EXHIBIT 2(F)
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement"), dated as of March 3, 1998, is
entered into by and among Magellan Health Services, Inc., a Delaware corporation
("Magellan"), Charter Behavioral Corporation, a Delaware corporation ("CBC"),
Charter Behavioral Health Systems, Inc., a Delaware corporation ("Charter
Inc."), Green Spring Health Services, Inc., a Delaware corporation ("Green
Spring"), Advantage Behavioral Systems, Inc., a Delaware corporation ("Advantage
Behavioral") (collectively, the "Sellers"), and Charter Behavioral Health
Systems, LLC, a Delaware limited liability company ("Charter LLC" or
"Purchaser").
WHEREAS, Magellan owns 100% of the membership interests in Charter
Advantage, LLC, a Delaware limited liability company ("Charter Advantage"), and
CBC, a wholly-owned subsidiary of Magellan, owns 100% of the membership
interests in Charter System, LLC, a Delaware limited liability company ("CS");
WHEREAS, Charter Inc., a wholly-owned subsidiary of Magellan, owns all of
the outstanding common stock of Golden Isle Assurance Company, Ltd., a Bermuda
company ("Golden Isle"), of Charter Behavioral Health of Puerto Rico, Inc., a
Georgia corporation ("Charter of Puerto Rico"), of Strategic Advantage, Inc., a
Minnesota corporation ("Strategic Advantage"), and of Charter Medical of Puerto
Rico, Inc., a Puerto Rican corporation ("Charter Medical");
WHEREAS, Green Spring, an affiliate of Magellan, owns all of the
outstanding common stock of Group Practice Affiliates, Inc., a Delaware
corporation ("Group Practice" and collectively with Charter Advantage, CS,
Golden Isle, Charter of Puerto Rico, Charter Medical and Strategic Advantage,
the "Subsidiaries") (the Group Practice stock, collectively with all of the
outstanding common stock of Golden Isle, Charter of Puerto Rico, Charter
Medical, and Strategic Advantage, the "Shares");
WHEREAS Green Spring and Advantage Behavioral own certain assets comprising
certain Staff Model Clinics (as hereinafter defined);
WHEREAS, the Sellers desire to sell, and Purchaser desires to purchase (i)
all of the membership interests of Charter Advantage (the "Advantage Interest"),
(ii) all of the membership interests of CS (the "CS Interest", collectively with
the Advantage Interest and the Shares, the "Subsidiary Equity Interests"), (iii)
all of the Shares, and (iv) the assets of certain Staff Model Clinics (such
assets are set forth on Schedule 1.02, as such schedule is updated as provided
in Section 8.13 of this Agreement, and hereinafter referred to as the "Staff
Model Clinics");
WHEREAS, Charter, Inc., Magellan and Crescent Operating, Inc. have agreed
to enter into that certain Equity Purchase Agreement dated March 3, 1998 (the
"Equity Purchase Agreement") pursuant to which Charter, Inc. will sell to
Crescent Operating and Crescent Operating will purchase from Charter, Inc. 100%
of Charter, Inc.'s membership interest in Charter LLC;
WHEREAS, in connection with the purchase and sale contemplated by this
Agreement and the Equity Purchase Agreement, the parties have agreed to
terminate, as of the Closing, Magellan's rights (other than related to
indemnification) under the Master Franchise Agreement dated as of June 17, 1997
between Magellan, Charter Advantage and Charter LLC (the "Master Franchise
Agreement") and the OpCo Franchise Agreements (as defined in the Master
Franchise Agreement; collectively, the Master Franchise Agreement and the OpCo
Franchise Agreements, the "Franchise Agreements") and to terminate, amend or
enter into certain other agreements as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Closing. Upon the terms and subject to the conditions hereof, the
closing (the "Closing") of the purchase and sale of the Subsidiary Equity
Interests and the purchase and sale of certain assets as provided herein, as set
forth herein shall take place at the offices of Dow, Xxxxxx & Xxxxxxxxx, Xxx
Xxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, on the fifth business day
following the date on which all of the conditions to the obligations of the
parties hereunder have been satisfied or waived or at such other time or place
as the parties hereto shall agree (the "Closing Date").
1.02 Purchase Price. Subject to the terms and conditions of this
Agreement, the Sellers shall sell, assign, transfer and convey to the Purchaser,
and the Purchaser shall purchase from the Sellers, (i) all of the Subsidiary
Equity Interests, free and clear of all liens, charges, pledges, security
interests, encumbrances, restrictions and claims of any kind whatsoever and (ii)
those assets of the Staff Model Clinics set forth on Schedule 1.02, free and
clear of all liens, charges, pledges, security interests, encumbrances,
restrictions and claims of any kind whatsoever, except as provided herein. The
aggregate consideration for the purchase and sale of the Subsidiary Equity
Interests and the Staff Model Clinics and the assets referred to in Section 4.18
hereof, for the transactions contemplated by the Joint Venture Purchase
Agreement to be executed by Magellan and Charter LLC prior to the Closing (the
"JV Purchase Agreement") and for the other agreements herein, including
Magellan's agreement to terminate its rights under the Franchise Agreement in
accordance with the Termination Agreement to be entered into pursuant to Section
4.07 hereof, is $280,000,000 (the "Purchase Price"). The parties shall agree
on an allocation of the Purchase Price at or prior to the Closing and, upon
agreement, such allocation shall be attached hereto as Exhibit A.
1.03 Deliveries.
(a) Delivery of the Shares shall be made by the Sellers at the
Closing by delivering to the Purchaser certificates representing the Shares,
each duly endorsed for transfer in
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blank or accompanied by a stock power duly endorsed in blank. Delivery of the
Advantage Interest and the CS Interest shall be made by the Sellers at the
Closing by delivering to the Purchaser instruments of transfer reasonably
satisfactory to the Purchaser and sufficient to transfer title free and clear of
all liens, charges, security interests, pledges and encumbrances of any kind.
Delivery of the Staff Model Clinics shall be made by Sellers at the Closing by
delivery to the Purchaser instruments of transfer reasonably satisfactory to the
Purchaser and sufficient to transfer title free and clear of all liens, charges,
security interests, pledges and encumbrances of any kind, except as otherwise
provided herein.
(b) The Purchaser shall deliver $280,000,000, plus the amount of
Creative Development Expenses referred to in Section 4.13 of this Agreement to
the Sellers at the Closing by wire transfer to Magellan in immediately available
funds.
(c) Each of the Sellers and the Purchaser shall deliver all other
documents, instruments and writings required to be delivered by either of them
at or prior to the Closing Date pursuant to this Agreement or as otherwise
required herein.
(d) As used in this Agreement the term affiliate of any of the
Sellers shall not be deemed to include Charter LLC.
ARTICLE II
REPRESENTATIONS OF THE SELLERS
Each of the Sellers hereby jointly and severally represents and warrants to
the Purchaser as follows:
2.01 Organization.
(a) Each Seller is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate or other power and authority to conduct its business as now
conducted. Each of the Subsidiaries is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has the requisite corporate power and authority to conduct its business as now
conducted.
(b) Each Subsidiary is duly qualified or licensed to do business as a
foreign corporation or limited liability company, as the case may be, and is in
good standing in each of the jurisdictions in which it is required to be so
qualified or licensed, except jurisdictions in which the failure to qualify to
do business would not have material adverse effect on the business or operations
of such Subsidiary.
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(c) The copies of the respective organizational documents of each of
the Sellers and each of the Subsidiaries heretofore delivered to the Purchaser
are complete and correct copies of such instruments as presently in effect and
include all amendments thereto.
(d) There are no dissolution, liquidation or revocation proceedings
pending with respect to any of the Sellers or Subsidiaries.
2.02 Authorization. Each Seller has the corporate power and authority to
enter into this Agreement and, assuming approval of their respective Boards of
Directors, to carry out the transactions contemplated hereby. The Board of
Directors of Magellan has preliminarily approved the transactions contemplated
herein and shall meet within seven (7) days of the execution of this Agreement
to consider final approval of such transactions. Promptly thereafter the Boards
of Directors of the other Sellers shall meet for the purpose of approving the
transactions contemplated herein. No other corporate or stockholder proceedings
on the part of any of the Sellers are necessary to consummate the transactions
contemplated hereby and perform such Seller's obligations hereunder. This
Agreement has been duly and validly executed and delivered by each of the
Sellers and, assuming that it is approved by the Boards of Directors of the
Sellers as provided above, and assuming the Agreement constitutes the legal,
valid and binding obligation of the Purchaser, constitutes a legal, valid and
binding obligation of each of the Sellers enforceable against each of the
Sellers in accordance with its terms, except that: (a) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights; and (b) the
remedies of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses.
2.03 No Violation. Subject to receipt of the consents referenced in
Section 2.05 of this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) violate any provisions of the Certificate of Incorporation or By-Laws or
organizational documents of any of the Sellers or the Subsidiaries; (b) violate,
or constitute a default under or result in the loss (with or without lapse of
time) of any benefit under, or the creation of any lien upon any property,
assets or operation of any of the Sellers or any of the Subsidiaries, any
license, permit, registration, mortgage indenture, loan or credit agreement,
franchise or agreement to which any of the Sellers or any of the Subsidiaries is
a party, or by which any of the Sellers or any of the Subsidiaries is bound or
to which any of the assets or property of the Sellers or the Subsidiaries may be
subject, except such violations, defaults or losses individually or in the
aggregate as would not have a material adverse effect on any of the Sellers or
the Subsidiaries; or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental agency or body to which
any of the Sellers or the Subsidiaries is subject or to which any of the assets
or property of the Sellers or the Subsidiaries may be subject, except such
violations as would not, individually or in the aggregate, have a material
adverse effect on any of the Sellers or any of the Subsidiaries.
