeds of accounts due the other party, the party
collecting such receivables shall deliver to the other party within three (3)
days of receipt those proceeds to which such party is entitled together with a
copy of the Explanation of Benefits ("EOBs") to which such proceeds relate.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements contained in
this Agreement, and the documents contemplated hereby, will be deemed
representations and warranties hereunder by Seller or Buyer, as the case may
be. All
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representations and warranties made by Seller or Buyer in this Agreement will
survive until the second (2nd) anniversary of the Closing Date. No claims for
breach of a representation or warranty (including an Indemnification Claim as
defined in Section 16) may be brought by any person unless written notice of
such claim will have been given on or prior to the end of such survival period
(in which event each representation and warranty with respect to any asserted
claim will survive until such claim is finally resolved and all obligations with
respect thereto are fully satisfied).
15. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned: (a) by the mutual written consent of Seller and
Buyer; (b) by either Seller or Buyer upon the failure of the other to comply
substantially with its or their conditions precedent to Closing and other
obligations set forth herein on or before the Closing Date; (c) upon Seller's
failure to cure (or waiver of the opportunity to cure), any condition or defect
in the Acquired Assets disclosed to Buyer during the Due Diligence Period and
reasonably unacceptable to Buyer. Such cure or waiver thereof shall take place
within thirty (30) days of receipt by Seller of written notice of such condition
or defect from Buyer (such notice to be delivered prior to expiration of the Due
Diligence Period). Termination pursuant to this Section will relieve the parties
of their obligations hereunder with each party responsible for its own fees,
costs and expenses; provided, however, that if the Agreement is terminated
pursuant to (b) above because one party fails to use its reasonable best efforts
to fulfill its obligations hereunder, such party will remain liable to the other
party for all rights as to deposits, losses, costs, expenses (including
attorney's fees) and liabilities incurred by such other party as a result of
such failure.
16. INDEMNIFICATION.
16.1 Losses. For purposes of this Section 16, "Losses" will mean all
damages, losses, costs, expenses (including legal, accounting and other fees
and expenses), interest, penalties, charges and liabilities.
16.2 Indemnification by Seller. Seller agrees to indemnify, defend and
hold harmless Buyer from and against any Loss incurred by Buyer related to or
arising out of (a) the breach of any of the warranties, representations,
covenants or agreements of Seller in this Agreement (a "Breach"), (b) any
liability arising from the ownership of use of the Acquired Assets by Seller
prior to the Closing Date, other than (i) Assumed Liabilities, and (ii) any
costs which may be associated with environmental liabilities relating to the
real property, or the condition of such real property on the Closing Date.
16.3 Indemnification by Buyer. Buyer agrees to indemnify, defend and
hold harmless Sellers from and against any Loss incurred by Sellers related to
or arising out of (a) the breach of any of the warranties, representations or
agreements of Buyer in the Buyer's Agreements, (b) any Assumed Liability, or
(c) any liability associated with
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<PAGE> 12
Buyer's ownership or use of the Acquired Assets or conduct of the Operation on
or after the Closing Date.
16.4 Procedures for Indemnification.
(a) An Indemnification Claim will be made by the Indemnitee by
delivery of a written declaration to Indemnitor requesting indemnification and
specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of a Third Party Claim, containing such other
relevant information as Indemnitee may have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim
the procedures set forth in Section 16.5 hereof will be observed by the
Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor will have ten (10) days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee specifying to the extent reasonable given the information available
to Indemnitor the basis for such objection. Failure to timely so object will
constitute acceptance of the Indemnification Claim by the Indemnitor and the
Indemnification Claim will be paid in accordance with Section 16.4(d). If any
objection is timely interposed by the Indemnitor and the dispute is not
resolved within fifteen (15) days from the date Indemnitee receives such
objection, such dispute will be resolved by litigation, arbitration or
mediation, at the preference of the parties.
(d) Upon determination of the amount of an Indemnification Claim
(including a Third Party Claim), whether by agreement between Indemnitor and
Indemnitee, by an arbitration award or otherwise, Indemnitor will pay the
amount of such Indemnification Claim within ten (10) days of the date such
amount is determined.
16.5 Defense of Third Party Claims.
(a) Should any Third Party Claim be made the obligations and
liabilities of the parties with respect to such Third Party Claim will be
subject to this Section 16.5.
(b) Within a reasonable time (i.e., such time as will not
prejudice the contest, defense, litigation, or settlement of a Third Party
Claim) following the receipt of notice of a Third Party Claim, the party
receiving the notice of the Third Party Claim will (i) notify the other party
of its existence setting forth in writing and with reasonable specificity the
facts and circumstances of which such party has received notice, and (ii) if
the party giving such notice is an Indemnitee, specify in writing the basis
hereunder
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<PAGE> 13
upon which the Indemnitee's claim for indemnification is asserted and tendering
defense of the Third Party Claim to Indemnitor.
(c) If the defense of a Third Party Claim is so tendered and
within ten (10) day thereafter such tender is accepted without qualification by
the Indemnitor as evidenced by written notice to Indemnitee, then, except as
provided below, the Indemnitee will not, and the Indemnitor will, have the
right to contest, defend, litigate and settle such Third Party Claim. The
Indemnitee will have the right to be represented by counsel of its own choice
and at Indemnitee's expense to participate in any contest, defense, litigation
or settlement conducted by the Indemnitor; provided that the Indemnitee will be
entitled to reimbursement therefor if the Indemnitor loses is right to contest,
defend, litigation and settle the Third Party Claim as provided below.
Notwithstanding the preceding provisions of this Section 16.5, if the Third
Party Claim is asserted against both of Indemnitor and Indemnitee and
representation of both of them by the same counsel would be inappropriate due
to actual or potentially differing interests between them, Indemnitee shall be
entitled to retain the right to contest, defend or litigate such Third Party
Claim as it relates to Indemnitee and will have the exclusive right, in its
discretion exercised in good faith, and with the advice of counsel, to settle
any such matter as it related to Indemnitee, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle will be given to the
Indemnitee. If, pursuant to the preceding sentence, the Indemnitee so contests,
defends, litigates or settles a Third Party Claim, the Indemnitee will be
reimbursed by the Indemnitor for the reasonable attorneys' fees and other
expenses of defending, contesting, litigating and/or settling the Third Party
Claim which are incurred from time to time, promptly following the presentation
to the Indemnitor of itemized bills for such attorneys' fees and other
expenses.
(d) The Indemnitor will lose its right to contest, defend,
litigate and settle the Third Party Claim if it fails to diligently contest the
Third Party Claim (except in connection with a settlement thereof in accordance
with the terms hereof). So long as the Indemnitor has not lost its right to
defend, contest, litigate and settle as herein provided, the Indemnitor will
have the exclusive right to contest, defend and litigate the Third Party Claim
and will have the exclusive right, in its discretion exercised in good faith,
and with the advice of counsel, to settle any such matter, either before or
after the initiation of litigation, at such time and upon such terms as it
deems fair and reasonable, provided that at least ten (10) days prior to any
such settlement, written notice of its intention to settle will be given to the
Indemnitee.
(e) All expenses (including without limitation attorneys' fees
and expenses) incurred by the Indemnitor in connection with the foregoing will
be paid by the Indemnitor.
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<PAGE> 14
(f) No failure by an Indemnitor to acknowledge in writing its
indemnification obligations under this Section 16 will relieve it of such
obligations to the extent they exist. If an Indemnitee is entitled to
indemnification against a Third Party Claim, and the Indemnitor fails to accept
or assume the defense of a Third Party Claim pursuant to Section 16.5(c), or
if, in accordance with the foregoing, the Indemnitor loses its right to
contest, defend, litigate and settle such a Third Party Claim, the Indemnitee
will have the right, without prejudice to its right of indemnification
hereunder, in its discretion exercised in good faith, and upon the advice of
counsel, to contest, defend and litigate such Third Party Claim, and may, in
its discretion exercised in good faith, and with the advice of counsel, settle
such Third Party Claim, either before or after the initiation of litigation, at
such time and upon such terms as it deems fair and reasonable, provided that at
least ten (10) days prior to any such settlement, written notice of its
intention to settle is given to the Indemnitor. If, pursuant to this Section
16.5(f), the Indemnitor so contests, defends, litigates or settles a Third
Party Claim for which it is entitled to indemnification hereunder, the
Indemnitee will be reimbursed by the Indemnitor for the reasonable attorneys'
fees and other expenses of defending, contesting, litigating and/or settling
the Third Party Claim which are incurred from time to time, promptly following
the presentation to the Indemnitor of itemized bills for such attorneys' fees
and other expenses.
16.6 Limitations.
(a) All notices of Loss must be delivered to the Indemnitor
prior to expiration of the two year period for the warranties and
representations as set forth in Section 14 hereof.
(b) The remedies provided in this Section 16 are in addition to,
and not in derogation of, any statutory, equitable, or common law remedy any
party may have for breach of any representation, warranty, covenant or
agreement set forth in this Agreement.
(c) Notwithstanding anything else to the contrary, Seller shall
be liable as an Indemnitee only if the aggregate Losses exceed $30,000.
17. TRANSACTION EXPENSES.
17.1 Except as provided in Section 17.2, all expenses incurred by the
parties in connection with or related to the authorization, preparation,
negotiation and consummation of this Agreement and the agreements, documents or
instruments contemplated hereby will be borne solely by the party which has
incurred the same.
17.2 Buyer shall be responsible for any and all recordation charges,
transfer taxes, or other fees required for transfer of the Acquired Assets.
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<PAGE> 15
18. MISCELLANEOUS.
18.1 Notice. All notices, requests, demands and other communications
hereunder will be in writing and will be deemed given and received (a) on the
date of delivery when delivered by and or when transmitted by confirmed
simultaneous telecopy, (b) on the following business day when sent by receipted
overnight courier, or (c) five (5) business days after deposit in the United
States Mail when mailed by registered or certified mail, return receipt
requested, first class postage prepaid, when addressed as set forth below:
Buyer: Paradigm Health Services, Inc.
13575 58th St. N., Suite 152
Clearwater, Florida 33760
Sellers: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive, Suite 810
Vienna, Virginia 22182
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner above
provided for giving notice.
18.2 Assignment; Binding Effect. This Agreement may not be assigned by
any of the parties hereto without the prior written consent of the other
parties hereto, provided that Buyer may assign its rights hereunder to any
entity majority ownership of which is held by Buyer or the owners of Buyer, so
long as Buyer remains obligated for performance of Buyer's obligations
hereunder. This Agreement will be binding upon the parties hereto and their
respective heirs, successors and permitted assigns.
18.3 Headings; Exhibits and Schedules. The Section, Subsection and
other headings in this Agreement are inserted solely as a matter of convenience
and for reference, and are not a part of this Agreement. The Exhibits and
Schedules attached hereto are a material part of this Agreement and are
incorporated herein by this reference.
18.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
18.5 Integration of Agreement. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject
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<PAGE> 16
matter hereunder. Neither this Agreement, nor any provision hereof, may be
changed, waived, discharged, supplemented or terminated orally, but only by an
agreement in writing signed by the party against which the enforcement of such
change, waiver, discharge or termination is sought.
18.6 Time of Essence. Time is of the essence in this Agreement.
18.7 Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Tennessee as applied to
contracts executed and performed wholly within that State.
18.8 Partial Illegality or Unenforceability. Wherever possible, each
provision hereof will be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
will, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or Unenforceability will not affect any other provisions of this
Agreement, and this Agreement will be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless the
deletion or such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
18.9 Singular or Plural. All defined terms used herein will have the
same meaning, whether used in the singular or plural form, unless the context
clearly requires otherwise.
18.10 "Person". The term "person" will be broadly interpreted to
include, without limitation, any corporation, partnership, association, limited
liability company, other association, trust or individual.
18.11 "Best Efforts". The use of the term "best efforts" herein will in
no event require any party to (a) expend funds which are not commercially
reasonably in relation to the transactions contemplated hereby or (b) take, or
cause to be taken, any action which would have a material adverse effect with
respect to it.
18.12 "Including". Whenever the term "including" is used in this
Agreement, it will mean "including, without limitation," (whether or not such
language is specifically set forth) and will not be deemed to limit the range of
possibilities of those items specifically enumerated.
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<PAGE> 17
18.13 No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person other than the parties and their respective
heirs, successors and permitted assigns.
The parties have executed this Agreement as of this 3 day of December, 1998.
BUYER:
Paradigm Health Services, Inc.
By: [SIGNATURE]
---------------------
Title: President
--------------------
SELLER:
MHM Extended Care Services, Inc.
By: [SIGNATURE]
-------------------
Title: Executive Vice President
--------------------------
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<PAGE> 1
Exhibit No. 10-3
INTERIM MANAGEMENT AGREEMENT
This Interim Management Agreement, made and entered into this 3rd day of
December, 1998, (the "Closing Date"), by and between Paradigm Health Services of
Ohio, Inc. ("Manager" or "Buyer"), and MHM Extended Care Services, Inc. ("ECS").
WHEREAS, ECS provides mental health services to certain nursing home
patients in the States of Tennessee and Georgia under contracts with nursing
homes and otherwise; and
WHEREAS, on the date of this Agreement, ECS and Manager have closed the
transaction contemplated by the Purchase Agreement between the parties dated as
of ______________,in which transaction Manager has purchased certain of the
assets and business of the Operations as defined therein, such purchase to be
effective as of the Effective Date;
WHEREAS, during the period of time between the Closing Date and the
Effective Date the parties wish to provide for the management of the Operations
on the terms and conditions herein;
NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Engagement. ECS hereby engages Manager to manage, administer and
operate the Operations, commencing on the Closing Date, and Manager hereby
accepts such engagement. As of the Closing Date and until the Effective Date,
ECS hereby authorizes Manager to supervise, manage and direct the day-to-day
operations of the Operations and to perform its duties and exercise its rights
under this Agreement. It is the intention of the parties that such management
and operation of the Operations by Manager shall be consistent with all
applicable standards, rules and regulations and of those federal, state and
local agencies having jurisdiction over or in connection with the Operations.
Manager acknowledges that the Operations do not include, and neither the
Purchase Agreement nor this Management Agreement extend to the operations
conducted by ECS in the State of Georgia pursuant to its PASARR contract with
the Georgia Department of Medical Assistance.
2. Relationship. It is expressly agreed by the parties hereto that
Manager is at all times hereunder acting and performing as an independent
contractor and that no act, commission or omission of either party hereto shall
be construed to make or render the other party its principal, agent, joint
venturer or associate, except to the extent specified herein. Wherever Manager
is required to seek the approval of ECS to
<PAGE> 2
perform any of the duties hereunder such approval shall not be unreasonably
withheld.
3. Responsibilities of Manager. For the term of this Agreement and
except as otherwise provided herein, as manager of the Operations, Manager shall
have the responsibility to conduct, supervise and manage all aspects of the
operation of the Operations, and shall have responsibility and commensurate
authority for, but not limited to, the following:
a. Charges. The establishment, maintenance, revision and
administration of the overall charge structure of the Operations.
b. Personnel Administration. At manager's expense, the hiring or
engaging as employees, independent contractors or otherwise, and supervision of
all personnel needed for the Operations, including the clinical, administrative
and financial staff, the administration of wage scales, rates of compensation,
employee benefits, conditions of employment, in-service training, attendance a
seminars or conferences, staffing schedules and job and position descriptions
with respect to all employees of or contractors to, the Operations.
c. Collection of Accounts. Subject to Section 6, the issuance of
bills for services furnished by the Operations and the collection of accounts
and monies owed during the management period.
d. Payment of Accounts and Indebtedness. The payment of payroll,
trade accounts, taxes, rents and all other expenses of operation and obligations
of the Operations arising after Closing, together with the obligation to provide
funding for such payments excluding ECS's one half share of the rent and
utilities for the Nashville premises.
e. Account and Financial Records. The establishment and
administration of accounting procedures and controls, and systems for the
development, preparation and safekeeping of records and books of accounting
relating to the business and financial affairs of the Operations.
f. Depositories for Funds. Maintenance of accounts in such banks,
savings and loan associations, and other financial institutions as Manager may
from time to time select, (including certificates of deposits) with such
balances therein (which may be interest-bearing or non-interest-bearing) as
Manager shall from time to time deem appropriate, taking into account the cash
needs of the Operations, and the disbursement from such accounts of such amounts
of the Operations' funds as Manager shall from time to time determine to be
appropriate in the discharge of the responsibilities of Manager under this
Agreement.
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<PAGE> 3
g. Purchases. The purchase of drugs, supplies, and all other
materials and services which Manager shall deem to be necessary for the
operations, subject to all provisions hereof.
h. Administrative and Fiscal Services. Provision of all
administrative and fiscal services to the Operations, including collections,
accounting, auditing (by a certified public accountant selected by Manager),
bookkeeping, budgeting, patient billings and record keeping, accounts receivable
and accounts payable processing, electronic data processing and such other
services, including marketing, recruiting and quality control, as may from time
to time be required.
i. Patient Records. Supervision of maintenance of patient records and
record retrieval and provision of monitoring services to assist in quality
assurance reviews. After closing, ECS will provide manager with access to all
such records.
j. Contracts for Services. Manager shall be empowered to negotiate,
enter into, and administer on behalf of the Operations all contracts for
services which Manager may determine are necessary for the Operations, such
contracts to be upon such terms and for such rates of compensation as Manager
shall determine. ECS hereby appoints Manager as its agent and attorney in fact
to act for ECS with respect to that certain Employment Agreement dated as of
March 1, 1997, as amended, between ECS, Psychiatric Speciality Group, P.C. and
Gilbert Katz, M.D., with all authority and power ECS would have acting on its
own behalf. This appointment and power includes, but is not limited to,
renegotiation of the Employment Agreement, exercise of the rights of termination
provided therein, and enforcement of any and all of the provisions of the
Employment Agreement including those as to non-competition and confidentiality.
Manager shall be responsible for all obligations payable to Dr. Katz after the
Closing Date. This appointment and power shall remain in effect until the
Effective Date, at which time it is acknowledged Manager will assume the
Employment Contract with Dr. Katz. Schedule 3(j) includes said contract and all
amendments thereto, together with all the agreements between ECS and Dr. Katz or
Psychiatric Speciality Group, P.C.
4. Covenants by ECS.
a. Liabilities and Obligations. ECS shall not, during the term of
this Agreement, without approval of Manager, incur any new liabilities or
obligations in relation to the Operations, including without limitation,
employment arrangements, debts, mortgages, liens, credit arrangements, loans or
leases.
b. Prompt Consideration. In all matters requiring ECS's decision or
consent under the terms of this Agreement, ECS shall promptly consider such
matters and expeditiously advise Manager of its decision so as not to hinder,
damage or delay Manager in its management or direction of the Operations or its
accomplishment of its
3
<PAGE> 4
duties and responsibilities under the terms of this Agreement.
5. Covenants by Manager.
a. Compliance with Agreements and Contracts. Manager will not take
any action that would cause Operations to default on any of its contracts and
agreements.
b. Patient Confidentiality. With respect to patients who receive
treatment as part of the Operations, Manager shall assure compliance with all
statutes, regulations, and rules concerning patient confidentiality.
c. Manager covenants and agrees to use its best reasonable efforts to
obtain at the earliest practical date the Provider Numbers necessary to permit
Buyer to bill Medicare and Medicaid programs for services rendered, and ECS and
Manager covenant and agree to use their best reasonable efforts to obtain all
necessary consents of third parties to the assignment of the contracts to
Purchaser or its designee. The Company covenants and agrees not to assign such
contracts to any party other than Manager or a designee of Manager.
6. Collection of Accounts Receivable. Manager shall have the right to
collect and retain all accounts receivable arising with respect to the
Operations on and after the Closing Date, to the extent such accounts receivable
are assignable, and ECS hereby assigns to Manager all of its rights, title, and
interest in and to such accounts receivable. Promptly upon receipt of payment
for any accounts receivable arising with respect to the Operations on and after
the Closing Date that are not assignable, ECS shall forward such payment to
Manager. If Manager receives any payments of accounts receivable arising from
services rendered before the Closing Date, Manager will not negotiate payment of
the check, but shall instead promptly give ECS possession of the check. If such
check includes payment of an account or accounts receivable arising both from
the Operations before as well as after the Closing Date, the party receiving
such payment shall promptly forward to the other party such portion of the
payment to which that party is entitled.
7. Amounts Paid. No amount paid or to be paid hereunder is intended to
be, nor shall it be construed to be, an inducement or payment for referral of
patients by ECS to Manager or any affiliate of Manager or by Manager or any
affiliate of Manager to ECS. In addition, no amount paid or advanced hereunder
includes any discount, rebate, kickback or other reduction in charge. The
parties shall comply in all respects with all applicable requirements of the
Medicare and Medicaid Fraud and Abuse "safe-harbor" regulations (the "Safe
Harbor Regulations") as they may exist from time to time, including, but not
limited to, the requirements of the Safe Harbor Regulations regarding management
agreements, and any amendment thereto, and shall comply with all
4
<PAGE> 5
applicable directives, orders or other lawful pronouncements of any lawful
authority related to the Safe Harbor Regulations.
8. Limitation of Liability; Indemnifications.
a. ECS shall indemnify Manager and any and all subsidiaries, parents
and affiliates of Manager, and the officers, directors, stockholders and
employees of Manager and its subsidiaries, parents and affiliates, and shall
hold each of them harmless from and against, any and all liability, claims,
losses, costs, actions, judgment or damages, and any expenses relating thereto
(including reasonable attorneys' fees and expenses), arising (a) from the
ownership and/or operation of the Operations in respect of any and all periods
prior to the Closing under the Purchase Agreement and/or (b) as a result of the
acts or omissions (negligent or otherwise) of ECS's agents, officers or
employees prior to the Closing under the Purchase Agreement (including, without
limitation, any claims by, or liability to, third parties, any governmental
agency, or patients of the Operations. Provided, however, that this paragraph,
and the indemnification provided therein, shall not apply to the Assumed
Liabilities as defined in the Purchase Agreement and Manager shall remain fully
responsible for the Assumed Liabilities pursuant to the Purchase Agreement.
b. Manager shall indemnify ECS and any and all subsidiaries, parents
and affiliates, and the officers, directors, stockholders and employees of ECS
and its subsidiaries, parents and affiliates, and shall hold each of them
harmless from and against, any and all liability, claims, losses, costs,
actions, judgments or damages, and any expenses relating thereto (including
reasonable attorneys' fees and expenses), arising from (a) the Operations during
the term of this Agreement (including, without limitation, all payroll, trade
accounts, short and long-term indebtedness, taxes, rents, and all other expenses
of operations and obligations of the Operations to the extent that such expenses
or obligations accrue on or after the Closing Date) and/or (b) Manager's
performance under this Agreement and/or (c) as a result of the acts or omissions
(negligent or otherwise) of Manager's agents, officers or employees (including,
without limitation, any claims by, or liability to, third parties, Manager and
its subsidiaries and affiliates, any governmental agency, or patients of the
Operations.
c. Each party acknowledges that the other has made no representations
or warranties, express or implied, and assumes no financial or other
responsibilities or liabilities in connection with this Agreement except as
specifically provided herein and in the Purchase Agreement.
9. Insurance. Manager shall maintain at all times during the term of
this Agreement, at Manager's own expense, professional liability insurance
covering Manager and its employees, officers and directors with limits of one
million ($1,000,000) dollars per occurrence and three million ($3,000,000)
dollars in the aggregate.
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<PAGE> 6
Manager shall maintain at all times during the term of this Agreement, at
Manager's own expense, general comprehensive liability insurance in such
amounts, with such coverages and with such companies as may be commercially
reasonable. All of the insurance required to be maintained under this Section
shall contain an endorsement naming ECS as additional insured thereunder and
shall not be cancelable without ten (10) days prior written notice to Manager
and ECS.
10. Term and Termination.
a. Term. The term of this Agreement shall begin on the date of
Closing under the Purchase Agreement and shall terminate on the Effective Date.
The Effective Date shall be the earlier of: (i) Manager obtaining its own
Provider Numbers for use in the Operations; or (ii) termination by Manager
pursuant to Section 10(b); or (iii) or six months from the Closing Date under
the Purchase Agreement, whichever first occurs.
b. Events of Default and Termination. Either party shall have the
right to terminate this Agreement prior to the Effective date: (i) on the
occurrence of a material breach hereof by the other party not cured within five
(5) business days of the giving of notice as to such breach; or (ii) if any
change in applicable law renders this Agreement, in whole or in material part,
illegal or unenforceable. Manager may terminate this Agreement at any time, with
or without cause, on three business days notice to ECS. Such termination shall
not effect transfer of the Acquired Assets under the Purchase Agreement and
Closing.
11. Notice. Any notice or other communication by either party to
the other shall be in writing and shall be deemed to have been given, if either
delivered personally or mailed, postage prepaid, registered or certified mail
addressed as follows:
To ECS: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive
Suite 810
Vienna, Virginia 22182
To Manager: Paradigm Health Services
13575 58th Street North, Suite 152
Clearwater, Florida 33760
or to such other address, and to the attention of such other person or officer
as either party may designate in writing.
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<PAGE> 7
12. Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing executed by both parties.
13. Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provisions of this Agreement.
14. Confidentiality. The parties agree that the terms and conditions of
this Agreement shall remain confidential. No party shall distribute this
Agreement, or any part thereof, to an third parties unless required by law or by
contractual requirements.
15. Governing Law. This Agreement shall be deemed to have been made and
shall be construed and interpreted in accordance with the laws of the State of
Tennessee.
In witness whereof, the parties have executed this Agreement as of the
Effective Date.
MHM EXTENDED CARE SERVICES, INC.
By: [SIGNATURE]
--------------------
Its: Executive Vice President
PARADIGM HEALTH SERVICES of Ohio, INC.
By: [SIGNATURE]
-------------------
Its: President
The undersigned corporate partner of Paradigm Health Services, Inc. hereby
grantee's performance by Manager of its obligations hereunder, and agrees to
indemnify and hold ECS harmless as to any defaults by Manager or its obligations
hereunder.
PARADIGM HEALTH SERVICES, INC.
By: [SIGNATURE]
-------------------
Its: President
7
<PAGE> 1
Exhibit No. 10-1
ASSET PURCHASE AGREEMENT
ARBOUR ELDER SERVICES, INC., d/b/a ARBOUR SENIORCARE ("Buyer") and MHM EXTENDED
CARE SERVICES, INC. and its corporate parent, MHM SERVICES, INC. (collectively
"seller") hereby agree as follows:
Buyer desires to purchase and Seller desires to sell to Buyer certain assets and
business related to Seller's delivery of mental health services within the State
of Massachusetts (the "Operations"), all on the terms and subject to the
conditions set forth in this Agreement. "The parties acknowledge that the
representations, warranties, covenants and agreements made by MHM Services,
Inc., are a material inducement to Buyer's decision to consummate this
transaction and shall be deemed material and relied upon by Buyer."
1. ACQUIRED ASSETS. The assets to be conveyed shall consist of the
Operations as currently operated by Seller in Massachusetts (the "State")
including but not limited to outpatient clinics (including license); behavioral
health services principally to nursing homes and extended care facilities; all
property, policy and procedures manuals, office and other equipment in place on
this date; to the extent assignable, all contract rights, affiliation
agreements, and non-compete agreements relating to the Operations; together with
all other assets relating to the Operations in the State (collectively, the
Acquired Assets"). The Acquired Assets are set out in Schedule 1.2 attached
hereto. Subject to the terms and conditions of this Agreement, Buyer agrees to
purchase and Seller agrees to sell, assign and deliver to Buyer as of Closing,
as defined in Section 10.1 of this Agreement, all of Seller's right, title and
interest in, to and under the Acquired Assets, free and clear of any mortgage,
pledge, hypothecation, claim, security interest, encumbrance, right or interest
of others, lease, license, easement, encroachment, covenant, title defect, lien,
option or right of first refusal (collectively, "Liens"). The Acquired Assets
shall not include, and Seller shall retain, all cash, cash equivalents, and
accounts receivable arising from the provision of services in the State prior to
the Closing Date, all assets of business operations similar to the Operations
conducted by Seller in States other than the State, and such assets related to
the Operations which Buyer in its sole discretion determines not to purchase
(the "Excluded Assets"). The Excluded Assets are set forth in Schedule 1.1.
2. CONSIDERATION. The consideration for the Acquired Assets will be payment
to Seller by Buyer of the sum of eight hundred fifty thousand dollars
($850,000.00) (the "Purchase Price"). At Closing, Buyer will pay the Purchase
Price to Seller by wire transfer of immediately available funds.
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2.1 Allocation of Purchase Price. The Purchase Price shall be
allocated in the manner set forth in Schedule 2.1. Each of the parties agrees
that any tax returns or other tax information such party may file or cause to be
filed with any governmental agency shall be prepared and filed consistent with
such allocation of the Purchase Price, and any positions taken in connection
with an audit of any such tax return or in connection with any contest of any
adjustment of the Purchase Price likewise shall be consistent with such
position.
2.2 Commissions and Finders Fees. Buyer and Seller warrant and
represent to each other that no broker or finder has acted for it in connection
with this transaction and that no brokerage, commissions or similar fees will be
due to any person at Closing.
2.3 Deposits. On execution of this Agreement, Buyer will deposit in
escrow with Seller the sum of twenty thousand dollars ($20,000.00) as a an
earnest money deposit. This deposit shall be non-refundable and shall be
retained by Seller as liquidated damages as the sole remedy if the transaction
fails to close other than as a result of Seller's breach of this Agreement. At
Closing, the deposit shall be applied toward the purchase consideration.
3. ASSUMPTION OF LIABILITIES. Buyer will not assume any liabilities of
Seller (including but not limited to malpractice claims, leases, contingent
liabilities, or environmental liabilities) which related to the activities of
Seller prior to the Closing Date, except that Buyer will assume and indemnify
seller for: (a) obligations, if any, for the provision of mental health services
of the Acquired Assets to patients in the State after Closing; and (b) all
liabilities arising from Buyer's conduct of the Operations after Closing. Seller
shall continue to be obligated to pay, perform and discharge such debts,
obligations and liabilities and hold Purchaser harmless from:
(I) any and all obligations for the payment of any long term
indebtedness of Seller incurred prior to closing;
(II) any and all liabilities of the Seller relating to acts or
omissions of Seller, including medical malpractice, occurring
through the Closing Date;
(Iii) any and all claims against Seller of the United States Government
under the Medicare program, or any state under Medicaid programs,
or of any other third party payers, arising out of the activities
of the Seller's business through the Closing Date;
(Iv) federal and state income taxes of Seller, if any, payable with
respect to any activities of the Seller through the Closing Date;
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(V) sales and other taxes (including, without limitation, use taxes)
payable by Seller with respect to the business or operations of
the Seller through the Closing Date or the transactions
contemplated hereby;
(Vi) any other debt, obligation or liability of the Seller other than
those debts, obligations and liabilities of the Seller
specifically assumed by Purchaser pursuant to this Agreement,
whether or not such debt, obligation or liability is disclosed on
the financial statements as hereinafter defined;
(Vii) any liability or obligation of Seller to any employee or former
employee of the Seller or to any third party, under any pension,
insurance, bonus, profit-sharing or other employee benefit plan or
arrangement or any obligation relating to salaries, bonuses,
vacation or severance pay, including, without limitation, any
liabilities relating to the activities and obligations of the
Seller through the Closing Date;
(Viii) the Seller's obligations and liabilities arising under this
Agreement;
(Ix) any liabilities of the Seller to any of its shareholders arising
out of any action by the Seller in connection with the transaction
contemplated herein;
(X) any obligation or monies owed by Seller to the Commonwealth of
Massachusetts regarding Medicaid billing for periods prior to the
Closing Date,
(Xi) any accrued but unpaid payroll tax obligations of the Seller
relating to the activities and operations of the Seller prior to
the Closing Date.
