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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
HORIZON MENTAL HEALTH MANAGEMENT, INC.
AS PURCHASER,
XXXXX X. XXXXXX, M.D.,
XXXXX X. XXXXXXX,
E. XXXXXXX XXXXX, AND
THE CENTER FOR HEALTH & CREATIVE
AGING, P.C. PROFIT SHARING PLAN
AS SELLERS,
AND
GERIATRIC MEDICAL CARE, INC.
AS OF
FEBRUARY 24, 1997
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TABLE OF CONTENTS
ARTICLE 1 DEFINED TERMS/SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Agreement to Sell and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Contract Review Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Joinder of Other Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Disputed Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH SELLER . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Title to Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Absence of Breach; No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Due Organization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Subsidiaries/Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Licenses/Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Copies/Status of Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Partial Hospitalization Management Contracts . . . . . . . . . . . . . . . . . . . . . 12
4.14 Employees, Et Cetera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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4.16 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.17 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.18 Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.19 Labor Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.21 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.23 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.24 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.25 Improper Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Absence of Breach; No Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 COVENANTS OF THE SELLERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Breach of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 No Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11 Updating of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.12 No Employment or Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7 COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 No Employment or Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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ARTICLE 8 CONDITIONS TO OBLIGATIONS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1 Conditions to Obligations of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 9 CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Conditions To Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 10 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 Date of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Actions by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Consulting/Release Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Post-Closing Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Actions by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Post-Closing Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Post-Closing Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Escrow Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Limited Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Additional Provisions of Limited Power of Attorney . . . . . . . . . . . . . . . . . . 32
10.5 Funding of Certain Company Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY; POST-CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Representations and Warranties to Survive . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.3 Indemnity Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) General Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Specific Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Time Limits for Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.5 Remedies; Default; Notice and Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.6 Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.7 Certain Post-Closing Management Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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ARTICLE 12 NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.1 Covenant Not to Compete; Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.2 Non-Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Nondisparagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.4 Reasonableness; Reformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Remedies for Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(b) Suit for Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 13 TERMINATION; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(b) By Purchaser or Sellers: Condition Precedent . . . . . . . . . . . . . . . . . . . . . 40
(c) By Purchaser or Sellers: Representations, Warranties and Covenants . . . . . . . . . . 40
13.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 14 CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.4 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.5 Closing Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.7 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.8 Counsel to Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.9 Counsel to Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.11 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.12 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.13 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.14 Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.15 Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.16 PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.17 Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.18 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.19 Welfare Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 15 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.1 Further Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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15.3 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.4 Binding Effect/Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.5 Exhibits/Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.6 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.7 Headings/Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.8 Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.9 Attorney's Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.10 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
LIST OF EXHIBITS
Exhibit A - Share Ownership of Company Capital Stock
Exhibit B - Signature Page and Joinder Agreement
Exhibit C - Form of Opinion of Counsel to Purchaser
Exhibit D - Consulting Agreement
Exhibit E - Form of Opinion of Counsel to Sellers
Exhibit F - Form of Release
Exhibit G - Post-Closing Escrow Agreement
LIST OF SCHEDULES
Schedule 3.2 - Unpaid Stock Subscriptions
Schedule 4.1 - States Where Company Qualified
Schedule 4.3 - Consents
Schedule 4.4 - Capitalization
Schedule 4.5 - Licenses, Etc.
Schedule 4.6 - Financial Statements
Schedule 4.7 - Adverse Changes
Schedule 4.8 - Undisclosed Liabilities
Schedule 4.9 - Assets
Schedule 4.10 - Litigation
Schedule 4.11 - Real Property Leases
Schedule 4.12 - Intellectual Property
Schedule 4.13 - Material Contracts
Schedule 4.14 - Employees, Etc.
Schedule 4.15 - Employee Benefit Plans
Schedule 4.16 - Receivables
Schedule 4.17 - Payables
Schedule 4.20 - Insurance
Schedule 4.22 - Environmental Matters
Schedule 4.23 - Taxes
Schedule 4.24 - Transactions with Affiliates
Schedule 6.4 - Certain Pre-Closing Matters
Schedule 8.1(h) - Xxxxxx Indebtedness
Schedule 11.7 - List of Hospital Locations
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of the
24th day of February, 1997 (the "Effective Date") by and among Horizon Mental
Health Management, Inc., a Delaware corporation ("Purchaser"), Xxxxx X. Xxxxxx,
M.D., Xxxxx X. Xxxxxxx, E. Xxxxxxx Xxxxx and The Center for Health & Creative
Aging, P.C. Profit Sharing Plan (collectively referred to herein as the
"Sellers" and individually as a "Seller") and Geriatric Medical Care, Inc., a
Tennessee corporation (referred to herein as the "Company").
WHEREAS, the Sellers each own the respective number of shares of
Common Stock and Preferred Stock of the Company set forth in Exhibit A (all of
such shares being collectively referred to herein as the "Shares"); and
WHEREAS, the Shares represent the percentage of the total issued and
outstanding shares of capital stock of the Company set forth in Exhibit A; and
WHEREAS, all the other shareholders of the Company will be provided
the opportunity to, and may, join as a party to this Agreement and become a
Seller hereunder; and
WHEREAS, subject to the terms and conditions hereinafter set forth,
the Sellers desire to sell to the Purchaser, and the Purchaser desires to
purchase from the Sellers, the Shares;
NOW, THEREFORE, in consideration of the premises and the mutual terms
and conditions herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINED TERMS/SCHEDULES
1.1 Defined Terms. As used in this Agreement, capitalized terms
shall have the meanings expressly set forth herein for such terms, and variants
and derivatives of such defined terms shall have correlative meanings. To the
extent that certain of the defined terms set forth herein express agreements
between or among parties to this Agreement, the parties agree to the same by
execution of this Agreement. The term "Sellers" shall include other
shareholders of the Company that join as a party to this Agreement in addition
to the shareholders specifically named in the introductory paragraph of this
Agreement.
1.2 Schedules.
(a) General. References to a Schedule shall include any
applicable disclosure expressly set forth on the face of any other Schedule
even if not specifically cross-referenced to such other Schedule. It is
specifically acknowledged by the parties hereto that certain agreements and
documents listed on the Schedules are not to be delivered herewith, but were
previously or will be delivered or made available to Purchaser or its
representatives in
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connection with the due diligence investigation of the Company conducted by
Purchaser and its representatives prior to Closing (hereinafter defined). All
such agreements and documents made available or delivered to Purchaser by the
Company and the Sellers shall be originals or true and correct copies of the
originals of all such agreements and documents. Each Schedule and the
agreements and documents expressly listed in each Schedule shall be considered
a part hereof as if set forth herein in full; provided, however, that the
representations and warranties of Sellers set forth in this Agreement shall not
be affected or deemed modified, waived or limited in any respect by the
information contained in any agreement or document listed or referenced in the
Schedules unless and only to the extent that any qualification, modification,
exception or limitation to any representation and warranty of the Sellers is
expressly set forth on the face of a Schedule or unless and only to the extent
that Purchaser has actual knowledge of the information contained in any
agreement or document listed or referenced in the Schedules as provided and
defined in Section 11.1(b) of this Agreement.
