EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 22, 1996
BETWEEN
COMMUNITY PSYCHIATRIC CENTERS,
CPC OF PUERTO RICO, INC.,
CPC-PHP, INC.
AND
BEHAVIORAL HEALTHCARE CORPORATION
TABLE OF CONTENTS
ARTICLE I - THE MERGER............................................ 1
Section 1.1. The Hospital Company Merger........... 2
Section 1.2. The Partially Owned Company Merger.... 4
Section 1.3. Closing............................... 4
Section 1.4. Statement of Adhesion................. 5
Section 1.5. Interpretation........................ 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS............ 7
Section 2.1. Organization and Good Standing........ 7
Section 2.2. Capitalization........................ 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..... 8
ARTICLE IV - COVENANTS OF SELLER.................................. 8
Section 4.1. Access and Information................ 8
Section 4.2. Fulfillment of Conditions............. 9
Section 4.3. Conduct of the Hospital Businesses
Prior to Closing...................... 9
Section 4.4. Title Commitments and Surveys......... 9
Section 4.5. Notice and Cure....................... 9
Section 4.6. HSR Act Filings....................... 10
Section 4.7. Environmental and Engineering Reports. 10
Section 4.8. Listing of Assets..................... 10
Section 4.9. Tax Treatment......................... 10
ARTICLE V - COVENANTS OF THE PURCHASER............................ 10
Section 5.1. Certain Employee Matters.............. 10
Section 5.2. Notice and Cure....................... 12
Section 5.3. Fulfillment of Conditions............. 12
Section 5.4. HSR Act Filings....................... 12
Section 5.5. Tax Treatment......................... 13
ARTICLE VI - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS... 13
Section 6.1. Representations and Warranties True... 13
Section 6.2. Authority............................. 13
Section 6.3. No Obstructive Proceeding............. 13
Section 6.4. Consents and Approvals................ 13
Section 6.5 HSR Act; Restraining Order............ 13
Section 6.6. Asset Purchase Agreement Closing...... 14
Section 6.7. Additional Agreements................. 14
Section 6.8. Adverse Change........................ 14
Section 6.9. Confirmation of Tax-Free Status....... 14
ARTICLE VII - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASER........................................... 14
Section 7.1. Representations and Warranties True... 14
Section 7.2. No Obstructive Proceeding............. 14
Section 7.3. Consents, Approvals and Licenses...... 14
Section 7.4. Consents and Approvals................ 15
Section 7.5. HSR Act; Restraining Order............ 15
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Section 7.6. Title Insurance Policies............... 15
Section 7.7. Adverse Change......................... 15
Section 7.8. Asset Purchase Agreement Closing....... 15
Section 7.9. Transfer of Tax Holiday................ 15
ARTICLE VIII - TERMINATION......................................... 16
Section 8.1. Optional Termination................... 16
Section 8.2. Mandatory Termination.................. 16
Section 8.3. Termination Consequences............... 16
ARTICLE IX - INDEMNIFICATION....................................... 17
Section 9.1. Indemnification by Sellers............. 17
Section 9.2. Indemnification by the Purchaser....... 17
Section 9.3. Limitations............................ 17
Section 9.4. Method of Asserting Claims............. 19
Section 9.5. Exclusive.............................. 19
Section 9.6. Method of Payment...................... 19
ARTICLE X - TAX AND MEDICARE MATTERS............................... 21
Section 10.1. Federal, State and Local Taxes......... 21
Section 10.2. Effect of Certain Audit Adjustments.... 22
Section 10.3. Nature of Payment...................... 23
ARTICLE XI - MISCELLANEOUS......................................... 23
ARTICLE XII - NONCOMPETITION....................................... 23
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER, dated as of October 22, 1996 is by and
among COMMUNITY PSYCHIATRIC CENTERS, a Nevada corporation ("CPC"), COMMUNITY
PSYCHIATRIC CENTERS OF PUERTO RICO, INC., a Nevada corporation (the "Hospital
Company"), CPC-PHP, INC., a Nevada corporation (the "Partially-Owned Company")
and BEHAVIORAL HEALTHCARE CORPORATION, a Delaware corporation (the "Parent")
with respect to the following facts:
A. CPC owns all the issued and outstanding capital stock of the Hospital
Company. The Hospital Company owns and operates San Xxxx Capestrano Hospital
located in San Xxxx, Puerto Rico.
B. CPC indirectly owns all the outstanding capital stock of the Partially-
Owned Company. The Partially Owned Company owns 70% of the outstanding capital
stock of CPC Clinicas Del Este, Inc., a Puerto Rico corporation ("CPC
Clinicas").
C. The Hospital Company and the Partially Owned Company are sometimes
collectively referred to herein as the "Companies". The Companies and CPC are
sometimes collectively referred to herein as the "Sellers".
D. The Hospital Company and CPC-Clinicas own and operate the facilities
listed in Exhibit A hereto, which facilities are sometimes referred to
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collectively herein as the "Hospitals." The healthcare business of the
Hospitals is sometimes referred to collectively herein as the "Hospital
Businesses."
E. CPC desires to cause the Companies to be merged with and into two newly
formed Tennessee corporations which are wholly-owned by the Parent ("BHC Sub I"
and "BHC Sub II" and collectively with the Parent, the "Purchaser").
F. The parties intend that the transactions contemplated herein shall
qualify as a tax-free reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements, the parties hereto hereby
agree as follows.
ARTICLE I
THE MERGER
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Section 1.1. The Hospital Company Merger. (a) Upon the terms and subject
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to the conditions hereof, at the Hospital Company Merger Effective Time (as
hereinafter defined), the Hospital Company shall be merged (the "Hospital
Company Merger") with and into BHC Sub I and the separate corporate existence of
the Hospital Company shall thereupon cease, and BHC Sub I shall be the
surviving corporation in the Hospital Company Merger. The Hospital Company
Merger shall have the effects set forth in the Tennessee Business
Corporation Act and the Nevada Revised Statutes.
(b) The Hospital Company Merger shall become effective when a properly
executed Certificate of Merger meeting the requirements of the Tennessee
Business Corporation Act is duly filed with the Secretary of State of the State
of Tennessee or at such later time as the parties hereto shall have designated
in such filing as the effective time of the Hospital Company Merger (the
"Hospital Company Merger Effective Time"), which filing shall be made as soon as
practicable after the closing of the transactions contemplated by this Agreement
in accordance with Section 1.3 hereof.
(c) The Certificate of Incorporation of the surviving corporation of the
Hospital Company Merger shall be the Certificate of Incorporation of BHC Sub I
in effect immediately prior to the Hospital Company Merger Effective Time.