4. DUE DILIGENCE. Buyer has had ample opportunity to conduct and complete
its due diligence examinations and inspections of the Acquired Assets and has
completed such due diligence as it deems necessary and appropriate. During the
Due Diligence Period, Buyer has had full access during normal business hours to
the Acquired Assets including Seller's books, records and other information
concerning the Operations for the purpose of conducting such inspections and
tests as Buyer reasonably has requested.
5. Representations and Warranties of the Seller. In order to induce the
Purchaser to enter into and perform this Agreement, the Seller represents,
warrants and agrees as set forth in this Section 5. The representations and
warranties as set forth in this
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Section relate to the activities and operations of the Seller through the
Closing Date.
5.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
the requisite power and authority to execute, deliver and perform this Agreement
and to hold the properties, rights and assets and to carry on the businesses now
conducted by it.
5.2 Ownership of Assets. On the Closing Date, except as set forth on Schedule
5.2 hereto, the Seller is the legal and beneficial owner of the Acquired Assets,
free and clear of any claims, charges, equities, liens (including tax lines),
security interests and encumbrances, and the Seller has full right, power and
authority to sell, transfer, assign, convey and deliver all of the Acquired
Assets.
5.3 The Seller's Authority and No Conflict. The Seller has the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement, and this Agreement has been duly authorized,
executed and delivered by the Seller. To the best of Seller's knowledge, the
consummation of the transactions contemplated hereby will not result in any
material conflict, breach or violation of, or default under, any applicable
statute, or any judgment. The consummation of this agreement will not violate
any order, decree, mortgage, agreement, deed of trust, indenture or other
instrument to which the Seller is a party or by which Seller is bound. All
action and other authorizations prerequisite to the execution of this Agreement
and the consummation of the transactions contemplated by this Agreement have
been or will be taken or obtained by the Seller as of the Closing Date. This is
a valid and binding agreement of the Seller enforceable in accordance with its
terms.
5.4 Compliance with Laws. To the best of Seller's knowledge, in connection
with the conduct of the operation and the conduct of its business, and in
connection with the lease of the Premises (as hereinafter defined) and ownership
of assets of the Seller, the Seller has complied with all applicable statutes
and regulations of all governmental authorities having jurisdiction over it
except where the failure to so comply would not have a material adverse effect
on the business or properties of the Seller. The Seller has not received any
notice of any violations of applicable laws.
5.5 Financial Statements Provided. Copies of the financial statements of the
Seller listed on and annexed to Schedule 5.5 hereto have been initialed for
identification and delivered to the Purchaser. The annual financial statements
have been prepared in accordance with the accrual basis method of accounting
throughout the periods indicated, and fairly present its financial position as
at the respective dates of the balance sheets included in the financial
statements and the results of its operations for the respective periods
indicated. The interim financial statements which are listed on Schedule 5.5
hereto, have been prepared in accordance with the accrual basis method
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of accounting according to procedures consistently applied to such statements
from month to month since August 30, 1998, and subject to normal year end
adjustments, and fairly present its financial position as of the date thereof in
accordance with generally accepted accounting principles.
5.6 Absence of Changes. Except as disclosed on Schedule 5.6 hereto, since
August 30, 1998, there has not been any (a) transaction by the Seller with
respect to the Operations except in the ordinary course of business as conducted
during the twelve-month period ending on that date; (b) material adverse change
in the condition (financial or otherwise), business or liabilities or assets of
the Operations, other than disclosed in the financial information provided to
Purchaser through August 30, 1998 and Schedule 5.6; (c) destruction, damage to,
or loss of Acquired Assets (whether or not covered by insurance) that materially
and adversely affects the condition, financial or otherwise, or business of the
Operations, (d) labor disputes or other event or condition relating to
employment or labor matters of any character materially and adversely affecting
the condition, financial or otherwise, of the Acquired Assets or the Operations,
(e) change in accounting methods or practices (including, without limitation,
change in depreciation or amortization policies or rates) by the Seller, as to
the operations (f) revaluation of Acquired Assets; (g) sale or transfer of any
asset of the Operations except in the ordinary course of business;(h) amendment
or termination of any material contract, agreement, or license as to the
operations to which the Seller is a party (except such nursing home contracts as
may have been terminated in the ordinary course.
5.7 Absence of Undisclosed Liabilities. The Seller does not have any material
debt, liability or obligation of any nature relating to the operations, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
which is not reflected or reserved against in the financial statements of the
Seller except for: (a) those which are not required by generally accepted
accounting principles to be so reflected, (b) those which were incurred in the
ordinary course of business and are usual and normal in amount both individually
and in the aggregate, and (c) those disclosed on Schedule 5.7.
5.8 Tax Returns and Audits. Within the times and in the manner prescribed by
law, the Seller has filed all Federal, state and local tax returns required by
law and has paid all taxes, assessments, and penalties due and payable, except
Seller has not filed State income tax returns for its fiscal year 1997 as to
which no taxes are or will be due. There are no present disputes as to taxes of
any nature payable by the Seller. The Seller has not received notice of, nor is
it otherwise aware of, an audit or examination, nor is it a party to any action
or proceeding by any governmental authority for assessment or collection of
taxes, excise taxes, charges, penalties or interest; nor has any claim for
assessment and collection been asserted against it, except as set forth on
Schedule 5.8 hereto. The Seller has accrued or paid or will have caused to be
paid on or prior to the Closing date, all applicable unemployment taxes, payroll
taxes, social
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security taxes, occupation taxes, property taxes, excise taxes, sales and use
taxes, and all other taxes of every kind, character or description required to
be paid, except for taxes which are not yet due and subject to proration.
5.9 (Intentionally Omitted)
5.10 Existing Employment and Other Contracts ERISA.
(a) Schedule 5.10 contains a list of all employment contracts
consulting agreements and collective bargaining agreements as to
the Operations which the Seller is a party or by which it is
bound; all such contracts and arrangements are in full force and
effect and the Seller is not in default under any of them.
Notwithstanding anything to the contrary, Purchaser shall not be
obligated in any way under such contracts and arrangements (except
for those contracts being assumed by Purchaser pursuant to Section
3). There is neither pending nor, to the best of the Seller's
knowledge, any basis therefor or threat thereof with respect to
any contract, agreement, covenant or obligation referred to in the
preceding sentence, including, without limitation, any claim for
money due for allegedly unpaid vacation time or sick pay. The
Seller views its relationship with its employees as satisfactory,
and there are no labor controversies pending or, to the best of
the Seller's knowledge, threatened between the Seller and the
employees of the Seller.
(b) Seller is in material compliance with all requirements, including
reporting, filing and disclosure requirements, applicable under
ERISA or otherwise to all employee welfare benefit and employee
pension benefit plans including but not limited to deferred
compensation plans, incentive plans, bonus plans or arrangements,
stock option plans, stock purchase plans, golden parachute
agreements, severance pay plans dependent care plans, cafeteria
plans, employee assistance programs, scholarship programs
employment contracts and other similar plans, agreements and
arrangements that are currently in effect as of the Closing Date,
for the benefit of directors, officers, employees, or former
employees (or their beneficiaries) of the Seller.
(c) The Seller shall have paid all compensation owed to the employees
of the Seller engaged in the Operations through the Closing Date
other than as to compensation not yet due.
(d) All pension and benefit plans have been fully funded through the
Closing.
(e) Seller represents and warrants that the non-competition agreements
executed by the Clinicians affiliated with the Seller, and
transferred to Buyer pursuant to this Agreement, represent the
portion of the Seller's Massachusetts behavioral health business
as set forth in Schedule 9 attached hereto.
6
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5.11 Insurance Policies. Schedule 5.11 contains a description of all insurance
policies held by the Seller concerning its business and the premises. All such
policies have the respective limits set forth in Schedule 5.11. If not already
covered, Seller will arrange for Professional Liability Tail Coverage for no
less than one million (1,000,000) per incident and three million aggregated for
no less than four years after closing.
5.12 Litigation. Except as disclosed in Schedule 5.12, there is no suit,
action, arbitration, or legal administrative, or other proceeding, or
governmental investigation pending or the Seller's knowledge threatened against
or affecting the operations or the Acquired Assets, any of the business, assets,
or condition, financial or otherwise, of the Seller or any of the transactions
or decree of any Federal, state, local, or foreign court, department, agency or
instrumentality.
5.13 Medicare CHAMPUS and Medicaid. All Clinics and Programs are the subject
of an existing Medicare contract with the Federal Government with the fiscal
intermediary whose name is set forth on Schedule 5.13 hereto, are certified for
participation in the Medicare program, CHAMPUS program and Medicaid Program, and
are parties to such agreements with other third party payers as are set forth on
Schedule 5.13 hereto, all of which are in full force and effect and no default
or event has occurred thereunder which, with the giving of notice, the passage
of time, or both, would constitute a default thereunder.
5.14 Filing of Reports. Other than claims or reports pertaining to individual
patients, the Seller has timely filed or caused to be timely filed all reports
of every kind whatsoever required by law or by written or oral contract or
otherwise to be made with respect to the purchase of services by a third- party
payers, including but not limited to, Medicare, Medicaid and CHAMPUS programs
and other insurance carriers, and all such reports are, or will be if filed
after the Closing Date, complete and accurate in all material respects.
5.15 Licenses. The Clinics, Programs and other business units of the Seller
have all material contracts, licenses, permits, consents, franchises and
approvals required by law or governmental regulations or that are necessary from
all applicable Federal, state and local authorities and any other regulatory
agencies for the lawful conduct of its business, and it is not in default in any
material respect under such licenses, permits, consents and approvals.
5.16 No Broker. The Seller represents and warrants it has not dealt with any
broker or finder in connection with any of the transactions contemplated by this
Agreement and, insofar as it knows, no other broker or other person is entitled
to any commission or finder's fee in connection with any of such transactions.
5.17 No Misleading Statements. This Agreement and the information and
schedules
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referred to herein do not include any untrue statement of a material fact and do
not omit to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
5.18 Employee Matters. The Seller acknowledges that it has no information that
the Purchaser would or would not qualify for successor status under Rev. Proc.
84-77. Pursuant to that pronouncement, the parties agree the Purchaser shall
follow procedures consistent with successor status. In addition, both parties
shall file 941's for the quarter during which the sale takes place, reflecting
the wages and deposits made during its period of ownership.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Sellers as follows:
6.1 Corporate Action. Buyer has taken all action required to authorize the
execution and consummation of this Agreement. This Agreement constitutes the
valid and legally binding obligations of Buyer enforceable in accordance with
its terms, except that enforce ability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
6.2 No Conflict With Other Agreements or Laws. The execution and consummation
by Buyer of this Agreement, and the other agreements and documents contemplated
hereby, will not (a) violate the terms of any instrument, agreement, judgment or
decree to which Buyer is a party, or by which Buyer or any of its properties is
bound, (b) be in conflict with, result in a breach of or constitute (with giving
of notice or lapse of time or both) a default under any such instrument,
agreement, judgment or decree, (c) result in the creation or imposition of any
Lien upon Buyer or its properties or assets, or (d) violate any applicable
federal, state, local or foreign law, regulation or order.
6.3 Organization and Qualification. Buyer is duly organized, validly existing
and in good standing. Buyer has full power and authority to execute and
consummate this Agreement.
6.4 Financial Standing. Buyer has the financial resources to consummate the
transaction contemplated in this Agreement.
7. PRE-CLOSING COVENANTS. The parties covenant and agree as follows:
7.1 Conduct of Business in Ordinary Course. The Seller agrees that from
execution of this Agreement until the Closing Date, the Seller will (i) not
increase any compensation payable to any employees or consultants of the
Operations, (ii) not create any material obligation or liability (absolute or
contingent) secured by the Acquired Assets; (iii) not enter into, amend or
terminate any material contract,
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agreement, permit or lease pertaining to the Operations without the prior
written consent of the Purchaser, except in the ordinary course of conduct of
business or as contemplated hereunder, (iv) not cancel or decrease any insurance
policy relating to the Operations; (v) not interfere with any material
obligations under contracts, leases and documents relating to or affecting
conduct of The Operations; (vi) use its reasonable best efforts to maintain and
preserve the Operations and Acquired Assets intact, its good will and
relationship with its present officers, employees, suppliers, medical staff and
others having a business relationship with it relating to the Operations, all
material licenses and permits requisite to the conduct of the Operations now
conducted.
7.2 Notification of Material Adverse Changes. Sellers will promptly notify
Buyer in writing of the occurrence of any material adverse change to the
Acquired Assets or Operations occurring on or after the date of this Agreement
and on or prior to the Closing Date.
7.3 Other Transactions. During the term of this Agreement, the parties will
deal exclusively and in good faith with each other regarding a sale of all or a
material portion of the Acquired Assets. Seller will not, and will direct
Sellers' officers, directors, financial advisors, accountants, agents and
counsel not to: (i) solicit submission of offers from any person relating to a
the Acquired Assets, (ii) participate in any discussions or negotiations
regarding, or furnish any nonpublic information to any person regarding purchase
of the Acquired Assets by any person other than Buyer, or (iii) enter into any
agreement or understanding, whether oral or written, that would have the effect
of preventing consummation of this Agreement.
7.4 Consents, Waivers and Approvals. Prior to Closing, Seller will obtain all
consents, waivers, approvals, and releases necessary for Seller to effect the
transactions contemplated herein, free and clear of any and all liens. All such
consents, waivers, releases and approvals will be in writing and in form and
substance satisfactory to Buyer in its discretion as reasonably exercised by
Buyer.
7.5 Supplemental Disclosure. Seller will have the continuing obligation up to
and including the Closing Date to supplement promptly or amend the Schedules
hereto with respect to any matter subsequently arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the Schedules.
7.6 Conditions Precedent. The parties will use their best efforts in good
faith to satisfy the conditions set forth in Sections 8 and 9 hereof.
7.7 Consents, Regulatory Approvals and Licenses. Buyer acknowledges that
certain of Seller's contracts with nursing homes or clinicians may not be
assignable,
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may be terminable upon no or minimal notice, or may consist of arrangements not
embodied in binding contractual relationships. Buyer further acknowledges that
Seller makes no warranties or representations as to the existence or
availability of any assignments, consents, approvals, regulatory licenses, or
certifications, including as to nursing home contracts, as may be necessary for
any use of the Acquired Assets as Buyer may intend. Seller agrees that it has
made such inquiry as to such matters during the Due Diligence Period as it
believes appropriate, and that consummation of the transaction contemplated
hereby shall not be contingent in any way upon the existence of or Buyer
obtaining any such assignments, consents or regulatory approvals, licenses, or
certifications. Seller agrees that to the extent any economic rights under such
contracts are assignable, it will assign such rights to Buyer. As to any assumed
contract the assignment of which by its terms requires the prior consent of a
third party thereto, if such consent is not obtained prior to the Closing Date,
the Seller shall deliver to the Buyer written documentation setting forth
arrangements for the transfer of the economic benefits of such assumed contracts
to Buyer as of the Closing Date under the terms and conditions acceptable to all
parties hereto. In any event, after Closing Seller shall forfeit and not seek to
perform under any non-assignable agreement or license in competition with Buyer.
7.8 Unless approved in advance by the other party, neither Buyer nor Seller
shall issue any press release or written statement for general or public
circulation relating to the transactions contemplated hereby, except as required
by law in the reasonable opinion of such party's counsel. Each party agrees to
use good faith efforts to obtain the other's approval of the text of any public
report, statement or release prepared.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement will be subject to the satisfaction, on or before the
Closing Date, or such other date as may be specified, of the following
conditions, any of which may be waived by Buyer in writing.
8.1 Representations. The representations and warranties made by Seller in
Section 5 hereof will be true and correct on the Closing Date as though such
representations and warranties had been made on such date and Seller will
deliver to Buyer a certificate dated as of the Closing Date to the foregoing
effect.
8.2 Covenants. Seller will have duly performed all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing Date, and Sellers
will deliver to Buyer a certificate dated as of the Closing Date to the
foregoing effect.
8.3 No Injunction, Etc. No proceeding, investigation, or legislation will
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement, or which materially affects title to, or
the existence or priority of liens on, the
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Acquired Assets.
8.4 Incumbency. Seller will have delivered a certificate of incumbency
executed by the president and secretary of Seller listing each officer and
director of Seller and the persons authorized to execute this Agreement and the
other documents contemplated hereby.
8.5 Material Adverse Change. No material adverse change to the Acquired
Assets shall have occurred on or after the date of this Agreement and on or
prior to the Closing Date.
8.6 Non-Competition Covenants. Seller shall provide to Buyer covenants of
non-competition in the form of Schedule 8.6, fully executed by such of Seller's
employees or independent contractors utilized in the operations as are willing
to sign such covenants.
9. (Intentionally Omitted)
10 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of Seller
to consummate this Agreement will be subject to the satisfaction, on or before
the Closing Date, of the following conditions, any of which may be waived by
Sellers in writing.
10.1 Representations. The representations and warranties made by Buyer in
Section 6 hereof will be true and correct in all material respects on the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such date and Buyer will deliver to Seller
a certificate dated as of the Closing Date to the foregoing effect for Buyer.
10.2 Covenants. Buyer will have duly performed all of the covenants, acts or
undertakings to be performed by it on or before the Closing Date, and Buyer will
deliver to Seller certificates dated as of the Closing Date to the foregoing
effect.
10.3 Certified Resolutions. Buyer will have delivered to Sellers certificates
executed by duly authorized officers and containing true and correct copy of
resolutions duly adopted by Buyer's Board of Directors approving and authorizing
this Agreement and its consummation. Such officers will also certify that such
resolutions have not been revoked or modified and remain in full force and
effect.
10.4 No Injunction, Etc. No proceeding, investigation or legislation will have
been instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, or prohibit, or to obtain substantial damages in
respect of this Agreement.
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10.5 Incumbency. Buyer will have delivered a certificate of incumbency
executed by its president or a vice president and the secretary or an assistant
secretary listing the persons authorized to execute this Agreement, and the
other documents contemplated hereby.
11. MUTUAL COVENANTS. Each of the parties hereto will refrain from taking any
action which would render any representation or warranty contained in Sections 5
or 6 of this Agreement inaccurate as of the Closing Date. Each party will
promptly notify the other of any action or proceeding that is instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Each party will take
such further action as may reasonably be requested by another party to evidence
the consummation of this Agreement.
12. CLOSING.
12.1 Time and Place. The closing ("Closing") will be held at the offices of
MHM Extended Care Services, 8000 Towers Crescent Drive, Suite 810, Vienna,
Virginia, on December 31, 1998.
12.2 Transactions at the Closing. At Closing, each of the following
transactions will occur:
(a) Sellers will deliver to Buyer the following:
(i) such bills of sale, endorsements, assignments and other
instruments of transfer as are necessary to vest in Buyer
all of Sellers' right, title and interest in, to and under
the Acquired Assets, free and clear of all Liens other than
Permitted Encumbrances;
(ii) all such certificates, dated as of the Closing Date, as
Buyer may reasonably request to evidence the fulfillment by
Seller, or other satisfaction as of the Closing Date, of
the terms and conditions of this Agreement; and
(iii) an opinion of Seller's counsel, in form and substance
reasonably satisfactory to Buyer, that Seller is duly
organized, validly existing, and in good standing under the
laws of the State of Delaware, that Seller has full power
and authority to own and convey the Acquired Assets, and
this Agreement constitutes the valid and binding obligation
of Seller, enforceable in accordance with its terms, except
that enforceability may be limited by applicable equitable
principles of bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
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(b) Buyer will deliver to Seller the following:
(i) the Purchase Price required under Section 2;
(ii) a certificate of good standing of Buyer from the Secretary
of State of its state of incorporation as of the most
recent practicable date;
(iii) all such certificates, dated as of the Closing Date, as
Seller may reasonably request to evidence the fulfillment
by Buyer, or other satisfaction as of the Closing Date, of
the terms and conditions of this Agreement; and
(iv) an opinion of Buyer's counsel in form and substance
reasonably satisfactory to Seller, that Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws its State of incorporation; that
Buyer has full power and authority to purchase and own the
Acquired Assets; that all action has been taken as required
to authorize the execution and consummation of this
Agreement by Buyer; and this Agreement constitutes the
valid and binding obligation of Buyer, enforceable in
accordance with its terms, except that enforceability may
be limited by applicable equitable principles of
bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
13. COVENANT NOT TO COMPETE. For a period of five years (5) after Closing,
without the prior written consent of Buyer, Seller and any affiliates, and
officers or Directors of Seller or its affiliates shall not: (a) except as
provided below, engage in the establishment or operation of any business for the
delivery of mental health services to patients within the State or competitive
with the outpatient clinic currently operated in the State by Seller, or (b)
hire or solicit for hire any employee of the Operations, or recommend, directly
or indirectly to any such employee that he or she obtain employment elsewhere.
Without in any way limiting the foregoing, it is acknowledged that this covenant
does not extend to the provision of mental health services at prisons, jails, or
other correctional facilities. At Buyer's request, and at the Buyer's sole and
full expense, Seller will co-operate in the bringing of suit in Seller's name to
enforce against any third party any covenant against competition contained in an
agreement to which Seller is a party.
14. ACCOUNTS RECEIVABLE AND PROVIDER NUMBERS. In order to assure collection
by Seller of accounts receivable arising from services provided prior to the
date of Closing (which accounts receivable are excluded from the Acquired Assets
(the "Excluded Receivables")), Buyer shall bill for services provided by it
after Closing under its own provider numbers or other appropriate billing
information of Buyer. Seller shall
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<PAGE> 14
retain the sole right to bill for and collect the Excluded Receivables together
with the sole right to utilize the provider numbers and other billing
identification which Seller has utilized in connection with the Operations. In
the event proceeds of accounts receivable are collected by Seller or Buyer after
Closing which include proceeds of accounts receivable to which the other party
is entitled, within one week of the receipt of such proceeds the receiving party
shall deliver such proceeds to the partied entitled thereto, together with a
copy of the Explanation of Benefits ("EOBs") relating to such proceeds.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements contained in
this Agreement, and the documents contemplated hereby, will be deemed
representations and warranties hereunder by Seller or Buyer, as the case may be.
All representations and warranties made by Seller or Buyer in this Agreement
will survive until the second (2nd) anniversary of the Closing Date, except that
warranties and representations as to taxes, environmental matters or ERISA
matters shall survive until six (6) months after expiration of the applicable
statute of limitations. No claims for breach of a representation or warranty
(including an Indemnification Claim as defined in Section 16) may be brought by
any person unless written notice of such claim will have been given on or prior
to the end of such survival period (in which event each representation and
warranty with respect to any asserted claim will survive until such claim is
finally resolved and all obligations with respect thereto are fully satisfied).
Provided this paragraph shall not apply to the breach of any obligations under
this agreement other than as to representation or warranties.
16. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned: (a) by the mutual written consent of Seller and
Buyer; (b) by either Seller or Buyer upon the failure of the other to comply
substantially with its or their conditions precedent to Closing and other
obligations set forth herein on or before the Closing Date; (c) upon Seller's
failure to cure (or waiver of the opportunity to cure), any condition or defect
in the Acquired Assets disclosed to Buyer during the Due Diligence Period and
reasonably unacceptable to Buyer. Such cure or waiver thereof shall take place
within thirty (30) days of receipt by Seller of written notice of such condition
or defect from Buyer (such notice to be delivered prior to expiration of the Due
Diligence Period). Termination pursuant to this Section will relieve the parties
of their obligations hereunder with each party responsible for its own fees,
costs and expenses; provided, however, that if the Agreement is terminated
pursuant to (b) above because one party fails to use its reasonable best efforts
to fulfill its obligations hereunder, such party will remain liable to the other
party for all rights as to deposits, losses, costs, expenses (including
attorney's fees) and liabilities incurred by such other party as a result of
such failure.
17. INDEMNIFICATION.
-14-
<PAGE> 15
17.1 Losses. For purposes of this Section 17, "Losses" will mean all damages,
losses, costs, expenses (including legal, accounting and other fees and
expenses), interest, penalties, charges and liabilities.
17.2 Indemnification by Seller. Seller agrees to indemnify, defend and hold
harmless Buyer from and against any Loss incurred by Buyer related to or arising
out of (a) the breach of any of the warranties, representations, covenants or
agreements of Seller in this Agreement (a "Breach"), (b) any liability arising
from the from the activities of the Seller or use of the Acquired Assets by
Seller prior to the Closing Date, other than (i) Assumed Liabilities.
17.3 Indemnification by Buyer. Buyer agrees to indemnify, defend and hold
harmless Sellers from and against any Loss incurred by Sellers related to or
arising out of (a) the breach of any of the warranties, representations or
agreements of Buyer in the Buyer's Agreements, (b) any Assumed Liability, or (c)
any liability associated with Buyer's ownership or use of the Acquired Assets or
conduct of the Operation on or after the Closing Date.
17.4 Procedures for Indemnification.
(a) An Indemnification Claim will be made by the Indemnitee by
delivery of a written declaration to Indemnitor requesting
indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses
and, in the case of a Third Party Claim, containing such
other relevant information as Indemnitee may have
concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim
the procedures set forth in Section 16.5 hereof will be
observed by the Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor will have ten (10) days
to object to such Indemnification Claim by delivery of a
written notice of such objection to Indemnitee specifying
to the extent reasonable given the information available to
Indemnitor the basis for such objection. Failure to timely
so object will constitute acceptance of the Indemnification
Claim by the Indemnitor and the Indemnification Claim will
be paid in accordance with Section 17.4(d). If any
objection is timely interposed by the Indemnitor and the
dispute is not resolved within fifteen (15) days from the
date Indemnitee receives such objection, such dispute will
be resolved by litigation, arbitration or mediation, at the
preference of the parties.
-15-
<PAGE> 16
(d) Upon determination of the amount of an Indemnification
Claim (including a Third Party Claim), whether by agreement
between Indemnitor and Indemnitee, by an arbitration award
or otherwise, Indemnitor will pay the amount of such
Indemnification Claim within ten (10) days of the date such
amount is determined.
17.5 Defense of Third Party Claims.
(a) Should any Third Party Claim be made, the obligations and
liabilities of the parties with respect to such Third Party
Claim will be subject to this Section 17.5.
(b) Within a reasonable time (i.e., such time as will not
prejudice the contest, defense, litigation, or settlement
of a Third Party Claim) following the receipt of notice of
a Third Party Claim, the party receiving the notice of the
Third Party Claim will (i) notify the other party of its
existence setting forth in writing and with reasonable
specificity the facts and circumstances of which such party
has received notice, and (ii) if the party giving such
notice is an Indemnitee, specify in writing the basis
hereunder upon which the Indemnitee's claim for
indemnification is asserted and tendering defense of the
Third Party Claim to Indemnitor.
(c) If the defense of a Third Party Claim is so tendered and
within ten (10) day thereafter such tender is accepted
without qualification by the Indemnitor as evidenced by
written notice to Indemnitee, then, except as provided
below, the Indemnitee will not, and the Indemnitor will,
have the right to contest, defend, litigate and settle such
Third Party Claim. The Indemnitee will have the right to be
represented by counsel of its own choice and at
Indemnitee's expense to participate in any contest,
defense, litigation or settlement conducted by the
Indemnitor; provided that the Indemnitee will be entitled
to reimbursement therefor if the Indemnitor loses is right
to contest, defend, litigation and settle the Third Party
Claim as provided below. Notwithstanding the preceding
provisions of this Section 17.5, if the Third Party Claim
is asserted against both of Indemnitor and Indemnitee and
representation of both of them by the same counsel would be
inappropriate due to actual or potentially differing
interests between them, Indemnitee shall be entitled to
retain the right to contest, defend or litigate such Third
Party Claim as it relates to Indemnitee and will have the
exclusive right, in its discretion exercised in good faith,
and with the advice of counsel, to settle any such matter
as it
-16-
<PAGE> 17
related to Indemnitee, either before or after the
initiation of litigation, at such time and upon such terms
as it deems fair and reasonable, provided that at least ten
(10) days prior to any such settlement, written notice of
its intention to settle will be given to the Indemnitee.
If, pursuant to the preceding sentence, the Indemnitee so
contests, defends, litigates or settles a Third Party
Claim, the Indemnitee will be reimbursed by the Indemnitor
for the reasonable attorneys' fees and other expenses of
defending, contesting, litigating and/or settling the Third
Party Claim which are incurred from time to time, promptly
following the presentation to the Indemnitor of itemized
bills for such attorneys' fees and other expenses.
(d) The Indemnitor will lose its right to contest, defend,
litigate and settle the Third Party Claim if it fails to
diligently contest the Third Party Claim (except in
connection with a settlement thereof in accordance with the
terms hereof). So long as the Indemnitor has not lost its
right to defend, contest, litigate and settle as herein
provided, the Indemnitor will have the exclusive right to
contest, defend and litigate the Third Party Claim and will
have the exclusive right, in its discretion exercised in
good faith, and with the advice of counsel, to settle any
such matter, either before or after the initiation of
litigation, at such time and upon such terms as it deems
fair and reasonable, provided that at least ten (10) days
prior to any such settlement, written notice of its
intention to settle will be given to the Indemnitee.
(e) All expenses (including without limitation attorneys' fees
and expenses) incurred by the Indemnitor in connection with
the foregoing will be paid by the Indemnitor.
(f) No failure by an Indemnitor to acknowledge in writing its
indemnification obligations under this Section 17 will
relieve it of such obligations to the extent they exist. If
an Indemnitee is entitled to indemnification against a
Third Party Claim, and the Indemnitor fails to accept or
assume the defense of a Third Party Claim pursuant to
Section 17.5(c), or if, in accordance with the foregoing,
the Indemnitor loses its right to contest, defend, litigate
and settle such a Third Party Claim, the Indemnitee will
have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in
good faith, and upon the advice of counsel, to contest,
defend and litigate such Third Party Claim, and may, in its
discretion exercised in good faith, and with the advice of
-17-
<PAGE> 18
counsel, settle such Third Party Claim, either before or
after the initiation of litigation, at such time and upon
such terms as it deems fair and reasonable, provided that
at least ten (10) days prior to any such settlement,
written notice of its intention to settle is given to the
Indemnitor. If, pursuant to this Section 17.5(f), the
Indemnitor so contests, defends, litigates or settles a
Third Party Claim for which it is entitled to
indemnification hereunder, the Indemnitee will be
reimbursed by the Indemnitor for the reasonable attorneys'
fees and other expenses of defending, contesting,
litigating and/or settling the Third Party Claim which are
incurred from time to time, promptly following the
presentation to the Indemnitor of itemized bills for such
attorneys' fees and other expenses.
17.6 Limitations.
(a) All notices of Loss must be delivered to the Indemnitor
prior to expiration of the two year period for the
warranties and representations as set forth in Section 15
hereof.
(b) The remedies provided in this Section 17 are in addition
to, and not in derogation of, any statutory, equitable, or
common law remedy any party may have for breach of any
representation, warranty, covenant or agreement set forth
in this Agreement.
(c) Notwithstanding anything else to the contrary, Seller shall
be liable as an Indemnitee only if the aggregate Losses
exceed $30,000.