2.04 Litigation. Except as set forth on Schedule 2.04(a) hereto, there are
no actions, suits or other proceedings pending or, to the Sellers' Knowledge,
threatened against any of the
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Subsidiaries or against any of the Sellers with respect to any of the
Subsidiaries or the business of any of the Subsidiaries or which could affect
the Sellers' ability to consummate the transaction contemplated by this
Agreement, except for actions, suits or other proceedings which would not,
individually or in the aggregate, have a material adverse effect on the
Subsidiaries, taken as a whole. As used in this Agreement, the "Sellers'
Knowledge" shall mean the actual knowledge of those individuals listed on
Schedule 2.04(b).
2.05 Consents. Except for (a) the expiration or termination of any
applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 0000 (xxx "XXX Xxx"), (x) the items as set forth on Schedule 2.05 hereto, and
(c) as may be necessary as a result of any facts or circumstances related solely
to Charter LLC, no consent, approval, authorization or order of, or registration
or filing with, any court or governmental agency or body (U.S. or foreign), or
other material consents from third parties, are required to be obtained by any
of the Sellers in connection with the execution, delivery or performance by any
of the Sellers of this Agreement or the consummation of the transactions
contemplated hereby.
2.06 Capitalization. The authorized capital stock of Golden Isle consists
of 3,500 shares of common stock, of which 3,500 shares have been issued and
3,500 shares are outstanding on the date hereof, all of which at the Closing
will be delivered by the Sellers free and clear of all liens, charges, security
interests, pledges or encumbrances of any kind. All of the outstanding shares
of common stock of Golden Isle have been duly and validly issued and are fully
paid and nonassessable. There are no subscriptions, warrants, options, calls,
commitments or agreements related to the issuance of shares of capital stock of
Golden Isle or any preemptive or similar rights held by any party with respect
to the shares of capital stock of Golden Isle. The authorized common stock of
Charter of Puerto Rico consists of 1000 shares of common stock, of which 1000
shares have been issued and are outstanding on the date hereof, all of which
will be delivered at the Closing to the Purchaser free of all liens, charges,
security interests, pledges or encumbrances of any kind. All of the outstanding
shares of common stock of Charter of Puerto Rico have been duly and validly
issued and are fully paid and nonassessable. There are no subscriptions,
warrants, options, calls, commitments or agreements related to the issuance of
the shares of capital stock of Charter of Puerto Rico or any preemptive or
similar rights held by any party with respect to the shares of capital stock of
Charter of Puerto Rico. The authorized common stock of Charter Medical consists
of 1000 shares of common stock, of which 500 shares have been issued and are
outstanding on the date hereof, all of which will be delivered at the Closing to
the Purchaser free of all liens, charges, security interests, pledges or
encumbrances of any kind. All of the outstanding shares of common stock of
Charter Medical have been duly and validly issued and are fully paid and
nonassessable. There are no subscriptions, warrants, options, calls,
commitments or agreements related to the issuance of the shares of capital stock
of Charter Medical or any preemptive or similar rights held by any party with
respect to the shares of capital stock of Charter Medical. The authorized
common stock of Group Practice consists of 2,000,000 shares of common stock, of
which 1,000,000 shares have been issued and 1,000,000 shares are outstanding on
the date hereof, all of which will be delivered at the Closing to the Purchaser
free of all liens, charges, security interests, pledges or encumbrances of any
kind. All of the outstanding shares of common stock of Group Practice have been
duly and validly issued
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and are fully paid and nonassessable. There are no subscriptions, warrants,
options, calls, commitments or agreements related to the issuance of the shares
of capital stock of Group Practice or any preemptive or similar rights held by
any party with respect to the shares of capital stock of Group Practice. The
authorized common stock of Strategic Advantage consists of 25,000 shares of
common stock, of which 25,000 shares have been issued and 25,000 shares are
outstanding on the date hereof, all of which will be delivered at the Closing to
the Purchaser free of all liens, charges, security interests, pledges or
encumbrances of any kind. All of the outstanding shares of common stock of
Strategic Advantage have been duly and validly issued and are fully paid and
nonassessable. There are no subscriptions, warrants, options, calls,
commitments or agreements related to the issuance of the shares of capital stock
of Strategic Advantage or any preemptive or similar rights held by any party
with respect to the shares of capital stock of Strategic Advantage. The Sellers
own directly or through subsidiaries, 100% of the membership interest in Charter
Advantage and CS and there are no other equity interests of Charter Advantage or
CS outstanding. There are no subscriptions, warrants, options, calls,
commitments or agreements related to the issuance of additional membership
interests of Charter Advantage or CS or any preemptive or similar rights held by
any party with respect to any membership interest in each of Charter Advantage
or CS. At the Closing, the Sellers will deliver the Advantage Interest and the
CS Interest to the Purchaser free and clear of all liens, charges, security
interests, pledges or encumbrances of any kind. Except as set forth on Schedule
2.06, none of the Subsidiaries owns an equity interest in any other entity.
2.07 Assets. Each of the Subsidiaries has good and marketable title to the
assets which it owns. None of the Subsidiaries owns any real property. Except
as disclosed in Schedule 2.07, the assets of each of the Subsidiaries and the
Staff Model Clinics are owned free and clear of any liens, encumbrances or
security interests (collectively, "Liens"), except: (i) Liens disclosed on the
Balance Sheets (as defined in Section 2.11 below); (ii) Liens for taxes not yet
due or being contested in good faith (and for which adequate accruals or
reserves have been established on the Balance Sheet); (iii) Liens which do not
detract from the value in any material respect of such property or assets as now
used, or interfere with any present or intended use in any material respect of
such property or assets; (iv) Liens attaching by operation of law, incurred in
the ordinary course of business consistent with past practices; or (v) Liens
with respect to which deposits or pledges have been made to obtain the release
of any such Liens described in clause (iv) above. Upon consummation of the
transactions contemplated hereby and by the JV Purchase Agreement, Charter LLC
will own or, through the Administrative Services Agreement dated as of June 16,
1997 between Magellan and Charter LLC (the "Administrative Services Agreement"),
as amended prior to Closing in accordance with the mutual agreement of the
parties, have access to (and assuming that (i) Charter LLC will continue to have
the right to utilize the assets of the Subsidiaries following consummation of
the transactions contemplated hereby and (ii) Charter LLC has retained all the
tangible and intangible assets received pursuant to the transactions consummated
under the Contribution Agreement dated as of June 16, 1997 by and among
Magellan, COI and Charter LLC (the "Contribution Agreement"), all tangible and
intangible assets reasonably necessary to conduct a business that is
substantially the same as, and that operates in accordance with substantially
the same standards of operation as, the business of the Hospitals (as such term
is defined in the Contribution Agreement) as operated immediately prior to June
17, 1997. Magellan reasonably believes that the services to be provided to
Charter LLC
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under the Administrative Services Agreement can be obtained from
other third parties at reasonable market rates. Schedule 8.13 identifies each
of the staff model clinics (other than the Merit staff model clinics) which are
required by any customer contract or dedicated to a specific customer
relationship of, or are related to the provision of EAP services by, Magellan or
its affiliates. Schedule 1.02 identifies all other Staff Model Clinics of
Magellan other than the Merit staff model clinics.
2.08 Trademarks, Licences, Etc.
(a) Charter Advantage owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Rights (as defined below)
needed or used in the operation of its business as presently conducted, except
that no representation is made with respect to the common law trademarks. Each
item of Rights owned or used (subject to the receipt of any required consent) by
Charter Advantage immediately prior to the Closing hereunder will be owned or
available for use by the Purchaser on substantially the same terms and
conditions immediately subsequent to the Closing hereunder.
(b) Set forth in Schedule 2.08 hereto is a list and brief description
of the material patents, registered and common law trademarks, service marks,
trade names, copyrights, licenses and other similar material rights ("Rights,")
used in the operation of the Subsidiaries' businesses as presently conducted.
Except as set forth in such Schedule 2.08, each Subsidiary owns all right, title
and interest in and to all such Rights (other than common law trademarks, as to
which no representation is made) identified as owned by it in Schedule 2.08 and
no material adverse claims have been made and no material dispute has arisen
with respect to any of such Rights; and, to Sellers' Knowledge, the operations
of the Subsidiaries and the use by the Subsidiaries of such Rights do not
involve infringement of any patent, trademark, service xxxx, trade name,
copyright, license or similar right. As of the date of this Agreement, no
suspension or cancellation of any of the Rights is pending or, to Sellers'
Knowledge, threatened except where any such suspension or cancellation would
have no material adverse effect on such Subsidiary.
2.09 Compliance with Laws. Except as set forth in Schedule 2.09 hereto,
the Staff Model Clinics are operated in compliance with, and each Subsidiary is
in compliance with, all laws, rules, regulations and ordinances relating to it
and its business and properties, except those the noncompliance with which would
not have a material adverse effect on the Subsidiaries and the Staff Model
Clinics, taken as a whole.
2.10 Broker's and Finder's Fees. Except for fees to be paid by Sellers in
connection with the rendering of a fairness opinion by its financial advisors,
neither the Sellers nor any of the Subsidiaries is obligated to pay, nor has any
of them retained, or entered into an agreement to retain, any broker or finder
or other person who is entitled to, any broker's or finder's fee or any other
commission or financial advisory fee based on any agreement or undertaking made
by the Sellers in connection with the transactions contemplated by this
Agreement.