(b) Delivery. It is specifically acknowledged by the
parties hereto that, on the Effective Date, the Sellers had not delivered to
the Purchaser the Schedules to this Agreement. The Sellers have agreed to
deliver the Schedules to this Agreement to Purchaser on or before the
expiration of the Contract Review Period (as defined in Section 2.4 below).
Upon delivery of the Schedules, the Purchaser in its sole discretion shall have
the right to accept or reject the Schedules as delivered by Sellers. In the
event that the Purchaser accepts the Schedules, then this Agreement shall
remain in full force and effect and the Schedules as so delivered by Sellers
will become the Schedules to this Agreement. If Purchaser rejects the
Schedules, then Purchaser shall have the right to terminate this Agreement by
written notice to the Sellers and the Company. Purchaser shall also have the
right to terminate this Agreement if Sellers fail to deliver the Schedules on
or before the expiration of the Contract Review Period.
ARTICLE 2
PURCHASE AND SALE
2.1 Agreement to Sell and Purchase. Subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants herein set forth, at the Closing the Sellers shall sell to
Purchaser, and Purchaser shall purchase from the Sellers, the Shares, free and
clear of any and all liens, claims, options, charges, pledges, security
interests, voting agreements or trusts, encumbrances or other restrictions or
interests of any kind or nature whatsoever (collectively, "Claims").
2.2 Purchase Price. Subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants
herein set forth, the Purchaser shall pay at the Closing, by certified or
cashier's check, as consideration for the Shares, an aggregate purchase price
in an amount equal to the respective percentage of total equity ownership of
the Company owned by the Sellers, determined on a fully converted basis
assuming the exercise of all outstanding warrants, options or rights to acquire
capital stock of the Company and the conversion of all outstanding securities
convertible into capital stock of the Company as shown on Exhibit A and
Schedule 4.4, times an amount equal to Five Million One Hundred Thousand
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Dollars ($5,100,000) less the reduction to such amount applicable pursuant to
the provisions of Section 8.1(h) of this Agreement and less the further
reduction to such amount pursuant to the provisions of Section 9.1(j) of this
Agreement but plus the increase to such amount pursuant to the provisions of
Section 9.1(k) of this Agreement (as so adjusted, the "Purchase Price").
2.3 Allocation of Purchase Price. The portion of the Purchase
Price allocated and payable to each Seller shall be determined on the basis
that the respective amount of the total equity ownership of the Company owned
by each Seller represents of the aggregate total equity ownership of the
Company owned by all Sellers.
2.4 Contract Review Period. Notwithstanding any provision of this
Agreement to the contrary, this Agreement shall be subject to and contingent
upon the Purchaser determining during the period commencing on the Effective
Date and continuing through and including twenty-one (21) days after the
Effective Date (the "Contract Review Period") that the management contracts
between the Company and hospitals for whom the Company is providing management
services (the "Management Contracts") are satisfactory to the Purchaser in its
sole discretion. During such Contract Review Period, Purchaser shall make such
review of the Management Contracts and may make such contacts with the
hospitals which are parties to the Management Contracts as Purchaser deems
necessary or appropriate to confirm the terms of the Management Contracts, to
confirm that the Management Contracts are not in default, and to confirm such
other matters pertaining to the Management Contracts as Purchaser may deem
appropriate; provided, however, that Purchaser shall not contact any hospital
(in person or by telephone) concerning any Management Contracts or any other
matter relating to the Company's business relationship with any such hospital
unless a designated representative of the Company participates in any such
meeting or conversation. Sellers and the Company covenant and agree that the
Company shall cooperate in good faith to make designated representatives
available for such purposes in order that Purchaser may complete such review of
all the Management Contracts within the Contract Review Period.
At any time during the Contract Review Period, the Purchaser shall have
the right to terminate this Agreement by written notice to Sellers and to the
Company if Purchaser determines in its sole discretion that the Management
Contracts are not satisfactory to it. If Purchaser fails to terminate this
Agreement on or before the expiration of the Contract Review Period, then
Purchaser shall be deemed to have waived such right of termination. In the
event Purchaser terminates this Agreement under the terms of this Section 2.4,
then neither Sellers, Purchaser nor the Company shall have any further rights
or obligations under this Agreement of any kind whatsoever except solely for
the provisions of Sections 6.12, 7.4 and 7.6 which shall survive such
termination.
2.5 Joinder of Other Shareholders. Promptly after execution and
delivery of this Agreement, the Purchaser shall offer to all other shareholders
of the Company the right to join as a party to this Agreement. The Sellers and
the Company shall cooperate and assist Purchaser in communicating such offer to
the other shareholders. Each other shareholder of the Company who elects to
join as a party to this Agreement shall be required to execute and deliver a
Signature Page and Joinder Agreement in the form of Exhibit B attached hereto.
Each
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shareholder of the Company that so joins as a party to this Agreement shall
become a "Seller" hereunder.
2.6 Disputed Instruments. The parties acknowledge that the
Purchase Price to be paid to the Sellers under this Agreement will be
determined based on a fully-converted basis assuming the exercise of all
outstanding warrants, options or rights to acquire capital stock of the Company
and the conversion of all outstanding securities convertible into capital stock
of the Company. Set forth in Schedule 4.4 is a warrant held by Ramsay
Healthcare (the "Ramsay Warrant") and certain outstanding convertible notes of
the Company (the "Convertible Notes"). Schedule 4.4 also sets forth the
percentage amount of the total equity ownership of the Company on a
fully-converted basis which was attributed to the Ramsay Warrant and the
Convertible Notes for the purposes of calculating the Purchase Price payable to
the Sellers under this Agreement.
Sellers and the Company contend that:
(a) The Ramsay Warrant is subject to an obligation of
Ramsay to comply with the terms of that certain agreement, dated August 22,
1994, between Ramsay and the Company, as amended by amendment dated January 26,
1996, which contemplates the continuation of two certain management agreements
through the expiration of their respective initial terms and it is the position
of the Company that the failure of Ramsay to satisfy such contractual
obligation will cause the Ramsay Warrant to be void and of no effect; and
(b) It is the position of the Company that certain of the
holders of the Convertible Notes have waived their right to convert their
respective Convertible Notes into capital stock of the Company by electing
certain accelerated prepayments of the Convertible Notes.
Purchaser shall have the right to calculate the Purchase Price payable
to the Sellers taking into account the equity ownership of the Company on a
fully-converted basis represented by the Ramsay Warrant and the Convertible
Notes and the total equity ownership of each Seller reflected in Exhibit A has
been calculated on such fully-converted basis. However, in the event that the
Convertible Notes are paid in full and not converted or there is a final and
binding determination by agreement of the parties or by a court of competent
jurisdiction that some or all of such Convertible Notes are not convertible,
then Purchaser shall promptly pay to Sellers that amount of the Purchase Price
which otherwise would have been payable to Sellers if the Convertible Notes had
not been outstanding on the date of Closing.