18. TRANSACTION EXPENSES.
18.1 Except as provided in Section 18.2, all expenses incurred by the parties
in connection with or related to the authorization, preparation, negotiation and
consummation of this Agreement and the agreements, documents or instruments
contemplated hereby will be borne solely by the party which has incurred the
same.
18.2 Buyer shall be responsible for any and all recordation charges, transfer
taxes, or other fees required for transfer of the Acquired Assets.
19. MISCELLANEOUS.
19.1 Notice. All notices, requests, demands and other communications hereunder
will be in writing and will be deemed given and received (a) on the date of
delivery when delivered by and or when transmitted by confirmed simultaneous
telecopy, (b) on the following business day when sent by receipted overnight
courier, or (c) five (5) business
-18-
<PAGE> 19
days after deposit in the United States Mail when mailed by registered or
certified mail, return receipt requested, first class postage prepaid, when
addressed as set forth below:
Roy Ettlinger
Buyer: Universal Health Services, Inc.
49 Robinwood Avenue
Boston, Massachusetts 02130-2156
Copy to: Bruce Gilbert, ESQ.
General Counsel
Universal Health Services, Inc.
367 South Gulph Road
P.O. Box 61958
King of Prussia, PA 19406-0958
Sellers: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive, Suite 810
Vienna, Virginia 22182
Any party may change the address to which notices are to be sent to it by
giving written notice of such change of address to the other party in the manner
above provided for giving notice.
19.2 Assignment: Binding Effect. This Agreement may not be assigned by any of
the parties hereto without the prior written consent of the other parties
hereto, provided that Buyer may assign its rights hereunder to any entity
majority ownership of which is held by Buyer or the owners of Buyer, so long as
Buyer remains obligated for performance of Buyer's obligations hereunder. This
Agreement will be binding upon the parties hereto and their respective heirs,
successors and permitted assigns.
19.3 Headings: Exhibits and Schedules. The Section, Subsection and other
headings in this Agreement are inserted solely as a matter of convenience and
for reference, and are not a part of this Agreement. The Exhibits and Schedules
attached hereto are a material part of this Agreement and are incorporated
herein by this reference.
19.4 Counterparts. This Agreement may be executed in one or more counterparts,
all of which will be considered one and the same agreement and will become
effective when one counterpart has been signed by each party and delivered to
the other party hereto.
19.5 Integration of Agreement. This Agreement supersedes all prior agreements,
oral and written, between the parties hereto with respect to the subject matter
hereunder.
-19-
<PAGE> 20
Neither this Agreement, nor any provision hereof, may be changed, waived,
discharged, supplemented or terminated orally, but only by an agreement in
writing signed by the party against which the enforcement of such change,
waiver, discharge or termination is sought.
19.6 Time of Essence. Time is of the essence in this Agreement.
19.7 Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Massachusetts as applied to
contracts executed and performed wholly within that State.
19.8 Partial Illegality or Unenforceability. Wherever possible, each provision
hereof will be interpreted in such manner as to be effective under applicable
law, but in case any one or more of the provisions contained herein will, for
any reason, be held to be illegal or unenforceable in any respect, such
illegality or Unenforceability will not affect any other provisions of this
Agreement, and this Agreement will be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless the
deletion or such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
19.9 Singular or Plural. All defined terms used herein will have the same
meaning, whether used in the singular or plural form, unless the context clearly
requires otherwise.
19.10 "Person". The term "person" will be broadly interpreted to include,
without limitation, any corporation, partnership, association, limited liability
company, other association, trust or individual.
19.11 "Best Efforts". The use of the term "best efforts" herein will in no
event require any party to (a) expend funds which are not commercially
reasonably in relation to the transactions contemplated hereby or (b) take, or
cause to be taken, any action which would have a material adverse effect with
respect to it.
19.12 "Including". Whenever the term "including" is used in this Agreement, it
will mean "including, without limitation," (whether or not such language is
specifically set forth) and will not be deemed to limit the range of
possibilities of those items specifically enumerated.
19.13 No Third Party Beneficiaries. Nothing in this Agreement shall confer any
rights upon any person other than the parties and their respective heirs,
successors and permitted assigns.
19.14 Post Closing Control and Rights. To the extent a claim or cause of action
arises
-20-
<PAGE> 21
after the Closing Date relating to the contracts and agreements assumed by Buyer
pursuant to this Agreement, Seller shall upon request of Buyer and at Buyer's
sole cost and expense, exert all rights Seller may have pursuant to Seller's
contracts or agreements on behalf of and to the benefit of the Buyer".
The parties have executed this Agreement as of this 31 day of December, 1998.
BUYER:
ARBOUR ELDER SERVICES, INC.
By: [SIG]
--------------------------------
Title: CEO
-----------------------------
SELLERS:
MHM EXTENDED CARE SERVICES, INC.
By: [SIG]
--------------------------------
Title: President
-----------------------------
MHM SERVICES, INC.
By: [SIG]
--------------------------------
Title: President
-----------------------------
-21-
<PAGE> 22
GUARANTEE OF PERFORMANCE
Universal Health Services, Inc. ("Universal") joins in this Agreement for
the sole purpose of guaranteeing the performance by its wholly-owned
subsidiary, Arbour Elder Services, Inc., if all of Buyer's obligations
hereunder. In consideration of Seller entering into this Agreement with
Buyer, and acknowledging this Agreement with Buyer is of benefit to
Universal, Universal hereby agrees to indemnify and hold harmless Seller
from and against any damages, costs, and expenses (including legal fees)
suffered or Incurred by Seller as a result of any breach or failure of
performance by Buyer of any of Buyer's obligations under this Asset
Purchase Agreement.
UNIVERSAL HEALTH SERVICES, INC.
By: [SIG]
--------------------------------
Title: V/P
-----------------------------
-22-
<PAGE> 23
[MHM SERVICES, INC. LETTERHEAD]
List of Schedules
for Arbour Agreement
Schedule Title
- -------- -----
1.1 Excluded Assets
1.2 Acquired Assets
2.2 Allocation of purchase price
5.2 Acquired assets not owned ("None")
5.5 Financial Statements provided (Arbour
should identify)
5.6 After 8/30/98 Material changes,
transactions not ordinary course, etc.
(See para 5.6). (Response should list
audits)
5.7 Debts or liabilities not disclosed in
financial statements (None?)
5.8 Tax assessments, claims, audits,
disputes (None?)
5.10 All employment contracts, consulting
agreements, collective bargaining
agreements (should include
independent contractor agreements)
5.11 All insurance policies
5.12 Litigation, threatened claims,
government investigations (include
audits)
Buyer not assuming there contractor
8.6 See 1.2 Form of non-compete
8.6(a) See 1.2 List of those who have signed
Form 8.6
9.0 Clinicion agreements/
Percentage of Business
-23-
<PAGE> 24
SCHEDULE 1.1
EXCLUDED ASSETS
CASH
CASH EQUIVALENTS
ACCOUNTS RECEIVABLE
LEASES AND REAL PROPERTY
MCLEAN MANAGEMENT CONTRACT
MEDICARE/MEDICAID PROVIDER NUMBERS AND AGREEMENTS
MEDICAL RECORDS
<PAGE> 25
SCHEDULE 1.2
ACQUIRED ASSETS
(2) EQUIPMENT (SEE ATTACHED LIST)
(1) NURSING HOME CONTRACTS (SEE ATTACHED LIST)
(1) CLINICAL AGREEMENTS (SEE ATTACHED LIST)
(1) NON-COMPETE (SEE ATTACHED LIST)
(1) SCHOOL CONTRACTS (SEE ATTACHED LIST)
(1) CLINIC LICENSES
<PAGE> 26
SCHEDULE 1.2
ACQUIRED ASSETS
EQUIPMENT INVENTORY/TAUNTON OFFICE
DESK - 12
COMPUTERS - 1, 1 BROKEN
4 DRAWER FILING CABINET - 11
2 DRAWER FILING CABINET - 2
MOBILE FILE UNDER DESK DRAWERS - 2
UPHOLSTERED CHAIRS - 10
DESK CHAIRS - 9
STACKING CHAIRS (UPHOLSTERED) - 17
REFRIGERATOR - 1
CONFERENCE TABLE - 1
ROUND TABLE - 1
BOOK SHELVES - 2
FORM ORGANIZER - 1
COFFEE TABLE - 1
BULLETIN BOARDS - 6
LAMPS - 1
DRY - ERASE BOARDS - 2
COMPUTER WORKSTATION - 3
PRINTERS - 3, 2 ARE BROKEN
STORAGE CABINET - 1
FAX MACHINE - 1
COPIER - 1
TYPEWRITER - 1
PAPER SHREDDER - 1
MOBILE DROP-LEAF STAND - 1
<PAGE> 27
SCHEDULE 1.2
ACQUIRED ASSETS
EQUIPMENT INVENTORY/CAMBRIDGE OFFICE
<TABLE>
<S> <C>
Banquet Folding Table 1
Book case (2 shelves) 2
Bookshelves 11
Bulletin Board 8
Coat Rack (Metal) 1
Coffee Table 1
Computer (Monitor Only) 2
Computers (Keyboard, Monitor, Tower Unit) 12
Conference Tables (Round and Oblong) 2
Desk Chairs 24
Desks 25
Display Booth 1
End Tables 3
Fax Machines 3
File Cabinet (2 drawers) 23
File Cabinet on wheels(small) 1
File Cabinets (4 drawer) 49 (40 used for Medical Records)
Folding Chairs 3
Large Storage Units(5 shelves)(2 plastic, 1 metal) 3
Laser Printer (Large) 1
Laser Printer (Small) 1
Metal Stacking Chairs 32
Microwave Oven 1
Postage Meter 1
Printer Table 2
Printers (dot matrix) 3
Side Table 3
Storage Unit (4 drawers) 4
Storage Unit (2 drawer) 6
Upholstered chairs 23
Wooden Storage Unit 1
Work Station (2 shelves) 6
Work Station (6 shelves) 1
2
</TABLE>
<PAGE> 28
SCHEDULE 1.2
ACQUIRED ASSETS
<TABLE>
<CAPTION>
OPENHOM 12/30/98
- ----------------------------------------------------------------------------------------------------------
Home Street City Stat Zip
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abbot House 28 Essex Street Lynn MA 01902
- ----------------------------------------------------------------------------------------------------------
Aberjona Nursing Center 184 Swanton Street Winchester MA 01890
- ----------------------------------------------------------------------------------------------------------
Acton Adult Day Care Concord MA
- ----------------------------------------------------------------------------------------------------------
Ashmere Manor NH 229 George Schnopp Road Hinsdale MA 01235
- ----------------------------------------------------------------------------------------------------------
Avery Manor 100 West Street Needham MA 02194
- ----------------------------------------------------------------------------------------------------------
Bartlett Manor RH 180 Summer Street Malden MA 02148
- ----------------------------------------------------------------------------------------------------------
Beaumont Rehabilitation 3 Vision Drive Natick MA 01760
- ----------------------------------------------------------------------------------------------------------
Blueberry Hill Healthcare 75 Brimbal Avenue Beverly MA 01915
- ----------------------------------------------------------------------------------------------------------
Bolton Manor NH 400 Bolton Street Marlborough MA 01752
- ----------------------------------------------------------------------------------------------------------
Bourne Manor 146 MacArthur Blvd Bourne MA 02532
- ----------------------------------------------------------------------------------------------------------
Brittany Conv. Home 168 West Central Street Natick MA 01760
- ----------------------------------------------------------------------------------------------------------
Brookhaven at Lexington 1010 Waltham Street Lexington MA 02173
- ----------------------------------------------------------------------------------------------------------
Buchanan Nursing Home 190 Summer Street Malden MA 02148
- ----------------------------------------------------------------------------------------------------------
Cambridge Outpatient Clinic 23 East Street Cambridge MA 02141
- ----------------------------------------------------------------------------------------------------------
Cantabridgia Health Care 195 Prospect Street Cambridge MA 02139
- ----------------------------------------------------------------------------------------------------------
Care Matrix of Dedham 10 Care Matrix Drive Dedham MA 02026
- ----------------------------------------------------------------------------------------------------------
Carleton-Williard Village 100 Old Billerica Road Bedford MA 01730
- ----------------------------------------------------------------------------------------------------------
Carlyle Nursing & Rehab. Ctr. 342 Winter Street Framingham MA 01702
- ----------------------------------------------------------------------------------------------------------
Catholic Memorial Home 2446 Highland Avenue Fall River MA 02720
- ----------------------------------------------------------------------------------------------------------
Charlesgate Manor Conv. Home 590 Main Street Watertown MA 02172
- ----------------------------------------------------------------------------------------------------------
Chelsea Jewish N H 17 Lafayette Street Chelsea MA 02150
- ----------------------------------------------------------------------------------------------------------
Clark House Nursing Center 30 Longwood Drive Westwood MA 02090
- ----------------------------------------------------------------------------------------------------------
COC - Bay View 26 Sturgis Street Winthrop MA 02152
- ----------------------------------------------------------------------------------------------------------
COC - Berkshire 360 West Housatonic Street Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------------------
COC - Westfield 60 East Silver Street Westfield MA 01085
- ----------------------------------------------------------------------------------------------------------
Cohen, Florence, Levine Estates 201 Captain's Row Chelsea MA 02150
- ----------------------------------------------------------------------------------------------------------
Coolidge House 30 Webster Street Brookline MA 02146
- ----------------------------------------------------------------------------------------------------------
Cooperative Elder Services, Inc (Burlington) 37-B Street Burlington MA 01803
- ----------------------------------------------------------------------------------------------------------
Courtyard Nursing Care Ctr 200 Governor's Ave Medford MA 02155
- ----------------------------------------------------------------------------------------------------------
East Longmeadow NH 305 Maple Street East Longmead MA 01028
- ----------------------------------------------------------------------------------------------------------
Edgecombe Nursing Home 40 Sunset Avenue Lenox MA 02140
- ----------------------------------------------------------------------------------------------------------
Elder Services Plan PACE Program, (Brighton) 320 Washington Street Brighton MA 02135
- ----------------------------------------------------------------------------------------------------------
Elder Services Plan PACE Program, (Jamaica P 555 Amory Street Jamaica Plain MA 02146
- ----------------------------------------------------------------------------------------------------------
Emerson Convalescent 59 Coolidge Hill Road Watertown MA 02172
- ----------------------------------------------------------------------------------------------------------
FairHaven Nursing Home 476 Varnum Avenue Lowell MA 01854
- ----------------------------------------------------------------------------------------------------------
German Home RH 374 Howard Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
Glen Ridge NCC Hospital Road Malden MA 02148
- ----------------------------------------------------------------------------------------------------------
Goddard House 210-205 South Huntington Ave Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------------------
Goddard House Asst. Living 165 Chestnut street Brookline MA 02146
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 29
SCHEDULE 1.2
ACQUIRED ASSETS
<TABLE>
<CAPTION>
OPENHOM 12/30/98
- ----------------------------------------------------------------------------------------------------------
Home Street City Stat Zip
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Great Barrington Rehab 148 Maple Avenue Great Barringto MA 01230
- ----------------------------------------------------------------------------------------------------------
Greenwood Nursing Home 90 Greenwood Street Wakefield MA 01880
- ----------------------------------------------------------------------------------------------------------
Hale House RH 273 Clarendon Street Boston MA 02116
- ----------------------------------------------------------------------------------------------------------
Hallmark Nursing Home 1123 Rockdale Ave New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Hammersmith House NCC 73 Chestnut Street Saugus MA 01906
- ----------------------------------------------------------------------------------------------------------
Harrington House 160 Main Street Walpole MA 02081
- ----------------------------------------------------------------------------------------------------------
Hathaway Manor 863 Hathaway Road New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Holyoke Nursing Home 1913 Northampton Street Holyoke MA 01040
- ----------------------------------------------------------------------------------------------------------
Island Terrace NH 57 Long Point Road Lakeville MA 02347
- ----------------------------------------------------------------------------------------------------------
Jesmond Nursing Home 271 Nahant Road Nahant MA 01908
- ----------------------------------------------------------------------------------------------------------
Jewish Rehab Center 300 Paradise Road Swampscott MA 01907
- ----------------------------------------------------------------------------------------------------------
Kimwell Nursing 495 New Boston Road Fall River MA 02720
- ----------------------------------------------------------------------------------------------------------
Life Care Center 80 Boston Road N. Billerica MA 01862
- ----------------------------------------------------------------------------------------------------------
Lynn Convalescent Home 655 Boston Street Lynn MA 01905
- ----------------------------------------------------------------------------------------------------------
Lynn Public Medical Institute 179 Holyoke Street Lynn MA 01905
- ----------------------------------------------------------------------------------------------------------
Mary Immaculate Nursing 172 Lawrence Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
Meadow Green NH 45 Woburn Street Waltham MA 02154
- ----------------------------------------------------------------------------------------------------------
Meadowood Nursing Home 573 Granby Road South Hadley MA 01075
- ----------------------------------------------------------------------------------------------------------
Milton Healthcare Facility 1200 Brush Hill Road Milton MA 02186
- ----------------------------------------------------------------------------------------------------------
Mt. Pleasant Rest Home 301 South Huntington Avenue Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------------------
Neponset Circle 35-45 Coffey Street Dorchester MA 02122
- ----------------------------------------------------------------------------------------------------------
Newton-Wellesley 694 Worcester Street Wellesley MA 02181
- ----------------------------------------------------------------------------------------------------------
Nichols House Nursing Home 184 Main Street Fairhaven MA 02719
- ----------------------------------------------------------------------------------------------------------
Northampton Nursing Home 737 Bridge Road Northampton MA 01060
- ----------------------------------------------------------------------------------------------------------
Olympus Healthcare Ctr 1350 Main Street Worcester MA 01603
- ----------------------------------------------------------------------------------------------------------
Olympus Specialty 1400 State Street Springfield MA 01109
- ----------------------------------------------------------------------------------------------------------
Our Ladys Haven 71 Centre Street Fairhaven MA 02719
- ----------------------------------------------------------------------------------------------------------
Park Avenue Nursing Home 146 Park Avenue Arlington MA 02174
- ----------------------------------------------------------------------------------------------------------
Pilgrim Rehabilitation 95 Forest Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
Providence House NH 84 Chapin Street Southbridge MA 01550
- ----------------------------------------------------------------------------------------------------------
Quaboag on the Common 47 East Main Street West Brookfiel MA 01585
- ----------------------------------------------------------------------------------------------------------
Rainbow Nursing Home 210 Lowell Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
Rogerson Communities 434 Jamaicaway Boston MA 02130
- ----------------------------------------------------------------------------------------------------------
Sacred Heart Nursing Home 359 Summer Street New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Sancta Maria Nursing Facility 799 Concord Ave Cambridge MA 02138
- ----------------------------------------------------------------------------------------------------------
Sherrill House 135 Huntington Avenue Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------------------
Southpoint Rehabilitation 100 Amity Street Fall River MA 02721
- ----------------------------------------------------------------------------------------------------------
Springside of Pittsfield 255 Lebanon Ave Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------------------
Stephen Caldwell Memorial 16 Green Street Ipswich MA 01938
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE> 30
SCHEDULE 1.2
ACQUIRED ASSETS
<TABLE>
<CAPTION>
OPENHOM 12/30/98
- ----------------------------------------------------------------------------------------------------------
Home Street City Stat Zip
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sunny Acres Nursing Home 254 Billerica Road Chelmsford MA 01824
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Beverly 265 Essex Street Beverly MA 01915
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Brighton 142 Bigelow Street Brighton MA 02135
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Broadway 281 Broadway Methuen MA 01844
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Brookline 99 Park Street Brookline MA 02146
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Colonial Heights 555 South Union Street Lawrence MA 01843
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Concord 578 Old Rd. to Nine Acre Corner Concord MA 01742
- ----------------------------------------------------------------------------------------------------------
SunRise Care - East Longmeadow 135 Benton Drive East Longmead MA 01028
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Fall River 170 Oak Grove Fall River MA 02723
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Glenwood 557 Varnum Avenue Lowell MA 01854
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Holyoke 260 East Hampton Road Holyoke MA 01040
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Lexington 178 Lowell Street Lexington MA 02173
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Lowell 19 Varnum Street Lowell MA 01850
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Milford 10 Veterans Memorial Drive Milford MA 01757
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Millbury 81 Chatham Street Worcester MA 01609
- ----------------------------------------------------------------------------------------------------------
SunRise Care - New Bedford 221 Fitzgerald Drive New Bedford MA 02745
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Newton 2101 Washington Street Newton MA 02162
- ----------------------------------------------------------------------------------------------------------
SunRise Care - North Reading 134 North Street North Reading MA 01864
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Northampton 548 Elm Street Northampton MA 01060
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Northshore 70 Granite Street Lynn MA 01901
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Peabody Glen 199 Andover Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Randolph 49 Thomas Patten Drive Randolph MA 02368
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Town Manor 55 Lowell Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Weymouth 64 Performance Drive Weymouth MA 02189
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Wilmington 750 Woburn Street Wilmington MA 01887
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Wood Mill 800 Essex Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
Taunton Outpatient Clinic 30 Taunton Green Street Taunton MA 02780
- ----------------------------------------------------------------------------------------------------------
Waban Health & Rehab. Inc. 22 Kinmonth Road Newton MA 02468
- ----------------------------------------------------------------------------------------------------------
Walden House 785 Main Street Concord MA 01742
- ----------------------------------------------------------------------------------------------------------
Wellesley Health & Rehab 678 Worcester Road Wellesley MA 02181
- ----------------------------------------------------------------------------------------------------------
Wentworth Nursing Care Center 500 Wentworth Avenue Lowell MA 01852
- ----------------------------------------------------------------------------------------------------------
Whitney Place 3 Vision Drive Natick MA 01760
- ----------------------------------------------------------------------------------------------------------
Willowood of Great Barrington 151 Christian Hill Road Great Barringto MA 01230
- ----------------------------------------------------------------------------------------------------------
Willowood of Pittsfield 169 Valentine Road Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------------------
Winchester Nursing Center 223 Swanton Street Winchester MA 01890
- ----------------------------------------------------------------------------------------------------------
Wingate at Brighton 100 N. Beacon Street Brighton MA 02134
- ----------------------------------------------------------------------------------------------------------
Wingate at Sudbury 136 Boston Post Road Sudbury MA 01776
- ----------------------------------------------------------------------------------------------------------
Woburn Nursing Home 18 Frances Street Woburn MA 01801
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE> 31
Schedule 1.2
Acquired Assets
Clinical Agreements and non-compete agreements
List of Signed Agreements
Ackerman, Ted Melnick, Barry
Barsky, Susan Merl, Lynne M.
Belozersky, Irene Minalga, Mary
Benner, Sharon Mondale, Jason
Berkshire Medical Center Moore, Nancy
Berlin, Joan Needles, Douglas
Brown, Alan Nestelbaum, Zamir
Cabezas, Thomas Noah, Deborah Lee
Camerlengo, Susan Owens, Honora E.
Carlson, Christie M. Piafsky, Lynne
Cohen, Lewis Postlethwaite, Joan
Crenshaw, Bradley Reich, Faye
Cutler, Mark Richter, Cwira
Donahue, Jacqueline Riley, Douglas C.
Farrington, Lee Roos, Patricia E.
Fraser-Dexter, Linda Rusnak, Stanley
Fink, Carla Ruyle, Jeanette
Fishbein, Leslie Saba, Marie L
Gerhard, Frederick Scheinan, Wendy
Graesser, Susan Schwarz, Rachel
Hass, Howard Scorzelli, James
Hammond, David Seppelin, Martetta
Hardney, Sylvia Spadola, Madeline
Hill, Phillip Tarquino, Ernest
Hynick, Timothy Trikha, Anjana
Ingraham, Merle Van Zoeren, Barbara
Israel, Joshua Vernick, Shelia
Janney, Peter Wallace, Mary
Jones, David Wasserman, Charles
Kalina, Lizabeth Weisberger, Charles
Katis, Mary Weiner, Rhonda
Knight, William Wilson-Everett, Andrea
Laferney, Michael Yaloff, Beverly
LeBar, Jill Young, Ruth C.
Longo, Richard Zieff, Eric
Looper, John
Maiman, Ellen
Martin, Luz M.
McMurtry, Douglas
<PAGE> 32
Schedule 1.2
Non-compete
List of Signed Agreements
Abrahamson, Erika
Benner, Sharon
Brykman, Gail
Chow, Michael
Creditor, Susan
Cuasay, Catherine
Fagan, Susan
Fessler, Susan
Hynick, Timothy
Janney, Peter
Machell, Stephanie
Peach, Kimberly
Piafsky, Lynn
Ralph, Jennifer
Reich, Faye
St. George, Genevieve
Tamulevich, Jane
Tarquino, Ernest
Van Zoeren, Barbara
Von Wittenbergh, Ron
Wallace, Mary Ann
Wintle, Carol
also being assigned herein are all non-compete agreements and/or covenents
related to all clinical services in Massachusetts.
<PAGE> 33
School Based Activity Referral Sources - Kim Tamaren 12/30/98
<TABLE>
<CAPTION>
- ------------------------------ -------------------- ------------ ---- ------ --------------- ---------------------- ---------------
Organization Name Address City Stat Postal Work # Contact Clinician
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------ -------------------- ------------ ---- ------ --------------- ---------------------- ---------------
Bates Elementary 426 Beech St. Roslindale MA 02131 (617) 635-8064 Sylvia Pittman K-Payne, C.
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Bradley Elementary 110 Beachview Rd. E. Boston MA 02128 (617) 635-8422 Catherine O'Brien Wintle, C
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Conley Elementary 450 Poplar St. Roslindale MA 02131 (617) 635-8099 Leah Sharkley
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Dever Elementary 325 Mount Vernon St. Dorchester MA 02125 (617) 635-8694 Peg Handraham Falkoff & K-Pay
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Guild Elementary 195 Leydon St. E. Boston MA 02128 (617) 635-8523 Simon Ho Wintle, C
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Manning Elementary 130 Louders Lane Jamaica Plain MA 02130 (617) 635-8102 Mrs. Walker Wintle, C
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
McCormack Middle 315 Mount Vernon Dorchester MA 02125 (617) 635-8657 Karen Mallory Chow & Cuasa
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Roosevelt Elementary *on hold 95 Needham St. Hyde Park MA 02136 (617) 635-8676 Mr. McLean
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Shaw Middle 20 Mt. Vernon St. West Roxbury MA 02132 (617) 635-8050 Mrs. Camerson
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Sumner Elementary 15 Basile St. Roslindale MA 02131 (617) 635-8131 Mr. Shay - Principal K-Payne + Abr
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Warren-Prescott Elementary 50 School St. Charlestown MA 02129 (617) 635-8346 Dr. Amara - Principal Machell, S
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Washington Irving Middle 114 Cummins Hwy Roslindale MA 02131 (617) 635-8072 Nancy Lee Herber + Cuas
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Wheatley Middle 20 Kearsarge Ave. Roxbury MA 02121 (617) 635-8165 Gloria Di Angelis K-Payne, C.
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Mayflower Mayflower Ave. Middleboro MA 02346 (508) 946-2033 Bob Brown Creditor, S
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Memorial Jr. High Main Street Middleboro MA 02346 (508) 946-2020 Dina Medeiros Creditor, S
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
Edwards Middle 28 Walker Street Charlestown MA 02129 (617) 635-8516 Maureen McGoldrick Gerhard, F
- ------------------------------ -------------------- ------------- ---- ------ --------------- ---------------------- ---------------
</TABLE>
Scheduled 1.2
Acquired Assets
School Contracts
Page 1
<PAGE> 34
SCHEDULE 2.2
ALLOCATION OF PURCHASE PRICE
CONTRACTS AND GENERAL INTANGIBLES $850,000
========
<PAGE> 35
SCHEDULE 5.2
ENCUMBERED ASSETS
NONE
<PAGE> 36
SCHEDULE 5.5
FINANCIAL STATEMENTS
12/17/98 Extended Care Services, Inc.