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2.11 No Undisclosed Liabilities; Etc. Except as (i) disclosed on the
balance sheet of each of the Subsidiaries dated as of December 31, 1997 (the
"Balance Sheets"), attached hereto as Exhibit C, (ii) set forth on Schedule 2.11
or (iii) liabilities which have arisen after December 31, 1997 in the ordinary
course of the Subsidiaries' business, the Subsidiaries have no liabilities other
than liabilities which are immaterial to the Subsidiaries, taken as a whole.
2.12 Labor Matters. Except as disclosed on Schedule 2.12, there is no
organizing activity, labor strike or slowdown pending against or involving any
of the Subsidiaries and no labor union representation question exists under the
National Labor Relation Act respecting employees of any Subsidiary. There is no
collective bargain agreement that is binding on any Subsidiary. Except as
disclosed on Schedule 2.12, none of the Subsidiaries is a party to any written
employment agreement.
2.13 Material Contracts. Except for the agreements set forth on Schedule
2.13, there are no other material contracts to which any of the Subsidiaries are
a party or by which any of the Subsidiaries are bound.
2.14 Tax Matters. Except as otherwise set forth in Schedule 2.14, (i) each
of the Subsidiaries have timely filed all material federal, state, local,
foreign and provincial income and franchise tax returns and all other material
tax returns required to have been filed or appropriate extensions therefor have
been properly obtained; (ii) all taxes required to have been paid by each of the
Subsidiaries which are due under the tax returns referred to in clause (i) have
been timely paid or extensions for payment have been properly obtained; (iii)
each of the Subsidiaries have complied in all material respects with all rules
and regulations relating to the withholding of taxes except to the extent that
any failure to comply with such rules and regulations, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a material
adverse effect on any of the Subsidiaries; (iv) none of the Subsidiaries has
waived in writing any statute of limitations in respect of its federal, state,
local, foreign or provincial income or franchise taxes and no deficiency with
respect to any taxes has been proposed, asserted or assessed against any of the
Subsidiaries, except to the extent that any such waiver or deficiency,
individually or in the aggregate has not had, and would not reasonably be
expected to have a material adverse effect on any of the Subsidiaries; (v) the
Internal Revenue Service is not currently examining any of the federal income
tax returns referred to in clause (i); (vi) no material issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of the tax returns referred to in clause (i) are currently pending;
(vii) all material written final deficiencies asserted or material written final
assessments made as a result of any examination of any tax returns referred to
in clause (i) by any taxing authority have been paid in full, or are adequately
reserved; and (viii) there are no material liens for taxes (other than for
current taxes not yet due and payable) on the assets of any of the
Subsidiaries).
2.15 Material Adverse Effect. Except with respect to the level of
franchise fees anticipated being received by Charter Advantage pursuant to the
Franchise Agreements, since December 31, 1997 (the "Balance Sheets Date"), there
has been no material adverse change on the financial condition, business or
assets of the Subsidiaries taken as a whole.
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2.16 Disposition of Assets. Since the Balance Sheets Date, except as
disclosed on Schedule 2.16, none of the Subsidiaries has sold or otherwise
disposed of, or committed to dispose of, any material assets other than in the
ordinary course of business.
2.17 Events Subsequent to the Balance Sheets Date. Since the Balance
Sheets Date through the date of this Agreement, except as disclosed on Schedule
2.17, (a) no party (including any Seller or Subsidiary) has accelerated,
terminated, amended, or canceled any of the contracts referred to in Section
2.13 or any of the insurance contracts referred to in Section 2.19; (b) none of
the Subsidiaries has made any capital expenditure (or series of related capital
expenditures) outside the ordinary course of business; (c) none of the
Subsidiaries has issued any note, bond or other debt security or, other than in
the ordinary course of business, created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation; (d) none of the
Subsidiaries has experienced any material damage, destruction, or loss (whether
or not covered by insurance) to its property; (e) none of the Subsidiaries has
entered into any employment agreement or severance agreement providing for
compensation in excess of $100,000 in a twelve month period; and (f) none of the
Subsidiaries is under any legal obligation, whether written or oral, to do any
of the foregoing.
2.18 Licenses. Except as disclosed on Schedule 2.18, each of the
Subsidiaries and the Staff Model Clinics have all licenses which are necessary
for the conduct of their respective businesses as historically operated, except
those licenses the lack of which would not have a material adverse effect on the
Subsidiaries and Staff Model Clinics taken as a whole.
2.19 Insurance. Set forth on Schedule 2.19 are a list of material
insurance policies and the types and amounts of coverages related to the
operation of the Subsidiaries and the Staff Model Clinics. The Sellers believe
such policies provide customary and commercially reasonable coverages for the
operations of the Subsidiaries and the Staff Model Clinics. Each of the
policies is in full force and effect except as disclosed on Schedule 2.19. Upon
Closing, the parties hereto shall use commercially reasonable efforts to bring
the Subsidiaries under the coverage of the insurance policies in effect for
Charter LLC.
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
3.01 Corporate Organization.
(a) The Purchaser is a limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation and has the requisite power and authority to conduct its business as
now conducted.
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(b) The copies of the organizational documents of the Purchaser
heretofore delivered to the Sellers are complete and correct copies of such
instruments as presently in effect.
3.02 Authorization. The Purchaser has the limited liability company power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The governing body of the Purchaser has approved this
Agreement and the transactions contemplated hereby and has authorized the
execution and delivery of this Agreement. No other limited liability company or
member proceedings on the part of the Purchaser are necessary to consummate the
transactions contemplated hereby and perform the Purchaser's obligations
hereunder. This Agreement has been duly and validly executed and delivered by
the Purchaser and, assuming the Agreement constitutes the legal, valid and
binding obligation of the Sellers, constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms, except that: (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights; and (b) the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses.
3.03 No Violation. Subject to the receipt of the consents referenced in
Section 3.04 of this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) violate any provisions of the organizational documents of the Purchaser; (b)
violate, or constitute a default under or result in the loss (with or without
lapse of time) of any benefit under, or the creation of any lien upon any
property, assets or operation of the Purchaser, any license, permit, mortgage
indenture, loan or credit agreement, franchise or agreement to which the
Purchaser is a party, or by which the Purchaser is bound, except such
violations, defaults or losses individually or in the aggregate as would not
have a material adverse effect on the Purchaser; or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental agency or body to which the Purchaser is subject, except such
violations as would not have a material adverse effect on the Purchaser.
3.04 Consents. Except (a) as set forth in Schedule 3.04 hereto, (b) for
the expiration or termination of any applicable HSR Act waiting period, and (c)
as may be necessary as a result of any facts or circumstances related solely to
any of the Sellers, no consent, approval, authorization or order of, or
registration or filing with, any court or governmental agency or body or other
material consents from third parties, are required to be obtained by Purchaser
in connection with the execution, delivery or performance by the Purchaser of
this Agreement.
3.05 Broker's and Finder's Fees. The Purchaser is not obligated to pay,
and has not retained, or entered any agreement to retain, any broker or finder
or other person who is entitled to, any broker's or finder's fee or any other
commission or financial advisory fee based on any agreement or undertaking made
by the Purchaser in connection with the transactions contemplated by this
Agreement.
3.06 Restrictions on Transfer. The Purchaser understands and agrees that
the Subsidiary Equity Interests have not been registered under the Securities
Act of 1933, as amended, or the
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securities laws of any state (collectively, "Securities Acts"), and may not be
resold unless permitted under applicable exemptions contained in such Securities
Acts or upon satisfaction of the registration or qualification requirements of
such Securities Acts. Purchaser acknowledges that it must bear the economic
risk of its investment in the Subsidiary Equity Interests for an indefinite
period of time since the Subsidiary Equity Interests have not been registered or
qualified under such Securities Acts and, therefore, cannot be sold unless they
are subsequently registered or exemptions from registration or qualification are
available.
3.07 Qualification of Purchaser.
(a) Purchaser is acquiring the Subsidiary Equity Interests for
investment purposes only, for its own account, not as nominee or agent for any
other person, firm or corporation, and not with a view to, or for resale in
connection with, a distribution or public offering thereof within the meaning of
such Securities Acts.