In the event that there is a final and binding determination by
agreement of the parties or by a court of competent jurisdiction within one (1)
year from the date of the Closing (or such later date as a final order may be
entered in the event litigation concerning such matter is pending at the end of
such year) that the Ramsay Warrant is void and of no effect, then the Purchaser
shall promptly pay to the Sellers that amount of the Purchase Price which
otherwise would have been payable to the Sellers if the Ramsay Warrant had not
been outstanding on the date of the Closing. If there has been no final and
binding determination that the Ramsay
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Warrant is void and of no effect within one (1) year (or such later date as a
final order may be entered in the event litigation concerning such matter is
pending at the end of such year), then the Purchaser shall have no obligation
to the Sellers of any kind whatsoever.
It is expressly understood that in the event the holders of the
Convertible Notes convert such Convertible Notes at or prior to the Closing or
the holder of the Ramsay Warrant exercises such Ramsay Warrant at or prior to
the Closing, then such holders may join as a party to their Agreement by the
execution and delivery of the Signature Page and Joinder Agreement as
contemplated by Section 2.5 above.
The Sellers shall have the right, at their own expense, to bring an
action to resolve the validity of the Ramsay Warrant and the convertibility of
the Convertible Notes described above. In the event that the Ramsay contracts
are terminated early by Ramsay, then Purchaser shall have the right to bring an
action to declare the Ramsay Warrant void and of no effect if the Sellers
decline to do so. In such event, if the Ramsay Warrant is declared void in
such proceeding, then the amount payable to the Sellers shall be reduced by the
aggregate amount of the costs and expenses of Purchaser in prosecuting such
declaratory judgment action. In the event that the Ramsay Warrant is not
declared void in such proceeding, the Purchaser shall be paid the aggregate
amount of such costs and expenses out of the post-closing escrow account
described in Section 10.4 of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller, severally and not jointly, represents and warrants to
Purchaser that, as of the Effective Date and as of the Closing Date:
3.1 Authority Relative to This Agreement. This Agreement has been
duly and validly executed and delivered by the Seller and constitutes a valid
and binding agreement of the Seller enforceable in accordance with its terms.
The other agreements to be executed and delivered by the Seller pursuant to
this Agreement will be valid and binding agreements of the Seller enforceable
in accordance with their respective terms when so executed and delivered by the
Seller. With respect to each Seller that is an entity and not an individual,
each entity has all requisite power and authority to enter into this Agreement
and the execution, delivery and performance of this Agreement by such entity
has been duly authorized by all requisite action on the part of such entity.
3.2 Title to Stock. Except as set forth in Schedule 3.2 attached
hereto, each Seller is the unconditional sole legal, beneficial, record and
equitable owner of the Shares, free and clear of any and all Claims. Schedule
3.2 set forth certain unpaid subscriptions for certain shares of the
outstanding capital stock of the Company which shall be paid on or prior to
Closing so that, on the date of Closing, all of such shares shall be fully paid
and nonassessable. At the Closing, each Seller will convey to Purchaser valid
and marketable title to the Shares owned by each Seller as set forth on Exhibit
A, free and clear of any and all Claims.
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3.3 Absence of Breach; No Consent. The execution, delivery, and
performance of this Agreement and the other agreements to be executed and
delivered pursuant to this Agreement by the Seller does not and will not: (i)
contravene any order, writ, judgment, injunction, decree, determination, or
award of any court or other authority which affects or binds the Seller or the
Shares owned by such Seller, (ii) conflict with or result in a breach of or
default under any indenture, loan or credit agreement or any other agreement or
instrument to which the Seller is a party or by which the Seller or the Shares
are bound, or (iii) require the authorization, consent, approval or license of
any third party or entity.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
In addition to the representations and warranties made in Article 3, the
Sellers, jointly and severally, represent and warrant to Purchaser that, as of
the Effective Date and as of the Closing Date:
4.1 Due Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee with all requisite corporate power and authority to conduct
its business operations as being conducted on the Effective Date. Except as
set forth in Schedule 4.1 attached hereto, the Company is duly qualified and in
good standing as a foreign corporation authorized to do business in each
jurisdiction where the failure to be so authorized would have a material
adverse effect on the business or operations of the Company. Schedule 4.1 is a
complete and accurate list of all jurisdictions in which the Company is so
authorized. The Company shall cure all exceptions noted on Schedule 4.1 on or
prior to the Closing. Sellers have delivered to Purchaser complete and correct
copies of the articles of incorporation and bylaws of the Company as amended to
and in effect on the Effective Date. The Company is not in violation of any
term or provision of its articles of incorporation or bylaws.
4.2 Subsidiaries/Investments. The Company has no subsidiaries,
whether direct or indirect. The Company has no equity interest or investment
in, and does not possesses any other right or obligation to purchase any equity
or other investment in, and is not a partner of or joint venturer with, any
other person or entity.
4.3 Due Authorization. Except for the consents reflected on
Schedule 4.3, the execution and delivery of this Agreement and the performance
of the transactions contemplated by this Agreement and all other instruments,
agreements, certificates and documents contemplated hereby to which either the
Sellers and the Company are or will be a party does not, on the date hereof,
and will not, on the Closing Date, (i) violate any decree or judgment of any
court or governmental authority which may be applicable to the Company; (ii) to
the knowledge of the Sellers, violate any law, rule or regulation, or any
decree or judgment of any court or governmental authority binding on the
Company; (iii) violate or conflict with, or result in a breach of, or
constitute a default (or an event which, with or without notice or lapse of
time or both, would constitute a default) under, or permit cancellation of, or
result in the creation of
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any encumbrance upon, any of the Shares or any of the assets of the Company
under any of the terms, conditions, or provisions of any contract, lease, sales
order, purchase order, indenture, mortgage, note, bond, instrument, license or
other agreement to which the Company is a party, or by which the Company or its
assets is bound; (iv) permit the acceleration of the maturity of any
indebtedness of the Company; (v) violate or conflict with any provision of the
articles of incorporation or bylaws of the Company and (vi) has been duly
authorized by all requisite corporate action of the Company.
4.4 Capitalization of the Company. The authorized capital stock
of the Company consists of One Million (1,000,000) shares of Common Stock,
$0.01 par value per share, of which 168,722 shares are validly issued and
outstanding and Five Hundred Thousand (500,000) shares of Preferred Stock,
$0.01 par value per share, of which 10,671 shares are validly issued and
outstanding. Except as set forth in Schedule 4.4 attached hereto, all such
outstanding shares of capital stock are fully paid and nonassessable and, on
the date of Closing, all of the outstanding shares of capital stock will be
fully paid and nonassessable. All of the outstanding shares of Common Stock
and Preferred Stock of the Company are owned beneficially and of record as set
forth on Exhibit A. Each Seller owns beneficially and of record the shares of
capital stock of the Company set opposite the name of such Seller in Exhibit A.