(d) The By-Laws of BHC Sub I as in effect immediately prior to the Hospital
Company Merger Effective Time shall be the By-Laws of the surviving corporation
of the Hospital Company Merger.
(e) The directors of BHC Sub I immediately prior to the effective time of
the Hospital Company Merger shall be the directors of the surviving corporation
of the Hospital Company Merger as of the Hospital Company Merger Effective Time.
(f) The officers of BHC Sub I immediately prior to the Hospital Company
Merger Effective Time shall be the officers of the surviving corporation of the
Hospital Company Merger and shall hold office until their respective successors
are duly elected or appointed and qualify in the manner provided in the
Certificate of Incorporation and By-Laws of the surviving corporation of the
Hospital Company Merger, or as otherwise provided by law.
(g) At the Hospital Company Merger Effective Time by virtue of the Hospital
Company Merger and without any action on the part of the holder thereof:
(i) The outstanding shares of common stock of the Hospital
Company (the "Hospital Company Shares"), issued and
outstanding immediately prior to the Hospital Company
Merger Effective Time (other than Hospital Company
Shares held in the treasury of the Hospital Company or
owned by any subsidiary of the Hospital Company) shall
be
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converted into the right to receive (i) an aggregate of
3,439,935 shares of the common stock, par value $.01
per share of the Parent (the "BHC Common Stock"), and
(ii) an aggregate of 1,774 shares of the Series B
Preferred Stock, par value $.01 per share, of the
Parent (the "BHC Preferred Stock") (BHC Common Stock
and BHC Preferred Stock to be issued in the Hospital
Company Merger is collectively referred to herein as
the "Hospital Company Merger Consideration"). As of the
Hospital Company Merger Effective Time, all such
Hospital Company Shares shall be no longer outstanding
and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate
representing any such Hospital Company Shares shall
cease to have any rights with respect thereto, except
to receive the Hospital Company Merger Consideration,
without interest.
(ii) Each Hospital Company Share issued and held in the
treasury of the Hospital Company or owned by any
subsidiary of the Hospital Company immediately prior to
the Hospital Company Merger Effective Time shall be
cancelled and retired and cease to exist and no payment
shall be made with respect thereto.
(iii) Each share of common stock, par value $.01 per share,
of BHC Sub I issued and outstanding immediately prior
to the effective time of the Hospital Company Merger
shall be converted into and become a fully paid and
non-assessable share of Common Stock of the surviving
corporation of the Hospital Company Merger.
(iv) Prior to the Hospital Company Merger Effective Time the
Parent shall contribute the Hospital Company Merger
Consideration to BHC Sub I.
(h) After the Hospital Company Merger Effective Time and upon
surrender to BHC Sub I of a certificate for Hospital Company Shares, the holder
thereof shall be entitled to receive in exchange therefor that portion of the
Hospital Company Merger Consideration which such holder has the right to receive
pursuant
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to the provisions of this Section 1.1, after giving effect to any required
withholding tax, and the certificate for Hospital Company Shares so surrendered
shall forthwith be cancelled.
(i) At the Hospital Company Merger Effective Time, the stock
transfer books of the Hospital Company shall be closed and no transfers of
Hospital Company Shares shall occur after such time. If any Hospital Company
Shares are presented to the surviving corporation of the Hospital Company Merger
for transfer, they shall be cancelled and exchanged for the Hospital Company
Merger Consideration.
Section 1.2. The Partially Owned Company Merger. The Partially-
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Owned Company shall be merged with and into BHC Sub II (the "Partially Owned
Company Merger") in accordance with the provisions of Section 1.1 provided that
(i) the outstanding shares of common stock of the Partially Owned Company (the
"Partially Owned Company Shares") shall be converted into an aggregate of
261,459 shares of BHC Common Stock and (ii) an aggregate pf 1,774 shares of BHC
Preferred Stock (the "Partially Owned Merger Consideration"), which shall have
been contributed by Parent prior to BHC Sub II, and (ii) other items used in the
Section shall be deemed to be appropriately modified.
Section 1.3. Closing. (a) The consummation of the transactions
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provided for herein (the "Closing") shall take place at the offices of counsel
for the Purchaser, Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, A Professional Limited
Liability Company, Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 0000, 000 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx. The Closing shall take place at 9:00 a.m., Nashville
time, as soon as practicable following the receipt of all regulatory approvals
and the satisfaction of other required conditions to the Closing. It is
contemplated that the Closing will occur on or before November 27, 1996. The
date on which the Closing is to take place is herein referred to as the "Closing
Date." At the Closing:
(i) The Hospital Company and BHC Sub I shall each deliver a
Certificate of Merger in a form reasonably satisfactory
to the Hospital Company and BHC Sub I and meeting the
requirements of applicable law;
(ii) The Partially-Owned Company and BHC Sub II shall each
deliver a Certificate of Merger in a form reasonably
satisfactory to the Partially-Owned Company and meeting
the requirements of applicable law;
(iii) The Hospital Company and the Partially-Owned Company
shall cause their
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stockholders to deliver stock certificates representing
all of the outstanding Hospital Company Shares and
Partially-Owned Company Shares;
(iv) Purchaser shall cause BHC Sub I and BHC Sub II to
deliver the Hospital Company Merger Consideration and
the Partially-Owned Company Merger Consideration; and
(v) The parties shall deliver to each other any other
closing documents set forth in Articles VI or VII of
this Agreement.
The documents described in Subsections 1.04(a)(i), (ii), (iii) and (v)
are hereinafter collectively referred to as the "Closing Documents."
(b) Notwithstanding anything to the contrary set forth herein, there
shall be no transfer of ownership or control of the "controlled substances" in
respect of the Hospital Businesses until such time as Purchaser has obtained, to
the extent required, the appropriate Controlled Substance Registration
Certificate from the United States Drug Enforcement Agency (the "DEA") in
respect of each Hospital's pharmacy. Until such time, Sellers shall execute
powers of attorney or similar documents as may be required by the DEA
authorizing Purchaser at Purchaser's expense to continue to operate the Hospital
pharmacy or pharmacies, pursuant to Sellers' Controlled Substance Registration
Certificates, utilizing such employee or employees of Purchaser after the
Closing as shall be reasonably necessary to continue the operation of such
pharmacy or pharmacies after the Closing in the manner as it had been
theretofore operated. Purchaser shall indemnify and hold harmless Sellers and
their affiliates and their stockholders, employees, officers, directors, agents
and representatives, upon and after the Closing, from and against any Damages
(as defined in Section 9.1) arising out of or relating to the operation of each
such Hospital pharmacy after the Closing, including without limitation the
dispensing of controlled substances.