4:43PM Extended Care Massachusetts
For the Month Ending October 31, 1998
TREND
OCTOBER TOTAL
------------- -------------
NET REVENUE $485,046.09 $485,046.09
COST OF SERVICES
SALARIED CLINICIAN PAY 257,074.43 257,074.43
CLINICIAN BENEFITS
CONTRACTOR CLINICAL P
COLLECTION FEES 31,012.63 31,012.63
INSURANCE-MALPRACTICE 1,949.02 1,949.02
------------- -------------
TOTAL COST OF SERVICES 290,036.08 290,036.08
GROSS PROFIT 195,010.01 195,010.01
GENERAL & ADMINSTRATIVE
ADMINISTRATIVE PAYROL 51,355.92 51,355.92
ADMINISTRATIVE BENEFIT 8,429.72 8,429.72
RENT & FACILITY EXPENSE 21,925.17 21,925.17
FREIGHT & DELIVERY 1,500.85 1,500.85
OFFICE SUPPLIES 5,670.67 5,670.67
TRAVEL EXPENSE 3,025.19 3,025.19
MARKETING EXPENSE 750.00 750.00
PROFESSIONAL SERVICES 9,984.42 9,984.42
BAD DEBT/CONTRACT ALL 153,599.17 153,599.17
OTHER G&A EXPENSES 4,739.38 4,739.38
------------- -------------
TOTAL G&A EXPENSES 260,980.49 260,980.49
DEPRECIATION & AMORTI 17,947.66 17,947.66
OTHER INCOME/EXPENSE
INTEREST INCOME
INTEREST EXPENSE 1,162.49 1,162.49
OTHER EXPENSE 2,390.95 2,390.95
------------- -------------
TOTAL OTHER INCOME/E 3,553.44 3,553.44
------------- -------------
TOTAL ALL EXPENSES 282,481.59 282,481.59
------------- -------------
NET INCOME/(LOSS) (87,471.58) (87,471.58)
============= ==============
<PAGE> 37
Schedule 5.5
Financial Statements
Extended Care ______ Massachusetts
Grand Total
For the Twelve Months Ending September 30, 1998
<TABLE>
<CAPTION>
OCTOBER NOVEMBER DECEMBER JANUARY FEBRUARY
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PSYCHOLOGY DO NOT USE
EXTENDED CARE REVENUE
EC REVENUE-PSYCHOLOGI 102,772.69 104,917.73 105,025.00 65,856.24 434,893.26
EC REVENUE-LICSW's 172,391.98 171,680.17 171,662.00 40,238.03
EC REVENUE-NURSES 45,699.10 44,126.50 44,142.00 38,487.64
EC REVENUE-COUNSELORS 37,572.53 37,199.82 37,282.00 139,541.58
EC REVENUE-PSYCHIATRIS 128,980.68 125,134.34 125,214.00 67,274.89
------------- ------------- ------------- ------------- -------------
TOTAL EXTENDED CARE 487,416.98 483,058.56 483,325.00 351,398.38 434,893.26
OP NET REVENUE-PSYCHOL 7,554.39 4,946.50 4,950.00 11,621.69
OP NET REVENUE-LICSW's 38,941.92 45,242.57 45,450.00 7,100.83
OP NET REVENUE-NURSES 6,791.94
OP NET REVENUE-COUNSE 45,490.46 34,418.48 34,525,00 24,624.98
OP NET REVENUE-PSYCHIA 2,765.01 1,721.77 1,750.00 11,872.04
School Revenue
Rehab Revenue
Mental Retardation Revenue
General Revenue
------------- ------------- ------------- ------------- -------------
TOTAL OUT-PATIENT RE 94,751.78 86,329.32 86,675.00 62,011.48
TOTAL REVENUE 582,168.76 569,387.88 570,000.00 413,409.86 434,893.26
Contractual Allowances
ALLOWANCES-PSYCHOLOG
ALLOWANCES-LICSW's
ALLOWANCES-NURSES
ALLOWANCES-COUNSELO
ALLOWANCES-PSYCHIATRI
------------- ------------- ------------- ------------- -------------
TOTAL CONTRACTUAL
% of Gross Revenue
NET REVENUE 582,168.76 569,387.88 570,000.00 413,409.86 434,893.26
PROGRAM MANAGER 11,452.83 13,649.31 14,931.92 14,307.35 11,113.72
PSYCHOLOGISTS 42,670.84 39,900.86 36,190.47 40,523.74 53,370.50
LICSW's 81,038.58 86,491.48 82,737.44 79,834.38 106,281.24
CLINICAL NURSE SPECIALI 17,830.50 16,893.40 13,808.60 19,435.00 24,872.10
COUNSELORS 15,321.96 9,362.43 9,490.20 7,959.15 (18,768.00)
PSYCHIATRISTS
EDUCATION DIRECTOR
CLINICAL ADMINISTRATIV
EDUCATION SPECIALISTS
OTHER PATIENT CARE
SALARIES
ADMINISTRATOR
ASST. ADMINISTRATOR
CO DIRECTORS 10,724.89 6,915.95 5,224.78 5,452.45 3,721.68
MEDICAL RECORD 3,420.39 7,046.50 6,359.55 5,885.52 4,974.60
SECRETARIAL & RECEPTIO 7,711.98 5,996.90 6,560.35 5,753.26 5,585.70
CUSTOMER SERVICE
ACCT/FINANCE
MARKETING/DEVELOP 16,563.30 15,866.91 16,725.38 12,463.33 11,552.50
BILLING & COLLECTION 20,760.44 16,532.90 15,821.02 6,336.61 6,471.48
------------- ------------- ------------- ------------- -------------
Total Salaries and Wages 227,495.71 218,656.64 207,849.71 197,950.79 209,175.52
PAYROLL TAXES-FICA 20,195.64
PAYROLL TAXES-FUTA
PAYROLL TAXES-SUTA
INSURANCE-WORKER'S CO
INSURANCE-HEALTH 3,868.68
INSURANCE-LIFE
INSURANCE-LTD
NON CLINICAL BOUNUSES
401K EXPENSE 1,379.97 1,565.44 _,309.02 1,372.69 1,427.12
ACCRUED VACATION 1,029.52 (10,657.69)
OTHER BENEFITS 40,056.20 31,404.17 38,709.32 27,426.98 1,108.44
------------- ------------- ------------- ------------- -------------
Total Benefits 41,436.17 32,969.61 42,047.86 18,141.98 26,599.88
% of Total Salaries 0.18 0.15 0.20 0.09 0.13
TOTAL SALARIES AND BEN 268,931.88 251,626.25 249,897.57 216,092.40 235,775.40
% of Net Revenue 0.46 0.44 0.44 0.52 0.54
Other Clinical Services
OTHER CLINICAL SERVICES
MAINTENANCE & REPAIRS
HOUSEKEEPING
CONTRACTED CLINICAL SE
CLINICIAN ADMINISTRATIO
PSYCHOLOGISTS-1099 8,697.50 9,270.99 9,332.50 15,601.50 17,075.50
LICSW's-1099 11,939.50 12,682.50 13,742.00 15,159.00 15,946.50
CLINICAL NURSE SPECIALIS 10,116.00 9,104.00 17,525.10 10,023.00 1,314.50
COUNSELORS-1099 16,534.50 14,239.00 19,005.25 15,578.00 11,395.00
PSYCHIATRISTS-1099 92,175.00 83,294.00 100,786.00 74,090.00 44,764.00
------------- ------------- ------------- ------------- -------------
Total Billable
Clinical Services 139,462.50 128,590.49 160,390.85 130,451.50 90,495.50
Contracted Clin 0.24 0.23 0.28 0.32 0.21
ADMIN. - 1099 22,116.50 20,761.50 20,595.00 16,146.62 15,158.25
% of Net Revenue 0.04 0.04 0.04 0.04 0.03
------------- ------------- ------------- ------------- -------------
Total Other Clinical
Services 161,579.00 149,351.99 180,985.85 146,598.12 105,653.75
TOTAL COMPENSATION 430,510.88 400,978.24 430,883.42 362,690.89 341,429.15
% of Net Revenue 0.74 0.70 0.76 0.88 0.79
</TABLE>
<TABLE>
<CAPTION>
TREND
MARCH APRIL MAY JUNE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PSYCHOLOGY DO NOT USE
EXTENDED CARE REVENUE
EC REVENUE-PSYCHOLOGI 592,287.48 689,494.81 655,571.94 581,584.73
EC REVENUE-LICSW's
EC REVENUE-NURSES
EC REVENUE-COUNSELORS
EC REVENUE-PSYCHIATRIS
------------- ------------- ------------- -------------
TOTAL EXTENDED CARE 592,287.48 689,494.81 655,571.94 581,584.73
OP NET REVENUE-PSYCHOL
OP NET REVENUE-LICSW's
OP NET REVENUE-NURSES
OP NET REVENUE-COUNSE
OP NET REVENUE-PSYCHIA
School Revenue
Rehab Revenue
Mental Retardation Revenue
General Revenue
------------- ------------- ------------- -------------
TOTAL OUT-PATIENT RE
TOTAL REVENUE 592,287.48 689,494.81 655,571.94 581,584.73
Contractual Allowances
ALLOWANCES-PSYCHOLOG
ALLOWANCES-LICSW's
ALLOWANCES-NURSES
ALLOWANCES-COUNSELO
ALLOWANCES-PSYCHIATRI
------------- ------------- ------------- -------------
TOTAL CONTRACTUAL
% of Gross Revenue
NET REVENUE 592,287.48 689,494.81 655,571.94 581,584.73
PROGRAM MANAGER
PSYCHOLOGISTS 273,912.36 339,578.32 319,453.12 294,429.53
LICSW's
CLINICAL NURSE SPECIALI
COUNSELORS
PSYCHIATRISTS
EDUCATION DIRECTOR
CLINICAL ADMINISTRATIV
EDUCATION SPECIALISTS
OTHER PATIENT CARE
SALARIES 52,276.75 51,145.00 49,834.19 50,669.26
ADMINISTRATOR
ASST. ADMINISTRATOR
CO DIRECTORS
MEDICAL RECORD
SECRETARIAL & RECEPTIO
CUSTOMER SERVICE
ACCT/FINANCE
MARKETING/DEVELOP
BILLING & COLLECTION
------------- ------------- ------------- -------------
Total Salaries and Wages 326,189.11 390,723.32 369,297.31 345,098.79
PAYROLL TAXES-FICA 14,195.57 19,524.67 18,677.84 27,201.72
PAYROLL TAXES-FUTA
PAYROLL TAXES-SUTA
INSURANCE-WORKER'S CO 2,160.00
INSURANCE-HEALTH
INSURANCE-LIFE
INSURANCE-LTD
NON CLINICAL BOUNUSES
401K EXPENSE
ACCRUED VACATION 1,375.75 (1,547.76) 904.71 789.26
OTHER BENEFITS 3,780.80
3,173.68 3,049.68 3,458.34 11,170.18
Total Benefits ------------- ------------- ------------- -------------
% of Total Salaries 18,745.00 23,186.59 23,040.89 42,941.96
0.06 0.06 0.06 0.12
TOTAL SALARIES AND BEN
% of Net Revenue 344,934.11 413,909.91 392,328.20 388,040.75
0.58 0.60 0.60 0.67
Other Clinical Services
OTHER CLINICAL SERVICES
MAINTENANCE & REPAIRS
HOUSEKEEPING
CONTRACTED CLINICAL SE
CLINICIAN ADMINISTRATIO
PSYCHOLOGISTS-1099
LICSW's-1099
CLINICAL NURSE SPECIALIS (1.00)
COUNSELORS-1099
PSYCHIATRISTS-1099
Total Billable ------------- ------------- ------------- -------------
Clinical Services
Contracted Clin
(1.00)
ADMIN. - 1099
% of Net Revenue
Total Other Clinical ------------- ------------- ------------- -------------
Services
(1.00)
TOTAL COMPENSATION
% of Net Revenue 344,933.11 413,909.91 392,328.20 388,040.75
% of Net Revenue 0.58 0.60 0.60 0.67
</TABLE>
<TABLE>
<CAPTION>
JULY AUGUST SEPTEMBER TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PSYCHOLOGY DO NOT USE
EXTENDED CARE REVENUE
EC REVENUE-PSYCHOLOGI 616,259.13 596,699.52 453,205.95 4,998,568.48
EC REVENUE-LICSW's 555,972.18
EC REVENUE-NURSES 172,455.24
EC REVENUE-COUNSELORS 251,595.93
EC REVENUE-PSYCHIATRIS 446,603.91
------------- ------------- ------------- -------------
TOTAL EXTENDED CARE 616,259.13 596,699.52 453,205.95 6,425,195.74
OP NET REVENUE-PSYCHOL 29,072.58
OP NET REVENUE-LICSW's 136,735.32
OP NET REVENUE-NURSES 6,791.94
OP NET REVENUE-COUNSE 139,058.92
OP NET REVENUE-PSYCHIA 18,108.82
School Revenue
Rehab Revenue
Mental Retardation Revenue
General Revenue
------------- ------------- ------------- -------------
TOTAL OUT-PATIENT RE 329,767.58
TOTAL REVENUE 616,259.13 596,699.52 453,205.95 6,754,963.32
Contractual Allowances
ALLOWANCES-PSYCHOLOG
ALLOWANCES-LICSW's
ALLOWANCES-NURSES
ALLOWANCES-COUNSELO
ALLOWANCES-PSYCHIATRI
------------- ------------- ------------- -------------
TOTAL CONTRACTUAL
% of Gross Revenue
NET REVENUE 616,259.13 596,699.52 453,205.95 6,754,963.32
PROGRAM MANAGER 65,455.13
PSYCHOLOGISTS 326,617.33 317,840.74 240,199.15 436,383.12
LICSW's 92,839.60
CLINICAL NURSE SPECIALI 23,365.74
COUNSELORS
PSYCHIATRISTS
EDUCATION DIRECTOR
CLINICAL ADMINISTRATIV
EDUCATION SPECIALISTS
OTHER PATIENT CARE
SALARIES 56,199.26 52,825.94 53,787.61 366,738.01
ADMINISTRATOR
ASST. ADMINISTRATOR
CO DIRECTORS 32,039.75
MEDICAL RECORD 27,686.56
SECRETARIAL & RECEPTIO 31,608.19
CUSTOMER SERVICE
ACCT/FINANCE
MARKETING/DEVELOP 73,171.42
BILLING & COLLECTION 65,922.45
------------- ------------- ------------- -------------
Total Salaries and Wages 382,816.59 370,666.68 293,986.76 3,539,896.93
PAYROLL TAXES-FICA 33,815.97 16,932.46 13,958.57 162,504.44
PAYROLL TAXES-FUTA
PAYROLL TAXES-SUTA
INSURANCE-WORKER'S CO 2,160.00
INSURANCE-HEALTH 3,868.68
INSURANCE-LIFE
INSURANCE-LTD
NON CLINICAL BOUNUSES
401K EXPENSE
ACCRUED VACATION 1,116.39 966.16 930.00 12,588.75
OTHER BENEFITS (5,847.37)
9,133.25 6,060.35 2,865.20 177,615.79
Total Benefits ------------- ------------- ------------- -------------
% of Total Salaries 44,065.61 23,958.97 17,753.77 354,888.29
0.12 0.06 0.06 0.10
TOTAL SALARIES AND BEN
% of Net Revenue 426,882.20 394,625.65 311,740.53 3,894,785.22
0.69 0.66 0.69 0.58
Other Clinical Services
OTHER CLINICAL SERVICES
MAINTENANCE & REPAIRS
HOUSEKEEPING
CONTRACTED CLINICAL SE
CLINICIAN ADMINISTRATIO
PSYCHOLOGISTS-1099
LICSW's-1099 59,977.99
CLINICAL NURSE SPECIALIS 69,468.50
COUNSELORS-1099 48,082.60
PSYCHIATRISTS-1099 76,751.75
395,109.00
Total Billable ------------- ------------- ------------- -------------
Clinical Services
Contracted Clin 649,389.84
0.10
ADMIN. - 1099
% of Net Revenue 94,777.87
0.01
Total Other Clinical ------------- ------------- ------------- -------------
Services
744,167.71
TOTAL COMPENSATION
% of Net Revenue 426,882.20 394,625.65 311,740.53 4,638,952.93
% of Net Revenue 0.69 0.66 0.69 0.69
</TABLE>
<PAGE> 38
SCHEDULE 5.5
FINANCIAL STATEMENTS
Extended Care Services, Inc. - Massachusetts
Grand Total
For the Twelve Months Ended September 30, 1998
<TABLE>
<CAPTION>
TREND
OCTOBER NOVEMBER DECEMBER JANUARY FEBRUARY MARCH
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Facility Expenses
RENT $15,611.61 $15,611.61 $15,364.11 $15,364.11 $15,611.61 $11,134.55
TAXES-PERSONAL PROPER 52.93 52.93 52.83
ELECTRICITY 1,766.18 460.26 774.79 1,405.30 1,668.41 2,749.35
TELEPHONE 5,332.31 4,252.53 1,987.74 5,840.11 5,106.11 4,069.24
ALARM & PROTECTION SER
OFFICE EQUIPMENT RENTA 1,667.20 2,099.50 1,889.05 2,076.20 1,485.10 1,879.38
TRANSPORTATION-RENT/LE
FURNITURE & EQUIP EXPE
MOVING EXPENSE
REPAIRS & MAINTENANCE 891.81 761.06 461.06 766.06 702.13 527.37
------------- ------------- ------------- ------------- ------------- -------------
Total Facility Expense 25,322.04 23,237.89 20,529.58 25,451.78 24,573.36 20,359.89
Amort. & Depreciation
AMORTIZATION-DEFERRED 7,934.92 7,934.92 7,934.92 7,934.92 7,934.92 7,934.92
AMORTIZATION - GOODWI 1,479.17 1,479.17 1,479.17 1,479.17 1,479.17 1,479.17
DEPRECIATION 1,614.31 1,614.31 1,614.43 1,614.43 1,614.43 1,614.41
------------- ------------- ------------- ------------- ------------- -------------
Total Amort./Deprec. 11,028.40 11,028.40 11,028.52 11,028.52 11,028.52 11,028.50
Non-Clinical Supplies
FREIGHT & DELIVERY 1,119.39 3,490.65 2,283.98 1,688.92 3,285.20 3,021.14
OFFICE SUPPLY 4,369.01 3,058.65 2,567.30 2,812.11 555.57 2,779.17
OUTSIDE PRINTING & DUPL 4,718.55 2,586.81 475.40 956.03 5,050.46
OTHER NON-CLINICAL SUP
------------- ------------- ------------- ------------- ------------- -------------
Total Non-Clinical
Supplies 10,206.95 9,136.11 5,326.68 4,501.03 4,796.80 10,850.77
Travel Expense
TRAVEL-AIR 3,568.49 1,167.98 388.50 1,500.00 305.20
TRAVEL-AUTO 138.55 30.50
TRAVEL-MILEAGE REIMBU 1,929.10 2,010.70 1,925.90 2,697.26 1,550.00 1,974.55
TRAVEL-LODGING 188.39
TRAVEL-MEALS 52.98 109.29 50.88
TRAVEL-OTHER 37.89 106.45 6.80
ENTERTAINMENT METS (170.00)
TRANSPORTATION LEASIN 80.00 80.00 80.00
------------- ------------- ------------- ------------- ------------- -------------
Total Travel Expenses 5,615.48 3,745.05 2,401.20 2,806.55 2,880.00 2,361.13
Marketing Expenses
MARKETING-PRINT
MARKETING-OTHER 130.00 80.00
------------- ------------- ------------- ------------- ------------- -------------
Total Marketing Expenses 130.00 80.00
Conv/Education/Refr/Dues
CONVENTIONS
TRAINING & EDUCATION 207.40 96.60 190.00
REFERENCE MATERIALS 21.46
BROCHURES & HANDBOOK
DUES & FEES 41.67 842.67 41.63 100.00
------------- ------------- ------------- ------------- ------------- -------------
Total Conv/Education
/Refr/Dues 249.07 960.73 41.63 190.00 100.00
Professional Services
TEMPORARY HELP 252.00 1,333.60 3,877.00
AUDITING 750.00 750.00 750.00 750.00 750.00 750.00
OUTSIDE DATA PROCESSIN 418.87 2,264.48 2,497.61 810.62 (97.18) 11,635.65
COLLECTION FEES 33,401.45 37,869.38
LEGAL
MISC CONSULTING 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
------------- ------------- ------------- ------------- ------------- -------------
Total Professional
Services 4,420.87 7,348.08 6,247.61 4,560.62 37,054.27 57.132.03
Other Operating Expense
EMPLOYEE FUNCTIONS 223.91 392.53 75.29
FOOD FOR OFFICE 249.01 376.10 46.78 67.65 155.40 140.76
PROVISION FOR BAD DEBT 72,771.08 71,173.49 165,250.01 82,681.98 86,978.65 92,777.08
INSURANCE-MALPRACTICE 5,821.68 5,693.89 5,700.00 4,134.09 4,348.93 5,922.87
INSURANCE-BLDG & EQUIP
INSURANCE-OTHERS 515.53 962.33
RECRUITMENT 595.50 859.64 237.30 949.20 359.73 760.10
TAXES & LICENSES 178.40
BANK SERVICE CHARGES 524.67 735.11 766.03 862.97 1,247.49 1,151.16
OTHER GENERAL & ADMIN 194.68 760.06
------------- ------------- ------------- ------------- ------------- -------------
Total Other
Operating Expense 79,961.94 79,256.82 173,152.71 88,771.18 93,605.73 101.892.70
TOTAL OPERATING EXP 567,315.63 535,821.32 649,611.35 500,000.57 515,367.83 548,738.13
------------- ------------- ------------- ------------- ------------- -------------
NET INCOME FROM OPERA 14,853.13 33,566.56 (79,611.35) (86,590.71) (80,474.57) 43,549.35
INTEREST EXPENSE OTHER 1,162.49 1,124.99 1,162.49 1,162.49 1,080.00 1,162.49
INTEREST EXPENSE-MHM
------------- ------------- ------------- ------------- ------------- -------------
Total Interest Expense 1,162.49 1,124.99 1,162.49 1,162.49 1,080.00 1,162.49
MHM BILLED DIRECT EXP
------------- ------------- ------------- ------------- ------------- -------------
Total Other Expense 1,162.49 1,124.99 1,162.49 1,162.49 1,080.00 1,162.49
Net Income 13,690.64 32,441.57 (80,773.84) (87,753.20) (81,554.57) 42,386.86
<CAPTION>
TREND
APRIL MAY JUNE JULY AUGUST SEPTEMBER
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Facility Expenses
RENT $16,299.53 $15,804.53 $15,893.03 $15,817.43 $15,562.00 $15,804.53
TAXES-PERSONAL PROPER
ELECTRICITY 866.37 (762.88) 805.61 792.74 778.23 977.46
TELEPHONE 4,165.23 3,852.18 3,927.79 4,673.60 4,082.83 4,059.20
ALARM & PROTECTION SER
OFFICE EQUIPMENT RENTA 2,665.67 1,868.81 1,778.57 1,804.76 1,874.66 2,072.93
TRANSPORTATION-RENT/LE
FURNITURE & EQUIP EXPE
MOVING EXPENSE
REPAIRS & MAINTENANCE 1,053.05 867.34 215.00 947.24 760.54 230.00
------------- ------------- ------------- ------------- ------------- -------------
Total Facility Expense 25,049.85 21,629.98 22,620.00 24,035.77 23,058.26 23,144.12
Amort. & Depreciation
AMORTIZATION-DEFERRED 7,934.92 7,934.92 7,934.92 7,934.92 7,934.92 7,934.92
AMORTIZATION - GOODWI 1,479.17 1,479.17 1,479.17 1,479.17 1,479.17 1,479.17
DEPRECIATION 1,614.41 1,626.11 1,626.11 1,626.11 1,626.11 1,626.11
------------- ------------- ------------- ------------- ------------- -------------
Total Amort./Deprec. 11,028.50 11,040.20 11,040.20 11,040.20 11,040.20 11,040.20
Non-Clinical Supplies
FREIGHT & DELIVERY
OFFICE SUPPLY 1,911.16 1,916.82 1,944.05 2,512.56 2,513.84 4,540.10
OUTSIDE PRINTING & DUPL 1,093.59 1,475.91 967.64 423.45 3,556.55 2,353.20
OTHER NON-CLINICAL SUP 2,960.65 2,277.60 1,836.20 2,646.88 2,090.01 1,466.95
------------- ------------- ------------- ------------- ------------- -------------
Total Non-Clinical
Supplies 5,965.40 5,670.33 4,747.89 5,582.89 8,160.40 8,360.25
Travel Expense
TRAVEL-AIR 1,106.81 976.77 2,203.02 370.50 3,375.48
TRAVEL-AUTO 150.00 109.28 81.96 282.99
TRAVEL-MILEAGE REIMBU 1,462.10 1,877.30 1,443.95 890.80 1,384.53 2,615.07
TRAVEL-LODGING 178.93
TRAVEL-MEALS 10.27 150.05 36.79 93.05 24.57
TRAVEL-OTHER 25.00 226.60 95.00
ENTERTAINMENT METS 213.56
TRANSPORTATION LEASIN 170.09
------------- ------------- ------------- ------------- ------------- -------------
Total Travel Expenses 2,718.91 2,864.34 3,931.30 927.59 2,156.64 6,955.69
Marketing Expenses
MARKETING-PRINT
MARKETING-OTHER
------------- ------------- ------------- ------------- ------------- -------------
Total Marketing Expenses
Conv/Education/Refr/Dues
CONVENTIONS
TRAINING & EDUCATION 255.00 500.00
REFERENCE MATERIALS 58.70
BROCHURES & HANDBOOK
DUES & FEES 500.00 235.00 9,278.00
------------- ------------- ------------- ------------- ------------- -------------
Total Conv/Education
/Refr/Dues 500.00 255.00 235.00 9,278.00 558.70
Professional Services
TEMPORARY HELP 2,857.10 9,711.40 1,233.00
AUDITING 750.00 750.00 750.00 750.00 750.00 750.00
OUTSIDE DATA PROCESSIN 479.55 277.29 402.19 508.98 612.46 (237.67)
COLLECTION FEES 54,085.00 42,555.00 32,261.93 39,402.06 38,151.47 28,976.86
LEGAL
MISC CONSULTING 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
------------- ------------- ------------- ------------- ------------- -------------
Total Professional
Services 61,171.65 56,293.69 39,414.12 43,661.04 42,513.93 33,722.19
Other Operating Expense
EMPLOYEE FUNCTIONS
FOOD FOR OFFICE 302.40 32.55 14.70 14.70 365.63 42.55
PROVISION FOR BAD DEBT 120,661.59 316,475.08 96,513.59 107,845.34 104,422.41 417,688.66
INSURANCE-MALPRACTICE 6,894.94 6,655.71 5,515.06 6,162.59 5,966.99
INSURANCE-BLDG & EQUIP
INSURANCE-OTHERS 962.33 2,934.21 2,774.97 1,394.33 962.33 962.33
RECRUITMENT 508.50 1,139.20 1,706.24 329.12 1,219.42 544.81
TAXES & LICENSES
BANK SERVICE CHARGES 1,156.71 1,111.35 737.78 1,462.76 2,486.31 1,404.91
OTHER GENERAL & ADMIN 483.10
------------- ------------- ------------- ------------- ------------- -------------
Total Other
Operating Expense 130,969.57 328,348.10 107.262.34 117,208.84 115,423.09 420,643.26
TOTAL OPERATING EXP 651,313.79 818,429.84 577,291.60 629,338.53 606,256.17 816,164.94
------------- ------------- ------------- ------------- ------------- -------------
NET INCOME FROM OPERA 38,181.02 (162,857.90) 4,293.13 (13,079.40) (9,556.65) (362,958.99)
INTEREST EXPENSE OTHER 1,124.99 1,162.49 1,124.99 1,162.49 1,162.49 1,124.99
INTEREST EXPENSE-MHM
------------- ------------- ------------- ------------- ------------- -------------
Total Interest Expense 1,124.99 1,162.49 1,124.99 1,162.49 1,162.49 1,124.99
MHM BILLED DIRECT EXP
------------- ------------- ------------- ------------- ------------- -------------
Total Other Expense 1,124.99 1,162.49 1,124.99 1,162.49 1,162.49 1,124.99
Net Income 37,056.03 (164,020.39) 3,168.14 (14,241.89) (10,719.14) (364,083.98)
<CAPTION>
TREND
TOTAL
-------------
<S> <C>
Facility Expenses
RENT $183,878.65
TAXES-PERSONAL PROPER 158.69
ELECTRICITY 12,281.82
TELEPHONE 51,348.87
ALARM & PROTECTION SER
OFFICE EQUIPMENT RENTA 23,161.83
TRANSPORTATION-RENT/LE
FURNITURE & EQUIP EXPE
MOVING EXPENSE
REPAIRS & MAINTENANCE 8,182.66
-------------
Total Facility Expense 279,012.52
Amort. & Depreciation
AMORTIZATION-DEFERRED 95,219.04
AMORTIZATION - GOODWI 17,750.04
DEPRECIATION 19,431.28
-------------
Total Amort./Deprec. 132,400.36
Non-Clinical Supplies
FREIGHT & DELIVERY 30,227.81
OFFICE SUPPLY 26,012.15
OUTSIDE PRINTING & DUPL 27,065.54
OTHER NON-CLINICAL SUP
-------------
Total Non-Clinical
Supplies 83,305.50
Travel Expense
TRAVEL-AIR 14,962.75
TRAVEL-AUTO 793.28
TRAVEL-MILEAGE REIMBU 21,761.26
TRAVEL-LODGING 367.32
TRAVEL-MEALS 527.88
TRAVEL-OTHER 497.74
ENTERTAINMENT METS 43.56
TRANSPORTATION LEASIN 410.09
-------------
Total Travel Expenses 39,363.88
Marketing Expenses
MARKETING-PRINT
MARKETING-OTHER 210.00
-------------
Total Marketing Expenses 210.00
Conv/Education/Refr/Dues
CONVENTIONS
TRAINING & EDUCATION 1,249.00
REFERENCE MATERIALS 80.16
BROCHURES & HANDBOOK
DUES & FEES 11,038.97
-------------
Total Conv/Education
/Refr/Dues 12,368.13
Professional Services
TEMPORARY HELP 19,264.10
AUDITING 9,000.00
OUTSIDE DATA PROCESSIN 19,572.85
COLLECTION FEES 309,703.15
LEGAL
MISC CONSULTING 36,000.00
-------------
Total Professional
Services 393,540.10
Other Operating Expense
EMPLOYEE FUNCTIONS 691.73
FOOD FOR OFFICE 1,808.23
PROVISION FOR BAD DEBT 1,735,238.96
INSURANCE-MALPRACTICE 62,816.75
INSURANCE-BLDG & EQUIP
INSURANCE-OTHERS 11,468.36
RECRUITMENT 9,208.76
TAXES & LICENSES 178.40
BANK SERVICE CHARGES 13,647.25
OTHER GENERAL & ADMIN 1,437.84
-------------
Total Other
Operating Expense 1,836,496.28
TOTAL OPERATING EXP 7,415,649.70
-------------
NET INCOME FROM OPERA (660,686.38)
INTEREST EXPENSE OTHER 13,717.39
INTEREST EXPENSE-MHM
-------------
Total Interest Expense 13,717.39
MHM BILLED DIRECT EXP
-------------
Total Other Expense 13,717.39
Net Income (674,403.77)
</TABLE>
<PAGE> 39
SCHEDULE 5.5
FINANCIAL STATEMENTS
Extended Care Services, Inc.
Extended Care Massachusetts
For the Month Ending October 31, 1998
<TABLE>
<CAPTION>
TREND
OCTOBER TOTAL
------------- -------------
<S> <C> <C>
NET REVENUE $ 485,046.09 $485,046.09
COST OF SERVICES
SALARIED CLINICIAN PAY 257,074.43 257,074.43
CLINICIAN BENEFITS
CONTRACTOR CLINICAL P
COLLECTION FEES 31,012.63 31,012.63
INSURANCE-MALPRACTICE 1,949.02 1,949.02
------------- -------------
TOTAL COST OF SERVICES 290,036.08 290,036.08
GROSS PROFIT 195,010.01 195,010.01
GENERAL & ADMINISTRATIVE
ADMINISTRATIVE PAYROLL 51,355.92 51,355.92
ADMINISTRATIVE BENEFIT 8,429.72 8,429.72
RENT & FACILITY EXPENSE 21,925.17 21,925.17
FREIGHT & DELIVERY 1,500.85 1,500.85
OFFICE SUPPLIES 3,670.67 3,670.67
TRAVEL EXPENSE 3,025.19 3,025.19
MARKETING EXPENSE 750.00 750.00
PROFESSIONAL SERVICES 9,984.42 9,984.42
BAD DEBT/CONTRACT ALL 153,599.17 153,599.17
OTHER G&A EXPENSES 4,739.38 4,739.38
------------- -------------
TOTAL G&A EXPENSES 260,980.49 260,980.49
DEPRECIATION & AMORTI 17,947.66 17,947.66
OTHER INCOME/EXPENSE
INTEREST INCOME
INTEREST EXPENSE 1,162.49 1,162.49
OTHER EXPENSE 2,390.95 2,390.95
------------- -------------
TOTAL OTHER INCOME/E 3,553.44 3,553.44
------------- -------------
TOTAL ALL EXPENSES 282,481.59 282,481.59
------------- -------------
NET INCOME/(LOSS) (87,471.58) (87,471.58)
============= =============
</TABLE>
<PAGE> 40
ECS MASS
Charges 595,722.00
Adjustment (111,587.32)
------------
Net Revenue 484,134.68
Adjustment (444.90)
Credit Balance 1,355.31
------------
Net Revenue per P&L 485,045.09
============
<PAGE> 41
SCHEDULE 5.6
ABSENCE OF CHANGE
NONE
<PAGE> 42
SCHEDULE 5.7
ABSENCE OF UNDISCLOSED LIABILITIES
NONE
<PAGE> 43
SCHEDULE 5.8
TAX RETURNS AND CREDITS
NONE
<PAGE> 44
SCHEDULE 5.10
LIST OF SIGNED AGREEMENTS
ACKERMAN, TED MELNICK, BARRY
BARSKY, SUSAN MERL, LYNNE M.
BELOZERSKY, IRENE MINALGA, MARY
BENNER, SHARON MONDALE, JASON
BERKSHIRE MEDICAL CENTER MOORE, NANCY
BERLIN, JOAN NEEDLES, DOUGLAS
BROWN, ALAN NESTELBAUM, ZAMIR
CABEZAS, THOMAS NOAH, DEBORAH LEE
CAMERLENGO, SUSAN OWENS, HONORA E.
CARLSON, CHRISTIE M. PIAFSKY, LYNNE
COHEN, LEWIS POSTLETHWAITE, JOAN
CRENSHAW, BRADLEY REICH, FAYE
CUTLER, MARK RICHTER, CWIRA
DONAHUE, JACQUELINE RILEY, DOUGLAS C.