The Company has provided to the Purchaser a correct and complete copy of the
stock registry of the Company listing all stockholders of the Company and the
outstanding share certificates and total number of shares issued to each
stockholder of the Company. The Company has no other capital stock authorized
for issuance and has no treasury shares. The Company has not purchased any
shares of its capital stock from a shareholder within the two (2) year period
prior to the Effective Date. Except as set forth in Schedule 4.4, there are no
outstanding options, warrants, convertible instruments, or other rights,
agreements, or commitments to issue or acquire any shares of common stock or
any other security constituting, or convertible or exchangeable into, capital
stock of the Company. Except as set forth in Schedule 4.4, since the date of
the Company Balance Sheet (as defined in Section 4.6 below), no shares of the
Company's capital stock, no options, warrants, or other rights, agreements, or
commitments (contingent or otherwise) obligating the Company to issue shares of
capital stock, and no other securities or instruments convertible or
exchangeable into shares of capital stock, have been executed or issued by the
Company. Except as set forth in the articles of incorporation of the Company,
the Company has not granted and is not a party to any agreement granting
preemptive rights, rights of first refusal, or registration rights with respect
to its outstanding capital stock or any capital stock of the Company to be
issued in the future. The Company is not bound by any exclusive agency or
indemnity agreement applicable to the issuance of shares of its capital stock
after the Effective Date.
4.5 Licenses/Compliance with Law. The Company has the lawful
authority and all federal, state or local governmental authorizations,
certificates of authority, licenses or permits necessary for or required to
conduct its respective business as such is presently being conducted. Schedule
4.5 contains a list and description of all authorizations, certificates of
authority, licenses and permits, including those granted or derived from
governmental sources, issued or granted to the Company. For the proper
conduct of its business, the Company is not required to obtain any additional
certificates of authority, permits, licenses or similar authorizations from
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any governmental authority other than it has already obtained as listed on
Schedule 4.5. There are no pending or, to the knowledge of the Sellers,
threatened legal, administrative, arbitration or other actions, notices, or
proceedings nor any pending or, to the knowledge of the Sellers, threatened
governmental investigations by any federal, state or local government or any
subdivision thereof or by any public or private group which assert or allege
any violation of or non-compliance with any governmental requirements or which
would have the effect of limiting, prohibiting or changing the business
operations of the Company as conducted by the Company. The Company has made
all filings with governmental agencies required for the conduct of its business
operations. There are no judgments against the Company, and no orders, rules,
consent decrees or injunctions of any court, governmental department,
commission, agency or instrumentality by which the Company is bound or to which
the Company is subject. The Company has not entered into or is subject to any
judgment, consent decree, compliance order or administrative order or received
any request for information, notice, demand letter, administrative inquiry or
formal or informal complaint or claim. Neither the Company's operations nor
any of the assets owned, leased, occupied or used by the Company in the
operation of its business materially violates or fails to comply in any
material respect with any applicable federal, state or local codes, laws, rules
or regulation.
4.6 Financial Statements. The Company has delivered to Purchaser
a copy of (i) the audited financial statements of the Company as of September
30, 1994, 1995 and 1996 consisting in each case of a balance sheet at such
respective dates, and the related statements of income, changes in
stockholders' equity and cash flows for the applicable twelve (12) month period
then ended and (ii) unaudited financial statements of the Company as of
December 31, 1996 (the "Balance Sheet Date") consisting of a consolidated
balance sheet of the Company at such date (the "Company Balance Sheet") and the
related statements of income for the applicable month and year-to-date period
then ended. Complete and accurate copies of all such financial statements are
attached hereto as Schedule 4.6 (the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial position of
the Company, and the results of the operations, changes in stockholders' equity
and cash flows of the Company, as of the respective dates thereof and for the
respective periods covered thereby, in conformity with generally accepted
accounting principles ("GAAP"). Except as set forth in the Company Balance
Sheet included in the Financial Statements, as of the Balance Sheet Date, there
were no liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due, which are required by
GAAP to be set forth in a balance sheet of the Company which have not been so
set forth in the Company Balance Sheet. Except as set forth on Schedule 4.6,
no dividends or distributions with respect to the capital stock of the Company
had been declared but not paid prior to the Balance Sheet Date. The Financial
Statements were prepared from the books and records of the Company. At the
Balance Sheet Date, the Company owned each of the assets included in the
Company Balance Sheet. From the date hereof through the Closing Date, the
Company will continue to prepare monthly and year-to-date unaudited financial
statements on the same basis as the Financial Statements and will promptly
deliver the same to Purchaser. The foregoing representations will be
applicable to all such monthly unaudited financial statements so prepared and
delivered; provided, however, that such unaudited financial statements shall be
subject to normal year-end adjustments, none of which will be material.
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4.7 No Adverse Change. Except as set forth on Schedule 4.7, since
the Balance Sheet Date, the business of the Company has been conducted only in
the ordinary course and there has not been (i) any material adverse change in
the financial condition, business, properties, assets, or results of operations
of the Company (financial or otherwise) exclusive of any general economic
factors affecting the health care industry in general; (ii) any material loss
or damage (whether or not covered by insurance) to any of the assets of the
Company which materially affects or impairs the ability of the Company to
conduct its business as previously conducted or any other event or condition of
any character which has materially and adversely affected the business or
operations of the Company; (iii) the attaching, placing or granting of, or the
agreement to attach, place or grant, any encumbrance on any of the assets of
the Company; (iv) any sale or transfer of any material portion of the assets of
the Company; (v) any material changes in the terms of or defaults under, any
material contract of the Company; (vi) any material change in the accounting
systems, policies or practices of the Company; (vii) any waiver by or on behalf
of the Company of any rights which have any material value; (viii) no taking
under condemnation or right of eminent domain of any of the assets of the
Company; (ix) any entry into or termination of any management contract or any
other material commitment, contract, agreement, or transaction (including,
without limitation, any material borrowing or capital expenditure or sale or
other disposition of any material assets) by the Company; (x) any redemption,
repurchase, or other acquisition of any of its capital stock by the Company, or
any issuance of capital stock of the Company or of securities convertible into
or rights to acquire any such capital stock; (xi) any dividend or distribution
declared, set aside or paid on capital stock of the Company; (xii) any transfer
or right granted by the Company of or under any material lease, license,
agreement, patent, trademark, trade name, service xxxx or copyright; (xiii) any
sale or other disposition of any material asset of the Company, or any
mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset of the Company, or any agreement relating to or contemplating
any of the foregoing not in the ordinary and usual course of business; or (xiv)
any default or breach by the Company in any material respect under any material
contract, license, or permit. Since the Balance Sheet Date, the Company has
conducted its business only in the ordinary and usual course of business and,
without limiting the foregoing, no changes have been made in (i) employee
compensation levels, (ii) the manner in which employees of the Company are
compensated, or (iii) supplemental benefits provided to any employees.
4.8 No Undisclosed Liabilities. True and correct copies of all
notes, agreements or other documents evidencing the outstanding debt (as such
term is determined pursuant to GAAP of the Company, as amended to and in effect
on the Effective Date, have been delivered to Purchaser by the Company. The
Company has no debt (as such term is determined pursuant to GAAP) or other
liabilities which are not adequately disclosed and reflected or reserved
against on the face of the Company Balance Sheet, except liabilities incurred
since the Balance Sheet Date in the ordinary course of business consistent with
past practice which, in the aggregate, would not have a material adverse effect
on the condition (financial or otherwise), assets or business of the Company.
Schedule 4.8 hereto sets forth each liability of the Company in an amount in
excess of $10,000 and each person to whom the aggregate amount of liabilities
owed to such person by the Company exceeds $10,000.