Section 1.4. Statement of Adhesion. Prior to the Closing Date, the
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Parent shall form BHC Sub I and BHC Sub II and cause them to adhere to this
Agreement by executing and delivering the Statement of Adhesion in a form
reasonably satisfactory to Sellers. Upon execution and delivery of the
Statement of Adhesion, BHC Sub I and BHC Sub II shall be bound by and entitled
to the benefit of any provisions herein intended to place an obligation on, or
grant a right to, the BHC Subs.
Section 1.5. Interpretation. In this Agreement, unless the context
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otherwise requires:
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(a) unless otherwise defined, words importing the singular
include the plural and vice versa;
(b) words importing a gender include every gender and the word
"including" shall mean including without limitation;
(c) references to any document (including this Agreement) are
references to that document as amended, consolidated, supplemented, novated or
replaced by the parties from time to time;
(d) references to this Agreement are references to this
Agreement, together with the Schedules, Exhibits and Appendices hereto;
(e) references to Articles, Sections, Schedules and Appendices
are references to articles and sections of, and schedules and appendices to,
this Agreement;
(f) references to any party to this Agreement shall include
references to its respective successors and permitted assigns;
(g) references to law shall include references to any
constitutional provision, treaty, decree, convention, statute, act, regulation,
rule, ordinance, subordinate legislation, rule of common law and of equity and
judgment and shall include the requirements of any applicable stock exchange;
(h) references to any law are references to that law as amended,
consolidated, supplemented or replaced from time to time;
(i) references to a judgment shall include references to any
order, injunction, decree, determination or award of any court or tribunal;
(j) references to person shall include references to any
individual, company, body corporate, association, partnership, firm, joint
venture, trust and governmental agency;
(k) references to time, unless otherwise provided, are references
to Nashville, Tennessee local time;
(l) references to "Knowledge of Sellers", the "best Knowledge of
Sellers" or "Known to Sellers" (or similar references) mean the actual knowledge
of any of the persons listed in Schedule 1.8(l) to the Asset Purchase Agreement
---------------
(as defined herein) (or any such person's successor in office if such person
prior to the Closing Date ceases to be employed by Seller); and
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(m) references to "Knowledge of Purchaser," the "best Knowledge
of Purchaser" or "Known to Purchaser" (or similar references) mean the actual
knowledge of any of the persons listed in Schedule 1.8(m) to the Asset Purchase
---------------
Agreement (or any person's successor in office if such person prior to the
Closing Date ceases to be employed by the Purchaser).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Reference is hereby made to that certain Asset Purchase Agreement,
dated of even date herewith, between the Parent, CPC and certain of CPC's
affiliates (the "Asset Purchase Agreement"). The representations and warranties
contained in Article III (with the exception of Sections 2.3 and 2.23) of the
Asset Purchase Agreement are hereby incorporated herein by reference as the
corresponding Sections of this Agreement and are hereby deemed representations
and warranties made by Sellers to Purchaser under this Agreement as though set
forth in full herein, except that any representations or warranties which relate
to CPC Clinicas (including the Hospital and Hospital Business operated by CPC
Clinicas and the property and assets used in the conduct and operation of the
psychiatric hospitals and residential treatment centers of CPC in the United
States and its territories (the "Business") insofar as it relates to CPC
Clinicas) shall be to the Knowledge of Sellers regardless of whether such
qualifier is used in representations or warranties contained in the Asset
Purchase Agreement (the term "this Agreement" as used in the incorporated
Sections of Article II being deemed to refer to this Agreement, the term "CPC
San Antonio" being deemed to refer to CPC Clinicas and other terms used in the
Asset Purchase Agreement being deemed to be appropriately modified to be
consistent with this Agreement).
Each of the Sellers also hereby represents and warrants the following
to the Purchaser:
Section 2.1. Organization and Good Standing. Each of the Sellers is
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a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation. Each of the Sellers has full corporate
power and authority under its governing instruments to own, operate and lease
its properties and to carry on its businesses as now conducted. Each of the
Sellers is qualified as a foreign corporation in each jurisdiction in which its
assets or operations require such qualification. CPC directly or indirectly
owns all of the outstanding capital stock of each of each of the Companies. The
Partially-Owned Company owns 70% of the outstanding capital stock of CPC
Clinicas.
Section 2.2. Capitalization. The Companies are set forth by name on
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Schedule 2.2 hereof, together with a statement
------------
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describing each class of capital stock, the par value and the number of shares
issued and outstanding. All Shares shown as issued and outstanding are validly
issued, fully paid and non-assessable. Except as set forth on Schedule 2.2,
------------
there are no existing agreements, options, warrants, rights, calls or
commitments of any character to which Sellers or any Company is a party or by
which Sellers or any Company is bound providing for the issuance of any
additional shares or securities, the sale of treasury shares, or for the
repurchase or redemption of shares of stock or other securities of any Company,
and there are no outstanding securities or other instruments convertible into or
exchangeable for shares of such capital stock and no commitments to issue such
securities or instruments.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The representations and warranties of the Purchaser contained in
Article III of the Asset Purchase Agreement including Section 3.25 are hereby
incorporated by reference and are hereby deemed representations and warranties
made by Purchaser to Sellers under this Agreement as though set forth in full
herein (the term "this Agreement" as used in such Article III being deemed to
refer to this Agreement).
ARTICLE IV
COVENANTS OF SELLER
-------------------
Sellers hereby covenant and agree as follows:
Section 4.1. Access and Information. Between the date hereof and
----------------------
the Closing Date, Sellers shall give to the Purchaser and its agents reasonable
access during normal business hours and upon reasonable prior request to the
premises, employees, books, accounts, records and other relevant documents of
the Companies and their Hospital Businesses and, to the extent Sellers have the
right to do so, to the premises, employees, books, accounts, records and other
relevant documents of CPC Clinicas; provided the Purchaser shall not have access
--------
to patient or employee records or other records the disclosure of which would be
prohibited by law, governmental rule or regulation.
Section 4.2. Fulfillment of Conditions. Each of the Sellers shall
-------------------------
execute and deliver prior to or at the Closing each contract that such Sellers
are required hereby to execute and deliver prior to or at the Closing and each
Seller shall take all commercially reasonable steps necessary or desirable and
proceed diligently and in good faith to satisfy each other condition to the
obligations of the parties contained in this Agreement to the
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extent the satisfaction of such condition is within the control of any of the
Sellers.
Section 4.3. Conduct of the Hospital Businesses Prior to Closing.
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On and after the date hereof and prior to the Closing, and except as otherwise
consented to or approved by the Purchaser or required by this Agreement, the
Companies shall conduct their respective businesses, operations and activities
only in the ordinary course of business and consistent with past practices.