FARRINGTON, LEE ROOS, PATRICIA E.
FRASER-DEXTER LINDA RUSNAK, STANLEY
FINK, CARLA RUYLE, JEANETTE
FISHBEIN, LESLIE SABA, MARIE L.
GERHARD, FREDERICK SCHEINAN, WENDY
GRAESSER, SUSAN SCHWARZ, RACHEL
HAAS, HOWARD SCORZELLI, JAMES
HAMMOND, DAVID SEPPELIN, MARTETTA
HARDNEY, SYLVIA SPADOLA, MADELINE
HILL, PHILLIP TARQUINO, ERNEST
HYNICK, TIMOTHY TRIKHA, ANJANA
INGRAHAM, MERLE VAN ZOEREN, BARBARA
ISRAEL, JOSHUA VERNICK, SHELIA
JANNEY, PETER WALLACE, MARY
JONES, DAVID WASSERMAN, CHARLES
KALLNA, LIZABETH WEISBERGER, CHARLES
KATIS, MARY WEINER, RHONDA
KNIGHT, WILLIAM WILSON-EVERETT. ANDREA
LAFERNEY, MICHAEL YALOFF, BEVERLY
LEBAR, JILL YOUNG, RUTH C.
LONGO, RICHARD ZIEFF, ERIC
LOOPER, JOHN
MAIMAN, ELLEN
MARTIN, LUZ M.
MCMURTRY, DOUGLAS
<PAGE> 45
SCHEDULE 5.11
INSURANCE POLICIES
POLICY NUMBER
98CGIC22000
Credit General Insurance Corporation
c/o Campania Management Company
111 Berry Street, S.E.
Post Office Box 2314
Vienna, Virginia 22183
In consideration of the premium and stipulations hereinafter mentioned, Credit
General Insurance Company. (hereinafter called the Company),
Does Insure: MHM Services, Inc.
----------------------------------------------------
8000 Towers Crescent Drive
----------------------------------------------------
Vienna, Virginia 22102-2812
----------------------------------------------------
(hereinafter called Insured),
Term: October 1, 1998, at 12:01 a.m., Eastern standard time
-----------------------------------------------------
October 1, 1999, at 12:01 a.m., Eastern standard time
-----------------------------------------------------
Coverage: Hospital Professional Liability Including General Liability
Conditions: As per policy and attachments hereto.
THIS POLICY SHALL NOT BE VALID UNLESS ENDORSEMENT ISSUED BY THIS COMPANY IS
ATTACHED HERETO, together with such other provisions, agreements or conditions
as may be endorsed hereon or added hereto; and no officer, agent or other
representative of the Company shall have the power to waive or be deemed to
have waived any provision or condition of this Policy unless such waiver, if
any, shall be written upon or attached hereto; nor shall any privilege or
permission affecting the insurance under this Policy exist or be claimed by the
Insured unless so written or attached.
IN WITNESS WHEREOF, this Company has executed these presents, but this Policy
shall not be valid unless countersigned by a duly authorized representative of
the Company
/s/ DENNIS R. SANTOLI
- --------------------------------
Attorney In Fact
Credit General Insurance Company
**THIS IS A MODIFIED CLAIMS MADE POLICY**
W/A 5 YEAR EXTENDED REPORTING PERIOD
<PAGE> 46
HOSPITAL PROFESSIONAL LIABILITY POLICY
SECTION I: DECLARATIONS
Policy Number 98CGIC22000
Item 1. Named Insured and Address:
MHM Services, Inc.
8000 Towers Crescent Drive
Vienna, Virginia 22182
Item 2. Each additional person or organization
"insured" added to this policy by endorsement
is a "Named Insured" under this policy.
Item 3. Policy Period:
From: October 1,1998 at 12:01 a.m., Eastern standard time
To: October 1,1999 at 12:01 a.m., Eastern standard time
Item 4. Premium: Per attached invoice
Item 5. This Hospital Professional Liability Policy
provides coverage by reason of "bodily
injury" or "property damage", to which this
insurance applies, caused by an "occurrence",
pursuant to the terms and conditions of this
policy.
Item 6. The limit of liability under this Policy
during a "policy period" is a maximum per
"occurrence" for any "insured". Irrespective
of the number of "insureds" who are provided
coverage by endorsement in addition to the
"Named Insured" identified in Item 2 of the
Declarations and the number of "occurrences",
the aggregate liability during the "policy
period" is $3,000,000.
<TABLE>
<CAPTION>
(a) Per Occurrence (b) Policy
Coverage Limit Aggregate
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Hospital Professional $1,000,000, with $3,000,000
Services, Bodily Injury,
Personal Injury and $10,000 Deductible Applies Each and Every
Property Damage Liability
</TABLE>
Item 7. Employees of the "Named Insured" are covered by this policy.
<PAGE> 47
Item 8. The following endorsements form a part of
this policy and are incorporated herein by
reference as of the effective date set out in
Item 3 of the Declarations:
Endorsement No. 1 - Nuclear Energy Exclusion Endorsement
(Broad Form)
Endorsement No. 2 - Good Samaritan Endorsement
Endorsement No. 3 - Punitive Damages Exclusion
Endorsement
Endorsement No. 4 - Service of Suit Endorsement
Endorsement No. 5 - Additional Named Insured Endorsement
Endorsement No. 6 - Host Liquor Liability Endorsement
<PAGE> 48
Endorsement #5
Policy 98CGIC22000
Effective October 1,1998
ADDITIONAL NAMED INSURANCE ENDORSEMENT
Schedule of Named Insureds
It is understood and agreed that the following entities shall be attached and
form the Schedule of Named Insureds Endorsement under this Policy.
Named Insured Additional Insured
MHM Services, Inc. 401 Bingham Street
8000 Towers Crescent Drive Suite 301
Vienna, Virginia 22182 Pittsburgh, PA 15203
3200 Pointe Parkway, #100
Norcross, GA 30092
1808 West End Avenue
Suite 511
Nashville, TN 37203
4515 Poplar Avenue
Suite 332
Memphis, TN 38117
30 Taunton Green, Suite #4/5
Taunton, MA 20780
23 East Street, 3rd Floor
Cambridge, MA 02141
<PAGE> 49
CAMPANIA [LETTERHEAD]
111 Berry Street, S.E.
Vienna, Virginia 22180 December 31, 1998
(703)242-9224
(703)242-3815 Fax To: Mickey Slade
(800)831-9506 From: Cynthia Booth
* Re: Extended Reporting
7601 First Place Drive, #A-9
MHM' General and Professional Liability policy
Oakwood Village, Ohio 44146 has a five year extended reporting period
included. This means coverage is extended for
(216)232-1585 events reported sixty months after the policy
ends, as long as the event occurred during the
(216)232-3975 Fax policy period.
(800)299-5401 Please call me if you need further clarification.
*
2001 9th Avenue, Suite 307D
Vero Beach, Florida 32960
(561)564-9222
(561)564-3430 Fax
(800)664-6036
*
<PAGE> 50
SCHEDULE 5.12
LITIGATION, THREATENED CLAIMS,
GOVERNMENT INVESTIGATION
CONTINGENCIES
On November 23, 1998, the Company received a notice from the Massachusetts Peer
Review Organization, Inc. (MassPro), that the Company's counseling clinic
located in Taunton, Massachusetts had failed to comply with certain
regulations, rules, standards and statutes applicable to providers
participating in the Massachusetts Medical Assistance Program. As a result of
MassPro's audit, the Company was requested to repay the Massachusetts Medical
Assistance Program $215, 000. The Company has thirty days to appeal this
determination. Although the Company believes it will prevail in reducing the
amount of repayment requested, the full amount of this potential liability has
been recorded in the consolidated financial statements at September 30, 1998.
MassPro performed a similar audit on the Company's clinic located in Cambridge,
Massachusetts. The Company has not received any correspondence from MassPro on
the results of this audit. The Company does not believe the results of this
audit will have a material financial impact on the Company's operation.
In December 1998, a lawyer for Dr. Anita Meyer wrote complaining of her
discharge from employment which took place in October 1998. No specific demand
was made.
In March 1998, an EEOC discrimination claim was filed on behalf of former
employee, Tracey Penn regarding her discharge. The Cambridge Human Rights
Commission found in Ms. Penn's favor. That determination is being appealed, and
a settlement conference is scheduled for January 1999.
<PAGE> 51
SCHEDULE 9.0
MEMO
MEL CARVALHO
MHM REGIONAL DIRECTOR
MASSACHUSETTS DIVISION
TO: ROY ETTLINGER
STEVE WHEELER
MICKEY SLADE
DATE: DECEMBER 31,1998
RE: CLINICIAN AGREEMENTS/PERCENTAGE OF BUSINESS
ENCLOSED IS THE PERCENTAGE OF REVENUE FOR THE EXTENDED CARE PROGRAM FOR THE
FOLLOWING CATEGORIES:
1. SUN HOMES
2. MCLEAN HOMES
3. HOMES COVERED BY THE APPROVED CLINICIAN AGREEMENT. THESE
NUMBERS ARE NOT INCLUDED IN THE SUN OR MCLEAN NUMBERS.
4. HOMES NOT COVERED BY THE APPROVED CLINICIAN AGREEMENT. THESE
NUMBERS ARE NOT INCLUDED IN THE SUN MCLEAN NUMBERS.
ALL EXTENDED CARE FACILITIES ARE LISTED WITH THE FOLLOWING CATEGORIES:
1. FACILITY NAME
2.. MHM HOME OR MCLEAN HOME
3. SIGNED AGREEMENT
4. NAME OF CLINICIAN IN THE FACILITY WHO HAS SIGNED
THE DECREASE IN THE NUMBER OF MCLEAN HOMES REFLECT A MORE ACCURATE COUNT OF THE
HOMES THAT WE ACTUALLY BILL FOR SERVICES. SEVERAL HOMES LISTED PREVIOUSLY HAD
NO CLINICIAN OR MD PERFORMING SERVICES.
ALSO, THE SLIGHT DECREASE NOTED IN THE NUMBER OF COVERED HOMES AND THE SLIGHT
INCREASE IN THE NUMBER OF NON-COVERED HOMES REFLECT MY UNDERSTANDING THAT I AM
TO COUNT ONLY THOSE HOMES WHERE A SIGNED APPROVED CLINICIAN AGREEMENT EXISTS.
(COPIES OF ADDITIONAL SIGNED AGREEMENTS ATTACHED)
THE REVENUE IS BASED ON THE OCTOBER 1998 MONTHLY REPORT OF CHARGES PER
FACILITY.
<PAGE> 52
Percentage of MHM Extended Care Business
Covered by Clinicians Agreements
Based on October 1998 Revenue
28 SUN FACILITIES=====35% OF EXTENDED CARE BUSINESS
21 FACILITIES (74%) COVERED BY UNIVERSAL APPROVED
AGREEMENTS=========REVENUE OF $86,996.00
7 FACILITIES (26%) NOT COVERED BY UNIVERSAL APPROVED
AGREEMENTS=======REVENUE OF $30,114.00
21 MCLEAN FACILITIES======10% OF BUSINESS
10 FACILITIES (60%)COVERED BY UNIVERSAL APPROVED
AGREEMENTS=========REVENUE OF $20,076.00
11 FACILITIES (40%) NOT COVERED BY UNIVERSAL APPROVED
AGREEMENTS=======REVENUE OF $13,384.00
36 FACILITIES COVERED BY UNIVERSAL APPROVED AGREEMENTS===========33% OF
BUSINESS=======REVENUE OF $110,418.00
28 FACILITIES NOT COVERED BY UNIVERSAL APPROVED AGREEMENTS=========22% OF
BUSINESS=======REVENUE OF $73,612.00
CLINICIANS THAT WORK IN 12 OF THE NON-COVERED FACILITIES HAVE INDICATED
THAT THEY ARE PLANNING TO WORK WITH ARBOUR.
<PAGE> 53
NURSING HOMES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NURSING HOME TYPE AGREEMENT CLINICIAN IN HOME HAS SIGNED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ABBOT HOUSE MC NO CLINICIAN
- ----------------------------------------------------------------------------------------------------------
ABERJONA NH YES SCHWARZ
- ----------------------------------------------------------------------------------------------------------
ACTON ADULT DAY NH NO CLINICIAN
- ----------------------------------------------------------------------------------------------------------
ASHMERE MANOR NH NO FESSLER, COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
AVERY MANOR NH YES TRIKHA
- ----------------------------------------------------------------------------------------------------------
BARLETT NH YES FARRINGTON
- ----------------------------------------------------------------------------------------------------------
BEAUMONT NH YES RUYLE
- ----------------------------------------------------------------------------------------------------------
BLUEBERRY HILL NH YES NEEDLES
- ----------------------------------------------------------------------------------------------------------
BOLTON MANOR NH YES BROWN
- ----------------------------------------------------------------------------------------------------------
BOURNE MANOR NH NO
- ----------------------------------------------------------------------------------------------------------
BRITTANY MC YES SPADOLA
- ----------------------------------------------------------------------------------------------------------
BROOKHAVEN MC NO
- ----------------------------------------------------------------------------------------------------------
BUCHANAN NH YES FARRINGTON
- ----------------------------------------------------------------------------------------------------------
CANTABRIDGIA NH YES HARDNEY/NEEDLES
- ----------------------------------------------------------------------------------------------------------
CARE MATRIX NH YES FINK
- ----------------------------------------------------------------------------------------------------------
CARLETON-WILLARD NH NO
- ----------------------------------------------------------------------------------------------------------
CARYLE NURSING NH YES BROWN
- ----------------------------------------------------------------------------------------------------------
CATHOLIC MEMORIAL NH YES SUTTON MD
- ----------------------------------------------------------------------------------------------------------
CHARLESGATE MC YES FINK, ISRAEL
- ----------------------------------------------------------------------------------------------------------
CHELSEA JEWISH MC YES SPADOLA
- ----------------------------------------------------------------------------------------------------------
CLARK HOUSE MC YES YOUNG
- ----------------------------------------------------------------------------------------------------------
COC BAYVIEW NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
COC BERKSHIRE NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
COC WESTFIELD NH YES HAMMOND. MD
- ----------------------------------------------------------------------------------------------------------
COHEN, FLORENCE MC NO CLINICIAN
- ----------------------------------------------------------------------------------------------------------
COOLIDGE HOUSE MC NO CASES
- ----------------------------------------------------------------------------------------------------------
COOPERATIVE ELDER NH NO CASES
- ----------------------------------------------------------------------------------------------------------
COURTYARD NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
EAST LONGMEADOW NH YES MIMNO, AN ARBOUR CLINICIAN
- ----------------------------------------------------------------------------------------------------------
EDGECOMB NH NO
- ----------------------------------------------------------------------------------------------------------
PACE PROGRAM MC YES YOUNG
- ----------------------------------------------------------------------------------------------------------
EMERSON MC YES SPADOLA
- ----------------------------------------------------------------------------------------------------------
FAIRHAVEN NH NO
- ----------------------------------------------------------------------------------------------------------
GERMAN HOME NH YES ARBOUR HOME ALREADY
- ----------------------------------------------------------------------------------------------------------
GLEN RIDGE NH YES HARDNEY
- ----------------------------------------------------------------------------------------------------------
GODDARD HOUSE MC NO
- ----------------------------------------------------------------------------------------------------------
GODDARD HOUSE AL MC NO
- ----------------------------------------------------------------------------------------------------------
GREENWOOD NH NO
- ----------------------------------------------------------------------------------------------------------
HALE HOUSE NH NO
- ----------------------------------------------------------------------------------------------------------
HALLMARK NH YES CABEZAS
- ----------------------------------------------------------------------------------------------------------
HAMMERSMITH MC NO
- ----------------------------------------------------------------------------------------------------------
HARRINGTON HOUSE NH YES MELNICK/FRUMIN
- ----------------------------------------------------------------------------------------------------------
HATHAWAY NH YES MELNICK
- ----------------------------------------------------------------------------------------------------------
HOLYOKE NURSING NH YES OWENS
- ----------------------------------------------------------------------------------------------------------
ISLAND TERRACE NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
JESMOND MC YES ZIEFF
- ----------------------------------------------------------------------------------------------------------
JEWISH REHAB NH NO
- ----------------------------------------------------------------------------------------------------------
KIMWELL NH YES MELNICK/SUTTON
- ----------------------------------------------------------------------------------------------------------
LIFE CARE CENTER NH YES GERHARD
- ----------------------------------------------------------------------------------------------------------
LYNN CONVALESCENT MC NO
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 54
NURSING HOMES
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
LYNN PUBLIC NH NO ARBOUR ALREADY SERVICING
- ----------------------------------------------------------------------------------------------------------
MARY IMMACULATE NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
MEADOWGREEN MC YES NEEDLES
- ----------------------------------------------------------------------------------------------------------
MEADOWOOD NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
MILTON HEALTHCARE NH NO
- ----------------------------------------------------------------------------------------------------------
MT. PLEASANT NH NO
- ----------------------------------------------------------------------------------------------------------
NEPONSET CIRCLE MC YES LOOPER
- ----------------------------------------------------------------------------------------------------------
NEVINS ADULT DAY NH YES MAIMAN
- ----------------------------------------------------------------------------------------------------------
NEWTON-WELLESLEY NH YES WHITTEMORE
- ----------------------------------------------------------------------------------------------------------
NICHOLS HOUSE NH NO
- ----------------------------------------------------------------------------------------------------------
NORTHAMPTON NH YES OWENS
- ----------------------------------------------------------------------------------------------------------
OLYMPUS HEALTHCARE NH YES BROWN
- ----------------------------------------------------------------------------------------------------------
OLYMPUS SPECIALTY NH YES HAMMOND
- ----------------------------------------------------------------------------------------------------------
OUR LADY'S HAVEN NH NO
- ----------------------------------------------------------------------------------------------------------
PARK AVENUE MC NO
- ----------------------------------------------------------------------------------------------------------
PILGRIM REHAB NH NO ARBOUR ALREADY
- ----------------------------------------------------------------------------------------------------------
PROVIDENCE HOUSE NH YES WHITTEMORE
- ----------------------------------------------------------------------------------------------------------
QUABOAG NH YES WHITTEMORE
- ----------------------------------------------------------------------------------------------------------
RAINBOW NH YES FARRINGTON
- ----------------------------------------------------------------------------------------------------------
ROGERSON COMM NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
SACRED HEART NH NO
- ----------------------------------------------------------------------------------------------------------
SANCTA MARIA NH YES NEEDLES
- ----------------------------------------------------------------------------------------------------------
SHERRILL HOUSE MC NO CLINICIAN
- ----------------------------------------------------------------------------------------------------------
SOUTHPOINT NH YES MELNICK
- ----------------------------------------------------------------------------------------------------------
SPRINGSIDE NH YES NUESSLE
- ----------------------------------------------------------------------------------------------------------
STEPHEN CALDWELL NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
SUNNY ACRES MC YES SCORZELLI
- ----------------------------------------------------------------------------------------------------------
SUN-BEVERLY NH YES TRANFLAFIA ALREADY ARBOUR
- ----------------------------------------------------------------------------------------------------------
SUN-BRIGHTON NH YES SPADOLA
- ----------------------------------------------------------------------------------------------------------
SUN-BROADWAY NH YES GERHARD
- ----------------------------------------------------------------------------------------------------------
SUN-BROOKLINE NH YES BELEROSKY
- ----------------------------------------------------------------------------------------------------------
SUN-COLONIAL HGTS NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-CONCORD NH YES MAIMAN
- ----------------------------------------------------------------------------------------------------------
SUN-E.LONGMEADOW NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-FALLRIVER NH YES CABEZAS
- ----------------------------------------------------------------------------------------------------------
SUN-GLENWOOD NH YES ROOS
- ----------------------------------------------------------------------------------------------------------
SUN-HOLYOKE NH YES ACKERMAN
- ----------------------------------------------------------------------------------------------------------
SUN-LEXINGTON NH YES FARRINGTON
- ----------------------------------------------------------------------------------------------------------
SUN-LOWELL NH YES GERHARD
- ----------------------------------------------------------------------------------------------------------
SUN-MILFORD NH YES RUYLE
- ----------------------------------------------------------------------------------------------------------
SUN-MILLBURY NH YES WHITTEMORE
- ----------------------------------------------------------------------------------------------------------
SUN-NEW BEDFORD NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-NEWTON NH YES MELNICK
- ----------------------------------------------------------------------------------------------------------
SUN N.READING NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-NORTHAMPTON NH YES OWENS
- ----------------------------------------------------------------------------------------------------------
SUN-NORTHSHORE NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-PEABODY GLEN NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
SUN-RANDOLPH NH YES ROOS
- ----------------------------------------------------------------------------------------------------------
SUN-TOWN MANOR NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
SUN-WEYMOUTH NH NH NO
- ----------------------------------------------------------------------------------------------------------
SUN-WOODMILL NH NO CLINICIAN IS COMING TO ARBOUR
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 55
NURSING HOMES
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
WABAN HEALTH NH YES GRASSER
- ----------------------------------------------------------------------------------------------------------
WALDEN HOUSE MC NO CLINICIAN
- ----------------------------------------------------------------------------------------------------------
WELLESLEY MC YES VERNICK
- ----------------------------------------------------------------------------------------------------------
WENTWORTH NH NO
- ----------------------------------------------------------------------------------------------------------
WHITNEY PLACE NH YES RUYLE
- ----------------------------------------------------------------------------------------------------------
WILLOWOOD GR. BAR NH NO
- ----------------------------------------------------------------------------------------------------------
WILLOWOOD PITTS NH YES NUESSLE
- ----------------------------------------------------------------------------------------------------------
WINCHESTER NH YES SCHWARZ
- ----------------------------------------------------------------------------------------------------------
WINGATE BRIGHTON MC NO
- ----------------------------------------------------------------------------------------------------------
WINGATE SUDBURY NH YES WHITTEMORE
- ----------------------------------------------------------------------------------------------------------
WOBURN NH YES MERL
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 56
GENERAL BILL OF SALE
Reference is made to the Asset Purchase Agreement dated December 21,
1998 (the "Agreement"), by and between MHM Extended Care Services, Inc.
("Seller") and Arbour Elder Services, Inc. ("Buyer"). Capitalized terms not
otherwise defined herein shall have the meanings given to them in the
Agreement.
FOR VALUE RECEIVED pursuant to the Agreement, Seller, for itself and
its successors and assigns, does hereby sell, convey, assign, transfer and
deliver to and vest in Buyer and its successors and assigns all right, title
and interest in and to the following assets and properties of Seller, wherever
located (collectively, the "Assets"):
(a) All equipment, machinery, fixed and movable
equipment, furniture, furnishings, fixtures, vehicles, supplies and all other
tangible and intangible personal property, including computers and billing
services, owned by Seller and used in the operation of the Seller's
Massachusetts business; including but not limited to the property listed on
Exhibit A attached hereto.
(b) Seller's charts, files, and other proprietary
information of the Seller, to the extent transferable to Buyer;
(d) All Clinic licenses of the Seller;
Seller warrants that it hereby transfers to Buyer good, valid and
transferable title to all of the Assets, free and clear of all liens,
encumbrances, restrictions, agreements and adverse claims of every kind, nature
and description, and agrees to defend such title.
<PAGE> 57
Seller further covenants and agrees that, from time to time after the
delivery of this instrument, at Buyer's request and without further
consideration, Seller will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all such further acts, conveyances,
transfers, assignments, documents and assurances as reasonably may be requested
by Buyer more effectively to convey to, transfer to and vest in Buyer all
right, title and interest in and to any of the Assets transferred or assigned
hereunder.
In WITNESS WHEREOF, Seller has executed this General Bill of
Sale as an instrument under seal as of this 31st day of December, 1998.
<TABLE>
<S> <C>
SELLER: BUYER:
MHM EXTENDED CARE SERVICES INC. ARBOUR ELDER SERVICES, INC.
/s/ M.S. PINKERT 1/4/99
- --------------------------- /s/ ROY ETTLINGER 12/31/98
Signature Date ---------------------------
Signature Date
Name: M. S. PINKERT Name: ROY ETTLINGER
--------------------- ---------------------
Title: PRESIDENT Title: CEO
--------------------- ---------------------
</TABLE>
-2-
<PAGE> 58
ATT. A
ACQUIRED ASSETS
EQUIPMENT INVENTORY/TAUNTON OFFICE
DESK - 12
COMPUTERS - 1, 1 BROKEN
4 DRAWER FILING CABINET - 11
2 DRAWER FILING CABINET - 2
MOBILE FILE UNDER DESK DRAWERS - 2
UPHOLSTERED CHAIRS - 10
DESK CHAIRS - 9
STACKING CHAIRS (UPHOLSTERED) - 17
REFRIGERATOR - 1
CONFERENCE TABLE - 1
ROUND TABLE - 1
BOOK SHELVES - 2
FORM ORGANIZER - 1
COFFEE TABLE - 1
BULLETIN BOARDS - 6
LAMP- 1
DRY - ERASE BOARDS - 2
COMPUTER WORKSTATION - 3
PRINTERS - 3,2 ARE BROKEN
STORAGE CABINET - 1
FAX MACHINE - 1
COPIER - 1
TYPEWRITER - 1
PAPER SHREDDER - 1
MOBILE DROP-LEAF STAND - 1
<PAGE> 59
ATT. A
ACQUIRED ASSETS
Equipment Inventory/Cambridge Office
<TABLE>
<S> <C>
Banquet Folding Table 1
Book case (2 shelves) 2
Bookshelves 11
Bulletin Board 8
Coat Rack (Metal) 1
Coffee Table 1
Computer (Monitor Only) 2
Computers (Keyboard, Monitor, Tower Unit) 12
Conference Tables (Round and Oblong) 2
Desk Chairs 24
Desks 25
Display Booth 1
End Tables 3
Fax Machines 3
File Cabinet (2 drawers) 23
File Cabinet on wheels(small) 1
File Cabinets (4 drawer) 49 (40 used for Medical Records)
Folding Chairs 3
Large Storage Units(5 shelves) (2 plastic, 1 metal) 3
Laser Printer (Large) 1
Laser Printer (Small) 1
Metal Stacking Chairs 32
Microwave Oven 1
Postage Meter 1
Printer Table 2
Printers (dot matrix) 3
Side Table 3
Storage Unit (4 drawers) 4
Storage Unit (2 drawer) 6
Upholstered chairs 23
Wooden Storage Unit 1
Work Station (2 shelves) 6
Work Station (6 shelves) 1
2
</TABLE>
<PAGE> 60
ASSIGNMENT AND ASSUMPTION OF AGREEMENTS
WHEREAS, MHM Extended Care Services, Inc. (hereinafter called
"Assignor") intends to transfer to Arbour Elder Services, Inc. (hereinafter
called "Assignee") certain assets pursuant to a certain Asset Purchase
Agreement by and between Assignor and Assignee, dated December 21, 1998 (the
"Purchase Agreement"). The Closing Date shall have the same meaning as set
forth in the Purchase Agreement.
WHEREAS, this Agreement shall be effective as of the Closing Date.
NOW, THEREFORE, the parties hereby act and agree as follows:
1. Assignor hereby assigns to Assignee all of its rights,
title and interest in those Agreements in Exhibit A hereto listed (the
"Assigned Agreements").
2. Assignee hereby assumes and agrees to perform, fulfill and
observe all of the covenants, agreements, warranties, obligations and
liabilities of the Assignor accruing or arising under the Assigned Agreements
out of actual facts or situations occurring after the Closing Date.
3. Assignor hereby agrees to perform, fulfill and observe all
of the covenants, agreements, warranties, obligations and liabilities of the
Assignor occurring or arising (i) under the Assigned Agreements arising out of
actual facts or situations occurring prior to the Closing Date and (ii) under
those contracts and agreements of the Assignor not assigned to the Assignee
pursuant to this Agreement.
4. Notwithstanding anything herein to the contrary, the
provisions of this Agreement shall be subject to the provisions of the Purchase
Agreement, and if to the extent they are inconsistent, the provisions of the
Purchase Agreement shall be controlling.
WITNESS the execution hereof on the 31 day of December, 1998.
<TABLE>
<S> <C>
ASSIGNOR: ASSIGNEE:
MHM EXTENDED CARE SERVICES INC. ARBOUR ELDER SERVICES, INC.