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4.9 Title to and Condition of Properties. Except as set forth in
Schedule 4.9, the Company has good, marketable, and insurable title, or valid,
effective and continuing leasehold rights in the case of leased property, to
all of the assets reflected on the Company Balance Sheet and all personal
property owned or leased by it or used by it in the conduct of its business in
such a manner as to create the appearance or reasonable expectation that the
same is owned or leased by it, free and clear of all liens, security interests,
restrictions, claims, encumbrances, and charges of any kind whatsoever. The
Sellers do not know of any potential action or assertion of rights, including
condemnation, by any party, governmental or other, and no proceedings with
respect thereto have been instituted of which any Seller or the Company has
notice, that would materially affect the ability of the Company to utilize each
of such assets in its business. The Company has not received any notices of
default or other violations from any landlord regarding any properties leased
by the Company. Schedule 4.9 hereto contains a detailed listing of all
material assets of the Company. The assets now owned by the Company constitute
all assets reasonably necessary to enable Purchaser to conduct the business and
operations of the Company on substantially the same terms as such business has
been conducted historically and is being conducted on the Effective Date.
Except as expressly set forth in this Agreement, no other representations or
warranties have been made by Sellers or the Company as to the condition or
suitability for any particular purpose of the assets of the Company. To the
knowledge of the Sellers, none of the assets owned, leased or used by the
Company in the operation of its business materially violates or fails to comply
in any material respect with any applicable federal, state or local health,
fire, environmental, safety, zoning, building or other codes, laws, rules or
regulations and the Company has not received any notice of an alleged violation
thereof.
4.10 Litigation. Except as set forth on Schedule 4.10 hereto, (i)
no material investigation or review by any governmental entity with respect to
the Company is pending or, to the knowledge of the Sellers, threatened, nor has
any governmental entity indicated to the Company an intention to conduct the
same; and (ii) there is no action, suit, or administrative, condemnation,
arbitration or other proceeding (including proceedings concerning labor
disputes or grievances or union recognition) pending or, to the knowledge of
the Sellers, threatened against or affecting the Company to which the Company
is a party, at law or in equity, before any federal, state, or municipal court
or other governmental department, commission, board, bureau, agency, or
instrumentality. The Company is not now, and has not been, a party to any
injunction, order or decree restricting the method of the conduct of its
business or the marketing of any of its products or services.
4.11 Real Property Leases . Schedule 4.11 lists all leases of real
property to which the Company is a party (the "Real Property Leases").
Accurate and complete copies of the Real Property Leases, as amended to the
Effective Date, have been delivered to Purchaser. Except as disclosed on
Schedule 4.11, neither the Sellers nor the Company has received any notices
that the land, buildings, facilities and other structures and improvements
subject to the Real Property Leases are not in compliance with any applicable
zoning, environmental or health laws and regulations or any other similar law,
statute, regulation or ordinance. The Company is the lessee and in peaceful
and undisturbed possession of the property subject to the Real Property Leases.
To the knowledge of the Sellers, all covenants or other restrictions (if any)
to which
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any of the property leased to the Company pursuant to the Real Property Leases
are being properly performed and observed in all material respects by the
Company, and the Company has not received any notice of violation (or claimed
violation) thereof which has not been resolved. The Company has delivered to
Purchaser true, correct and complete copies of all reports or audits of any
engineers, environmental consultants or other consultants in the possession of
the Company relating to any of premises subject to the Real Property Leases.
There is no pending proceeding or governmental action, and the Sellers have not
received notice of any threatened proceeding or governmental action, to condemn
or take by the power of eminent domain (or to purchase in lieu thereof) all or
any part of the property subject to the Real Property Leases which is material
to the operations of the Company as presently conducted. The Company does not
own any real property.
4.12 Intellectual Property. Schedule 4.12 is an accurate and
complete list of all copyrights, trade names that the Company uses in its
business operations. Except as disclosed on Schedule 4.12 the Company has no
United States and foreign patents, patent applications, patent licenses,
trademarks, and service xxxx registrations (and applications therefor), and has
no copyrights and copyright registrations (and applications therefor), trade
secrets, inventions, processes, designs, know-how and formula which are owned
or licensed for use by the Company and utilized by the Company in the business
operations of the Company as presently conducted. There is no adverse claim
against the Company, or to the knowledge of the Sellers, any threatened
litigation or claim of infringement. Except for the license to use the
trademark owned by The Center for Health & Creative Aging, P.C. set forth in
Schedule 4.12, to the knowledge of the Sellers, the Company does not utilize
any intellectual property or proprietary trade secret information which
infringes any trademark, trade name, service xxxx, copyright or patent of
another, and the Company has not received any notice contesting its right to
use any trade name, intellectual property or proprietary trade secret
information now used by it in connection with its business operations. The
Company has not granted any license to a third party in respect of any of its
intellectual property except as set forth in Schedule 4.12. As of the date of
Closing, the Company will have a license to use the trademark currently used in
its business operations for a period of one (1) year after the Closing at no
fees, costs or other expense to the Company.
4.13 Contracts.
(a) Material Contracts. Schedule 4.13 lists all material
contracts or agreements of the following types to which the Company is a party
or by which the Company is bound:
(i) any management or other contract pursuant to which
the Company owns, manages, develops or operates mental health treatment
units or programs on behalf of general acute care hospitals or any other
person or entity (the "Management Contracts");
(ii) any contract or agreement with a physician,
psychiatrist, psychologist or other health provider or any partnership
or professional association or corporation owned by physicians,
psychiatrists, psychologists or other health providers;
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(iii) any contract or agreement which is not terminable
upon thirty (30) days or less notice or which obligates the Company to
the payment of more than $10,000 including, without limitation, loan
agreements;
(iv) any contract or agreement for the maintenance,
purchase or sale of equipment or capital assets having a value in excess
of $10,000;
(v) any power of attorney (other than routine powers
given to governmental officials authorizing service of process);
(vi) any lease of personal property;
(vii) any guaranty, suretyship agreement or other agreement
relating to any contingent liability.
(viii) any contract with an independent agent or broker
acting on behalf of the Company;
(ix) any contract or agreement with an independent
consultant;
(x) any contract or agreement restricting the method by
which the Company conducts its business or the marketing of any of its
products or services; and
(x) any contract or agreement between the Company and any
of the shareholders or other affiliates of the Company including,
without limitation, affiliates of the shareholders of the Company.
(b) Copies/Status of Material Contracts. True, complete
and correct copies of all contracts are included as a part of Schedule 4.13
and, except to the extent disclosed on Schedule 4.13 and Schedule 4.7 (i) all
of the contracts listed on such Schedule 4.13 are in full force and effect,
(ii) the Company has not received any notice of cancellation with respect to
any such contract or been advised that the other party thereto intends to
cancel any such agreement, (iii) there are no material outstanding disputes
under such contracts, (iv) each such contract is with an unrelated third party
entered into on an arms-length basis in the ordinary course of business, (v)
there are no material defaults under any of such contracts, (vi) there are no
verbal amendments, modifications or other understandings relating to such
contracts, (vii) the Company has no obligation that has accrued to refund all
or any portion of the fees that have been paid under the Management Contracts.