(b) Purchaser has knowledge and experience in financial and business
matters, is capable of evaluating the merits and risks of its investment in the
Subsidiary Equity Interests, and is able to bear the economic risks inherent in
its investment in the Subsidiary Equity Interests.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.01 Conduct and Business. The Sellers covenant that, except for actions
taken to implement this Agreement and as specifically consented to in writing by
the Purchaser, from and after the date of this Agreement and until the Closing
Date they shall cause each of the Subsidiaries to:
(a) use commercially reasonable best efforts consistent with good
business judgment to: (i) preserve its present business organization intact;
(ii) keep available the services of its present employees; (iii) preserve its
present relationships with entities or persons having business dealings with it;
and (iv) generally operate its business in the ordinary and regular course
consistent with its prior practices;
(b) other than cash dividends, dividends of intercompany receivables
and repayment of intercompany loans each of which is expressly permitted by this
Agreement, refrain from declaring or paying any dividend or other distribution
in respect of its capital stock, or, directly or indirectly, purchasing,
redeeming or otherwise acquiring or disposing of any shares of its capital stock
and shall not issue any additional equity interest or any subscription,
warrants, options, calls, commitments or rights to acquire any shares of its
capital stock or membership interests or take any steps otherwise affecting or
changing its capitalization;
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(c) maintain its books and records in accordance with good business
practice, on a basis consistent with prior practice and in accordance with
generally accepted accounting principles, subject to normal year end
adjustments;
(d) make no changes or amendment in its organizational documents;
(e) The Sellers also covenant that, except as otherwise permitted
under Section 8.04, from and after the date of this Agreement until the Closing
Date, they shall ensure that each of the Subsidiaries does not (i) adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization; (ii) make any
acquisition, by means of merger, consolidation or otherwise, of any direct or
indirect ownership interest in or assets comprising any business enterprise or
operation; (iii) incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in, any other corporation,
any partnership or other legal entity or to any other persons, except for bank
deposits and other investments in marketable securities and cash equivalents
made in the ordinary course of its business; (iv) authorize or enter into any
agreement providing for management services to be obtained by any Subsidiary
from any third party or an increase in management fees paid to any third-party
under existing management agreements; (v) mortgage, pledge, encumber or lease
any material assets of any Subsidiary or except with the prior written consent
of the Purchaser or as contemplated by this Agreement; or (vi) authorize or
announce an intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing; and
(f) Between the date of this Agreement and the Closing Date, the
Sellers will not willfully take any action or willfully fail to take any action,
in either case, which would result in any representation or warranty of any
Seller being untrue in any material respect.
4.02 Access. From the date hereof until the Closing Date, the Sellers will
and will cause each Subsidiary to afford to the Purchaser and its
representatives, during regular business hours and upon reasonable notice, such
access to its personnel, offices and books and records as the Purchaser may
reasonably request in connection with the transactions contemplated by this
Agreement; provided, however, that any investigation made by the Purchaser
pursuant to this clause shall be conducted in such a manner as not to interfere
unreasonably with the operation of the businesses of any of the Subsidiaries.
4.03 Filings and Consents. After the execution hereof, each of the Sellers
(and the Subsidiaries to the extent applicable) and the Purchaser: (a) shall
promptly prepare and make any required filings with, and shall thereafter
promptly make any required submissions to any applicable governmental agency or
authority; and (b) shall use its commercially reasonable best efforts to obtain
and to cooperate in obtaining any consent, approval, authorization or order of,
or in making any registration or filing with, any governmental agency or body or
other third party required in connection with the execution, delivery or
performance of this Agreement. Notwithstanding
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anything herein to the contrary, Purchaser acknowledges that Golden Isle has no
active business operations and Purchaser has agreed to prepare, make and be
responsible for any filings, consents, authorizations, license transfers and
approvals needed with respect to the purchase of Golden Isle and the startup of
its operations.
4.04 Confidential Information.
The Purchaser hereby covenants and agrees that prior to Closing
neither it nor any of its officers or agents shall reveal to any person,
association or company, without the consent of the Sellers, any of the trade
secrets or confidential information concerning the organization, business or
finances of any of the Subsidiaries, except as may be required by law (or the
rules of the National Association of Security Dealers, Inc. or of the New York
Stock Exchange) or except as such information may be in the public domain
without violation by the Purchaser of this or any other confidentiality
obligation between Purchaser and a Seller (or a Seller's affiliate), or use or
attempt to use any such information in any manner which may injure, cause loss
or be otherwise detrimental, directly or may benefit or may be calculated to
benefit a direct competitor of any of the Subsidiaries or of the Sellers;
provided, however, that the foregoing in no way prohibits Purchaser from making
available to any financial institution or other person engaged in providing or
assisting Purchaser in evaluating the transaction (including investment bankers)
or obtaining the financing necessary for the subject transaction any of the
foregoing information, or to its representatives or other agents retained in
connection with this transaction, so long as such financial institution or other
person is bound by similar confidentiality restrictions. The provisions of this
Section 4.04 shall terminate upon Closing or, if Closing does not occur, the
provisions of this Section 4.04 shall terminate two (2) years after the
termination of this Agreement.
4.05 Directors. The Sellers shall cause, immediately prior to the Closing,
each member of the Board of Directors of each of the Subsidiaries so requested
by the Purchaser to deliver to the Purchaser a written resignation from such
Board of Directors effective as of the Closing Date.
4.06 Certain Tax Matters.
(a) The Sellers shall be entitled to any credits or refunds of
federal income taxes (including interest), and shall pay, and indemnify and hold
harmless the Purchaser against, all federal income taxes (including interest and
penalties and any pending or future assessments), attributable to any Subsidiary
with respect to any taxable year, or portion thereof, of any Subsidiary which
ends on a date which is on or before the Closing Date. Any amount in respect of
federal income taxes (including interest) to which the Sellers are entitled
under this Section 4.06 but which is received by or credited to the Purchaser
any time after the Closing Date shall promptly be paid to the Sellers following
such receipt or crediting. The limitations on the amount of indemnification
obligations specified in Article VI shall not apply to this provision.
(b) The Sellers and the Purchaser (i) will each provide the other,
and the Purchaser will cause each Subsidiary to provide the Sellers, with such
assistance as may reasonably
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be requested by either of them in connection with the assessment of taxes, any
audit or other examination by any taxing authority, any judicial or
administrative proceedings relating to liability for taxes; (ii) will each
retain and provide the other with any records or information which may be
reasonably necessary to such return, audit or examination, proceeding or
determination; and (iii) will each provide the other with the final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any return of the other for any
period. The party requesting assistance hereunder shall promptly reimburse the
other for reasonable expenses incurred for providing such assistance.
(c) The Sellers shall prepare and send to the Purchaser when due all
tax returns that are required to be filed by the Subsidiaries for all tax
periods ending on or before the Closing Date and the Purchaser shall file or
cause to be filed when due such tax returns and all other tax returns that are
required to be filed by or with respect to the Subsidiaries for all tax periods
ending after the Closing Date.
(d) The Sellers and the Purchaser shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with any
audit, litigation or other proceeding with respect to taxes and with the
preparation of any tax returns. The Sellers, the Subsidiaries, and the
Purchaser agree (i) to retain all books and records under their control with
respect to tax matters pertinent to the Subsidiaries relating to any tax period
ending on or before the Closing Date in accordance with customary record
retention policies, and (ii) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, the Sellers, the Subsidiaries, and the
Purchaser, as the case may be, shall allow the other party to take possession of
such books and records.
4.07 Other Agreements. At the Closing, the parties shall terminate or
execute amendments to certain agreements entered into in connection with the
Contribution Agreement, or enter into certain additional agreements, which
amendments and agreements shall be in the form mutually agreeable to the parties
to such agreements. The parties shall agree on the form of the agreements
within thirty (30) days after the execution of this Agreement and the form of
the agreements shall be added as Schedule 4.07 to this Agreement.
4.08 Non Compete. The parties shall execute at the Closing the Non
Compete Agreements attached as Exhibit D.
4.09 The Charter System. Each Seller covenants and agrees that to the
extent any intellectual property rights or other assets used predominantly as
part of the Charter System (as defined in Exhibit E hereto) are presently owned
or held by it or any of its subsidiaries (other than the Subsidiaries) it will
transfer, or cause to be transferred, subject to the receipt of any required
consent, any such rights or assets to the appropriate Subsidiary prior to the
Closing. Each Seller also agrees that to the extent it or any of its affiliates
is a party to any lease or other agreement related exclusively to the operation
of any Subsidiary, it will assign (or cause to be assigned), subject to
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receipt of any required consent, such lease or agreement to the appropriate
Subsidiary prior to Closing.
4.10 Repayment of Loans. Charter LLC hereby agrees to repay to the
Sellers, within 180 days after the Closing Date, all amounts owed (including
principal, interest or other amounts but net of amounts owed to Charter LLC and
its subsidiaries from the Sellers and their affiliates) under any working
capital loan or advances or other loan or advance or prepaid items
(collectively, including any deferred revenue referred to below and including
amounts added to Schedule 4.10 as provided below, the "Advances") to any of the
Sellers or any of their affiliates from Charter LLC or any of its subsidiaries
as well as any deferred revenue owed to the Sellers or their affiliates. The
amount of each Advance and the total amount of net Advances owed by Charter LLC
and its subsidiaries to the Sellers or their affiliates as of January 31, 1998
is set forth on Schedule 4.10; provided it is understood that any distributions
due pursuant to the Partial Satisfaction Agreement dated as of January 30, 1998
between Magellan and Charter LLC (the "Partial Satisfaction Agreement") are not
listed as an Advance and are governed pursuant to the terms of the above Partial
Satisfaction Agreement. The parties shall update Schedule 4.10 on a monthly
basis, for the period between the date hereof and Closing, using the same method
pursuant to which Schedule 4.10 was compiled, and shall update Schedule 4.10 as
of the Closing Date; it being understood that the amounts referenced in Section
4.23 shall be included on Schedule 4.10. Charter LLC shall not be obligated to
repay Charter Inc.'s capital contribution of $17,500,000, received for a
preferred interest in Charter LLC. It is understood by the parties that nothing
in this Agreement is intended to affect the rights and obligations of the
parties under the Working Capital Settlement Agreement dated June 17, 1997
between Charter LLC and Magellan. Any amounts or Advances Charter LLC fails to
pay to any of the Sellers or any of their affiliates, as the case may be, within
180 days after Closing shall bear interest at a rate of nine (9) percent per
annum until such amounts are paid by Charter LLC. As of the Closing, Magellan,
Charter LLC and the affiliates of Charter LLC that are parties to the Services
Agreements (as said term is defined in Section 5.01(j)) shall enter into a
security agreement, in a form acceptable to Magellan, subject to any required
consent of a senior lender, and all necessary or ancillary documentation related
thereto, to provide Magellan, in connection with providing security for the
repayment of such amounts or Advances, with a security interest in the rights of
said affiliates of Charter LLC to receive amounts under the Services
Agreements. In the event Charter LLC is not be able to obtain the consent of
its senior lender as provided above, it shall use its commercially reasonable
best efforts to provide comparable security to Magellan for repayment of the
above amounts.