Sellers shall not dispose of any capital assets relating to the Business having
an aggregate book value in excess of $25,000. The Companies shall use all
commercially reasonable efforts to keep available to the Purchaser the services
of the present employees of their respective Hospital Businesses (except those
dismissed for cause or those who voluntarily discontinue their employment) and
to use all reasonable efforts to preserve for the Purchaser the goodwill of the
suppliers, patients and others having business relations with their respective
Hospital Businesses. The Seller shall provide access to its employees upon
reasonable notice to its employees for purposes relating to the conduct of the
Business prior to the Closing.
Section 4.4. Title Commitments and Surveys. Sellers will deliver as
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applicable, as soon as reasonably possible, to the Purchaser the Title
Commitments for owner's title insurance from First American Title Insurance
Company or their local issuing agents (collectively, the "Title Company").
Sellers will also deliver, as soon as reasonably possible, to the Purchaser,
"as-built" surveys (the "Surveys") of the real property listed on Schedule 4.4
------------
(the "Real Property"), showing the perimeter boundaries of the Real Property and
all improvements thereon.
Section 4.5. Notice and Cure. Sellers shall notify the Purchaser
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promptly in writing of, and contemporaneously will provide the Purchaser with
true and complete copies of, any and all information or documents relating to,
and will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of Sellers under this
Agreement to be breached in any material respect or that renders or will render
untrue in any material respect any representation or warranty of Sellers
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. To the extent that a failure to do so
would result in the material inaccuracy of any Schedule, Sellers shall update
and supplement (pursuant to Section 11.16 of this Agreement) any Schedule
rendered inaccurate by any such event, transaction or circumstance. In
addition, Sellers shall use all commercially reasonable efforts to cure, before
the Closing, any material violation or material breach of any representation,
warranty, covenant or agreement made by it in this Agreement,
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whether occurring or arising before or after the date of this Agreement.
Section 4.6. HSR Act Filings. Sellers will (a) take promptly all
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actions necessary to make the filings required of the Sellers or their
affiliates under the HSR Act, such filing to occur on or before October 23,
1996, (b) comply at the earliest practicable date with any request for
additional information received by any Seller or their affiliates from the
Federal Trade Commission (the "FTC") or the Antitrust Division of the Department
of Justice (the "DOJ") pursuant to the HSR Act, and (c) cooperate with the
Purchaser in connection with the Purchaser's filings under the HSR Act and in
connection with resolving any investigation or other regulatory inquiry
concerning the transactions contemplated by this Agreement commenced by either
the FTC or the DOJ.
Section 4.7. Environmental and Engineering Reports. Seller shall
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order environmental phase one surveys of the Real Property and engineering
reports of the structural and mechanical systems of the Real Property, to be
delivered to the Purchaser as soon as reasonably practicable but in any event on
or before November 15, 1996.
Section 4.8. Listing of Assets. Sellers shall provide Purchaser
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with such lists of the assets of the Companies as Purchaser may reasonably
request.
Section 4.9. Tax Treatment. Sellers shall treat the transactions
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contemplated herein as a tax-free reorganization within the meaning of Section
368 of the Code.
ARTICLE V
COVENANTS OF THE PURCHASER
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The Purchaser covenants and agrees as follows:
Section 5.1. Certain Employee Matters. (a) Purchaser intends to
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offer employment in comparable positions to all of the employees working at the
Hospitals as of the Closing Date. All such employees who accept Purchaser's
offer of employment shall be referred to herein as the "Hired Employees." Also
prior to Closing, Purchaser will notify Sellers of any employees to whom
Purchaser does not intend to offer employment. In any event, Purchaser agrees
to make a sufficient number of offers of employment such that Sellers'
termination of employees under the Asset Purchase Agreement prior to Closing and
any employees not hired under this Agreement will not constitute a violation of
the WARN Act. Except as otherwise provided for in this Agreement, Purchaser
shall be responsible for all costs and liabilities attendant to the termination
of any employees of the Hospitals at or following the Closing.
(b) Purchaser shall give all Hired Employees full credit for all of
the accrued vacation, holiday and sick pay of
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such employees, either by allowing such employees the accrued time off reflected
in the employment records of the Seller or by making full payments to such
employees of the amounts which such employees would have received had they taken
their accrued or accumulated holiday or vacation time. Purchaser shall not be
obligated to pay any Hired Employee for accrued sick time upon the termination,
whether voluntary or involuntary, of such Hired Employee.
(c) Purchaser shall offer health insurance benefits to all Hired
Employees and their dependents (except those persons not having health insurance
benefits with the Seller immediately prior to the Closing), effective
simultaneously with the Closing, and shall be responsible for all employee
health claims resulting from occurrences beginning before, on or after the
Closing Date without regard to whether a Hired Employee is actively at work on
said date, except those Hired Employees who are hospitalized on the Closing Date
who will remain the responsibility of Seller until they are discharged from the
hospital. Notwithstanding the foregoing sentence, in no event shall Seller be
liable after Closing to Hired Employees or dependents who are in a hospital
receiving healthcare services on the Closing Date for continuation of healthcare
benefits beyond the period required pursuant to the healthcare continuation
provisions of Section 4980B of the Code and of Sections 601 through 609 of
ERISA. Any amounts which have been applied toward satisfaction of the calendar
year 1996 deductible on behalf of any Hired Employee under any insured employee
welfare benefit plan of Seller shall be deemed to be so applied toward
satisfaction of the calendar year 1996 deductible under the applicable insured
employee welfare benefit plan of the Purchaser. Any amounts which have
accumulated towards any Hired Employee's satisfaction of a limitation on benefit
payments or coverage under any employee welfare benefit plan of Seller shall be
applied toward any such limitation under the applicable insured welfare benefit
plan of Purchaser, and Purchaser shall cause its employee welfare benefit plans
to waive any limitations for pre-existing conditions with respect to conditions
affecting any Hired Employees as of the date of hire by Purchaser other than
conditions affecting such Hired Employees which were excluded with respect to
such Hired Employees as pre-existing conditions under the employee welfare
benefit plan of Seller. Purchaser shall take into account all service with
Seller or any affiliate or division of Seller for purposes of determining
whether an employee has satisfied the service requirements for eligibility,
participation and all other purposes (including without limitation vesting of
benefits) under all of the employee welfare benefit plans of Purchaser (whether
or not insured).
(d) Except as otherwise provided for in this Agreement, Hired
Employees will be offered employee benefits to the same extent as employees
occupying similar positions with similar experience with Purchaser.