(c) Partial Hospitalization Management Contracts. With
respect to the Management Contracts that relate to partial hospitalization
(outpatient) treatment programs, (a) no hospital that is the contracting party
to such Management Contract has or will have the right to terminate such
Management Contract or to assert a breach or violation of such Management
Contract and (b) the Company shall have no obligation or liability to refund
any fees paid under such Management Contract, in either case as a result of the
denial of third party
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reimbursement to such hospital of the fees charged to patients of such partial
hospitalization programs relating to treatment provided on or prior to the date
of Closing.
4.14 Employees, Et Cetera. Schedule 4.14 hereto lists in accurate
and complete detail all employees of the Company as of the Effective Date,
their job titles, annual rates of compensation, accrued vacation, holiday and
sick leave as of the most recent regular payroll date of the Company
immediately preceding the Effective Date, other fringe benefits, if any, a
description of any severance pay arrangements, if any, and the amounts payable
with respect to such accrued vacation, holiday and sick leave as of the most
recent payroll date of the Company immediately preceding the Effective Date and
the rate at which such vacation, holiday and sick leave will accrue after the
Effective Date. Except as shown on Schedule 4.14, the Company is not bound by
any written contract of employment with any of its employees and all oral
employment contracts are terminable at will, subject to applicable law, or by
any consulting or similar agreements. Except as set forth in Schedule 4.14 and
except as contemplated by the provisions of Section 11.6 of this Agreement, the
Company is not a party to any employment or other agreement, whether written or
oral, pursuant to which the Company has agreed to make a loan to, or guarantee
any loan of, any employee or relating to any bonus, deferred compensation,
severance pay or similar plan, agreement, arrangement or understanding. Except
as listed on Schedule 4.14 or Schedule 4.15 hereof, the Company has no Welfare
Plan, no Pension Plan, nor any other type of pension, profit sharing, deferred
compensation, retirement, stock option, bonus, severance, medical, dental, life
insurance, accident, or other employee benefit or compensation plan, agreement,
arrangement, practice or policy with respect to employees. The Company has
complied with all requirements of Sections 6001 through 6008 of the ERISA and
Section 4980B of the Code with respect to itself and its employees. The
Company is not bound, and following the Closing will not be bound, by any
express or implied contract or agreement to employ, directly or as a consultant
or otherwise, any person for any specific period of time or until any specific
age except as specified in the written agreements identified in Schedule 4.14.
4.15 Employee Benefit Plans. Except as disclosed in Schedule 4.15:
(a) The Company does not maintain or contribute to, and
has not in the past maintained or contributed to, any Pension Plan or Welfare
Plan, nor is the Company presently, or has it ever been, a participating
employer in any Multiemployer Plan.
(b) With respect to each Pension Plan and each Welfare
Plan listed on Schedule 4.15, to the knowledge of the Sellers: (i) there is no
fact, including, without limitation, any reportable event, that exists that
would constitute grounds for termination of such plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such plan, in each case as contemplated by ERISA; (ii) neither the
Company nor any subsidiary nor any fiduciary, trustee, or administrator of any
such Pension Plan or Welfare Plan, has engaged in a prohibited transaction that
would subject the Company to any material tax or any material penalty imposed
by ERISA or the Code; (iii) the Company has not incurred any material liability
to the PBGC (other than for payment of premiums); (iv) the Company has
contributed all amounts thereto it is required to contribute under the terms
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of the plan in question and applicable law, and there is no accumulated funding
deficiency with respect to any such Pension Plan, whether or not waived, other
than routine, non-contested claims for benefits. There is not pending or, to
the knowledge of the Sellers, threatened any claim by or on behalf of or
against any Pension Plan or Welfare Plan, by any employee or former employee
covered or previously covered under any Pension Plan or Welfare Plan, or
otherwise involving any Pension Plan or Welfare Plan.
(c) There has been no termination of any Pension Plan or
Welfare Plan by the Company during the five-year period ending on the Effective
Date.
(d) The Company has no knowledge of any material
liability being incurred under Title IV of ERISA by the Company with respect to
any Pension Plan maintained by a trade or business (whether or not
incorporated) which is under common control with, or part of a controlled group
of corporations with, the Company, within the meaning of Sections 414(b) or (c)
of the Code.
(e) No Welfare Plan listed on Schedule 4.15 is funded
with a trust or other funding vehicle, other than insurance policies.
(f) Each Welfare Plan, Pension Plan, and any other type
of pension, profit sharing, deferred compensation, retirement, stock option,
bonus, severance, medical, dental, life insurance, accident, or other employee
benefit or compensation plan, agreement, arrangement, practice, or policy with
respect to employees maintained by or contributed to by the Company is
maintained, administered, and operated in accordance with all applicable laws,
including but not limited to, ERISA and the Code.
(g) Each Pension Plan listed on Schedule 4.15 which is
intended to be qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Internal Revenue Service as to the
qualification under the Code of each such Pension Plan as amended to comply
with the Tax Reform Act of 1986 and all applicable, subsequent legislation,
and, to the knowledge of the Sellers, no event has occurred since the date of
such favorable determination letter that would adversely affect such
qualification.
(h) Except as expressly contemplated by this Agreement,
no bonus, severance pay, or any other employee benefit under any Welfare Plan,
Pension Plan, or any other type of pension, profit sharing, deferred
compensation, retirement, stock option, bonus, severance, or other employee
benefit or compensation plan, agreement, arrangement, practice, or policy with
respect to employees maintained by or contributed to by the Company is payable
or exercisable as a result of the transaction contemplated by this Agreement,
and the payment, exercise, or vesting of any such bonus, severance pay, or
employee benefit will not be accelerated or otherwise enhanced by such
transaction.
True, correct and complete copies of each Pension Plan and Welfare Plan listed
on Schedule 4.15 as amended to and in effect on the date hereof; any agreements
entered into in connection with each such Pension Plan and Welfare Plan; the
most recent annual report filed
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with the Internal Revenue Service for each such Pension Plan and Welfare Plan;
the most recent actuarial report, if any, for each such Pension Plan and
Welfare Plan; the most recent summary plan description, together with each
summary of material modifications; and any other communication generally
disseminated to employees or former employees of the Company and describing
benefits provided under each such Pension Plan and Welfare Plan, have been
delivered to Purchaser by the Company.
4.16 Receivables. To the knowledge of the Sellers, all Receivables
of the Company whether or not reflected in the Company Balance Sheet, represent
transactions in the ordinary course of business, and, except as disclosed on
Schedule 4.16, are current and collectible net of any reserves therefor shown
on the Company Balance Sheet (which reserves are adequate and were calculated
consistent with past practice). Schedule 4.16 consists of an aged accounts
receivable report of the Company as of December 31, 1996.
4.17 Accounts Payable. The accounts payable reflected on the
Company Balance Sheet and those reflected on the books of the Company at the
time of the Closing will reflect all material amounts owed by the Company in
respect of trade accounts due and other Payables as required by GAAP to be
identified on such Company Balance Sheet or in the books of the Company.