4.11 Guarantees. (a) Charter LLC agrees to use its commercially reasonable
best efforts to secure the full and complete release, prior to the Closing (and
continuously thereafter if not released prior to Closing), of any and all
guarantees (the "Magellan Guarantees") by the Sellers or any of their affiliates
of any indebtedness or obligations of Charter LLC or its affiliates (other than
Charter Inc.) or any of the Subsidiaries or their subsidiaries (or under any
contract assigned to Purchaser pursuant to this Agreement) and to secure full
and complete release, prior to Closing (and continuously thereafter if not
released prior to Closing), of any and all obligations (the "Magellan
Obligations") (i) of the Sellers or any of their affiliates (other than the
Subsidiaries) under any
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agreement which was assigned to Charter LLC or its subsidiaries pursuant to
the Contribution Agreement and under which Sellers or any of their affiliates
(other than the Subsidiaries) remain obligors or indemnitors in any manner
and (ii) under any agreement of any of the Subsidiaries or their subsidiaries
(or under any contract assigned to Purchaser pursuant to this Agreement) and
under which Sellers or any of their affiliates (other than the Subsidiaries)
will remain obligors or indemnitors in any manner after the Closing. Set
forth on Schedule 4.11, to Sellers' Knowledge after reasonable inquiry, is a
list of all Magellan Guarantees and Magellan Obligations. To the extent,
after the date hereof, Sellers discover there are other Magellan Guarantees
or Magellan Obligations not identified on Schedule 4.11 ("Unlisted
Obligations"), Sellers may request Purchaser to add any such Unlisted
Obligation to Schedule 4.11. If Purchaser agrees to add an Unlisted
Obligation, Schedule 4.11 shall be automatically amended to include the
Unlisted Obligation, which shall be treated as if it had appeared on Schedule
4.11 at the time of execution of this Agreement. Should Purchaser object to
the addition of an Unlisted Obligation, Magellan may terminate any such
Unlisted Obligation (and the related underlying obligations, if any) provided
that such termination is permitted under the applicable contractual
agreement; provided further that Charter LLC or its affiliates shall agree to
such termination if permitted under such agreement or permitted by any third
party to such agreement. Charter LLC agrees that, to the extent any Magellan
Guarantee (listed on Schedule 4.11) of any such indebtedness or obligation or
any Magellan Obligation (listed on Schedule 4.11) is not fully and completely
released on or before the Closing, Charter LLC will indemnify and hold
harmless the Sellers and their respective affiliates and their successors and
assigns from, against and in respect of any and all claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and other judgments
(at equity or at law) and damages whenever arising or incurred (including,
without limitation, amounts paid in settlement, costs of investigation and
reasonable attorneys' fees and expenses) arising out of or relating to the
Magellan Guarantees and Magellan Obligations. The limitations on the amount
of indemnification obligations specified in Article VI shall not apply to
this provision.
(b) Magellan acknowledges that it has agreed to use its
commercially reasonable best efforts to secure the full and complete release,
prior to Closing (and continuously thereafter if not released prior to
Closing), of any and all guarantees made by the Subsidiaries, or of any
pledge of the stock or assets of the Subsidiaries, with regard to existing or
new Magellan credit facilities or other indebtedness or refinancings thereof
(the "Subsidiary Pledges and Guarantees"). Magellan agrees that to the
extent any Subsidiary Pledges and Guarantees are not fully and completely
released on or before Closing, Magellan will indemnify and hold harmless
Purchaser and its respective affiliates and their successors and assigns
from, against and respect of any and all claims, liabilities, obligations,
losses, costs, expenses, penalties, fines and other judgments (at equity or
at law) and damages whenever arising or incurred (including, without
limitation, amounts paid in settlement, costs of investigation and reasonable
attorneys' fees and expenses) arising out of or relating to the Subsidiary
Pledges and Guarantees. The limitations on the amount of indemnification
specified in Article VI shall not apply to this provision.
4.12 License of the Charter System. Magellan and the Purchaser shall
enter into a royalty free, non-exclusive license granting Magellan and its
wholly-owned subsidiaries the right to use the
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Charter System in connection with its respective existing hospital operations
headquartered in London, England and Nyon, Switzerland which license shall be
substantially in the form of Exhibit F attached hereto and will provide for a
mutually agreeable designated territory. Charter LLC and its affiliates
shall not compete within such designated territory nor shall Charter LLC
license to any other party the right to use the Charter System within such
designated territory. In the event Magellan sells its operations in London,
England to the party with which it is in current discussions within the next
(twelve) 12 months, Charter LLC agrees that Magellan may sublicense the
Charter System, including the Intellectual Property, to such party on
substantially the terms which have been discussed between Magellan and
Charter LLC, and which shall be added on Schedule 4.12 within twenty-one (21)
days of the date of this Agreement.
4.13 Creative Development Expenses. Charter LLC shall reimburse the
Sellers at Closing for actual creative developmental expenses incurred by the
Subsidiaries, with the prior approval of Charter LLC, through the Closing
Date.
4.14 Group Practice shall use commercially reasonable best efforts to
terminate the non-compete obligations related to the Services Agreement
between GPA Pennsylvania and Intercare dated December 1, 1994 (the "Intercare
Contract") or to terminate the Intercare Contract (and related agreements),
including, without limitation, the commitment to retransfer to Intercare
those assets purchased under the purchase agreement for no or minimal legal
consideration prior to Closing. In the event Group Practice is unable to
terminate the Intercare non-compete obligations or the Intercare Contract,
Magellan, at its option, may require Charter LLC to manage the Intercare
Contract for a management fee equal to Charter LLC's cost of managing the
Intercare Contract (provided, however, that in no event shall Charter LLC be
subject to the non-compete obligations) or may cause the shares of GPA
Pennsylvania to be transferred to an affiliate of Magellan which is not a
Subsidiary.
4.15 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially
reasonable best efforts to satisfy the conditions set forth in Article V
hereof insofar as such matters are within its control, and to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
4.16 Intercompany Receivable. Except as set forth on Schedule 4.16, or
as otherwise expressly provided in this Agreement, the parties acknowledge
and agree that all intercompany receivables due to any of the Subsidiaries
from Magellan or any of its affiliates, or due to Magellan or any of its
affiliates from any of the Subsidiaries, will extinguish as of the Closing,
and Magellan or its affiliates and the Subsidiaries shall not be obligated to
fund such receivables.
4.17 Financing. Immediately after the execution of this Agreement,
Charter LLC will begin preparation of any offering documents or other
material required in connection with obtaining financing for the transactions
contemplated by this Agreement. Charter LLC shall use its commercially
reasonable best efforts to obtain such financing, upon terms acceptable to
Charter LLC in its sole judgment, within 120 days after the date of this
Agreement; it being understood by the
17
parties that certain extensions to this 120 day period may be necessary to
complete all actions necessary to obtain such financing. Magellan agrees to
cooperate with Charter LLC in providing any information needed in connection
with obtaining the financing.
4.18 Merit Staff Model Clinics and RDTC. (a) After the date this
Agreement is executed, Magellan shall permit the Purchaser to conduct a due
diligence investigation of the staff model clinics of Merit Behavioral Care
Corporation ("Merit"). Within twenty-one (21) days after the execution of
this Agreement, Purchaser shall complete its due diligence and make an
election as to whether it will purchase from Magellan (subject to any
required consents) the staff model clinics of Merit and its subsidiaries for
no additional consideration, other than staff model clinics of Merit which
are required by any customer contract or dedicated to a specific customer
relationship of Merit or any of its subsidiaries (the "Retained Merit
Clinics"). The Sellers acknowledge and agree that the Purchaser may elect not
to purchase any or all of the staff model clinics of Merit and its
subsidiaries (provided Purchaser may not elect to purchase some but not all
of the assets of any particular staff model clinic of Merit) based on its due
diligence investigation. Such election by the Purchaser may be done so
without penalty to the Purchaser. To the extent Purchaser decides to
purchase from Magellan any or all staff model clinics of Merit or any of its
subsidiaries, Magellan and the Purchaser shall execute a definitive agreement
with respect to such staff model clinics of Merit and close the transaction
within fourteen (14) days after making the election referred to above. In
the event Magellan becomes aware of any Merit staff model clinic (other than
the Retained Merit Clinics) which was not disclosed to the Purchaser prior to
the date of this Agreement, it shall notify (the "Subsequent Notice")
Purchaser of such staff model clinic; the time periods referred to in this
Section 4.18 with respect to any such staff model clinic shall commence from
the date Purchaser receives the Subsequent Notice. In the event Purchaser
does not elect to purchase any staff model clinic of Merit, Magellan may
either continue to operate such staff model clinic or dispose of such staff
model clinic, in its sole discretion.
(b) Magellan shall permit the Purchaser to conduct a due diligence
investigation of the Resource Day Treatment Center ("RDTC"), a Pennsylvania
non profit entity. If requested in writing by Purchaser, Advantage
Behavioral shall use its commercially reasonable best efforts, consistent
with applicable law, to resign as the managing member of RDTC and have
Purchaser elected as the managing member.