M.S. PINKERT 1/4/99
- --------------------------- ROY ETTLINGER 12/31/98
Signature Date ---------------------------
Signature Date
Name: MICHAEL PINKERT Name: ROY ETTLINGER
--------------------- ---------------------
Title: PRESIDENT Title: CEO
--------------------- ---------------------
</TABLE>
<PAGE> 61
12/30/98
ATT. A
Acquired Assets
OPENHOM
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Home Street City State Zip
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abbot House 28 Essex Street Lynn MA 01902
- ----------------------------------------------------------------------------------------------
Aberjona Nursing Center 184 Swanton Street Winchester MA 01890
- ----------------------------------------------------------------------------------------------
Acton Adult Day Care Concord MA
- ----------------------------------------------------------------------------------------------
Ashmere Manor NH 229 George Schnopp Road Hinsdale MA 01235
- ----------------------------------------------------------------------------------------------
Avery Manor 100 West Street Needham MA 02194
- ----------------------------------------------------------------------------------------------
Bartlett Manor RH 180 Summer Street Malden MA 02148
- ----------------------------------------------------------------------------------------------
Beaumont Rehabilitation 3 Vision Drive Natick MA 01760
- ----------------------------------------------------------------------------------------------
Blueberry Hill Healthcare 75 Brimbal Avenue Beverly MA 01915
- ----------------------------------------------------------------------------------------------
Bolton Manor NH 400 Bolton Street Marlborough MA 01752
- ----------------------------------------------------------------------------------------------
Bourne Manor 146 MacArthur Blvd Bourne MA 02532
- ----------------------------------------------------------------------------------------------
Brittany Conv. Home 168 West Central Street Natick MA 01760
- ----------------------------------------------------------------------------------------------
Brookhaven at Lexington 1010 Waltham Street Lexington MA 02173
- ----------------------------------------------------------------------------------------------
Buchanan Nursing Home 190 Summer Street Malden MA 02148
- ----------------------------------------------------------------------------------------------
Cambridge Outpatient Clinic 23 East Street Cambridge MA 02141
- ----------------------------------------------------------------------------------------------
Cantabridgia Health Care 195 Prospect Street Cambridge MA 02139
- ----------------------------------------------------------------------------------------------
Care Matrix of Dedham 10 Care Matrix Drive Dedham MA 02026
- ----------------------------------------------------------------------------------------------
Carleton-Willard Village 100 Old Billerica Road Bedford MA 01730
- ----------------------------------------------------------------------------------------------
Carlyle Nursing & Rehab. Ctr. 342 Winter Street Framingham MA 01702
- ----------------------------------------------------------------------------------------------
Catholic Memorial Home 2446 Highland Avenue Fall River MA 02720
- ----------------------------------------------------------------------------------------------
Charlesgate Manor Conv. Home 590 Main Street Watertown MA 02172
- ----------------------------------------------------------------------------------------------
Chelsea Jewish NH 17 Lafayette Street Chelsea MA 02150
- ----------------------------------------------------------------------------------------------
Clark House Nursing Center 30 Longwood Drive Westwood MA 02090
- ----------------------------------------------------------------------------------------------
COC - Bay View 26 Sturgis Street Winthrop MA 02152
- ----------------------------------------------------------------------------------------------
COC - Berkshire 360 West Housatonic Street Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------
COC - Westfield 60 East Silver Street Westfield MA 01085
- ----------------------------------------------------------------------------------------------
Cohen, Florence, Levine Estates 201 Captain's Row Chelsea MA 02150
- ----------------------------------------------------------------------------------------------
Coolidge House 30 Webster Street Brookline MA 02146
- ----------------------------------------------------------------------------------------------
Cooperative Elder Services, Inc 37-B Street Burlington MA 01803
(Burlington)
- ----------------------------------------------------------------------------------------------
Courtyard Nursing Care Ctr 200 Governor's Ave Medford MA 02155
- ----------------------------------------------------------------------------------------------
East Longmeadow NH 305 Maple Street East Longmead MA 01028
- ----------------------------------------------------------------------------------------------
Edgecombe Nursing Home 40 Sunset Avenue Lenox MA 02140
- ----------------------------------------------------------------------------------------------
Elder Services Plan PACE 320 Washington Street Brighton MA 02135
Program, (Brighton)
- ----------------------------------------------------------------------------------------------
Elder Services Plan 555 Amory Street Jamaica Plain MA 02146
PACE Program, (Jamaica P
- ----------------------------------------------------------------------------------------------
Emerson Convalescent 59 Coolidge Hill Road Watertown MA 02172
- ----------------------------------------------------------------------------------------------
FairHaven Nursing Home 476 Varnum Avenue Lowell MA 01854
- ----------------------------------------------------------------------------------------------
German Home RH 374 Howard Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------
Glen Ridge NCC Hospital Road Malden MA 02148
- ----------------------------------------------------------------------------------------------
Goddard House 210-205 South Huntington Ave Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------
Goddard House Asst. Living 165 Chestnut street Brookline MA 02146
- ----------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 62
ATT. A
ACQUIRED ASSETS
OPENHOM 12/30/98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Home Street City State Zip
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Great Barrington Rehab 148 Maple Avenue Great Barringto MA 01230
- ----------------------------------------------------------------------------------------------------------
Greenwood Nursing Home 80 Greenwood Street Wakefield MA 01880
- ----------------------------------------------------------------------------------------------------------
Hale House RH 273 Clarendon Street Boston MA 02116
- ----------------------------------------------------------------------------------------------------------
Hallmark Nursing Home 1123 Rockdale Ave New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Hammersmith House NCC 73 Chestnut Street Saugus MA 01906
- ----------------------------------------------------------------------------------------------------------
Harrington House 160 Main Street Walpole MA 02081
- ----------------------------------------------------------------------------------------------------------
Hathaway Manor 863 Hathaway Road New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Holyoke Nursing Home 1913 Northampton Street Holyoke MA 01040
- ----------------------------------------------------------------------------------------------------------
Island Terrace NH 57 Long Point Road Lakeville MA 02347
- ----------------------------------------------------------------------------------------------------------
Jesmond Nursing Home 271 Nahant Road Nahant MA 01908
- ----------------------------------------------------------------------------------------------------------
Jewish Rehab Center 300 Paradise Road Swampscott MA 01907
- ----------------------------------------------------------------------------------------------------------
Kimwell Nursing 495 New Boston Road Fall River MA 02720
- ----------------------------------------------------------------------------------------------------------
Life Care Center 80 Boston Road N. Billerica MA 01862
- ----------------------------------------------------------------------------------------------------------
Lynn Convalescent Home 655 Boston Street Lynn MA 01905
- ----------------------------------------------------------------------------------------------------------
Lynn Public Medical Institute 179 Holyoke Street Lynn MA 01905
- ----------------------------------------------------------------------------------------------------------
Mary Immaculate Nursing 172 Lawrence Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
Meadow Green NH 45 Woburn Street Waltham MA 02154
- ----------------------------------------------------------------------------------------------------------
Meadowood Nursing Home 573 Granby Road South Hadley MA 01075
- ----------------------------------------------------------------------------------------------------------
Milton Healthcare Facility 1200 Brush Hill Road Milton MA 02186
- ----------------------------------------------------------------------------------------------------------
Mt. Pleasant Rest Home 301 South Huntington Avenue Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------------------
Neponset Circle 35-45 Coffey Street Dorchester MA 02122
- ----------------------------------------------------------------------------------------------------------
Newton-Wellesley 694 Worcester Street Wellesley MA 02181
- ----------------------------------------------------------------------------------------------------------
Nichols House Nursing Home 184 Main Street Fairhaven MA 02719
- ----------------------------------------------------------------------------------------------------------
Northampton Nursing Home 737 Bridge Road Northampton MA 01060
- ----------------------------------------------------------------------------------------------------------
Olympus Healthcare Ctr 1350 Main Street Worcester MA 01603
- ----------------------------------------------------------------------------------------------------------
Olympus Specialty 1400 State Street Springfield MA 01109
- ----------------------------------------------------------------------------------------------------------
Our Ladys Haven 71 Centre Street Fairhaven MA 02719
- ----------------------------------------------------------------------------------------------------------
Park Avenue Nursing Home 146 Park Avenue Arlington MA 02174
- ----------------------------------------------------------------------------------------------------------
Pilgrim Rehabilitation 95 Forest Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
Providence House NH 84 Chapin Street Southbridge MA 01550
- ----------------------------------------------------------------------------------------------------------
Quaboag on the Common 47 East Main Street West Brookfield MA 01585
- ----------------------------------------------------------------------------------------------------------
Rainbow Nursing Home 210 Lowell Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
Rogerson Communities 434 Jamaicaway Boston MA 02130
- ----------------------------------------------------------------------------------------------------------
Sacred Heart Nursing Home 359 Summer Street New Bedford MA 02740
- ----------------------------------------------------------------------------------------------------------
Sancta Maria Nursing Facility 799 Concord Ave Cambridge MA 02138
- ----------------------------------------------------------------------------------------------------------
Sherrill House 135 Huntington Avenue Jamaica Plain MA 02130
- ----------------------------------------------------------------------------------------------------------
Southpoint Rehabilitation 100 Amity Street Fall River MA 02721
- ----------------------------------------------------------------------------------------------------------
Springside of Pittsfield 255 Lebanon Ave Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------------------
Stephen Caldwell Memorial 16 Green Street Ipswich MA 01938
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE> 63
ATT. A
ACQUIRED ASSETS
OPENHOM 12/30/98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Home Street City State Zip
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sunny Acres Nursing Home 254 Billerica Road Chelmsford MA 01824
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Beverly 265 Essex Street Beverly MA 01915
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Brighton 142 Bigelow Street Brighton MA 02135
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Broadway 281 Broadway Methuen MA 01844
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Brookline 99 Park Street Brookline MA 02146
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Colonial Heights 555 South Union Street Lawrence MA 01843
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Concord 578 Old Rd. to Nine Acre Corner Concord MA 01742
- ----------------------------------------------------------------------------------------------------------
SunRise Care - East Longmeadow 135 Benton Drive East Longmead MA 01028
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Fall River 170 Oak Grove Fall River MA 02723
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Glenwood 557 Varnum Avenue Lowell MA 01854
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Holyoke 260 East Hampton Road Holyoke MA 01040
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Lexington 178 Lowell Street Lexington MA 02173
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Lowell 19 Varnum Street Lowell MA 01850
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Milford 10 Veterans Memorial Drive Milford MA 01757
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Millbury 81 Chatham Street Worcester MA 01609
- ----------------------------------------------------------------------------------------------------------
SunRise Care - New Bedford 221 Fitzgerald Drive New Bedford MA 02745
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Newton 2101 Washington Street Newton MA 02162
- ----------------------------------------------------------------------------------------------------------
SunRise Care - North Reading 134 North Street North Reading MA 01864
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Northampton 548 Elm Street Northampton MA 01060
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Northshore 70 Granite Street Lynn MA 01901
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Peabody Glen 199 Andover Street Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Randolph 49 Thomas Patten Drive Randolph MA 02368
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Town Manor 55 Lowell Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Weymouth 64 Performance Drive Weymouth MA 02189
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Wilmington 750 Woburn Street Wilmington MA 01887
- ----------------------------------------------------------------------------------------------------------
SunRise Care - Wood Mill 800 Essex Street Lawrence MA 01841
- ----------------------------------------------------------------------------------------------------------
Taunton Outpatient Clinic 30 Taunton Green Street Taunton MA 02780
- ----------------------------------------------------------------------------------------------------------
Waban Health & Rehab. Inc. 22 Kinmonth Road Newton MA 02468
- ----------------------------------------------------------------------------------------------------------
Walden House 785 Main Street Concord MA 01742
- ----------------------------------------------------------------------------------------------------------
Wellesley Health & Rehab 878 Worcester Road Wellesley MA 02181
- ----------------------------------------------------------------------------------------------------------
Wentworth Nursing Care Center 500 Wensworth Avenue Lowell MA 01852
- ----------------------------------------------------------------------------------------------------------
Whitney Place 3 Vision Drive Natick MA 01760
- ----------------------------------------------------------------------------------------------------------
Willowood of Great Barrington 151 Christian Hill Road Great Barrington MA 01230
- ----------------------------------------------------------------------------------------------------------
Willowood of Pittsfield 169 Valentine Road Pittsfield MA 01201
- ----------------------------------------------------------------------------------------------------------
Winchester Nursing Center 223 Swanton Street Winchester MA 01890
- ----------------------------------------------------------------------------------------------------------
Wingate at Brighton 100 N. Beacon Street Brighton MA 02134
- ----------------------------------------------------------------------------------------------------------
Wingate at Sudbury 136 Boston Post Road Sudbury MA 01776
- ----------------------------------------------------------------------------------------------------------
Woburn Nursing Home 18 Frances Street Woburn MA 01801
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE> 64
ATT.A
ACQUIRED ASSETS
CLINICAL AGREEMENTS AND NON-COMPETE AGREEMENTS
LIST OF SIGNED AGREEMENTS
ACKERMAN, TED MELNICK, BARRY
BARSKY, SUSAN MERL, LYNNE M.
BELOZERSKY, IRENE MINALGA, MARY
BENNER, SHARON MONDALE, JASON
BERKSHIRE MEDICAL CENTER MOORE, NANCY
BERLIN, JOAN NEEDLES, DOUGLAS
BROWN, ALAN NESTELBAUM, ZAMIR
CABEZAS, THOMAS NOAH, DEBORAH LEE
CAMERLENGO, SUSAN OWENS, HONORA E.
CARLSON, CHRISTIE M. PIAFSKY, LYNNE
COHEN, LEWIS POSTLETHWAITE, JOAN
CRENSHAW, BRADLEY REICH, FAYE
CUTLER, MARK RICHTER, CWIRA
DONAHUE, JACQUELINE RILEY, DOUGLAS C.
FARRINGTON, LEE ROOS, PATRICIA E.
FRASER-DEXTER LINDA RUSNAK, STANLEY
FINK, CARLA RUYLE, JEANETTE
FISHBEIN, LESLIE SABA, MARIE L.
GERHARD, FREDERICK SCHEINAN, WENDY
GRAESSER, SUSAN SCHWARZ, RACHEL
HAAS, HOWARD SCORZELLI, JAMES
HAMMOND, DAVID SEPPELIN, MARTETTA
HARDNEY, SYLVIA SPADOLA, MADELINE
HILL, PHILLIP TARQUINO, ERNEST
HYNICK, TIMOTHY TRIKHA, ANJANA
INGRAHAM, MERLE VAN ZOEREN, BARBARA
ISRAEL, JOSHUA VERNICK, SHELIA
JANNEY, PETER WALLACE, MARY
JONES, DAVID WASSERMAN, CHARLES
KALINA, LIZABETH WEISBERGER, CHARLES
KATIS, MARY WEINER, RHONDA
KNIGHT, WILLIAM WILSON-EVERETT. ANDREA
LAFERNEY, MICHAEL YALOFF, BEVERLY
LEBAR, JILL YOUNG, RUTH C.
LONGO, RICHARD ZIEFF, ERIC
LOOPER, JOHN
MAIMAN, ELLEN
MARTIN, LUZ M.
MCMURTRY, DOUGLAS
<PAGE> 65
ATT.A
NON-COMPETE
LIST OF SIGNED AGREEMENTS
ABRAHAMSON, ERIKA
BENNER, SHARON
BRYKMAN, GAIL
CHOW, MICHAEL
CREDITOR, SUSAN
CUASAY, CATHERINE
FAGAN, SUSAN
FESSLER, SUSAN
HYNICK, TIMOTHY
JANNEY, PETER
MACHELL, STEPHANIE
PEACH, KIMBERLY
PIAFSKY, LYNN
RALPH JENNIFER
REICH, FAYE
ST. GEORGE, GENEVIEVE
TAMULEVICH, JANE
TARQUINO, ERNEST
VAN ZOEREN, BARBARA
VON WITTENBERGH, RON
WALLACE, MARY ANN
WINTLE, CAROL
<PAGE> 66
ATT. A
ACQUIRED ASSETS
SCHOOL CONTRACTS
School Based Active Referral Sources - Kim Tamaren 12/30/98
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Organization Name Address City State Postal Work # Contact Clinician
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bates Elementary 426 Beech St. Roslindale MA 02131 (617) 635-8064 Sylvia Pittman K-Payne, C
- -----------------------------------------------------------------------------------------------------------------------------------
Bradley Elementary 110 Beachview Rd. E. Boston MA 02128 (617) 635-8422 Catherine O'Brien Wintel, C
- -----------------------------------------------------------------------------------------------------------------------------------
Conley Elementary 450 Poplar St. Roslindale MA 02131 (617) 635-8099 Leah Sharkley
- -----------------------------------------------------------------------------------------------------------------------------------
Dever Elementary 325 Mount Vernon St. Dorchester MA 02125 (617) 635-8694 Peg Handraham Falkoff and K-Pay
- -----------------------------------------------------------------------------------------------------------------------------------
Guild Elemenatry 195 Leydon St. E. Boston MA 02128 (617) 635-8523 Simon Ho Wintel, C
- -----------------------------------------------------------------------------------------------------------------------------------
Manning Elementary 130 Louders Lane Jamaica Plain MA 02130 (617) 635-8102 Mrs. Walker Winkle, C
- -----------------------------------------------------------------------------------------------------------------------------------
McCormack Middle 315 Mount Vernon St. Dorchester MA 02125 (617) 635-8657 Karen Mallory Chow + Cuasa
- -----------------------------------------------------------------------------------------------------------------------------------
Roosevelt Elementary 95 Needham St. Hyde Park MA 02136 (617) 635-8676 Mr. McLean
* on hold
- -----------------------------------------------------------------------------------------------------------------------------------
Shaw Middle 20 Mt. Vernon St. West Roxbury MA 02132 (617)635-8050 Mrs. Camerson
- -----------------------------------------------------------------------------------------------------------------------------------
Sumner Elementary 15 Basile St. Roslindale MA 02131 (617)635-8131 Mr. Shay - K-Payne + Abr
Principal
- -----------------------------------------------------------------------------------------------------------------------------------
Warren-Prescott 50 School St. Charlestown MA 02129 (617)635-8346 Dr. Amara - Machell, S
Elementary Principal
- -----------------------------------------------------------------------------------------------------------------------------------
Washington Irving 114 Cummins Hwy Roslindale MA 02131 (617)635-8072 Nancy Lee Herber + Cuasa
Middle
- -----------------------------------------------------------------------------------------------------------------------------------
Wheatley Middle 20 Kearsarge Ave. Roxbury MA 02121 (617)635-8165 Gloria Di Angelis K-Payne, C
- -----------------------------------------------------------------------------------------------------------------------------------
Mayflower Mayflower Ave. Middleboro MA 02346 (508)946-2033 Bob Brown Creditor, S
- -----------------------------------------------------------------------------------------------------------------------------------
Memorial Jr. High Main Street Middleboro MA 02346 (508)946-2020 Dina Medeiros Creditor, S
- -----------------------------------------------------------------------------------------------------------------------------------
Edwards Middle 28 Walker Street Charlestown MA 02129 (617)635-8516 Maureen McGoldrick Gerhard, F
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</TABLE>
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<PAGE> 67
ARBOUR ELDER SERVICES, INC.
CLOSING CERTIFICATE
I, Thomas J. Bender, the Vice President of Arbour Elder Services, Inc., a
Massachusetts corporation, (the "Corporation"), do hereby certify, pursuant to
the Asset Purchase Agreement by and between the Corporation and MHM Extended
Care Services, Inc., dated December 21, 1998 (the "Agreement"), to the best of
my knowledge, as follows:
1. That each of the representations and warranties of the Corporation set
forth in Section 6 of the Asset Purchase Agreement are true and correct as of
the date of closing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
31st day of December 1998.
Arbour Elder Services, Inc.
By: /s/ THOMAS J. BENDER
---------------------------------
Thomas J. Bender
Vice President
<PAGE> 68
SECRETARY'S CERTIFICATE
I, Bruce R. Gilbert, Secretary of Arbour Elder Services, Inc. (the
"Corporation"), do hereby certify that the following is a true and correct copy
of the resolution adopted by the Board of Directors of said Corporation on
December 1, 1998.
RESOLVED, that the Board of Directors of the Corporation does hereby
authorize the Corporation to enter into an Asset Purchase Agreement (the
"Agreement") by and between the Corporation and MHM Extended Care, Inc.
("Seller") whereby the Corporation shall purchase certain assets of the Seller
related to the Seller's Massachusetts behavioral health care business, for a
purchase price of $850,000, as more particularly set forth in the Purchase
Agreement; and further
RESOLVED, that Roy Ettlinger, CEO of Arbour Health Systems be authorized
and directed to take such actions and to execute and deliver, on behalf of the
Corporation, the Agreement and any and all other documents related to the
transaction as Mr Ettlinger deems necessary and desirable, with the advice of
counsel, to carry out the intent and purposes set forth in the preceding
resolution.
WITNESS, my hand and seal of the Corporation this 31st day of December
1998.
/s/ BRUCE R. GILBERT
----------------------------------
BRUCE R. GILBERT
SECRETARY
<PAGE> 69
UNIVERSAL HEALTH SERVICES, INC.
CERTIFICATE OF THE ASSISTANT SECRETARY
I, Bruce R. Gilbert, Assistant Secretary of Universal Health Services, Inc.,
a Delaware corporation (the "Corporation"), DO HEREBY CERTIFY as follows:
A. That the following officer of the Corporation has been duly elected,
and as of the date hereof, holds the offices of the Corporation
specified beside his name, and that the signature set forth beside his
name is his true signature
Title Typed Name Signature
----- ---------- ---------
Vice President Thomas J. Bender /s/ THOMAS J. BENDER
---------------------------
B. That Thomas J. Bender is authorized to execute and deliver on behalf of
the Corporation, that certain Asset Purchase Agreement by and between
Arbour Elder Services, Inc. (a wholly owned subsidiary of the
Corporation) and MHM Extended Care Services, Inc. dated December 21,
1998
IN WITNESS WHEREOF, I have hereunto set my hand as of the 21st day of
December, 1998.
/s/ BRUCE R. GILBERT
------------------------------
Bruce R. Gilbert
Assistant Secretary
<PAGE> 70
[UHS LETTERHEAD]
MHM Extended Care Services, Inc.
c/o MHM Services, Inc.
8000 Towers Cresent Drive
Suite 810
Vienna, VA 22182
Attn: Lee Calligaro, Esq.
Ladies and Gentlemen:
Reference is made to the Asset Purchase Agreement dated as of December 21,
1998 (the "Purchase Agreement"), between Arbour Elder Services, Inc., a
Massachusetts company ("Buyer") and MHM Extended Care Services, Inc., a
Delaware corporation ("Seller").
I have acted as counsel for Buyer and Universal Health Services, Inc. (as
Guarantor of the obligations of the Buyer) ("UHS") in connection with the
preparation of the Purchase Agreement, and the Exhibits thereto. In connection
therewith, I have examined such documents and other records and questions of
law, and made such inquiries as I have deemed necessary for the purposes of
this opinion.
On the basis of the foregoing, I advise you that in my opinion:
1. Buyer is a corporation duly organized and existing under, and by virtue
of, the laws of the Commonwealth of Massachusetts, is in good standing under
such laws. Buyer has the requisite corporation power to own and operate its
respective properties and assets.
2. Buyer and UHS have all requisite power to enter into and to carry out
and perform their obligations under the Purchase Agreement.
3. All action on the part of the Buyer and UHS necessary for the
authorization, execution, delivery and performance by Buyer and UHS of the
Purchase Agreement and the consummation of the transactions contemplated
therein has been taken. The Purchase Agreement is a valid and binding
obligation of the Buyer and UHS, enforceable in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, from time to time in effect,
affecting the enforcement of creditors' rights generally (no opinion being
expressed herein with respect to the availability of specific performance and
other equitable remedies).
[CELEBRATING 20 EXCELLENCE LOGO]
<PAGE> 71
December 31, 1998
MHM Extended Care Services, Inc.
Page 2
4. The execution, delivery and performance of and compliance with the
Purchase Agreement will not result to any violation of, be in conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any term of Buyer's or UHS's Articles of Incorporation or
Bylaws. The execution, delivery performance of and compliance with the Purchase
Agreement will not, to the best of my knowledge, result in any violation of, or
be in conflict with, or constitute a default under, any (i) term of any
mortgage, indenture, contract, agreement, instrument, judgment, decree or other
applicable to Buyer, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of Buyer pursuant to
any such term, (ii) outstanding judgment, decree or order of any court binding
on Buyer or UHS, or (iii) provision of state of Federal law, or any rule or
regulation thereunder, to which Buyer is subject.
When a matter is stated herein as being "to the best of my knowledge," I
have not conducted an independent investigation into such matter and am
intending to advise you that in the course of my representation of Buyer,
nothing has come to my attention that leads me to believe, and I do not
believe, that the matter is other than as stated herein.
This letter and the opinions referred to herein are effective only as to
the Closing as that term is defined in the Purchase Agreement. The opinions
expressed herein are rendered only to you and are solely for your benefit in
connection with the consummation of the transactions contemplated by the
Purchase Agreement. Such opinions may not be relied upon by you for any other
purpose, or furnished to, quoted to or relied by any other person, firm, or
entity for any purpose, without the express written consent of the undersigned.
Very truly yours,
/s/ GEORGE H. BRUNNER, JR.
-----------------------------------
George H. Brunner, Jr.
Assistant General Counsel
UHS of Delaware, Inc.
<PAGE> 72
[HEALTHCARE FINANCIAL PARTNERS LETTERHEAD]
December 30, 1998
MHM Extended Care Services, Inc.
8000 Towers Crescent Drive
Suite 810
Vienna, Virginia 22182
Attention: Mr. Michael S. Pinkert
RE: ARBOUR HEALTH SYSTEMS
Dear Mr. Pinkert:
HCFP Funding, Inc. ("HCFP") understands that Arbour Health Systems
("Arbour") is purchasing from MHM Extended Care Services, Inc. ("MHM")
substantially all of MHM's assets related to MHM's Massachusetts operations
(which assets expressly exclude cash and accounts receivable of MHM) pursuant
to that certain Asset Purchase Agreement dated December 21, 1998 (the "Asset
Agreement"). Pursuant to a Loan and Security Agreement by and among HCFP and
MHM and certain of its affiliates (collectively, "Borrower"), dated as of March
11, 1997, as amended on September 24, 1997 (the "Loan Agreement"), HCFP is
making, and may in the future make, loans to Borrower, which loans are secured
by, among other things, the accounts receivable of MHM (the "Accounts
Receivable"). In connection with said financing arrangement, HCFP has required
that all remittances made by Account Debtors in payment of the Accounts
Receivable be made to the Lockbox Account specified in the Loan Agreement (the
"Lockbox Account") and described on Exhibit A to this Letter Agreement.
1. As provided in Section One (1) of the Asset Agreement, the Accounts
Receivable attributable to services rendered prior to the closing date of the
transactions contemplated by the Asset Agreement (the "pre-Closing Date
Accounts Receivable") are not included in the assets being sold and MHM shall
be responsible for collecting such pre-Closing Date Accounts Receivable. MHM
hereby confirms to HCFP that the proceeds of any and all of the pre-Closing
Date Accounts Receivable collected by MHM shall be immediately forwarded to the
Lockbox Account.
2. Until notified that all balances due to HCFP under the Loan Agreement
and that certain Secured Bridge Note made by MHM and certain affiliates in
favor of HCFP Funding II, Inc., an affiliate of Lender ("Funding II"), dated as
of July 15, 1998 (which Note has a Maturity Date of January 15, 1999 but which
may be extended upon the mutual agreement of MHM and Funding II). Arbour hereby
agrees to take all necessary steps to process any remittances, checks
or other cash items that are identified as the proceeds of pre-Closing Date
Accounts Receivable
<PAGE> 73
[HEALTHCARE FINANCIAL PARTNER LETTERHEAD]
MHM Extended Care Services, Inc.
December 30, 1998
Page Two
and to promptly remit such items (no more than three (3) business days after
receipt of such items) to the Lockbox Account at the address specified on
Exhibit A to this Letter Agreement. Arbour hereby waives any right of setoff or
claim against pre-Closing Date Accounts Receivable and the proceeds therefrom
until MHM'S debt to HCFP has been extinguished.
If the foregoing is acceptable, please sign below where indicated and
return this Letter Agreement to the undersigned
Very truly yours,
HCFP FUNDING, INC.
By: /s/ JEFFREY P. HOFFMAN
------------------------------
Jeffrey P. Hoffman
Vice President
ACCEPTED AND AGREED TO:
MHM EXTENDED CARE SERVICES, INC.
By: /s/ [sig]
------------------------
Name: /s/ [sig]
----------------------
Title: President
--------------------
ACCEPTED AND AGREED TO AS TO PARAGRAPH 2 ONLY:
ARBOUR HEALTH SYSTEMS
By: /s/ ROY ETTLINGER
-----------------------
Name: Roy Ettlinger
----------------------
Title: CEO
---------------------
<PAGE> 1
Exhibit No. 10-4
ASSET ACQUISITION AGREEMENT
This Asset Acquisition Agreement ("AGREEMENT") is entered into as of the
22nd day of December, 1998 by and between BHG of Pennsylvania, LLC, a
Pennsylvania limited liability company ("BUYER") and MHM EXTENDED CARE SERVICES,
INC., a Delaware corporation ("SELLER").
RECITALS
Buyer desires to purchase and Seller desires to sell to Buyer certain
assets and business related to Seller's operation within the State of
Pennsylvania (the "STATE") related to arranging for the delivery of mental
health services to patients of nursing homes located in the State and any
nursing homes located in New Jersey (the "OPERATIONS") which exist as of the
date of this Agreement, all on the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Buyer and Seller agrees as
follows:
1. ACQUIRED ASSETS. SCHEDULE 1.1 lists the assets to be conveyed which
include, to the extent assignable, all contracts with nursing homes related to
the Operations for provision of mental health services, all patient and employee
records and databases, all customer lists of the Operations, all rights under
covenants not to compete or similar agreements related to the Operations, all
management agreements and other contractual rights Seller may have related to
the Operations, and all other tangible and intangible property related to the
Operations (collectively, the "ACQUIRED ASSETS"). Seller will transfer to Buyer
at Closing all billing information and other files (whether in paper or
digitized form) related to the Operations, including correspondence and
communications with regulatory agencies, except as to billing records needed to
collect accounts receivable retained by Seller (to which records each party
shall have full access). Subject to the terms and conditions of this Agreement,
Buyer agrees to purchase and Seller agrees to sell, assign and deliver to Buyer,
all of Seller's right, title and interest in, to and under the Acquired Assets,
free and clear of any mortgage, pledge, hypothecation, claim, security interest,
encumbrance, right or interest of others, lease, license, easement,
encroachment, covenant, title defect, lien, option or right of first refusal
(collectively, "LIENS"). The Acquired Assets shall not include, and Seller shall
retain, all cash, cash equivalents, and accounts receivable related to the
Operations prior to Closing, and all assets of business operations similar to
the Operations conducted by Seller in states other than the State (collectively
the "EXCLUDED ASSETS").
2. ASSUMPTION OF LIABILITIES. Buyer will not assume or become responsible
for any liabilities or obligations of Seller. Buyer acknowledges that Buyer is
responsible for its liabilities arising after the Closing resulting from the
Acquired Assets.
<PAGE> 2
3. PURCHASE PRICE.
3.1. Purchase Price. The aggregate purchase price for the Acquired
Assets (the "PURCHASE PRICE") is $170,000. The Purchase Price shall be comprised
of (1) a demand promissory note substantially in the form attached as EXHIBIT A,
in the amount of $20,000 payable to Seller (the "DEMAND NOTE"), and (2) a term
promissory note substantially in the form attached as EXHIBIT B, in the amount
of $150,000 payable to Seller (the "TERM NOTE"). Buyer shall pay the Purchase
Price to Seller by: (i) executing and delivering the Demand Note upon execution
of this Agreement, and (ii) executing and delivering the Term Note at Closing.
3.2. Payment of the Demand Note and the Term Note. The Demand Note shall
be in the principal amount of $20,000 which is due, in its entirety, at Closing
and if Closing does not occur by December 31, 1998, other than as a result of
the non-satisfaction of the conditions described in SECTION 7, then upon
Seller's written demand, without interest. The Term Note shall be in the
principal amount of $150,000 which is due, in its entirety, on the 90th day
after the Closing without interest.
3.3. Purchase Price Allocation. The Purchase Price will be allocated
among the Acquired Assets as follows: (1) fixtures, furniture and equipment:
$9,501 and (2) the balance to the Contracts.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as expressly set forth
to the contrary in a schedule hereto, Seller represents and warrants to Buyer as
follows:
4.1. Seller and its Board of Directors and stockholders have taken all
action required by its articles of incorporation, bylaws, and otherwise to
authorize the execution and, as of Closing will have taken all action to
consummate, this Agreement. This Agreement constitutes the valid and legally
binding obligation of Seller, enforceable in accordance with its terms, except
that enforceability may be limited by applicable equitable principles or
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally.
4.2. The execution and consummation by Seller of this Agreement, and the
other agreements and documents contemplated hereby, will not (a) violate the
terms of Seller's articles of incorporation, bylaws or any instrument,
agreement, mortgage, judgment, decree, commitment or understanding, written or
oral, to which Seller is a party, or by which Seller or any of its property is
bound, (b) conflict with, result in a breach of, constitute (with giving of
notice or lapse of time or both) a default under or give any person any right to
terminate, modify, accelerate or otherwise change the existing obligations of
Seller under any such instrument, agreement, mortgage, judgment, decree,
commitment or understanding, (c) result in the creation or imposition of any
Lien upon the Acquired Assets, or (d) violate any applicable law.
4.3. Seller is duly organized, validly existing and in good standing
under the laws of Delaware. Seller has full power and authority to carry on its
business as it is now being conducted, to own and lease the properties and
assets which it now owns or leases and to
2
<PAGE> 3
consummate Seller's obligations under this Agreement. Seller is duly qualified
to do business and is in good standing as a foreign corporation in Pennsylvania
and Virginia.