Except as set forth on Schedule 4.17, to the knowledge of the Sellers, no
account payable of the Company is past due or otherwise in default by the
Company.
4.18 Broker's and Finder's Fees. No agent, broker, employee,
officer, stockholder or other person or entity acting on behalf of, or under
the authority of, the Sellers or the Company is or will be entitled to any
commission or broker's or finder's fee from any of the parties hereto in
connection with this Agreement or any of the transactions contemplated hereby.
4.19 Labor Practices. The Company has no collective bargaining or
other labor union agreements. There is no unfair labor practice complaint
against the Company pending before the National Labor Relations Board, there is
no pending or, to the knowledge of the Sellers, threatened labor dispute,
strike or work stoppage affecting the Company's business, nor has there been
any of the same or any labor union organizing activity relating to the Company
within the last three (3) years.
4.20 Insurance. Schedule 4.20 lists all insurance policies and
coverages maintained by or for the Company including but not limited to real
and personal property insurance, comprehensive liability insurance, automobile
liability insurance, workers' compensation insurance, medical malpractice
insurance and professional liability insurance. Schedule 4.20 lists all
insurance claims submitted in connection with property damage or in connection
with liability, medical or professional malpractice claims involving the
Company or any of its employees for the latest three (3) years.
4.21 Consents. Except as set forth in Schedule 4.3 hereto, to the
knowledge of the Sellers, no consents, approvals, or authorizations of any
person, entity or governmental agency are required in connection with the sale
of the Shares and the consummation of the transactions contemplated by this
Agreement. The Sellers agree to cause Company to assist the Purchaser
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in obtaining any consents, approvals or authorizations required to consummate
the transactions contemplated by this Agreement.
4.22 Environmental Matters. Except as disclosed on Schedule 4.22,
(a) the Company has not received any notice from any governmental authority or
private person or entity advising it that the operation of the Company's
business is in violation of any environmental law or any applicable
environmental permit or that it is responsible (or potentially responsible) for
the cleanup of any pollutants, contaminants, hazardous or toxic wastes,
substances or materials at, on or beneath the property subject to the Real
Property Leases; and (b) to the knowledge of the Sellers, the Company is not
the subject of federal, state, local or private litigation or proceedings
involving a demand for damages or other potential liability with respect to
violations of environmental laws.
4.23 Taxes. Except as set forth in Schedule 4.23, all federal,
state, local and other tax returns and reports of the Company required by law
to be filed have been prepared and properly filed or valid extensions obtained,
and, except as set forth in Schedule 4.23, all taxes, charges, fees, duties,
levies or other assessments which are imposed by the United States, or any
federal, state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions ("Taxes") imposed upon the
Company or any of its properties, assets or income which are due and payable or
claimed by any taxing authority to be due and payable have been paid or
reserved for. The liability for accrued taxes as shown in the Company Balance
Sheet (net of amounts reserved for deferred taxes) is sufficient for the
payment of all unpaid Taxes of the Company accrued for or applicable to the
periods prior to the Balance Sheet Date and all years and periods prior thereto
and for which the Company may at that date have been liable in its own right or
by reason of its being a member of any group of corporations filing
consolidated tax returns (including any such amounts payable as a result of an
audit of any tax return for any such period). The Company utilizes the accrual
method of accounting for tax purposes.
Except as set forth on Schedule 4.23, there are no claims for Taxes
pending against the Company, and the Sellers do not know of any threatened
claim for tax deficiencies or any basis for such claims, and there are not now
in force any waivers or agreements by the Company for the extension of time for
the assessment of any tax, nor has any such waiver or agreement been requested
by the Internal Revenue Service (the "Service") or any other taxing authority.
Except as set forth on Schedule 4.23, the Federal income tax returns of
the Company have not been examined or audited by the Service. Except as set
forth on Schedule 4.23, no material issues have been raised in any examination
by any taxing authority with respect to the businesses and operations of the
Company which, by application of similar principles, could be expected to
result in a proposed adjustment to the liability of the Company for taxes for
any other period not so examined.
The Company has not filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code") concerning collapsible
corporations. Except as disclosed in Schedule 4.23, the Company has not made
any payments, is not obligated to make any
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payments, and is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under
Section 280G of the Code. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The Company has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement of
federal income tax within the meaning of Section 6662 of the Code. The Company
is not a party to any tax allocation or sharing agreement. The Company (a) has
not been a member of an affiliated group filing a consolidated federal income
tax return and (b) has no liability for the taxes of any person (other than
any of the Company) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise. The Company has not agreed, nor is it required to
make, any adjustment under Code Section 481(a) by reason of a change in
accounting method or otherwise.
The Company has paid or is withholding and has or will pay when due to
the proper taxing authorities all withholding amounts and taxes required to be
withheld or paid for all income, unemployment, social security, medicare or
other similar Taxes, programs or benefits with respect to wages, salary and
other compensation of directors, officers and employees of the Company.
The Company has at all times of its existence been taxed as a "C
Corporation" and at no time has elected to be taxed, or filed tax returns as an
"S Corporation," as such terms are commonly used under the Code.
4.24 Transactions With Affiliates. Except as set forth in Schedule
4.24, there are no loans, leases, agreements, contracts or other transactions
between the Company and any present or former stockholder, director or officer
of the Company, or any member of such stockholder's, director's or officer's
immediate family. Except as set forth in Schedule 4.24, no stockholder,
director or officer of the Company nor any of their respective spouses or
family members owns directly or indirectly on an individual or joint basis any
material interest in, or serves as an officer or director of, or in any similar
capacity for, any competitor, customer, provider or supplier of the Company or
any organization which has a material contract or arrangement with the Company.
4.25 Improper Payments. To the knowledge of the Sellers, neither
the Company, nor any shareholder, director, officer, employee or agent of the
Company has made any improper bribes, kickbacks or other payments on behalf of
the Company to, or received any such payments from, customers, vendors,
suppliers or other persons contracting with the Company.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
5.1 Due Incorporation. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
5.2 Corporate Authority. Purchaser has all requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by Purchaser has been duly authorized by all necessary corporate
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms.
5.3 Absence of Breach; No Consents. The execution and delivery of
this Agreement by the Purchaser, and the performance by Purchaser of its
obligations hereunder, do not (i) conflict with, and will not result in a
breach of, any of the provisions of the certificate of incorporation or bylaws
of Purchaser; (ii) contravene any law, rule, or regulation of any State or
Commonwealth or of the United States, or of any applicable foreign
jurisdiction, or any order, writ, judgment, injunction, decree, determination,
or award affecting or binding upon Purchaser; (iii) conflict with or result in
a material breach of or default under any material indenture or loan or credit
agreement or any other material agreement or instrument to which Purchaser is a
party or by which it or any of its material properties may be affected or
bound; or (iv) except as reflected on Schedule 4.3, require the authorization,
consent, approval, or license of any third party.