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Section 5.2. Notice and Cure. Purchaser will notify Sellers promptly
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in writing of, and contemporaneously will provide Sellers with true and complete
copies of, any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance occurring after the date of this Agreement that
causes or will cause any covenant or agreement of the Purchaser under this
Agreement to be breached in any material respect or that renders or will render
untrue in any material respect any representation or warranty of Purchaser
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. To the extent that a failure to do so
would result in the material inaccuracy of any Schedule, Purchaser shall cause
each of the Purchasers to update and supplement (pursuant to Section 11.16 of
this Agreement) any Schedule rendered inaccurate by any such event, transaction
or circumstance. In addition, the Purchaser will use all commercially
reasonable efforts to cure, before the Closing, any material violation or
material breach of any representation, warranty, covenant or agreement made by
it in this Agreement, whether occurring or arising before or after the date of
this Agreement.
Section 5.3. Fulfillment of Conditions. Purchaser will execute and
-------------------------
deliver prior to or at the Closing each contract that the Purchaser is required
hereby to execute and deliver prior to or at the Closing, and Purchaser shall
take all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the obligations of the
parties contained in this Agreement to the extent the satisfaction of such
condition is under the control of Purchaser.
Section 5.4. HSR Act Filings. Purchaser will (a) take promptly all
---------------
actions necessary to make the filings required of the Purchaser or its
affiliates under the HSR Act, such filing to occur on or before October 23,
1996, (b) comply at the earliest practicable date with any request for
additional information received by Purchaser or its affiliates from the FTC or
the DOJ pursuant to the HSR Act, and (c) cooperate with the Sellers in
connection with the Sellers' or their affiliates' filings under the HSR Act and
in connection with resolving any investigation or other regulatory inquiry
concerning the transactions contemplated by this Agreement commenced by either
the FTC or the DOJ.
Section 5.5. Tax Treatment. Purchaser shall treat the transactions
-------------
contemplated herein as a tax-free reorganization within the meaning of Section
368 of the Code.
ARTICLE VI
CONDITIONS PRECEDENT TO
-----------------------
THE OBLIGATIONS OF SELLERS
--------------------------
All obligations of Sellers which are to be discharged under this
Agreement at the Closing are subject to the performance or waiver, at or prior
to the Closing Date, in all material
12
respects of all covenants and agreements contained herein which are to be
performed by the Purchaser at or prior to the Closing Date and to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
Section 6.1. Representations and Warranties True. Section 6.1 of
-----------------------------------
the Asset Purchase Agreement is hereby incorporated herein by reference as if
set forth herein in its entirety.
Section 6.2. Authority. All action required to be taken by or on
---------
behalf of the Purchaser to authorize the execution, delivery and performance of
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby shall have been duly and validly taken. The Purchaser shall
have delivered to the Sellers certified resolutions of its board of directors
evidencing such authorization, together with a certified copy of its Certificate
of Incorporation and Bylaws.
Section 6.3. No Obstructive Proceeding. No suit, action or other
-------------------------
proceeding shall have been instituted to restrain, enjoin or otherwise prevent
or question the legality of the consummation of the transactions contemplated by
this Agreement.
Section 6.4. Consents and Approvals. The Sellers shall have
----------------------
obtained all third party consents reasonably necessary for the legal or
authorized consummation of the transactions contemplated by this Agreement.
Section 6.5. HSR Act; Restraining Order. The waiting period under
--------------------------
the HSR Act shall have expired or been terminated, and no order restraining or
enjoining the transactions contemplated hereby shall have been obtained by the
FTC, the DOJ or any state regulatory agency or any private party and be in
effect.
Section 6.6. Asset Purchase Agreement Closing. The transactions
--------------------------------
contemplated within the Asset Purchase Agreement shall have been consummated or
shall be consummated contemporaneously with the consummation of the transactions
contemplated within this Agreement.
Section 6.7. Additional Agreements. Purchaser, its securities
---------------------
holders and affiliates shall have entered into such additional agreements as may
reasonably be required to be entered into by such parties on or before the
Closing.
Section 6.8. Adverse Change. There shall have been no material
--------------
adverse change in condition (financial or otherwise) of the Purchaser and its
subsidiaries from the date of this Agreement through the Closing Date.
Section 6.9. Confirmation of Tax-Free Status. Sellers shall have
-------------------------------
received confirmation from the taxing authorities in Puerto Rico that the
transactions contemplated herein shall be treated as a tax-free reorganization.
13
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
---------------------------------------
OF THE PURCHASER
----------------
All obligations of the Purchaser which are to be discharged under this
Agreement at the Closing are subject to the performance or waiver, at or prior
to the Closing Date, in all material respects of all covenants and agreements
contained herein which are to be performed by the Sellers on or prior to the
Closing Date and to the fulfillment, at or prior to the Closing Date, of each of
the following conditions:
Section 7.1. Representations and Warranties True. Section 7.1 of the
-----------------------------------
Asset Purchase Agreement is hereby incorporated herein by reference as if set
forth herein in its entirety.
Section 7.2. No Obstructive Proceeding. No suit, action or other
-------------------------
proceeding shall have been instituted to restrain, enjoin or otherwise prevent
or question the legality of the consummation of the transactions contemplated by
this Agreement.
Section 7.3. Consents, Approvals and Licenses. The Purchaser shall
--------------------------------
have received and been issued all licenses and approvals required under the
provisions of state and federal law necessary for the Purchaser to own and
operate and legally conduct all relevant operations of the Hospitals being
conducted by the Companies on the Closing Date (except for the Controlled
Substance Registration Certificate relating to the pharmacies in the Hospitals
and such licenses and approvals which will be issued in due course and be
effective as of the Closing), and the Purchaser or the Sellers shall have
obtained all third party consents reasonably necessary for the legal and
authorized transfer of all material assets, including, without limitation, the
Scheduled Contracts and Scheduled Leases, except where the failure to receive
such licenses, approvals and consents would not have a material adverse effect
on the operations of Parent and its subsidiaries, taken as a whole.
Section 7.4. Consents and Approvals. Purchaser shall have obtained
----------------------
all third-party consents reasonably necessary for the legal or authorized
consummation of the transactions contemplated by this Agreement.
Section 7.5. HSR Act; Restraining Order. The waiting period under
--------------------------
the HSR Act shall have expired or been terminated and no order restraining or
enjoining the transactions contemplated hereby shall have been obtained by the
FTC, the DOJ or any state regulatory agency or any private party and be in
effect.
14
Section 7.6. Title Insurance Policies. The Purchaser shall have been
------------------------
issued owner's title insurance policies by the Title Company in an amount set
forth in Schedule 7.5 pursuant to the Title Commitments insuring as of the
------------
Closing Date the Hospital Company's good, indefeasible and, to the extent
available in the applicable jurisdiction, marketable title to the Real Property
which shall contain no liens except for the Permitted Encumbrances, with the
survey and other standard exceptions deleted, and except for liens approved by
the Purchaser which arise between the dates of the Title Commitments and the
Closing.
Section 7.7. Adverse Change. There shall have been no material
--------------
adverse change in the assets or condition (financial or otherwise) of the
business or material assets of the Companies between the date of this Agreement
through the Closing Date.