4.4. Seller has (a) timely filed in accordance with applicable laws, all
Tax Returns (as defined below) with respect to Taxes, except as to certain state
income Tax Returns as to which no Taxes are, or will be, due, (b) paid all Taxes
(as defined below) shown to have become due pursuant to such Tax Returns, and
(c) paid all Taxes for which a notice of, or assessment or demand for, payment
has been received or which are otherwise due or payable. In respect of Seller
(i) there is no action, suit, proceeding, investigation, audit, claim or
assessment pending or proposed with respect to Taxes or with respect to any Tax
Return, (ii) all amounts required to be collected or withheld by Seller with
respect to Taxes have been duly collected or withheld and any such amounts that
are required to be remitted to any taxing authority have been duly remitted,
(iii) no extension of time within which to file any Tax Return has been
requested which Tax Return has not since been filed, (iv) there are no security
interests for Taxes upon the Acquired Assets, and (v) there are no waivers or
extensions of any applicable statute of limitations for the assessment or
collection of Taxes with respect to any Tax Return which remain in effect. The
term "TAX(ES)" shall mean any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect to the foregoing. The term "TAX RETURN(S)" shall
mean returns, declarations, reports, claims for refund, information returns or
other documents (including any related or supporting schedules, statements or
information) filed or required to be filed in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
4.5. SCHEDULE 4.5 hereto sets forth a true and correct list of any items
of furniture, fixtures, equipment and other personal property included among the
Acquired Assets, all of which are conveyed "AS IS" with no warranties, express
or implied, as to the condition of such assets.
4.6. Seller has good and marketable title to all of the Acquired Assets,
free and clear of any Liens. Upon consummation of the transactions provided in
this Agreement, Buyer will be vested with good and marketable title to all of
the Acquired Assets, free and clear of all Liens.
4.7. No waiver, consent or approval from or filing with any person will
be required for Seller to consummate this Agreement, and the other agreements
contemplated hereby, without creating a default or liability.
4.8. Seller has not incurred any liability to any broker, finder or
agent and there are no claims for any brokerage fees, finder's fees or
commissions in connection with the transactions contemplated by this Agreement.
3
<PAGE> 4
4.9. All balance sheets, income statements and other financial
information furnished by Seller to Buyer fairly represent the financial
condition of the Operation as of the date and for the period shown thereon. All
other information, reports, documents, papers and data furnished by Seller to
Buyer are accurate and correct in all material respects and complete insofar as
completeness may be necessary to give Buyer a true and accurate knowledge of the
subject matter thereof. Since September 30, 1998:
(i) there has been no material adverse change in the Acquired
Assets, the Operations, liabilities, profits, prospects or conditions (financial
or otherwise) of the Operations, and, to Seller's Best Knowledge, no fact or
condition exists or is contemplated or threatened which might reasonably be
expected to cause such a change in the future;
(ii) there has been no damage, destruction, loss or claim, whether
or not covered by insurance, or condemnation or other taking adversely affecting
in any material respect any of the Acquire Assets or the Operation; and
(iii) Seller has conducted the Business only in the ordinary course
and in conformity with past practice.
4.10. Seller does not have any unpaid and past due debts, claims or
liabilities relating to the Purchased Assets; Seller's assets exceed its
liabilities; and Seller is paying its liabilities as they arise in the ordinary
course of business.
4.11. There are no lawsuits, claims, proceedings or investigations
pending or threatened against or affecting Seller in respect of the Acquired
Assets or the Operations nor is there any basis for any of the same, and there
is no lawsuit, claim or proceeding pending in which Seller is the plaintiff or
claimant which relates to the Acquired Assets or the Operations. To Seller's
Best Knowledge, the Acquired Assets and the Operations comply in all material
respects with all applicable federal, state and local laws affecting them and
the Operations. To Seller's Best Knowledge, Seller has complied in all material
respects with all federal, state and local laws which are applicable to the
Purchased Assets or the Operation.
4.12. Complete and correct copies of each contract, lease, license, or
any other agreement (written or verbal) (collectively "CONTRACTS") to which
Seller is a party and which relate to the Operations have been delivered to
Buyer by Seller. All such Contracts are legal, valid, binding, enforceable, in
full force and effect, and, except as provided in SECTION 6.7 and subject to any
required consent of the other parties thereto, are fully transferable to Buyer.
No party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification or acceleration, under said Contracts. No party has repudiated any
provision of any Contract. Seller has not received any notice or information
from any client indicating an intention to decrease the quantity of services
Seller provides to any such client, or to reduce the rates at which Seller is
being compensated for any and all services provided by Seller under any
Contract.
4
<PAGE> 5
4.13. To Seller's Best Knowledge, all health care professionals under
contract, directly or indirectly, with Seller are duly licensed and/or
certified, as appropriate and in good standing in their areas of practice. To
Seller's Best Knowledge, all such providers are qualified to render the services
which they have contracted to render. Seller has been assigned the authority to
bill the Medicare and Medicaid programs on behalf of health care professionals
who provide services pursuant to their contracts with Seller.
4.14. Seller is not a party to any collective bargaining or labor
agreement and there is not now any strike, slow-down, work stoppage, lockout,
organizational campaign or other labor controversy or dispute pending or
threatened. Seller is not liable for any unpaid wages, bonuses or commissions,
or for any tax penalty, assessment or forfeiture for failure to comply with any
employer/employee matter.
4.15. Seller has obtained and maintained in full force and effect
commercially reasonable amounts of insurance to protect itself and the Acquired
Assets and Operations against the types of liabilities, including medical
malpractice, customarily insured against by such entities in connection with the
operation of similar practices, and all premiums due on such policies have been
paid. Such insureds have complied in all material respects with the provisions
of all such policies.
4.16. Seller owns or has the perpetual royalty-free right to use all
patents, trademarks, service marks, copyrights, trade names, inventions,
improvements, processes, formulae, trade secrets, mailing lists, know-how and
proprietary or confidential information used in conducting the Operations. No
infringement of any patent, patent right, trademark, service mark, trade name or
copyright or registration thereof has occurred or results in any way from the
operation or business of the Business.
4.17. None of the representations or warranties of Seller contained
herein, and none of the information referred to, and none of the other
information or documents furnished or to be furnished to Buyer by Seller
pursuant to the terms of this Agreement, is false or misleading in any material
respect or omits to state a fact necessary to make the statements herein or
therein not misleading in any material respect. There is no fact which adversely
affects or in the future is likely to adversely affect the Acquired Assets or
the Operations in any material respect which has not been set forth or referred
to in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:
5.1. Buyer has taken all action required to authorize the execution and
consummation of this Agreement. This Agreement constitutes the valid and legally
binding obligations of Buyer, enforceable in accordance with its terms, except
that enforceability may be limited by applicable equitable principles or
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally.
5
<PAGE> 6
5.2. The execution and consummation by Buyer of this Agreement, and the
other agreements and documents contemplated hereby, will not (a) violate the
terms of any instrument, agreement, mortgage, judgment, decree, commitment or
understanding, written or oral, to which Buyer is a party, or by which Buyer or
any of its property is bound, (b) conflict with, result in a breach of, or
constitute (with giving of notice or lapse of time or both) a default under or
give any person any right to terminate, modify, accelerate or otherwise change
the existing obligations of Buyer under any such instrument, agreement,
mortgage, judgment, decree, commitment or understanding, (c) result in the
creation or imposition of any Lien upon Buyer or its properties or assets, or
(d) violate any applicable law.
5.3. Buyer is duly organized, validly existing and in good standing
under the laws of Pennsylvania. Buyer has full power and authority to execute
and consummate Buyer's obligations under this Agreement.
5.4. Other than Cain Bros., whose fees and expenses will be paid by
Buyer, Buyer has not incurred any liability to any broker, finder or agent for
any brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement.
5.5. None of the representations or warranties of Buyer contained
herein, and none of the information referred to, is false or misleading in any
material respect or omits to state a fact necessary to make the statements
herein or therein not misleading in any material respect.
6. PRE-CLOSING COVENANTS. The parties covenant and agree as follows:
6.1. Condition of Assets Prior to Closing. Without the prior written
consent of Buyer, Seller will operate the Acquired Assets and the Operations in
the ordinary and usual course and substantially in the same manner as they are
presently operated.
6.2. Notification of Material Adverse Changes. Seller will promptly
notify Buyer in writing of the occurrence of any material adverse change to the
Acquired Assets or Operations occurring on or after the date of this Agreement
and on or prior to the Closing Date.
6.3. Other Transactions. The parties will deal exclusively and in good
faith with each other regarding a sale of all or a material portion of the
Acquired Assets. Seller will not, and will direct Seller's officers, directors,
financial advisors, accountants, agents and counsel not to: (i) solicit
submission of offers from any person relating to a the Acquired Assets, (ii)
participate in any discussions or negotiations regarding, or furnish any
nonpublic information to any person regarding purchase of the Acquired Assets by
any person other than Buyer, or (iii) enter into any agreement or understanding,
whether oral or written, that would have the effect of preventing consummation
of this Agreement. Seller will promptly notify Buyer of the terms of any
communication Seller may receive or become aware of relating to such activities.
6.4. Consents, Waivers and Approvals. Except as provided in SECTION 6.7,
Seller will obtain all consents, waivers, approvals, and releases necessary for
Seller to effect the transactions contemplated herein, free and clear of any and
all Liens, but shall not be required to obtain any
6
<PAGE> 7
consents, waivers, approvals or releases (governmental or otherwise) necessary
to permit or to enable Buyer to conduct the Operations. All consents, waivers,
releases and approvals will be in writing and in form and substance satisfactory
to Buyer, in its discretion as reasonably exercised by Buyer. Notwithstanding
any of the above, Seller will cooperate with the reasonable requests of Buyer to
effect the transfer of assignable Contracts (governmental or otherwise).
6.5. Supplemental Disclosure. Seller will have the continuing obligation
up to and including the Closing to supplement promptly or amend the Schedules
hereto with respect to any matter subsequently arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the Schedules.
6.6. Conditions Precedent. The parties will use commercially reasonable
efforts to satisfy the conditions set forth in SECTIONS 7 AND 8 hereof.
6.7. Consents, Regulatory Approvals and Licenses. Buyer acknowledges
that certain of Seller's Contracts with nursing homes or clinicians may not be
assignable, may be terminable upon no or minimal notice, or may consist of
arrangements not embodied in binding contractual relationships. Buyer further
acknowledges that Seller makes no warranties or representations as to the
existence or availability of any assignments, consents, approvals, regulatory
licenses, or certifications, including as to nursing home Contracts, as may be
necessary for any use of the Acquired Assets as Buyer may intend. Buyer has made
such inquiry as to such matters as it believes appropriate, and that
consummation of the transaction contemplated hereby shall not be contingent upon
the existence of, or Buyer obtaining, any such assignments, consents, approvals,
regulatory licenses, or certifications.
6.8. Press Releases. Unless approved in writing and in advance by the
other party, neither Buyer nor Seller shall issue any press release or written
statement for general or public circulation relating to the transactions
contemplated hereby, except as required by law in the reasonable opinion of
Buyer's counsel. Each party agrees to use commercially reasonable efforts to
obtain the other's approval of the text of any public report, statement or
release prepared.
6.9. Representations and Warranties. Each of the parties hereto will
refrain from taking any action which would render any representation or warranty
contained in SECTIONS 4 or 5 of this Agreement inaccurate as of the Closing.
Each party will promptly notify the other of any action or proceeding that is
instituted or threatened against such party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated by this Agreement. Each
party will take such further action as may reasonably be requested by another
party to evidence the consummation of this Agreement.
6.10. Employees and Independent Contractors. Buyer will use commercially
reasonable efforts to make offers of comparable employment and of comparable
contractual arrangements to all employees and independent contractors of Seller
whose duties directly relate to the Operations.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement will be subject to the satisfaction, on or before the
Closing, or such other date as may be specified, of the following conditions,
any of which may be waived by Buyer in writing.
7.1. Representations. The representations and warranties made by Seller
in SECTION 4 will be true and correct on the Closing as though such
representations and warranties had been made on such date and Seller will
deliver to Buyer a certificate dated as of the Closing to the foregoing effect.
7.2. Covenants. Seller will have duly performed all of the covenants,
acts and undertakings to be performed by it on or prior to the Closing, and
Seller will deliver to Buyer a certificate dated as of the Closing to the
foregoing effect.
7.3. Certified Resolutions. Seller will have delivered to Buyer a
certificate executed by a duly authorized person evidencing Seller's authority
to enter into this Agreement. Such person will also certify that such authority
has not been revoked or modified and remains in full force and effect.
7.4. No Injunction, Etc. No proceeding, investigation, or legislation
will have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement, or which materially affects title to, or
the existence or priority of Liens on, the Acquired Assets, and Seller will
deliver to Buyer a certificate dated as of the Closing to the foregoing effect.
7.5. Incumbency. Seller will have delivered a certificate of incumbency
executed by the president and secretary of Seller listing each officer and
director of Seller and the persons authorized to execute this Agreement and the
other documents contemplated hereby.
7.6. Material Adverse Change. No material adverse change to the Acquired
Assets or the Operations shall have occurred on or after the date of this
Agreement and on or prior to the Closing, and Seller will deliver to Buyer a
certificate dated as of the Closing to the foregoing effect.
7.7. Deliverables. Buyer has received all documents and other items to
be delivered under SECTION 9.3(a).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of Seller
to consummate this Agreement will be subject to the satisfaction, on or before
the Closing, of the following conditions, any of which may be waived by Seller
in writing.
8.1. Representations. The representations and warranties made by Buyer
in SECTION 5 will be true and correct on the Closing as though such
representations and warranties had been made on such date and Buyer will deliver
to Seller a certificate dated as of the Closing to the foregoing effect.
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8.2. Covenants. Buyer will have duly performed all of the covenants,
acts or undertakings to be performed by it on or before the Closing, and Buyer
will deliver to Seller a certificate dated as of the Closing to the foregoing
effect.
8.3. Certified Resolutions. Buyer will have delivered to Seller a
certificate executed by a duly authorized person evidencing Buyer's authority to
enter into this Agreement. Such person will also certify that such authority has
not been revoked or modified and remains in full force and effect.
8.4. No Injunction, Etc. No proceeding, investigation or legislation
will have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, or prohibit, or to obtain substantial
damages in respect of this Agreement, and Buyer will deliver to Seller a
certificate dated as of the Closing to the foregoing effect.
8.5. Incumbency. Buyer will have delivered a certificate of incumbency
executed by its manager listing the persons authorized to execute this
Agreement, and the other documents contemplated hereby.
8.6. Guaranty. Buyer will cause Integrated Health Options, LLC ("IHO"),
BHG, Inc., and Illiana Behavioral Management, Inc. to deliver their guarantees
substantially in the form attached as EXHIBIT C (the "GUARANTY AGREEMENT")
together with the security agreement to be executed by IHO substantially in the
form attached as EXHIBIT D (the "SECURITY AGREEMENT").
8.7. Deliverables. Seller has received all documents and other items to
be delivered under SECTION 9.3(b).
9. CLOSING.
9.1. Time and Place. The closing will be held on December 31, 1998 at
9:00 a.m., eastern standard time, at the offices of Seller, or at such other
place and time as shall be agreed upon by Buyer and Seller (the "CLOSING").
9.2. Effective Date. Seller acknowledges it will take some period of
time for Buyer to obtain, on behalf of the Operations, Medicare and Medicaid
Provider Numbers ("PROVIDER NUMBERS") for participation in the Medicare and
Medicaid programs. Accordingly, the effective date of transfer to Buyer of the
Acquired Assets will be postponed after Closing to the earliest to occur of: (i)
Buyer's obtaining such Provider Numbers, (ii) Buyer's cancellation of the
Interim Management Agreement, or (iii) the 90th day following Closing (the
"EFFECTIVE DATE").
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9.3. Transactions at the Closing. At Closing, each of the following
transactions will occur:
(a) Seller will deliver to Buyer the following:
(i) a certificate of good standing of Seller, dated not more
than five business days prior to the Closing, from the offices of the
Secretaries of State of Delaware, Pennsylvania and Virginia;
(ii) all other such certificates, dated as of the Closing, as
Buyer may reasonably request to evidence the fulfillment by Seller, or other
satisfaction as of the Closing, of the terms and conditions of this Agreement
including, but not limited to, the certifications required under SECTION 7.1,
7.2, 7.3, 7.4, 7.5, AND 7.6;
(iii) an opinion of Seller's counsel, substantially in the form
attached as EXHIBIT E, that Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the States of Delaware,
Pennsylvania and Virginia, that Seller has full power and authority to perform
its obligations under this Agreement, that all action has been taken as required
to authorize the execution and consummation of this Agreement by Seller, and
this Agreement constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except that enforceability may be
limited by applicable equitable principles of bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally;
(iv) the Interim Management Agreement; and
(v) SCHEDULES 1.1 and 4.5.
(b) Buyer will deliver to Seller the following:
(i) payment on the Demand Note by wire transfer of immediately
available funds to an account of Seller at a bank specified by
Seller in writing at least one business day prior to Closing;
(ii) the Term Note;
(iii) a certificate of good standing of Buyer, dated not more
than five business days prior to the Closing, from the Secretary of State of
Pennsylvania;
(iv) all other such certificates, dated as of the Closing, as
Seller may reasonably request to evidence the fulfillment by Buyer, or other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement, including, but not limited to the certifications required under
SECTIONS 8.1, 8.2, 8.3, 8.4 AND 8.5;
(v) an opinion of Buyer's counsel, substantially in the form
attached as EXHIBIT E, that Buyer is a limited liability company duly organized,
validly existing, and in good
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standing under the laws of the State of Pennsylvania; that Buyer has full power
and authority to perform its obligations under this Agreement, that all action
has been taken as required to authorize the execution and consummation of this
Agreement by Buyer, and this Agreement constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms, except that
enforceability may be limited by applicable equitable principles of bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally;
(vi) the Guaranty Agreement;
(vii) the Security Agreement; and
(viii) the Interim Management Agreement.
9.4. Transaction on the Effective Date. On the Effective
Date, Seller will deliver to Buyer the assignment and bill of sale substantially
in the form attached as EXHIBIT F;
10. POST-CLOSING COVENANTS.
10.1. Covenants of Seller. For a period of five years after Closing,
without the prior written consent of Buyer, Seller and its affiliates, and
officers or directors of Seller or its affiliates shall not: (a) engage in the
establishment or operation of any business related to the provision or delivery
of mental health services to patients at nursing homes within the State, or (b)
hire or solicit for hire any employee of the Operations, or recommend, directly
or indirectly to any such employee that he or she obtain employment elsewhere.
Without in any way limiting the foregoing, it is acknowledged that this covenant
does not extend to the provision or delivery of mental health services at
prisons, jails or other correctional facilities. Buyer expressly acknowledges
that Seller may be continuing to provide or deliver mental health services to
patients at nursing homes in states other than the State after Closing. Seller
shall not, without Buyer's prior written consent, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement. Seller understands that Buyer will not have an adequate remedy at law
for the breach or threatened breach by Seller of covenants and agree that Buyer,
in the case of any such breach, in addition to any other remedies which may be
available to Buyer hereunder or under any other agreement entered into with
Seller, or by virtue of any provision of law, may file suit in equity to enjoin
Seller from such breach or threatened breach.
10.2. Accounts Receivable and Provider Numbers. In order to assure
collection by Seller of accounts receivable arising from services provided prior
to the date of Closing (which accounts receivable are excluded from the Acquired
Assets (the "EXCLUDED RECEIVABLES")), except as otherwise provided in the
Interim Management Agreement, Buyer shall bill after the Closing, in its own
name, for services provided by it. Seller shall retain the sole right to bill
for and collect the Excluded Receivables together with the sole right, subject
to the Interim Management Agreement, to utilize the Medicare and Medicaid
provider numbers and other billing identification which Seller has historically
utilized in connection with the Operations. In the event proceeds of accounts
receivable are collected by either party which include both
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proceeds of Excluded Receivables and proceeds of accounts receivable to which
Buyer is entitled either under the Interim Management Agreement or otherwise,
the party collecting such receivables as soon as reasonably practical shall
deliver to the other party those proceeds to which such party is entitled
together with a copy of the Explanation of Benefits to which such proceeds
relate.
10.3. Survival of Representations and Warranties. All statements
contained in this Agreement, and the documents contemplated hereby, will be
deemed representations and warranties hereunder by Seller or Buyer, as the case
may be. All representations and warranties made by Seller or Buyer in this
Agreement will survive until the second anniversary of the Closing Date;
provided, however, that representations and warranties made under (a) SECTION
4.1 will have no limitation period, and (b) SECTION 4.4 shall survive for the
period of the relevant statute of limitations. No claims for breach of a
representation or warranty (including an Indemnification Claim as defined in
SECTION 12) may be brought by any person unless written notice of such claim
will have been given on or prior to the end of such survival period (in which
event each representation and warranty with respect to any asserted claim will
survive until such claim is finally resolved and all obligations with respect
thereto are fully satisfied).
10.4. Interim Management Agreement. Buyer and Seller will enter into an
interim management agreement related to the Operations pursuant to an agreement
substantially in the form attached as EXHIBIT G (the "INTERIM MANAGEMENT
AGREEMENT"). The Interim Management Agreement appoints Buyer as manager of the
Operations on behalf of Seller on the terms and conditions set forth and until
the Effective Date.
10.5. Provider Numbers. Buyer will use commercially reasonable efforts to
obtain, at the earliest practical date, the Provider Numbers necessary to permit
Buyer to participate in the Medicare and Medicaid programs.
10.6. Regulatory Compliance. The parties agree that nothing contained in
this Agreement shall require either party or its contracted health care
professionals to refer patients to, or order any goods or services from the
other party. Notwithstanding any unanticipated effect of any provision of this
Agreement, neither party will knowingly or intentionally conduct its behavior in
such a manner as to violate the prohibition against fraud and abuse in
connection with the Medicare and Medicaid programs.
10.7 Access to Patient Records. Buyer will provide access, pursuant to
Seller's reasonable request for access, to patient records acquired by Buyer
from Seller, provided the patient consents to such access and Seller agrees to
maintain the confidentiality of information included in such patient's records.
11. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned: (i) by the mutual written consent of Seller and
Buyer; or (ii) by either Seller or Buyer upon the failure of the other party to
use its commercially reasonable efforts to fulfill its obligations set forth in
this Agreement on or before the Closing.
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12. INDEMNIFICATION.
12.1. Losses. For purposes of this SECTION 12, "LOSSES" will mean all
damages, losses, costs, expenses (including legal, accounting and other fees and
expenses), interest, penalties, charges and liabilities.
12.2. Indemnification by Seller. Seller agrees to indemnify, defend and
hold harmless Buyer from and against any Loss incurred by Buyer related to or
arising out of (a) the breach of any of the warranties, representations,
covenants or agreements of Seller in this Agreement (a "BREACH"), or (b) any
liability arising from the ownership or use of the Acquired Assets or the
conduct of the Operations by Seller prior to the Closing.
12.3. Indemnification by Buyer. Buyer agrees to indemnify, defend and
hold harmless Seller from and against any Loss incurred by Seller related to or
arising out of (a) the breach of any of the warranties, representations,
covenants or agreements of Buyer in this Agreements, or (b) any liability
associated with Buyer's ownership or use of the Acquired Assets or the conduct
of the Operations on or after the Closing.
12.4. Procedures for Indemnification.
(a) An indemnification claim (an "INDEMNIFICATION CLAIM") will be
made by the party to be indemnified (the "IDEMNITEE") by delivery of a written
declaration to the party to indemnify (the "INDEMNITOR") requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a claim from a person not a
party to this Agreement or an affiliate thereof (a "THIRD PARTY CLAIM"),
containing such other relevant information as Indemnitee may have concerning
such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in SECTION 12.5 hereof will be observed by the Indemnitee
and Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor will have 10 days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee specifying to the extent reasonable given the information available
to Indemnitor the basis for such objection. Failure to timely so object will
constitute acceptance of the Indemnification Claim by the Indemnitor and the
Indemnification Claim will be paid in accordance with SECTION 12.4(d). If any
objection is timely interposed by the Indemnitor and the dispute is not resolved
within 15 days from the delivery of such objection, such dispute will be
resolved by litigation, or, if mutually agreeable by Indemnitor and Indemnitee,
by arbitration or mediation.
(d) Upon determination of the amount of an Indemnification Claim
(including a Third Party Claim), whether by agreement between Indemnitor and
Indemnitee, by an arbitration award or otherwise, Indemnitor will pay the amount
of such Indemnification Claim within 10 days of the date such amount is
determined in writing.
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12.5. Defense of Third Party Claims.
(a) Should any Third Party Claim be made, the obligations and
liabilities of the parties with respect to such Third Party Claim will be
subject to this SECTION 12.5.
(b) Within a reasonable time (i.e., such time as will not prejudice
the contest, defense, litigation, or settlement of a Third Party Claim)
following the receipt of notice of a Third Party Claim, the party receiving the
notice of the Third Party Claim will (i) promptly notify the other party of its
existence setting forth in writing and with reasonable specificity the facts and
circumstances of which such party has received notice, and (ii) if the party
giving such notice is an Indemnitee, specify in writing the basis hereunder upon
which the Indemnitee's claim for indemnification is asserted and tendering
defense of the Third Party Claim to Indemnitor.
(c) If the defense of a Third Party Claim is so tendered and within
10 days thereafter such tender is accepted without qualification by the
Indemnitor as evidenced by written notice to Indemnitee, then, except as
provided below, the Indemnitee will not, and the Indemnitor will, have the right
to contest, defend, litigate and settle such Third Party Claim. The Indemnitee
will have the right to be represented by counsel of its own choice and at
Indemnitee's expense to participate in any contest, defense, litigation or
settlement conducted by the Indemnitor; provided that the Indemnitee will be
entitled to reimbursement by the Indemnitor therefor if the Indemnitor loses is
right to contest, defend, litigation and settle the Third Party Claim as
provided below. Notwithstanding the preceding provisions of this SECTION 12.5,
if the Third Party Claim is asserted against both of Indemnitor and Indemnitee
and representation of both of them by the same counsel would be inappropriate
due to actual or potentially differing interests between them, Indemnitee shall
be entitled to retain the right to contest, defend or litigate such Third Party
Claim as it relates to Indemnitee and will have the exclusive right, in its
discretion exercised in good faith, and with the advice of counsel, to settle
any such matter as it is related to Indemnitee, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least 10 days prior to any such settlement, written
notice of its intention to settle will be given to the Indemnitee. If, pursuant
to the preceding sentence, the Indemnitee so contests, defends, litigates or
settles a Third Party Claim, the Indemnitee will be reimbursed by the Indemnitor
for the reasonable attorneys' fees and other expenses of defending, contesting,
litigating and/or settling the Third Party Claim which are incurred from time to
time, promptly following the presentation to the Indemnitor of itemized bills
for such attorneys' fees and other expenses.
(d) The Indemnitor will lose its right to contest, defend, litigate
and settle the Third Party Claim if it fails to diligently contest the Third
Party Claim (except in connection with a settlement thereof in accordance with
the terms hereof). So long as the Indemnitor has not lost its right to defend,
contest, litigate and settle as herein provided, the Indemnitor will have the
exclusive right to contest, defend and litigate the Third Party Claim and will
have the exclusive right, in its discretion exercised in good faith, and with
the advice of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it
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deems fair and reasonable, provided that at least 10 days prior to any such
settlement, written notice of its intention to settle will be given to the
Indemnitee.
(e) All expenses (including without limitation attorneys' fees and
expenses) incurred by the Indemnitor in connection with the foregoing will be
paid by the Indemnitor.
(f) No failure by an Indemnitor to acknowledge in writing its
indemnification obligations under this SECTION 12 will relieve it of such
obligations to the extent they exist. If an Indemnitee is entitled to
indemnification against a Third Party Claim, and the Indemnitor fails to accept
or assume the defense of a Third Party Claim, or if, in accordance with the
foregoing, the Indemnitor loses its right to contest, defend, litigate and
settle such a Third Party Claim, the Indemnitee will have the right, without
prejudice to its right of indemnification hereunder, in its discretion exercised
in good faith, and upon the advice of counsel, to contest, defend and litigate
such Third Party Claim, and may, in its discretion exercised in good faith, and
with the advice of counsel, settle such Third Party Claim, either before or
after the initiation of litigation, at such time and upon such terms as it deems
fair and reasonable, provided that at least 10 days prior to any such
settlement, written notice of its intention to settle is given to the
Indemnitor. If, pursuant to this SECTION 12.5(f), the Indemnitor so contests,
defends, litigates or settles a Third Party Claim for which it is entitled to
indemnification hereunder, the Indemnitee will be reimbursed by the Indemnitor
for the reasonable attorneys' fees and other expenses of defending, contesting,
litigating and/or settling the Third Party Claim which are incurred from time to
time, promptly following the presentation to the Indemnitor of itemized bills
for such attorneys' fees and other expenses.
12.6. Limitations.
(a) All notices of Loss must be delivered to the Indemnitor prior
to expiration of the period for the warranties and representations as set forth
in SECTION 10.3 hereof.
(b) Notwithstanding anything else to the contrary, Indemnitor shall
be liable only to the extent that: (i) any Loss arising from a Breach, on a per
occurrence basis, exceeds $1,000 (a "RELEVANT CLAIM"), and (ii) then only to the
extent that aggregate Relevant Claims exceed $17,000.
13. TRANSACTION EXPENSES.
13.1. Except as provided in SECTION 13.2, all expenses incurred by the
parties in connection with or related to the authorization, preparation,
negotiation and consummation of this Agreement and the agreements, documents or
instruments contemplated hereby will be borne solely by the party which has
incurred the same. Termination of this Agreement pursuant to SECTION 11 will
relieve the parties of their obligations hereunder with each party responsible
for its own fees, costs and expenses; provided, however, that if the Agreement
is terminated pursuant to Section 11, clause (ii) because one party fails to use
commercially reasonable efforts to fulfill its obligations hereunder, such party
will remain liable to the other party for all rights as
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to deposits, losses, costs, expenses (including attorney's fees) and liabilities
incurred by such other party as a result of such failure.
13.2. Buyer shall be responsible for any and all recordation charges,
transfer taxes, or other fees required for transfer of the Acquired Assets.
14. MISCELLANEOUS.
14.1. Notice All notices, requests, demands and other communications
hereunder must be in writing and will be deemed delivered (a) on the following
business day when sent by receipted overnight courier, or (b) five business days
after deposit in the United States Mail when mailed by registered or certified
mail, return receipt requested, first class postage prepaid, when addressed as
set forth below:
Buyer: BHG of Pennsylvania, LLC
c/o Integrated Health Options, LLC.
10500 Lunt Avenue, Suite 106
Rosemont, IL 60018
Attn: Frank M. Rosenbaum
with a copy to:
Ungaretti & Harris
3500 Three First National Plaza
Chicago, IL 60602-4283
Attn: Craig E. Nelson, Esq.
Seller: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive, Suite 810
Vienna, Virginia 22182
Attn: President
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner above
provided for giving notice.
14.2. Assignment; Binding Effect. This Agreement may not be assigned by
any of the parties hereto without the prior written consent of the other parties
hereto, provided that Buyer may assign its rights hereunder to any entity the
majority ownership of which is held by Buyer or the owners of Buyer. This
Agreement will be binding upon the parties hereto and their respective heirs,
successors and permitted assigns.
14.3. Headings; Exhibits and Schedules. The Section, Subsection and other
headings in this Agreement are inserted solely as a matter of convenience and
for reference, and are not a part of this Agreement. The Exhibits and Schedules
attached hereto are a material part of this Agreement and are incorporated
herein by this reference.
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14.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
14.5. Integration of Agreement. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject matter hereunder. Neither this Agreement, nor any provision hereof, may
be changed, waived, discharged, supplemented or terminated orally, but only by
an agreement in writing signed by the party against which the enforcement of
such change, waiver, discharge or termination is sought.
14.6. Time of Essence. Time is of the essence in this Agreement.
14.7. Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware.