4.19 Assets. The Sellers covenant and agree that the current assets of
the Subsidiaries will exceed, on an aggregate basis, the current liabilities
of the Subsidiaries, as of the date of Closing.
4.20 Lease of Monarch Space. Charter LLC agrees that, as of the
Closing, and subject to the required consent, it will enter into a sublease
with Magellan of the entire 9th floor leased under the Master Lease (defined
below) at 0000 Xxxxxxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx. The sublease will be
on substantially the same terms as Magellan leases this space under a lease
dated July 25, 1994 between Charter Medical Corporation and Equity Life
Society of the United States, as amended on July 19, 1996 (the "Master
Lease") and the sublease will be for a term equal to the remaining term under
the Master Lease.
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4.21 Software.
a. The parties agree that proprietary software presently owned by
Magellan (or its affiliates), the Subsidiaries or Charter LLC that is used
exclusively (or will be used exclusively after the Closing) by either
Magellan or its affiliates, the Subsidiaries or Charter LLC shall be
transferred to (or remain with, as the case may be) the exclusive user of
such software as of Closing. The parties acknowledge that certain
proprietary software ("Shared Software") is used, and will be used after
Closing, by each of Magellan, the Subsidiaries and Charter LLC. The parties
agree that the title to any Shared Software shall be transferred to (or
remain with, as the case may be) the predominate user of such Shared
Software, as of the Closing, and that the predominate user shall license the
software to the other users of such Shared Software in perpetuity, on a
non-exclusive, royalty free basis. Between the date of this Agreement and
the Closing, the parties shall cooperate with each other in determining which
parties are the exclusive, predominate or other users of proprietary software
and the parties shall take the necessary actions to implement the above
agreements.
b. The parties agree that to the extent software licensed from a
vendor ("Vendor Software") by Magellan (or its affiliates), the Subsidiaries
or Charter LLC is used exclusively (or will be used exclusively after
Closing) by Magellan or its affiliates, the Subsidiaries or Charter LLC, each
party shall use its commercially reasonable best efforts to register the
licenses in the name of the exclusive user of such Vendor Software as of
Closing. The parties also acknowledge that certain software licensed from a
vendor is used (or will be used after Closing) by each of Magellan, the
Subsidiaries or Charter LLC ("Shared Vendor Software"). The parties agree
that, under such circumstances, each party will use its commercially
reasonable best efforts to register in the name of the other users of such
Shared Vendor Software the appropriate number of licensees with respect to
such Shared Vendor Software as of the Closing Date. Between the date of this
Agreement and Closing, the parties shall cooperate with each other in
determining which parties are the exclusive or other users of Shared Vendor
Software and the parties shall take the necessary actions to implement the
above agreements.
c. To the extent maintenance/service agreements are in place for,
or otherwise relate to, the proprietary software, the Shared Software, the
Vendor Software or the Shared Vendor Software (jointly referred to herein as
the "Operations Software"), or the hardware upon which such Operations
Software is run, each party shall use its commercially reasonable best
efforts to assign each of such agreements, or the benefits of each of such
agreements, to the exclusive user or predominant user, as the case may be, of
Operations Software being serviced/maintained pursuant to such agreements .
Each party also agrees that it will use its commercially reasonable best
efforts to obtain continued maintenance/service support for other users of
the Operations Software and related hardware for the term of the existing
maintenance/service agreements. Between the date of this Agreement and
Closing, the parties shall cooperate with each other in determining which
parties are the exclusive, predominant or other users of the Operations
Software and the parties shall take the necessary actions to implement the
above agreements.
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4.22 Assignment of Contracts. As of the Closing, Green Spring shall
assign to Purchaser, subject to any required consents, all of the contracts,
agreements and leases of the Staff Model Clinics and Purchaser shall assume
any and all obligations and liabilities under such contracts, agreements and
leases from the Closing Date forward. In addition, Magellan shall use
commercially reasonable best efforts to assign to Purchaser, subject to any
required consents, those contracts with payors described on Schedule 4.22 and
Purchaser shall assume any and all obligations and liabilities under such
contracts. To the extent that a required consent with respect to the
assignment of any such contract has not been obtained by the Closing,
Magellan shall continue to use its commercially reasonable best efforts to
obtain such consent and until such time as such consents are obtained,
Magellan and/or the Magellan affiliate that is a party to the contract and
the Purchaser shall treat such contract as though it had been assigned to
and assumed by the Purchaser.
4.23 Franchise Fees. Magellan and Charter LLC agree that
contemporaneously with Closing (and only in the event the transactions
contemplated herein are consummated) they will execute an amendment to the
Franchise Agreement which will provide the following terms: (i) during the
period from February 1, 1998 until the Closing Date, the franchise fees due
under Section 5 of the Master Franchise Agreement will be $5 million per
month (prorated for any partial month); and (ii) all fees due under clause
(i) above and all accrued and unpaid franchise fees as of the date of this
Agreement shall be due and payable on the date which is no later than 180
days after the Closing Date. From the execution of this Agreement until the
Closing Date, to the extent Magellan has rights under Section 5.9 of the
Master Franchise Agreement, Magellan will use commercially reasonable best
efforts to obtain any consent of the lenders necessary under that certain
Credit Agreement dated as of February 12, 1998 (which Credit Agreement is
disclosed on Schedule 2.05) to permit Magellan to forebear from the exercise
of such rights. Between the date of this Agreement and the Closing, Charter
LLC will pay franchise fees to the extent it has available funds.
4.24 In the event that the transfer of the Group Practice stock triggers
a buy-out right of a party with which Group Practice has a joint venture, any
proceeds received pursuant to such buy-out right shall be part of the assets
being purchased by Charter LLC pursuant to this Agreement. Magellan will
consult with Charter LLC in the event any party with which Group Practice has
entered into a joint venture gives notice to Group Practice of its intent to
exercise any buy-out rights which may exist.
ARTICLE V
CLOSING CONDITIONS
5.01 Conditions to Obligations of the Purchaser. The obligation of the
Purchaser to deliver the Purchase Price at the Closing is subject to
satisfaction of the following conditions precedent, any and all of which may
be waived in writing by the Purchaser at its sole discretion:
(a) The representations and warranties of the Sellers contained
herein shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though such
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representations and warranties were made at and as of the Closing Date other
than representations and warranties that speak as of a specific date or time
(which need only be true and correct as of such date or time) and the Sellers
shall furnish Purchaser with an officer's certificate as to the foregoing;
(b) Each of the Sellers shall have performed in all material
respects all of its obligations required by this Agreement to be performed
by it on or prior to the Closing and the Sellers shall furnish Purchaser with
an officer's certificate as to the foregoing;
(c) As of the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental or regulatory agency of competent
jurisdiction to the effect that the transactions contemplated by this
Agreement may not be consummated and there shall be no action, suit or
proceeding pending, which is brought by any governmental or regulatory
agency, seeking to so enjoin the transaction;
(d) The applicable waiting period under the HSR Act shall have
expired or been terminated;
(e) The Purchaser shall have received all consents, approvals,
authorizations or orders required as set forth on Schedule 3.04;
(f) The Purchaser shall have received an opinion from Dow, Xxxxxx
& Xxxxxxxxx, in form and substance reasonably acceptable to the Purchaser,
dated as of the Closing Date: (i) as to the due authorization, execution,
delivery and enforceability of this Agreement; (ii) as to the good standing
of the Subsidiaries; and (iii) that the transactions contemplated by this
Agreement do not violate the organizational documents of the Subsidiaries.
(g) The Sellers (or their affiliates as applicable) shall have
executed the agreements referenced in Section 4.07 and as set forth on
Schedule 4.07, and the other agreements required to be entered into pursuant
to this Agreement;
(h) The Purchaser shall have obtained the financing referred to in
Section 4.17;
(i) The closing of the transactions contemplated by the Equity
Purchase Agreement shall have occurred or shall occur simultaneously with the
Closing; and
(j) Magellan and the Purchaser (or their respective affiliates)
shall have either (i) executed the JV Purchase Agreement, upon terms and
conditions mutually agreeable to Magellan and Purchaser, pursuant to which
Magellan will cause its subsidiaries which are joint venture partners (the
"Joint Venture Partners") in joint ventures ("Joint Ventures") which are the
subject of the services agreements dated June 16, 1997 (the "Services
Agreements") between Magellan and certain subsidiaries of Purchaser, to
transfer to Purchaser the joint venture interests in the Joint Ventures or
(ii) executed amendments to the Services Agreements, upon terms mutually
agreeable to the parties, pursuant to which Magellan will transfer to
Purchaser all rights to receive all
21
distributions with respect to the Joint Ventures other than pursuant to
working capital loan agreements and the Partial Satisfaction Agreement and
pursuant to which Purchaser shall assume all obligations of the Joint Venture
Partners thereafter arising with respect to the interests in the Joint
Ventures.