Section 7.8. Asset Purchase Agreement Closing. The transactions
--------------------------------
contemplated within the Asset Purchase Agreement shall have been consummated or
shall be consummated contemporaneously with the consummation of the transactions
contemplated within this Agreement.
Section 7.9. Transfer of Tax Holiday. Purchaser shall have received
-----------------------
confirmation from the taxing authorities in Puerto Rico that the "tax holiday"
enjoyed by the companies may be assigned to Purchaser.
ARTICLE VIII
TERMINATION
-----------
Section 8.1. Optional Termination. This Agreement may be terminated
--------------------
and the Hospital Company Merger and the Partially-Owned Company Merger abandoned
(i) at any time prior to the Closing by the mutual written consent of Sellers
and Parent; (ii) by Parent if Sellers adds any supplement to any Schedule to
this Agreement or the Asset Purchase Agreement after the date hereof which
supplement shall reasonably be expected to result in a material adverse change
in the consolidated financial condition or results of operations of the
Companies or, after the Closing Date, Parent, in excess of $500,000 for an
individual failure or $2,500,000 for all such failures, except that, in the case
of criminal activity or fraud, Parent shall have the right to terminate this
Agreement without regard to the preceding dollar limitations; provided that
--------
Parent must notify Sellers of its election to terminate the Agreement pursuant
to this Section 8.1 within ten business days after its receipt of such
supplement; (iii) by Sellers if Purchaser adds any supplement to any Schedule to
this Agreement or the Asset Purchase Agreement after the date hereof which
supplement shall reasonably be expected to result in a material adverse change
in the consolidated financial condition or results of operations of Sellers or,
after the Closing Date, Parent, in excess of $500,000 for an individual failure,
$2,500,000 for all such failures other than breaches of Section 3.25 hereof for
breaches of Section 3.25 and $2,500,000 for breaches of Section 3.25 hereof,
except that, in the case of criminal activity or fraud, Sellers shall have the
right to terminate this Agreement without regard to the preceding
15
dollar limitations; provided that Sellers must notify Parent of its election to
--------
terminate the Agreement pursuant to this Section 8.1 within ten business days
after its receipt of such supplement; and (iv) by Parent at any time prior to
[NOVEMBER 22, 1996], if the environmental phase one surveys and engineering
reports with respect to the Real Property pursuant to this Agreement should not
be reasonably satisfactory to Parent. In addition, this Agreement shall
immediately terminate in the event of the termination of the Asset Purchase
Agreement.
Section 8.2. Mandatory Termination. If the Closing has not occurred
---------------------
by March 31, 1997, this Agreement shall automatically terminate, unless extended
by the written agreement of CPC and the Parent.
Section 8.3. Termination Consequences. In the event this Agreement
------------------------
is terminated pursuant to Section 8.1 or Section 8.2, then, except as expressly
provided to the contrary in this Agreement, the parties shall be discharged from
their obligations under this Agreement, and neither of the parties nor any of
their respective shareholders, directors or officers shall have any liability to
the other party for costs, expenses, loss of anticipated profits, consequential
damages or otherwise. Promptly upon the termination of this Agreement, the
Purchaser shall deliver to Sellers all documents (and copies thereof in its
possession) concerning the Hospital Businesses previously delivered to the
Purchaser.
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1. Indemnification by Sellers. After the Closing and
--------------------------
subject to the limitations set forth in this Article IX Sellers shall indemnify
and hold harmless the Purchaser (and its stockholders, employees, officers,
directors, subsidiaries, agents and representatives) from and against all
liabilities, damages, costs and expenses (including reasonable attorneys' fees)
incurred by such entities and persons (collectively, the "Damages") arising out
of any breach, misrepresentation or nonfulfillment by Seller and, where
applicable, Companies, of any of its/their representations, warranties or
covenants set forth in this Agreement.
Section 9.2. Indemnification by the Purchaser. After the Closing and
--------------------------------
subject to the limitations set forth in this Article IX, Purchaser and the
Subsidiaries shall jointly and severally indemnify and hold harmless Sellers
(and their stockholders, employees, officers, directors, agents and
representatives) from and against all Damages arising out of any breach,
misrepresentation or nonfulfillment by any Purchaser of any
16
of its representations, warranties or covenants set forth in this Agreement.
Section 9.3. Limitations. (a) Neither Sellers nor Purchaser shall
-----------
have any liability to the other under this Article IX and no claim under this
Article IX shall:
(i) accrue unless and only to the extent that the actual
liability of (A) the Sellers (as a group) pursuant to
the indemnification provisions hereof and the Asset
Purchase exceeds $2,500,000 in the aggregate; (B) the
Purchaser (as a group) pursuant to the indemnification
provisions hereof and in the Asset Purchase Agreement
(other than liability arising as a result of breaches
of Section 3.25 hereof and Section 3.25 of the Asset
Purchase Agreement) exceeds $2,500,000 in the
aggregate; (C) the Purchaser (as a group) pursuant to
the indemnification provisions of this Agreement and
the Merger Agreement arising as a result of breaches of
Section 3.25 hereof and Section 3.25 of the Asset
Purchase Agreement exceeds $2,500,000 in the aggregate
(each a "Relevant Claim");
(ii) be made to the extent that any loss is recovered under
a policy of insurance payable to the Indemnified Party
which policy is in force on the date of loss;
(iii) be made following the three year anniversary of the
Closing Date.
(b) The liability of Sellers shall cease, and any subsisting claim
shall be withdrawn, on the date that the Hospital Businesses (or the individual
Hospital relating to such claim) shall cease for any reason to be directly or
indirectly wholly owned by the Purchaser or by a corporation controlled,
directly or indirectly, by the Purchaser.
(c) In the event that an Indemnified Party is entitled to recover any
sum (whether by payment, discount, credit or otherwise) from any third party in
respect of any matter for which a claim of indemnity could be made against the
party hereto that would be liable for the Damages to an Indemnified Party
hereunder (an "Indemnifying Party"), the Indemnified Party shall use
commercially reasonable efforts to recover such sum from such
17
third party (but shall not be required to institute legal proceedings) and any
sum recovered will reduce the amount of the claim; and if the Indemnifying Party
pays to the Indemnified Party an amount in respect of, and the Indemnified Party
subsequently recovers from a third party a sum which is referable to, that
claim, the Indemnified Party shall forthwith repay to the Indemnifying Party, so
much of the amount paid by it as does not exceed the sum recovered from the
third party less all reasonable costs, charges and expenses incurred by the
Indemnified Party in obtaining payment in respect of that claim and in
recovering that sum from the third party.