14.8. Partial Illegality or Unenforceability. Wherever possible, each
provision hereof will be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
will, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or unenforceability will not affect any other provisions of this
Agreement, and this Agreement will be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless the
deletion or such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
14.9. Singular or Plural. All defined terms used herein will have the
same meaning, whether used in the singular or plural form, unless the context
clearly requires otherwise.
14.10. "Person". The term "PERSON" will be broadly interpreted to
include, without limitation, any corporation, partnership, association, limited
liability company, other association, trust or individual.
14.11. "Best Efforts". The use of the term "BEST EFFORTS" herein will in
no event require any party to (a) expend funds which are not commercially
reasonably in relation to the transactions contemplated hereby or (b) take, or
cause to be taken, any action which would have a material adverse effect with
respect to it.
14.12. "Including". Whenever the term "INCLUDING" is used in this
Agreement, it will mean "INCLUDING, WITHOUT LIMITATION," (whether or not such
language is specifically set forth) and will not be deemed to limit the range of
possibilities of those items specifically enumerated.
14.13. "Seller's Best Knowledge". Whenever the term "SELLER'S BEST
KNOWLEDGE" is used in this Agreement, it will mean knowledge possessed, or which
should have been possessed after due internal inquiry, by Seller's officers and
other personnel whose responsibilities include management of the Operations.
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14.14. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person other than the parties and their respective
successors and permitted assigns.
14.15. Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
* * *
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The parties have caused this Agreement to be duly executed and delivered
as of the day and year first above written.
BUYER:
BHG of Pennsylvania, LLC
By: Integrated Health Options, LLC
Its: Manager
By: /s/ FRANK M. ROSENBAUM
--------------------------------
Printed Name: Frank M. Rosenbaum
Title: Manager
SELLER:
MHM Extended Care Services, Inc.
By: /s/ STEVEN H. WHEELER
------------------------------
Printed Name: Steven H. Wheeler
-------------------
Title: Executive Vice President
-------------------------
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - Demand Note
B - Term Note
C - Guaranty Agreement
D - Security Agreement
E - Opinion of Counsel
F - Assignment and Bill of Sale
G - Interim Management Agreement
SCHEDULES
1.1 - Acquired Assets
4.5 - Furniture, Fixtures & Equipment
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Exhibit No. 10-5
INTERIM MANAGEMENT AGREEMENT
THIS Interim Management Agreement (this "MANAGEMENT AGREEMENT"), is made
and entered into this 31st day of December, 1998, (the "CLOSING DATE"), by and
between BHG of Pennsylvania, LLC, a Pennsylvania limited liability company
("MANAGER"), and MHM Extended Care Services, Inc., a Delaware corporation
("ECS").
WHEREAS, ECS arranges for the provision of mental health services to
certain nursing home patients in the State of Pennsylvania under contracts with
nursing homes and otherwise;
WHEREAS, on the date of this Management Agreement, ECS and Manager have
closed the transaction contemplated by the Asset Acquisition Agreement between
the parties dated as of December 22, 1998 (the "ASSET ACQUISITION AGREEMENT"),
in which transaction Manager has purchased certain of the assets and business of
the Operations as defined therein, and where such purchase is to be effective as
of the Effective Date;
WHEREAS, any capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Asset Acquisition Agreement; and
WHEREAS, during the period of time between the Closing and the Effective
Date the parties wish to provide for the management of the Operations on the
terms and conditions herein.
NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, it is agreed as follows:
1. Engagement. ECS hereby engages Manager to manage, administer and
operate, at Manager's sole expense, the Acquired Assets and the Operations,
commencing on the Closing, and Manager hereby accepts such engagement. As of the
Closing and until the Effective Date, ECS hereby authorizes Manager to
supervise, manage and direct the day-to-day operations of the Operations and to
perform its duties and exercise its rights under this Management Agreement.
Management and operation of the Operations by Manager shall be consistent with
all applicable standards, rules and regulations and of those federal, state and
local agencies having jurisdiction over or in connection with the Operations.
Manager acknowledges that the Operations do not include, and neither the Asset
Acquisition Agreement nor this Management Agreement extend to the operations
conducted by ECS in any state other than the State and New Jersey.
2. Relationship. Manager is at all times hereunder acting and
performing as an independent contractor and that no act, commission or omission
of either party hereto shall be construed to make or render the other party its
principal, agent, joint venturer or associate, except to the extent specified
herein. Wherever Manager is required to seek the approval of ECS to perform any
of the duties hereunder such approval shall not be unreasonably withheld.
<PAGE> 2
3. Responsibilities of Manager. For the term of this Management
Agreement and except as otherwise provided herein, as manager of the Operations,
Manager shall have the responsibility to conduct, supervise and manage all
aspects of the Operations, including the obligation to fund all costs and
expenses of the Operations after Closing, and shall have responsibility and
commensurate authority for, but not limited to, the following:
a. Charges. The establishment, maintenance, revision and
administration of the overall charge structure of the Operations.
b. Personnel Administration. At Manager's expense, the hiring
or engaging of employees, independent contractors or otherwise, and supervision
of all personnel needed for the Operations, including the clinical,
administrative and financial staff, the administration of wage scales, rates of
compensation, employee benefits, conditions of employment, in-service training,
attendance a seminars or conferences, staffing schedules and job and position
descriptions with respect to all employees of or contractors to, the Operations.
c. Collection of Accounts. Subject to SECTION 6, the issuance
of bills for services furnished by the Operations and the collection of accounts
and monies owed during the management period.
d. Payment of Accounts and Indebtedness. The payment of
payroll, trade accounts, taxes, rents and all other expenses of operation and
obligations of the Operations arising after Closing.
e. Account and Financial Records. The establishment and
administration of accounting procedures and controls, and systems for the
development, preparation and safekeeping of records and books of accounting
relating to the business and financial affairs of the Operations.
f. Depositories for Funds. Maintenance of accounts in such
banks, savings and loan associations, and other financial institutions as
Manager may from time to time select, (including certificates of deposits) with
such balances therein (which may be interest-bearing or non-interest-bearing) as
Manager shall from time to time deem appropriate, taking into account the cash
needs of the Operations, and the disbursement from such accounts of such amounts
of the Operations' funds as Manager shall from time to time determine to be
appropriate in the discharge of the responsibilities of Manager under this
Agreement.
g. Purchases. The purchase of supplies, and all other
materials and services which Manager shall deem to be necessary for the
operations, subject to all provisions hereof.
h. Administrative and Fiscal Services. Provision of all
administrative and fiscal services to the Operations, including collections,
accounting, auditing (by a certified public accountant selected by Manager),
bookkeeping, budgeting, patient billings and record keeping,
2
<PAGE> 3
accounts receivable and accounts payable processing, electronic data processing
and such other services, including marketing, recruiting and quality control, as
may from time to time be required.
i. Patient Records. Supervision of maintenance of patient
records and record retrieval and provision of monitoring services to assist in
quality assurance reviews. After Closing, ECS will provide Manager with access
to all such records.
j. Contracts for Services. Manager shall be empowered to
negotiate, enter into, and administer on behalf of the Operations all contracts
for services which Manager may determine are necessary for the Operations, such
contracts to be upon such terms and for such rates of compensation as Manager
shall determine.
4. Covenants by ECS.
a. Liabilities and Obligations. ECS shall not, during the term
of this Management Agreement, without approval of Manager, incur any new
liabilities or obligations in relation to the Operations, including without
limitation, employment arrangements, debts, mortgages, liens, credit
arrangements, loans or leases.
b. Prompt Consideration. In all matters requiring ECS's
decision or consent under the terms of this Management Agreement, ECS shall
promptly consider such matters and expeditiously advise Manager of its decision
so as not to hinder, damage or delay Manager in its management or direction of
the Operations or its accomplishment of its duties and responsibilities under
the terms of this Management Agreement.
5. Covenants by Manager.
a. Compliance with Agreements and Contracts. Manager will not
take any action that would cause Operations to default on any of its contracts
and agreements.
b. Patient Confidentiality. With respect to patients who
receive treatment as part of the Operations, Manager shall assure compliance
with all statutes, regulations, and rules concerning patient confidentiality.
6. Collection of Accounts Receivable. In consideration of its
services rendered under this Management Agreement, Manager shall have the right
to collect and retain all accounts receivable arising with respect to the
Operations on and after the Closing, to the extent such accounts receivable are
assignable, and ECS hereby assigns to Manager all of its rights, title, and
interest in and to such accounts receivable. Promptly upon receipt of payment
for any accounts receivable arising with respect to the Operations on and after
the Closing that are not assignable, ECS shall promptly forward such payment to
Manager. If Manager receives any payments of accounts receivable arising from
services rendered before the Closing, Manager will
3
<PAGE> 4
not negotiate payment of the check, but will instead promptly give ECS
possession of the check duly endorsed, if necessary, to ECS. If ECS receives any
payments of accounts receivable arising from services rendered on and after the
Closing, ECS will not negotiate payment of the check, but will instead promptly
give Manager possession of the check duly endorsed, if necessary, to Manager. If
such check includes payment of an account or accounts receivable arising both
from the Operations before as well as after the Closing Date, the party
receiving such payment shall promptly forward to the other party such portion of
the payment to which that party is entitled.
7. Regulatory Compliance. The parties shall comply in all respects
with all applicable requirements of the Medicare and Medicaid programs as they
may exist from time to time.
8. Limitation of Liability; Indemnifications.
a. ECS shall indemnify Manager and any and all subsidiaries,
parents and affiliates of Manager, and the officers, directors, stockholders,
members and employees of Manager and its subsidiaries, parents and affiliates,
and shall hold each of them harmless from and against, any and all liability,
claims, losses, costs, actions, judgment or damages, and any expenses relating
thereto (including reasonable attorneys' fees and expenses), arising (a) from
the ownership and/or operation of the Operations in respect of any and all
periods prior to the Closing under the Asset Acquisition Agreement and/or (b) as
a result of the acts or omissions (negligent or otherwise) of ECS's agents,
officers or employees prior to the Closing under the Asset Acquisition Agreement
(including, without limitation, any claims by, or liability to, third parties,
any governmental agency, or patients of the Operations).
b. Manager shall indemnify ECS and any and all subsidiaries,
parents and affiliates, and the officers, directors, stockholders and employees
of ECS and its subsidiaries, parents and affiliates, and shall hold each of them
harmless from and against, any and all liability, claims, losses, costs,
actions, judgments or damages, and any expenses relating thereto (including
reasonable attorneys' fees and expenses), arising from (a) the Operations during
the term of this Agreement (including, without limitation, all payroll, trade
accounts, short and long-term indebtedness, taxes, rents, and all other expenses
of operations and obligations of the Operations to the extent that such expenses
or obligations accrue on or after the Closing) and/or (b) Manager's performance
under this Management Agreement and/or (c) as a result of the acts or omissions
(negligent or otherwise) of Manager's agents, officers or employees (including,
without limitation, any claims by, or liability to, third parties, Manager and
its subsidiaries and affiliates, any governmental agency, or patients of the
Operations).
c. Each party acknowledges that the other has made no
representations or warranties, express or implied, and assumes no financial or
other responsibilities or liabilities in connection with this Management
Agreement except as specifically provided herein and in the Asset Acquisition
Agreement.
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<PAGE> 5
9. Insurance. Manager shall maintain at all times during the term of
this Agreement, at Manager's own expense, professional liability insurance
covering Manager and its employees, officers and directors with limits of one
million ($1,000,000) dollars per occurrence and three million ($3,000,000)
dollars in the aggregate. Manager shall maintain at all times during the term of
this Agreement, at Manager's own expense, general comprehensive liability
insurance in such amounts, with such coverages and with such companies as may be
commercially reasonable. All of the insurance required to be maintained under
this SECTION 9 shall contain an endorsement naming ECS as additional insured
thereunder and shall not be cancelable without 10 days prior written notice to
Manager and ECS.
10. Term and Termination.
a. Term. The term of this Agreement shall begin on the date of
the Closing under the Asset Acquisition Agreement and shall terminate on the
Effective Date, as defined in SECTION 9.2 of the Asset Acquisition Agreement.
b. Events of Default and Termination. Either party shall have
the right to terminate this Agreement prior to the Effective Date: (i) on the
occurrence of a material breach hereof by the other party not cured within five
business days of the delivery of notice as to such breach; or (ii) if any change
in applicable law renders this Agreement, in whole or in material part, illegal
or unenforceable. Manager may terminate this Agreement at any time, with or
without cause, on three business days notice to ECS. Such termination shall not
effect transfer of the Acquired Assets under the Asset Acquisition Agreement and
Closing.
11. Notice. Any notice or other communication by either party to the
other shall be in writing and shall be deemed to have been delivered if
delivered personally or mailed, postage prepaid, registered or certified mail
addressed as follows:
To ECS: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive
Suite 810
Vienna, Virginia 22182
Attn: President
To Manager: BHG of Pennsylvania, LLC
10500 Lunt Street, Suite 102
Rosemont, IL 60018
Attn: Frank M. Rosenbaum
5
<PAGE> 6
with a copy to:
Ungaretti & Harris
3500 Three First National Plaza
Chicago, IL 60602
Attn: Craig E. Nelson, Esq.
or to such other address, and to the attention of such other person or officer
as either party may designate in writing.
12. Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing executed by both parties.
13. Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provisions of this Agreement.
14. Confidentiality. The parties agree that the terms and conditions
of this Agreement shall remain confidential. No party shall distribute this
Agreement, or any part thereof, to an third parties unless required by law or by
contractual requirements.
15. Governing Law. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the State
of Delaware.
In witness whereof, the parties have executed this Management Agreement
as of the date first above written.
MHM EXTENDED CARE SERVICES, INC.
By: /s/ STEVEN H. WHEELER
--------------------------------
Its: Executive Vice President
--------------------------------
Printed Name: Steven H. Wheeler
----------------------
BHG OF PENNSYLVANIA, LLC
By: Integrated Health Options, LLC
Its: Manager
By: /s/ FRANK M. ROSENBAUM
--------------------------------
Its: Manager
Printed Name: Frank M. Rosenbaum
6
<PAGE> 1
Exhibit No. 10-6
EXHIBIT B
TERM PROMISSORY NOTE
$ 150,000.00 Dated: December 31, 1998
FOR VALUE RECEIVED, the undersigned, BHG of Pennsylvania, LLC, a
Pennsylvania limited liability company ("BHG"), promises to pay to the order of
MHM Extended Care Services, Inc., a Delaware corporation ("ECS"), the principal
sum of ONE HUNDRED FIFTY THOUSAND and 00/100 CENTS ($150,000.00). (Any
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in that certain Asset Acquisition Agreement by and between BHG
and ECS dated of December 22, 1998, which is incorporated herein by reference.)
This Promissory Note ("NOTE") shall not bear any interest on any
principal amount outstanding.
Payments of indebtedness evidenced hereby shall be payable on or before
the 90th day following the Closing.
Upon the occurrence of an Event of Default, ECS may, by written notice to
BHG, declare the entire unpaid principal amount hereunder to be immediately due
and payable, whereupon the same shall become immediately due and payable, and
proceed to exercise any and all rights and remedies that ECS may have at law or
in equity. For purposes hereof, an "EVENT OF DEFAULT" shall be deemed to have
occurred if BHG admits in writing of its inability to pay its debts as they
mature. The successful party involved in any action related to this Note shall
be reimbursed by the other party for reasonable attorneys fees incurred
contesting such action.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or
amendment is sought.
This Note is binding upon BHG and its successors and assigns, and shall
inure to the benefit of ECS.
This Note is made under and governed by the internal laws and decisions
of the State of Delaware, without regard to conflict of laws principles.
All notices, demands and other communications given hereunder shall be
given as provided in the Asset Acquisition Agreement.
<PAGE> 2
IN WITNESS WHEREOF, BHG has made and delivered this Note as of the date
first written above.
BHG OF PENNSYLVANIA, LLC
By: Integrated Health Options, LLC
Its: Manager
By: /s/ FRANK M. ROSENBAUM
------------------------------------------
Its: Manager
Printed Name: Frank M. Rosenbaum
MHM EXTENDED CARE SERVICES, INC.
By: /s/ STEVEN H. WHEELER
------------------------------------------
Printed Name: Steven H. Wheeler
-------------------------
Its: Executive Vice President
----------------------------------
2
<PAGE> 1
Exhibit No. 10-7
EXHIBIT C
GUARANTY AGREEMENT
This Guaranty Agreement (this "Guaranty") is made and entered into as
of the 31st day of December, 1998, by Integrated Health Options, LLC, a
Michigan limited liability company ("IHO"), BHG, Inc., a Michigan corporation
and Illiana Behavioral Management, Inc., a Michigan corporation (collectively
the "Guarantors"), for the benefit of MHM Extended Care Services, Inc., a
Delaware corporation ("ECS").
BHG of Pennsylvania, LLC, a Pennsylvania limited liability company
("BHG"), of which IHO is the sole member and manager, and ECS are entering into
an Asset Acquisition Agreement, dated December 22, 1998 (the "Acquisition
Agreement") and pursuant to which BHG will purchase the Acquired Assets of ECS,
and a Management Agreement dated the same date (the "Management Agreement")
pursuant to which BHG will provide management services to ECS in connection
with the Operations between the Closing and the Effective Date upon the terms
and conditions set forth therein. Except as otherwise indicated, capitalized
terms used herein are defined as set forth in the Acquisition Agreement and the
Management Agreement (collectively, the "Agreements").
The Guarantors are executing and delivering this Guaranty as an
inducement to ECS to enter into the Agreements.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Guarantors hereby agree as follows:
1. Guarantor's Guarantee. The Guarantors hereby guarantee the
full and punctual performance and discharge, when due, without demand therefor,
of the Obligations (as defined in SECTION 3 below) of BHG under the Agreements.
This Guaranty is secured by a pledge of certain collateral by IHO pursuant to a
Security Agreement dated the date hereof and agreed to between IHO and ECS.
2. Absolute and Continuing Guaranty. The Guaranty shall be an
irrevocable, absolute and continuing guaranty. The obligations of the
Guarantors hereunder are direct, primary and independent of the obligations of
BHG and a separate claim or demand under the Agreements may be asserted against
and sought to be collected from Guarantors, whether claim or demand is asserted
against BHG or whether BHG is joined in any such claim(s) or demand(s).
3. Obligations. As used herein, "Obligations" means (a) all
covenants and obligations of BHG, including obligations of performance, under
the Agreements arising or accruing after the Closing and on or prior to the
Effective Date and (b) all obligations of BHG under the Demand Note and Term
Note.
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<PAGE> 2
4. Representations and Warranties. The Guarantors hereby
represent and warrant to ECS as follows:
(a) The execution, delivery and performance by the Guarantors of
this Guaranty does not and will not contravene or conflict
with (i) any law, order, rule, regulation, writ, injunction or
decree now in effect of any government, governmental
instrumentality or court having jurisdiction over the
Guarantors or (ii) any contractual restriction binding on or
affecting the Guarantors or any of its property or assets;
(b) This Guaranty creates legal, valid and binding obligations of
the Guarantors enforceable against them in accordance with its
terms;
(c) There is no action, proceeding or investigation pending or, to
the knowledge of the Guarantors, threatened affecting the
Guarantors which may adversely affect the Guarantors' ability
to fulfill and perform the Obligations and other undertakings
under this Guaranty; and
(d) The Guarantors are not insolvent on the date of this Guaranty
and will not become insolvent as a result of entering into
this Guaranty.
The Guarantors hereby agree to indemnify, defend and hold harmless ECS from and
against: (a) any loss, cost, damage or expense occurring by reason of a breach
of any of the foregoing representations and warranties; and (b) the loss,
mitigation, subordination or other consequences adverse to ECS by reason of any
performance of the Obligations being challenged as a preference or suffering
any other subjugation under any bankruptcy or other law, whether state or
federal, affecting debtors, creditors and/or the relationship between and among
them.
5. Governing Law. This Guaranty shall be governed by and
construed in accordance with the internal laws of the State of Delaware.
6. Amendment. This Guaranty may not be amended, modified or
supplemented except upon the expiration and delivery of a written agreement
executed by the parties hereto.
7. No Assignment. This Guaranty and all of the provisions hereof
shall be binding upon the Guarantors and shall inure to the benefit of ECS and
its respective successors. Neither this Guaranty nor any of the rights,
interest or obligations hereunder shall be assigned by ECS without the prior
written consent of the Guarantors.
8. Waiver. Any of the terms or conditions of this Guaranty which
may be lawfully waived may be waived in writing at any time by the entity which
is entitled to the benefits thereof. Any waiver of any of the provisions of
this Guaranty by any entity shall be binding only if set forth in an instrument
in writing signed on behalf of such entity. No waiver of any of the provisions
of this Guaranty shall be deemed to or shall constitute a waiver of any of the
2
<PAGE> 3
provisions of this Guaranty shall be deemed to or shall constitute a waiver of
any other provision hereof nor shall such waiver constitute a continuing
waiver.
9. Notices. All notices, requests, approvals, demands and other
communications required or permitted to be given under this Guaranty shall be
in writing and shall be deemed to have been duly given and to be effective when
delivered personally (including delivery by overnight, express or courier
service) or, if mailed, five days after being deposited in the United States
mail as registered or certified, postage prepaid, return receipt requested,
addressed as follows or to such other address as any such entity may designate
by notice:
<TABLE>
<S> <C>
If to the Guarantors: Integrated Health Options, LLC
10500 Lunt Avenue, Suite 106
Rosemont, IL 60018
Attn: Frank M. Rosenbaum
Illiana Behavioral Management, Inc.
10500 Lunt Avenue, Suite 106
Rosemont,IL 60018
Attn: Frank M. Rosenbaum
BHG, Inc.
10500 Lunt Avenue, Suite 106
Rosemont, IL 60018
Attn: Frank M. Rosenbaum
with a copy to: Ungaretti & Harris
3500 Three First National Plaza
Chicago, IL 60602
Attn: Craig E. Nelson, Esq.
If to ECS: MHM Extended Care Services, Inc.
8000 Towers Crescent Drive, Suite 810
Vienna, Virginia 22182
Attn: President
</TABLE>
or to such other address as any such entity may, from time to time, designate
in a written notice given in like manner.
11. Complete Agreement, Conflict. This Guaranty and the other
documents and writings referred to herein or delivered pursuant hereto, contain
the entire understanding of the entities with respect to their subject matter.
This Guaranty supersedes all prior agreements and understandings, both written
and oral, between such entities with respect to such subject matter.
12. Headings. The headings contained in this Guaranty are for
reference only and shall not affect in any way the meaning or interpretation of
this Guaranty.
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<PAGE> 4
13. Third Party Beneficiaries. Nothing in this Guaranty, expressed
or implied is intended to confer on any person other than ECS and its
successors any rights, remedies, obligations or liabilities under or by reason
of this Guaranty.
<TABLE>
<CAPTION>
<S> <C>
INTEGRATED HEALTH OPTIONS, LLC
By: /s/ FRANK ROSENBAUM
---------------------------------
Its: Manager
Printed Name: FRANK ROSENBAUM
--------------------
BHG, INC.
By: /s/ FRANK ROSENBAUM
---------------------------------
Its: President
-----------------------------
Printed Name: FRANK ROSENBAUM
--------------------
ILLIANA BEHAVIORAL MANAGEMENT,
INC.
By: /s/FRANK ROSENBAUM
---------------------------------
Its: President
-----------------------------
Printed Name: FRANK ROSENBAUM
--------------------
</TABLE>
4
<PAGE> 1
Exhibit No. 10-8
EXHIBIT D
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and
entered into as of the 31st day of December, 1998, by and between INTEGRATED
HEALTH OPTIONS, LLC, a Michigan limited liability company ("Guarantor"), and
MHM EXTENDED CARE SERVICES, INC., a Delaware corporation ("Seller").
RECITALS
A. Guarantor's affiliate, BHG of Pennsylvania, LLC, a
Pennsylvania limited liability company ("Buyer") has entered into an Asset
Acquisition Agreement with Seller dated December22, 1998 (the "Asset
Acquisition Agreement") pursuant to which Buyer is acquiring certain assets
from Seller. Any capitalized terms used in this Security Agreement and not
otherwise defined have the meanings ascribed to them in the Asset Acquisition
Agreement.
B. To induce Seller to enter into and consummate the transactions
contemplated by the Asset Acquisition Agreement, Guarantor and two affiliates
of Guarantor have agreed to enter into the Guaranty Agreement and Guarantor has
agreed to collateralize the performance of the Buyer's Obligations, as defined
in SECTION 3 of the Guaranty Agreement, pursuant to this Security Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Creation of Security Interest.
(a) Guarantor hereby grants to Seller a valid, binding
and enforceable security interest in and to Guarantor's rights,
including all proceeds with respect thereto, under the two contracts
attached as EXHIBIT A, to this Security Agreement (the "Collateral"):
(b) Guarantor hereby grants and assigns to Seller a
continuing security interest in and to the Collateral for the purpose of
securing performance of the Guaranty Agreement. Guarantor hereby agrees
that it shall not, without the prior written consent of Seller, enter
into any agreement, incur any debt, take any action or fail to take any
action which will result in the creation of a security interest in the
Collateral which is senior to the security interest granted to Seller
hereunder.
<PAGE> 2
2. Covenants of Guarantor. Guarantor hereby covenants that:
(a) Guarantor will not permit any default on the part of
Guarantor to occur under the contracts constituting the Collateral; and
(b) Guarantor shall furnish promptly to Seller such
information concerning the Collateral as Seller from time to time may
reasonably request.
3. Perfection of Security Interest. Guarantor agrees, at the
request of Seller:
(a) To execute from time to time one or more financing
statements pursuant to the Uniform Commercial Code of the State of
Illinois (the "UCC"), in a form satisfactory to Seller, to perfect
Seller's security interest in and to the Collateral to the extent that
such security interest may be perfected by such a filing under the UCC;
(b) To execute and deliver such further documents and
instruments as may be required, in addition to, or in lieu of, filings
under the UCC, to perfect Seller's interest in the Collateral; and
(c) To do such further acts and things as Seller may at any
time, and from time to time, reasonably request in writing to effect the
purpose of this Security Agreement.
4. Preservation of Collateral by the Seller. Should Guarantor fail
or refuse to perform or take any other action which Guarantor is obligated
hereunder to take or do at the time or in the manner herein provided, then
Seller, at Seller's reasonable discretion, and upon reasonable prior notice to
Guarantor but without releasing Guarantor from any obligation may take or do
the same in such manner and to such extent as Seller may deem necessary to
protect Seller's security interest in, and/or the value of, the Collateral.
5. Default and Remedies.
(a) The failure of Guarantor to perform or observe any
material terms or conditions of this Security Agreement and the
continuation of such failure for a period of 10 days after notice
thereof, shall constitute an "Event of Default" hereunder. Upon the
occurrence of an Event of Default, Seller may at any time, at its
election, with notice as provided herein, and to the extent permitted by
this Agreement:
(i) Make such payments and do such acts as Seller
may deem necessary to protect Seller's security interest in the
Collateral, including but not limited to, performing any
obligations of Guarantor under the contracts constituting the
Collateral, and, in exercising any such powers or authority, pay
all expenses incurred in connection therewith;
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<PAGE> 3
(ii) Notify the other party to any contract constituting
the Collateral to make any payment due thereunder directly to Seller
and/or require Guarantor to deliver any such payments to Seller, or an
agent or representative designated by Seller; and
(iii) Exercise any remedies available to Seller under the
UCC available under any other applicable law.
(b) Seller shall have the right to enforce one or more remedies
hereunder, successively or concurrently, and such action shall not
operate to estop or prevent Seller from pursuing any further remedy
which it may have pursuant to the terms of this Security Agreement or
the Guaranty Agreement.
6. Termination of Security Interest. This Agreement shall terminate
upon performance in full of Buyer's Obligations and termination of the Guaranty
Agreement.
7. Notices. All notices, demands and other communications
given hereunder shall be given as provided in the Asset Acquisition Agreement.
8. Waiver. Seller's failure to require strict performance by
Guarantor of any provision of this Security Agreement shall not waive, affect
or diminish any right of Seller thereafter to demand strict compliance and
performance therewith. Any waiver of an Event of Default hereunder shall not
suspend, waive or affect any other Event of Default hereunder.
9. Governing Law. This Security Agreement shall be governed by the
internal laws of the State of Delaware (without regard to the principles
thereof respecting the conflict of laws), which laws shall, without limitation,
govern the enforceability, validity and interpretation of this Security
Agreement.
10. Severability. Whenever possible, each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of the
Security Agreement.
11. Assignment. This Security Agreement may not be assigned without
the prior written consent of the other party hereto.
12. Successor and Assigns. All agreements, covenants, conditions and
provisions of this Agreement shall inure to the benefit of Seller and Seller's
successors and assigns and shall be binding upon Guarantor and Guarantor's
successors and assigns.
13. Headings and Terminology. The headings in this Security
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or
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<PAGE> 4
any provision hereof. As used in this Security Agreement, the singular shall
include the plural, and the plural shall include the singular, as the context
requires.
14. Amendment. This Security Agreement can be modified or
rescinded only by writing expressly referring to this Security Agreement and
signed by the parties.
15. Multiple Counterparts. This Security Agreement may be executed
in two counterparts, which taken together shall constitute one and same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed as of the date first above written.
GUARANTOR:
INTEGRATED HEALTH OPTIONS, LLC
By:
----------------------------------
Its: Manager
Printed Name: Frank M. Rosenbaum
SELLER:
MHM EXTENDED CARE SERVICES, INC.
By: /s/ STEVEN H. WHEELER
----------------------------------
Printed Name: Steven H. Wheeler
-------------------------
Its: Executive Vice President
--------------------------------
4
<PAGE> 1
Exhibit 99.1
Company Press Release
MHM SERVICES, INC. DIVESTS EXTENDED CARE SERVICES BUSINESS
VIENNA, Va., Jan. 12 /PRNewswire/ -- MHM Services, Inc. (OTC Bulletin Board:
MHMM - news) announced today that it has sold its nursing home services
businesses in Massachusetts, Pennsylvania, Tennessee, and Georgia to three
separate buyers. As a result of these transactions, the Company has effectively
divested all of its fee-for-service mental health care operations in nursing
homes. It will now focus on expanding its existing business of providing
capitated mental health services in correctional facilities and nursing homes.
The divested businesses accounted for $11.5 million in revenues in fiscal 1998.
The transaction resulted in the company realizing a gain of $207,000 and net
cash proceeds of approximately $870,000.
Michael Pinkert, MHM's President and CEO, said, ``By divesting these
fee-for-service nursing home operations, we can now concentrate on expanding
our correctional mental health business, where we have a unique and profitable
niche. We anticipate rapid growth in the areas of providing mental health and
substance abuse services to inmates in jails and prisons.'' MHM currently
provides mental health services to approximately 52,000 inmates in Tennessee
and Georgia (through contracts with the Department of Corrections in each
state) and to 2,400 nursing home residents in Georgia (through a capitated
Medicaid contract).
MHM Services, Inc. is a leading provider of on-site specialty health care
services in the United States.
This release includes forward-looking statements based on management's current
plans and expectations. Such statements involve risks and uncertainties which
may cause actual future activities and results of operations to be materially
different from those suggested in this release, including the use of available
cash resources to fund continued operating losses, the amount and timing of
receipt of government reimbursement and the resolution of claim reviews, risks
associated with industry consolidation and acquisitions, and the need to manage
growth. For additional information, please refer to the Company's filings with
the Securities and Exchange Commission.
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