5.02 Conditions to Obligations of the Sellers. The obligation of the
Sellers to deliver the Subsidiary Equity Interests at the Closing is subject
to the satisfaction of the following conditions precedent, any or all of
which may be waived in writing by the Sellers at their sole discretion:
(a) The representations and warranties of the Purchaser contained
herein shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though such representations and
warranties were made at and as of the Closing Date other than representations
and warranties that speak as of a specific date or time (which need only be
true and correct as of such date or time) and Purchaser shall furnish the
Sellers with an officer's certificate as to the foregoing;
(b) The Purchaser shall have performed in all material respects
all of its obligations required by this Agreement to be performed by it on
or prior to the Closing and the Purchaser shall furnish the Sellers with an
officer's certificate as to the foregoing;
(c) As of the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental or regulatory agency of competent
jurisdiction to the effect that the transactions contemplated by this
Agreement may not be consummated and there shall be no action, suit or
proceeding pending, which is brought by any governmental or regulatory
agency, seeking to so enjoin the transaction;
(d) The Sellers shall have received all consents, approvals,
authorizations or orders required as set forth on Schedule 2.05;
(e) The applicable waiting period under the HSR Act shall have
expired or been terminated;
(f) The Purchaser (or its affiliate as applicable) shall have
executed the agreements referenced in Section 4.07 and as set forth on
Schedule 4.07 and the other agreements required to be entered into pursuant
to this Agreement;
(g) The Purchaser shall have obtained the financing referred to in
Section 4.17;
(h) The closing of the transactions contemplated by the Equity
Purchase Agreement shall have occurred or shall occur simultaneously with the
Closing; and
(i) Magellan and the Purchaser (or their respective affiliates)
shall have either (i) executed the JV Purchase Agreement, upon terms and
conditions mutually agreeable to Magellan
22
and Purchaser, pursuant to which Magellan will cause its subsidiaries which
are Joint Venture Partners in Joint Ventures which are the subject of the
Services Agreements between Magellan and certain subsidiaries of Purchaser,
to transfer to Purchaser the joint venture interests in the Joint Ventures or
(ii) executed amendments to the Services Agreements, upon terms mutually
agreeable to the parties, pursuant to which Magellan will transfer to
Purchaser all rights to receive all distributions with respect to the Joint
Ventures other than pursuant to working capital loan agreements and the
Partial Satisfaction Agreement and pursuant to which Purchaser shall assume
all obligations of the Joint Venture Partners thereafter arising with respect
to the interests in the Joint Ventures.
(j) The Boards of Directors of the Sellers shall have approved, in
accordance with Section 2.02, the transactions contemplated in this
Agreement.
ARTICLE VI
INDEMNIFICATION AND ASSUMPTION OF CERTAIN LIABILITIES
6.01 Indemnification for Breach of Representation or Warranty.
(a) After the Closing, each of the Sellers hereby jointly and
severally agrees to indemnify and hold the Purchaser harmless from any
claims, liabilities, obligations, losses, costs, expenses, penalties, fines,
judgments and other damages including reasonable attorneys' fees
(collectively "Damages"), incurred by the Purchaser as a result of (i) any
breach by any Seller of any representation or warranty of any of the Sellers
contained in Article II of this Agreement; or (ii) a failure by the Sellers
to perform in any material respect any covenant or agreement required to be
performed by it under this Agreement, or (iii) the litigation set forth on
Schedule 2.04 provided, however, that the Sellers shall have no liability to
the Purchaser under this paragraph unless the Purchaser shall have first
delivered to Magellan a written claim to indemnification hereunder on or
before the date which is 18 months after the Closing Date except as otherwise
provided in Section 8.01; provided, further, that the Sellers shall only be
liable to indemnify the Purchaser in the event that (i) Damages arising under
this Agreement for which claims may be brought under this Section 6.01(a),
and (ii) Damages for which indemnification claims may be brought by the
purchaser(s) under, and that are incorporated into this Agreement pursuant
to, the JV Purchase Agreement ("JV Damages") exceed, in the aggregate,
$6,000,000 (the "Indemnification Threshold"). In the event the
Indemnification Threshold is met or has been met at any time in the past,
Sellers shall indemnify Purchaser for all Damages hereunder for which claims
for indemnification may be brought. Notwithstanding the foregoing, the
Indemnification Threshold shall not be applicable to Damages incurred by the
Purchaser as a result of a breach by the Sellers of the representations and
warranties set forth in Sections 2.01(a), (b) and (d), 2.02, 2.04, 2.06, and
2.14, and with respect to clause (iii) in the first sentence of this Section
6.01(a) ("Purchaser's First Dollar Damages"). The parties acknowledge and
agree that Purchaser's First Dollar Damages or first dollar Damages incurred
by purchaser(s) under the JV Purchase Agreement shall not count toward or be
applied against the Indemnification Threshold.
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(b) After the Closing, Purchaser hereby agrees to indemnify and
hold the Sellers harmless from any Damages incurred by the Sellers as a
result of (i) any breach by the Purchaser of any representation or warranty
contained in Article III of this Agreement; or (ii) a failure by the
Purchaser to perform in any material respect a covenant or agreement required
to be performed by it under this Agreement; provided, however, that the
Purchaser shall have no liability to the Sellers under this paragraph unless
a Seller shall have first delivered to the Purchaser a written claim to
indemnification hereunder on or before the date which is 18 months after the
Closing Date; provided, further, that Purchaser shall only be liable to
indemnify the Sellers in the event that (i) Damages arising under this
Agreement for which claims may be brought under this Section 6.01(b), and
(ii) JV Damages for which indemnification claims may be brought by seller(s)
under the JV Purchaser Agreement exceed, in the aggregate, the
Indemnification Threshold. In the event the Indemnification Threshold under
this Section 6.01(b) is met or has been met at any time in the past, the
Purchaser shall indemnify the Sellers for all Damages hereunder for which
claims for indemnification may be brought. Notwithstanding the foregoing,
the representations and warranties set forth in Section 3.06 shall survive
until the date that the representations and warranties in the Contribution
Agreement survive and the Indemnification Threshold shall not be applicable
to Damages incurred by the Sellers as a result of a breach by Purchaser of
the representations and warranties in Sections 3.01, 3.02 and 3.06 ("Seller's
First Dollar Damages"). The parties acknowledge and agree that Seller's
First Dollar Damages or first dollar Damages incurred by seller(s) under the
JV Purchase Agreement shall not count toward or be applied against the
Indemnification Threshold provided for in this Section 6.01(b).
(c) Subject to the provisions of Sections 6.01(a) and 6.01(b), in
the event of the occurrence of an event which any party asserts a claim for
Damages, such party shall provide the indemnifying party with prompt notice
of such event and shall otherwise make available to the indemnifying party
all relevant information which is material to the claim and which is in the
possession of the indemnified party. If such event involves the claim of any
third party (a "Third-Party Claim"), the indemnified party shall have the
right to elect to join in the defense, settlement, adjustment or compromise
of any such Third-Party Claim, and to employ counsel to assist such
indemnifying party in connection with the handling of such claim, at the sole
expense of the indemnifying party, and no such claim shall be settled,
adjusted or compromised, or the defense thereof terminated, without the prior
consent of the indemnifying party unless and until the indemnifying party
shall have failed, after the lapse of a reasonable period of time, but in no
event more than 30 days after written notice to it of the Third-Party Claim,
to join in the defense, settlement, adjustment or compromise of the same. An
indemnified party's failure to give timely notice or to furnish the
indemnifying party with any relevant data and documents in connection with
any Third-Party Claim shall not constitute a defense (in part or in whole) to
any claim for indemnification by such party, except and only to the extent
that such failure shall result in any material prejudice to the indemnifying
party. If so desired by any indemnifying party, such party may elect, at
such party's sole expense, to assume control of the defense, settlement,
adjustment or compromise of any Third-Party Claim, with counsel reasonably
acceptable to the indemnified parties, insofar as such claim relates to the
liability of the indemnifying party, provided that such indemnifying party
shall obtain the consent of all indemnified parties before entering into any
24
settlement, adjustment or compromise of such claims, or ceasing to defend
against such claims, if as a result thereof, or pursuant thereto, there would
be imposed on an indemnified party any material liability or obligation not
covered by the indemnity obligations of the indemnifying parties under the
Acquisition Agreements (including, without limitation, any injunctive relief
or other remedy). In connection with any Third-Party Claim, the indemnified
party, or the indemnifying party if it has assumed the defense of such claim
pursuant to the preceding sentence, shall diligently pursue the defense of
such Third-Party Claim.
(d) The maximum amount of (i) the Sellers' indemnification
obligation under this Section 6.01 together with (ii) that of the seller(s)
under, and that are incorporated into this Agreement pursuant to, the JV
Purchase Agreement together with (iii) that of Charter Inc. under the Equity
Purchase Agreement shall not exceed $100,000,000, in the aggregate. The
maximum amount of (i) the Purchaser's indemnification obligation under this
Section 6.01 together with (ii) that of the purchaser(s) under the JV
Purchase Agreement together with (iii) that of Crescent Operating, Inc. under
the Equity Purchase Agreement shall not exceed $100,000,000, in the aggregate.
(e) The amount of any and all Damages for which indemnification is
provided pursuant to this Article VI shall be net of any amounts received by
the indemnified party under insurance policies with respect to such Damages
(it being understood that any proceeds obtainable from a captive insurance
company of the indemnified party or any amounts which the indemnified party
self-insures shall not be so taken into account). In the event that any
claim for indemnification asserted under this Article VI is, or may be, the
subject of the insurance coverages of the Sellers and Purchaser, the
indemnified party agrees to promptly notify the applicable insurance carrier
of such claim and tender defense thereof to such carrier. If insurance
coverage is denied (in whole or in part), or if no resolution of an insurance
claim shall have occurred upon payment of the relevant indemnification
obligation, the indemnifying party shall be subrogated to the rights of the
indemnified party against such insurance carrier.