(d) If either party is liable to the other for Damages arising out of
any breach, misrepresentation or nonfulfillment of any representations,
warranties or covenants set forth in this Agreement, then the liability of the
Indemnifying Party shall be reduced and any amount paid shall be refunded when
and to the extent that the Indemnified Party obtains the benefit of a reduction
in its liability for its tax (whether by way of credit or otherwise) which it
would not have obtained had the breach which gave rise to liability of the
Indemnifying Party not arisen.
Section 9.4. Method of Asserting Claims. All claims for
--------------------------
indemnification by any Indemnified Party under this Article IX shall be asserted
and resolved in accordance with Section 9.4 of the Asset Purchase Agreement,
which provisions will be deemed to be incorporated herein by this reference.
Section 9.5. Exclusive. Any dispute arising under this Agreement or
---------
in connection with or as a result of the transactions contemplated by this
Agreement or any Damages or injury alleged to be suffered by either party as a
result of the actions or failure to act by any other party shall, unless
otherwise specifically stated, be governed solely and exclusively by the
provisions of this Article IX.
Section 9.6. Method of Payment. (a) Any amounts required to be
-----------------
paid to Purchaser by Sellers pursuant to Section 9.1 hereof shall be paid in
cash.
(b) Any amounts required to be paid to Sellers by Purchaser pursuant
to Section 9.2 and Section 11.22 hereof or by virtue of any breach of any other
agreements executed concurrently herewith or in connection with the Closing (the
"Additional Amounts") shall be in the form of additional shares of BHC Preferred
Stock (and/or, at the election of CPC, BHC Common Stock so long as CPC thereupon
owns less than 20% of the outstanding BHC Common Stock) (the "Additional
Shares") such that the value of the BHC Common Stock and BHC Preferred Stock
theretofore issued pursuant to this Agreement (including pursuant to this
Section 9.6), with such value being determined prior to the
18
issuance of the Additional Shares (the "Original Value"), plus the value of the
Additional Shares equals the Original Value plus the Additional Amounts after
giving effect to the dilutive effects caused by the issuance of the Additional
Shares, all as provided below. For example, assume that the value of the BHC
Common Stock and BHC Preferred Stock held by Sellers prior to the issuance of
Additional Shares is $50 million and that Sellers are entitled to receive $3
million from Purchaser pursuant to Section 9.2 hereof. In such case, BHC shall
issue to Sellers a number of shares of BHC Preferred Stock (or BHC Common Stock
as provided above) such that following the issuance of such shares (and after
giving effect to the reduced value of the Original Shares as a result of the
dilution caused by the issuance of the Additional Shares) Sellers shall hold BHC
Common Stock and BHC Preferred Stock having a value of $53 million.
(c) If at the time Additional Shares are to be issued pursuant to
Section 9.2(b) BHC Common Stock is not publicly traded, the number of Additional
Shares to be issued to Sellers pursuant to Section 9.6(b) hereof shall be
determined as provided in this Section 9.6(c). Promptly upon determination of
the Additional Amounts, Parent and CPC shall attempt in good faith to agree upon
the number of Additional Shares to be issued to Sellers. If the parties are
unable to agree upon the number of Additional Shares to be issued to Sellers
within 30 days of the date of the determination of the Additional Amounts,
Parent and CPC shall each appoint one investment banker not affiliated with
either party who is experienced in valuing businesses similar to Parent's
business to determine the number of Additional Shares to be issued to Sellers,
taking into account the reduced value of the Original Shares as a result of the
dilutive effect of the issuance of Additional Shares. If the two investment
bankers are unable to agree upon the number of Additional Shares to be issued to
Sellers within 30 days, CPC and Parent shall deliver to the other their
determination of the number of Additional Shares to be issued to Sellers and
shall jointly select a third investment banker with the same qualifications to
determine the number of Additional Shares to be issued to Sellers. If CPC and
Parent are unable to agree upon the third investment banker, such investment
banker shall be selected by an arbitrator selected pursuant to the commercial
rules of the American Arbitration Association. The third investment banker
shall select either the number of Additional Shares to be issued to Sellers
submitted by CPC or the number of Additional Shares to be issued to Sellers
submitted by Parent as the number of Additional Shares to be issued to Sellers.
Promptly following the determination of the number of Additional Shares to be
issued to Sellers, Parent shall issue to Sellers such Additional Shares. The
fees and expenses of such investment bankers shall be borne by Parent.
19
(d) If at the time Additional Shares are to be issued pursuant to
Section 9.2(b) BHC Common Stock is publicly traded, the value of Additional
Shares to be issued to Sellers pursuant to Section 9.6(b) shall be determined as
provided in this Section 9.6(d). Promptly upon determination of the Additional
Amounts, the Parent shall issue a press release stating, among other things, the
amount owed to Sellers, that Additional Shares will be issued in satisfaction of
such obligation and the method by which the value of the Additional Shares will
be determined. The average closing price of the BHC Common Stock on the
principal exchange on which it is traded or on the NASDAQ National Market System
(or, if such stock is not so traded, then the average of the closing bid and
asked prices of such stock) for the 20 business day period commencing five
business days following the issuance of the press release shall then be
determined (the "Average Price"). Promptly following the determination of the
Average Price, the Parent shall issue to Sellers Additional Shares with an
aggregate value (valuing each Additional Share at the Average Price) such that
Sellers then hold BHC Common Stock and BHC Preferred Stock with an aggregate
value (valuing each share at the Average Price) equal to the Original Value (for
such purposes, the Original Value will be determined using the method of
calculation for the Average Price, except that the 20 business day period shall
be the 20 business days preceding the date of determination of the Additional
Amounts plus the Additional Amounts.
(e) For purposes of this Section 9.6, the value of a share of BHC
Preferred Stock shall be deemed to be equal to the value of a share of BHC
Common Stock.
(f) Any payments required pursuant to this Section 9.6 shall be
considered as adjustments to the Merger Consideration and shall not be
considered a dividend.
ARTICLE X
TAX AND MEDICARE MATTERS
------------------------
Section 10.1. Federal, State and Local Taxes. (a) Sellers shall be
------------------------------
responsible for the preparation and filing of the federal, state and local tax
returns of the Companies for all taxable periods prior to the Closing Date, it
being understood that Purchaser shall be responsible for all such taxes. Where
applicable, the Companies may be included in any federal consolidated income tax
return or state or local consolidated or combined tax return for any affiliated
group of which CPC is the common parent and for the consolidated or combined
taxable year which includes the Closing Date. The Purchaser shall be
responsible for the preparation and filing of federal, state and local tax
returns with respect to the Companies for periods ending on or after the Closing
Date.
20
(b) After the Closing, the parties shall cooperate with each other and
shall make available to each other, as reasonably requested, all information,
records or documents relating to tax liabilities or potential tax liabilities
attributable to the Hospital Businesses for all periods prior to the Closing and
shall preserve all such information, records and documents at least until the
expiration of any applicable statute of limitations or extensions thereof. The
parties shall also, upon reasonable prior notice, make available to each other
as reasonably required, and at the reasonable cost of the requesting party (for
out-of-pocket costs and expenses only), personnel responsible for preparing or
maintaining information, records and documents in connection with tax matters.
(c) In the event that the Purchaser receives written notice from an
appropriate taxing authority of any pending or threatened examination, claim,
settlement, proposed adjustment or related matter with respect to the taxes of
the Sellers that could affect the Sellers or any affiliate of the Sellers, or if
the Sellers or any affiliate of the Sellers receives written notice from an
appropriate taxing authority of any such matters that could affect the
Purchaser, any of its subsidiaries or respective affiliates, the party receiving
notice shall notify in writing the potentially affected party within thirty (30)
days following its receipt thereof. The failure of any party to give the notice
required by this Section 10.1 shall not impair that party's rights under this
Agreement except to the extent that the other party demonstrates that is has
been materially prejudiced thereby.
(d) In the case of any audit, examination or other proceeding (a
"Proceeding") with respect to taxes for which the Sellers are or may be liable
pursuant to this Agreement, the Purchaser shall promptly inform the Sellers, and
the Purchaser shall execute or cause to be executed powers of attorney or other
documents necessary to enable the Sellers to take all actions desired by the
Sellers with respect to such Proceeding to the extent such Proceeding may affect
the amount of taxes for which the Sellers are liable pursuant to this Agreement.
The Sellers shall have the right to control any such Proceeding, and, if there
is a reasonable basis therefor, to initiate any claim for refund, file any
amended return or take any other action that they deem appropriate with respect
to such taxes. All costs and expenses incurred in connection with any such
Proceeding shall be borne by the Sellers, and the Purchaser shall be reimbursed
by the Sellers for any and all reasonable direct costs and expenses incurred by
them in connection with such Proceeding.
Section 10.2. Effect of Certain Audit Adjustments. (a) In the event
-----------------------------------
that any income tax audit of the affiliated group of corporations of which
either of the companies is the common parent undergoes tax
21
audit adjustments for any taxable period that includes the Closing Date, then:
(i) If such adjustment results in post Closing Date
deductions, losses or credits to any Company, or to any
affiliate group of which such Company is a member,
then, Purchaser shall remit to CPC as a purchase price
adjustment an amount equal to the Actual Tax Benefit
(defined below) received.
(ii) If such adjustment results in post Closing Date income,
gains or reduction in credits, then CPC shall remit to
Purchaser an amount equal to the Actual Tax Detriment
(defined below) incurred.
(b) In the event that, by reason of taxpayer elections or otherwise,
Purchaser, the Companies, or any affiliate group of which any Company is a
member shall either (i) obtain a refund of taxes paid by Sellers, any affiliated
group of which CPC is now or was the common parent, or any tax return or tax
reporting group of corporations, or (ii) utilize available tax loss carry
forwards or credits of such taxpayer or groups of taxpayer, then Purchaser shall
pay CPC as a purchase price adjustment an amount equal to the Actual Tax Benefit
received as a result of the foregoing circumstance.
(c) For purposes of this Section, the term "Actual Tax Benefit" shall
mean the greater of (i) the deduction or loss recognized, multiplied by the tax
rate applicable to Parent with respect to ordinary income or capital gain, (ii)
the cash received (in the case of a tax refund), or (iii) the tax savings (in
the case of a credit). For purposes of this Section, the term "Actual Tax
Detriment" means the greater of (i) the gain or income recognized multiplied by
the tax rate applicable to the Parent with respect to ordinary income or capital
gain, (ii) the cash paid in the case of a tax payment, or (iii) the tax loss (in
the case a tax credit is offset).
(d) Payments hereunder shall be made on the date of filing of the tax
return with respect to which any tax benefit is obtained or within ten (10) days
following receipt of any cash refund or credit.
ARTICLE XI
MISCELLANEOUS
-------------
Section 10.3 Nature of Payment. Any payments required to be made
-----------------
pursuant to this Article X shall be considered as adjustments to the Hospital
Merger Consideration or Partially Owned Company Merger Consideration, as
applicable and not as a dividend.
The provisions of Sections 11.1 through 11.24 of the Asset Purchase
Agreement are hereby incorporated herein by reference as though set forth in
full herein (the term "this
22
Agreement" as used in such sections being deemed to refer to this Agreement).
ARTICLE XII
NONCOMPETITION
--------------
Sellers recognize that (i) Purchaser's entering into this Agreement is
induced primarily because of the covenants and assurances made by Sellers
hereunder, (ii) CPC's covenant not to compete is necessary to insure the
continuation of the businesses of the Companies subsequent to the Closing, and
(iii) irreparable harm and damage will be done to Purchaser in the event that
CPC, or CPC's affiliates, compete with Purchaser within the area or areas
specified in this Section. Therefore, in consideration of the premises and as
an inducement for Purchaser to enter into this Agreement and consummate the
transactions contemplated herein, CPC agrees that, for a period of three (3)
years from and after the Closing Date, CPC, its affiliates (other than
affiliates which become affiliates as a result of the acquisition of stock or
assets of CPC) (collectively, the "Regulated Persons") will not own, lease,
manage or operate any psychiatric hospitals, beds or units within the 25-mile
radiuses of the Hospitals or any facility operated by Purchaser on the Closing
Date (the "Proscribed Area"). Notwithstanding the foregoing, the Regulated
Persons may own, lease, manage and operate psychiatric hospitals, beds and/or
units within the Proscribed Area: (a) in any non-psychiatric hospital acquired
by the Regulated Persons, provided that purchaser has been offered a right of
first refusal to manage the psychiatric services provided at such hospital on
then reasonably customary terms (provided that CPC shall not enter into any
agreement to manage such psychiatric services on terms less favorable to CPC
than those last offered to Purchaser) and (b) at THC New Orleans. The parties
agree that no portion of the Hospital Company Merger Consideration or the
Partially Owned Company Merger Consideration shall be allocated the non-
competition covenant contained in this Section XII.
23
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ENTITIES CONSTITUTING THE "SELLERS"
COMMUNITY PSYCHIATRIC CENTERS
By:_______________________________
Title:____________________________
COMMUNITY PSYCHIATRIC CENTERS OF PUERTO RICO, INC.
By:_______________________________
Title:____________________________
CPC-PHP, INC.
By:_______________________________
Title:____________________________
"PARENT"
BEHAVIORAL HEALTHCARE CORPORATION
By:_______________________________
Title:____________________________
24