(f) The indemnification provided in this Article VI and in Section
4.11 of this Agreement, and the obligations in Section 7.02 of this
Agreement, shall be the exclusive remedy of the parties for any breach of
this Agreement.
ARTICLE VII
TERMINATION PRIOR TO CLOSING
7.01 Termination Prior to Closing. This Agreement may be terminated and
abandoned at any time prior to the Closing:
(a) by the mutual consent of the Sellers and the Purchaser;
(b) by the Sellers or the Purchaser, in the event the Closing has
not occurred by the date which is six months after the date of this Agreement
(the "Cut-Off Date"), unless failure of
25
such consummation shall be due to the failure of the party seeking to
terminate this Agreement to comply in all material respects with the
agreements and covenants contained herein to be performed by such party on or
before the Cut-Off Date.
7.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.01 hereof, such termination shall be without
liability or obligation of either party (or any director, officer, employee,
or representative of such party) to the other party to this Agreement;
provided that if such termination shall result from the willful failure of
either party to fulfill a condition to the performance of the obligations of
the other party or to perform a covenant of this Agreement or from a breach
by either party to this Agreement, such party, once the Indemnification
Threshold has been met, shall be fully liable for any and all Damages
incurred or suffered by the other party as a result of such failure or breach
and provided the Indemnification Threshold shall not apply to breaches
referred to in the last sentences of Section 6.01(a) and 6.01(b). The
provisions of Sections 4.04 and 8.05 shall survive any termination hereof
pursuant to Section 7.01.
ARTICLE VIII
MISCELLANEOUS
8.01 Survival. The representations and warranties made by the parties
in this Agreement shall expire with, and be terminated and extinguished on
the date which is 18 months after the Closing Date, and thereafter neither
the Sellers nor the Purchaser, nor any officer, director or principal
thereof, shall have any liability whatsoever with respect to any such
representation or warranty, except that the representations and warranties in
Sections 2.01(a), (b) and (d), 2.02, 2.06 shall survive without limitation
and that the representations and warranties in Sections 2.04 and 2.14 shall
survive until the applicable statute of limitations period for any applicable
claim. The covenants and agreements of the parties contained herein shall
survive the Closing to the extent they relate to an agreement or obligation
to be performed after the Closing.
8.02 Notices. All notices, requests, instructions or documents
hereunder shall be in writing and delivered personally or by Federal Express,
or sent by telecopy, or sent by United States registered or certified mail,
postage prepaid as follows:
(i) if to the Purchaser:
Xxxx Xxxx, Esq.
General Counsel
Charter Behavioral Health Systems, LLC
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
26
(ii) if to any of the Sellers:
Xxxxx Xxxxxx, Esq.
General Counsel
Magellan Health Services, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
J. Xxxx Xxxxxxxx, Esq.
Dow, Xxxxxx & Xxxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
or such other address as any party may designated by written notice to the
other parties. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement will be deemed to have
been duly given only if delivered in person or by first class, prepaid,
registered or certified mail, or sent by courier or, if receipt is confirmed,
by telecopier.
8.03 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto contain the entire agreement between the parties hereto with respect
to the transaction contemplated herein, and no modification hereof shall be
effective unless in writing and signed by the party against which it is
sought to be enforced. This Agreement supersedes all prior understandings,
negotiations and agreements relating to the transactions contemplated herein.
8.04 Successors and Assigns. The terms, covenants and conditions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns; provided, however, that
neither party may assign its rights and obligations under this Agreement
without the prior written consent of the other party except that any Seller
may assign this Agreement to any other wholly-owned subsidiary of Magellan
provided that it transfers its ownership interest of any Subsidiary Equity
Interest to such wholly-owned subsidiary. It is understood by the parties
that Charter LLC anticipates becoming a corporation prior to the closing in
connection with the financing referred to in Section 4.17; the parties agree
to cooperate in taking further action in connection with Charter LLC's change
to a corporate form, provided that the Sellers are not required to take any
such further action which adversely affects the Sellers or their rights or
benefits under this Agreement. Within thirty (30) days from the date of this
Agreement, the parties shall use commercially reasonable best efforts to
agree to the structure of Charter LLC's conversion to a corporate form.
27
8.05 Expenses. Each of the Sellers and the Purchaser shall bear its own
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby. Charter LLC shall be solely responsible
for any fees and expenses associated with the purchase and startup of Golden
Isle and any consents, license transfers, authorizations or approvals
associated therewith.
8.06 Severability. If any provision of this Agreement shall be
determined by arbitration in accordance with Section 8.08 to be void and of
no effect, the provisions of this Agreement shall be deemed amended to delete
or modify, as necessary, the offending provision, and this Agreement as so
amended or modified shall not be rendered unenforceable or impaired but shall
remain in force to the fullest extent possible in keeping with the intention
of the parties hereto.
8.07 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, applicable in the case
of agreements made and to be performed entirely within such state, without
regard to such state's conflicts of laws rules.
8.08 Arbitration. The parties agree to resolve any dispute, controversy
or claim arising out of or relating to this Agreement, its interpretation or
performance (a "Controversy"), in accordance with this Section 8.08.
(a) The parties agree to negotiate in good faith for up to 45 days after
written notice by one party to the other party or parties to the
Controversy, in order to attempt to resolve such Controversy. In this
regard, the parties agree to involve senior management in these
discussions if necessary.
(b) In the event that such Controversy is not resolved through mutual
discussions within such 45 day period of time, such dispute or
controversy may be submitted by any such party to, and if so submitted
shall be finally settled by, arbitration in accordance with the
Commercial Arbitration Rules (The "Rules") of the American Arbitration
Association, and judgment upon the award may be entered in any court
where the arbitration takes place or any court having jurisdiction.
Any such arbitration shall take place in Atlanta, Georgia, and there
shall be one arbitrator. The parties shall attempt to agree on the
selection of the arbitrator within 60 days after receipt of the
written notice referred to in clause (a); if the parties agree, the
agreed-upon person shall be the arbitrator; if the parties cannot so
agree, the arbitrator shall be selected by the American Arbitration
Association in accordance with the Rules. The arbitrator may order
specific performance or other equitable relief or remedies to the
extent he or she deems it appropriate, in any situation in which a
court could so order. All costs of such arbitration, including the
compensation of the arbitrator (but not including the parties'
attorneys', accounts' and other professionals' fees, as to which each
party shall pay its own), shall be allocated 50% to the Purchaser and
its affiliates, and 50% to such Sellers as are parties to the
arbitration. The decision of the arbitrators shall be final and
binding upon the parties, their successors and assigns, and they shall
comply with such decision in good faith, and each party
28
hereby submits itself to the jurisdiction of the courts of the place
where the arbitration is held, but only for the entry of judgment with
respect to and to enforce the decision of the arbitrators hereunder.
8.09 Headings. The headings in this Agreement are included herein for
convenience of reference only, and shall not constitute a part of this
Agreement for any other purpose.
8.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and same instrument.
8.11 Waiver. Any of the terms or conditions of this Agreement which may
be lawfully waived may be waived in writing at any time by the party which is
entitled to the benefits thereof. Any waiver of any of the provisions of
this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce
any provision of this Agreement shall be deemed to or shall constitute a
waiver of such provision and no waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
8.12 Variations of Pronouns; Definitions; Number; Gender. All pronouns
and all variations thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person or
persons may require. Whenever used herein the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall include all genders. "Person" shall mean an individual, firm, trust,
association, corporation, limited liability company, partnership, government
(whether federal, state, local or other political subdivision, or any agency
or bureau of any of them) or other entity.
8.13 Group Practice and Staff Model Clinics. The Sellers hereby
acknowledge and agree that the Purchaser's due diligence investigation of
Group Practice and the Staff Model Clinics may continue after the date this
Agreement is executed. Notwithstanding any provision to the contrary, the
Sellers further acknowledge and agree that the Purchaser, at any time prior
to the Closing Date and in its sole and absolute discretion, may elect not to
purchase the shares of Group Practice (provided Purchaser may not elect to
purchase some but not all of the shares of Group Practice) and/or the Staff
Model Clinics (provided Purchaser may not elect to purchase some but not all
of the assets of any particular Staff Model Clinic) based on its due
diligence investigation. Such election by the Purchaser may be done so
without penalty to the Purchaser. There shall be no reduction in the Purchase
Price if Purchaser determines not to purchase the shares of Group Practice
and/or the Staff Model Clinics. Schedule 8.13 sets forth those staff model
clinics of Magellan (not including the Merit staff model clinics referred to
in Section 4.18) which will be retained by Magellan and will not be subject
to Section 8.13.
29
IN WITNESS WHEREOF, this Purchase Agreement has been duly executed by
the parties hereto as of the date first above written.
MAGELLAN HEALTH SERVICES, INC.
By: /s/ Xxxxx X. XxXxxxxx
-------------------------------------------
CHARTER BEHAVIORAL CORPORATION
By: /s/ Xxxxxx XxXxxx
-------------------------------------------
CHARTER BEHAVIORAL HEALTH
SYSTEMS, INC.
By: /s/ Xxxxxx XxXxxx
-------------------------------------------
GREEN SPRING HEALTH SERVICES, INC.
By: /s/ Xxxxxxxxx Xxxxxxx
-------------------------------------------
ADVANTAGE BEHAVIORAL SYSTEMS, INC.
By: /s/ Xxxxxxxxx Xxxxxxx
-------------------------------------------
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
By: /s/ Xxxxx Xxxxx
-------------------------------------------
30