5.4 Investment Representations. Purchaser will acquire the Shares
for its own account for investment and not with a view to the resale or
distribution thereof. Purchaser will not transfer or otherwise dispose of the
Shares, or any interest therein, in such manner as to violate any provisions of
the Securities Act of 1933, as amended, and the rules and regulations
thereunder (collectively, the "Securities Act"), or of any applicable state
securities laws regulating the disposition thereof. Purchaser agrees that the
certificates representing the Shares may bear legends to the effect that such
shares have not been registered under the Securities Act or such other state
securities laws, and that no interest therein may be transferred or otherwise
disposed of in violation of the provisions thereof or of any rules and
regulations issued thereunder.
5.5 Broker's or Finder's Fees. No agent, broker, employee,
officer, stockholder or other person or firm acting on behalf of, or under the
authority of, Purchaser is or will be entitled to any commission or broker's or
finder's fee from any of the parties hereto in connection with any of the
transactions contemplated herein.
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5.6 Access to Information. Purchaser represents that it has had
the full and complete opportunity to inspect the books and records of the
Company and to make such inquiry of officers and representatives of the Company
as it deems necessary or appropriate to make its decision to purchase the
Shares. The Purchaser further represents that it relied only on
representations made in this Agreement and not on any outside or oral
representations made by the Sellers, the Company or others and that the
information Purchaser has received is sufficient to make its decision
concerning the purchase of the shares. Purchaser understands and has taken
cognizance of all risk factors related to the purchase of the Shares and its
knowledge and experience in financial and business matters is such that
Purchaser is capable of evaluating the business, financial or otherwise, of the
Company and hereby represents and warrants that its financial situation is such
that it can bear the economic risk in connection with its purchase of the
Shares and that it can afford to suffer the complete loss of its investment in
the Shares.
ARTICLE 6
COVENANTS OF THE SELLERS AND THE COMPANY
Pending the Closing, Sellers and the Company shall do the following:
6.1 Affirmative Covenants. Subject to the terms and conditions
stated herein, Sellers will take, and cause the Company to take, and the
Company will take, every action reasonably required of the Sellers and the
Company to satisfy the conditions to Closing set forth in this Agreement on or
before the Closing Date and otherwise to ensure the prompt and expedient
consummation of the transactions substantially as contemplated by this
Agreement, and will exert all reasonable efforts to cause the transactions
contemplated by this Agreement to be consummated.
6.2 Access and Information. Sellers shall cause the Company to
afford, and the Company shall afford, to Purchaser and its representatives
reasonable access during reasonable hours throughout the period prior to the
Closing to all properties, books, contracts, commitments, computer programs and
data, reports, manuals and records (including, but not limited to, tax
returns), and to all personnel of the Company and the Subsidiaries and, during
such period, shall promptly furnish to Purchaser all other information
concerning such business, properties, and personnel as Purchaser may reasonably
request. Purchaser shall maintain the confidentiality of all such information
as required by Section 7.4 hereof.
6.3 No Solicitation. From the date of this Agreement until the
Closing or the termination of this Agreement pursuant to its terms, the Company
and the Sellers, and those acting on behalf of any of them, will not, and the
Company and Sellers will use its and their best efforts to cause its and their
officers, employees, agents, and representatives (including any investment
banker) not, directly or indirectly, to solicit, encourage, or initiate any
discussion with, or negotiate or otherwise deal with, or provide any
information to, any person or entity other than Purchaser and its
representatives concerning any merger, sale of assets, or similar transaction
involving the Company, or sale of any capital stock of the Company, or any
interest therein. Sellers will, or will cause the Company to, notify Purchaser
immediately upon receipt
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of any offer or proposal relating to any of the foregoing and such notice shall
describe in detail the terms thereof and identify the party or parties thereto.
From the date of this Agreement, until the Closing or the termination of this
Agreement pursuant to its terms, neither the Company nor any of the Sellers
will furnish, without the prior written consent of Purchaser, to any person or
entity (other than Purchaser) any non-public information concerning the Company
or its businesses, financial affairs or prospects for the purpose of or with
the intent of permitting such person or entity to evaluate a possible
acquisition of any capital stock or (other than in the ordinary course of
business) assets of the Company.
6.4 Conduct of Business Prior to Closing. Sellers and the Company
covenant and agree that, from and after the Effective Date to and including the
date of the Closing under this Agreement or to the date of termination of this
Agreement pursuant to its terms, unless Purchaser shall otherwise consent in
writing, and except as otherwise contemplated by this Agreement, each of the
following shall be complied with:
(a) The business of the Company shall be conducted only
in the ordinary and usual course and the Company shall use reasonable efforts
to keep intact its business organization and good will, to keep available the
services of its officers and employees and to maintain a good relationship with
suppliers, lenders, creditors, distributors, employees, customers, and others
having business or financial relationship with it, and the Sellers or the
Company shall immediately notify Purchaser of any event or occurrence or
emergency material to, and not in the ordinary and usual course of business of,
the Company.
(b) The Company shall not (i) amend its articles of
incorporation or bylaws or (ii) split, combine, or reclassify any of its
outstanding securities, or (iii) declare, set aside, or pay any dividend or
other distribution on, or make, agree or commit to make any exchange for or
redemption of, any of its outstanding securities whether payable in cash, stock
or property;
(c) Except as set forth in Schedule 4.4, the Company
shall not (i) issue or agree to issue any additional shares of, or rights of
any kind to acquire any shares of, its capital stock of any class; or (ii)
enter into any contract, agreement, commitment, or arrangement with respect to
any of the foregoing;
(d) The Company shall not create, incur, or assume any
long-term or short-term indebtedness for money borrowed or make any capital
expenditures or commitment for capital expenditures in excess of $10,000
individually or $50,000 in the aggregate, without the prior written consent of
Purchaser;
(e) The Company shall not (i) adopt, enter into, or amend
any bonus, profit sharing, compensation, stock option, warrant, pension,
retirement, deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director, or employee of the Company or (ii) agree to
any increase in the compensation payable or to become payable to, or any
increase in the contractual term of employment of, any officer, director or
employee of the Company;
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provided, however, that the Company may (i) make usual and customary employee
salary adjustments not in excess of 5% for any individual employee, excluding,
however, the Sellers and (ii) may terminate and employ non-management employees
as needed to operate the business of the Company, in each case consistent with
past practices;
(f) The Company shall not sell, lease, mortgage,
encumber, or otherwise dispose of or grant any interest in any of its assets or
properties except for liens for taxes not yet due or liens or encumbrances that
are not material in amount or effect and do not impair the use of the property,
or as specifically provided for or permitted in this Agreement;
(g) Except as set forth in Schedule 6.4, the Company
shall not enter into, or terminate, any material contract, agreement,
commitment, or understanding other than agreements entered into with
unaffiliated third parties, on an arms-length basis and in the ordinary course
of business constituting either (i) management contracts at rates and for terms
comparable to its most recent management contracts and (ii) marketing
affiliation and sales agreements on terms comparable with its existing
agreements of such nature;
(h) The Company shall not incur or modify any contingent
liability as a guarantor or otherwise with respect to the obligations of third
parties except in the ordinary course of business consistent with past practice
or as required by law;
(i) Except as set forth in Schedule 6.4 the Company shall
not prepay any loans, including, without limitation, loans from its
stockholders, officers, directors or employees, and shall not make any
principal payments on any outstanding loan due to a Seller and shall not,
except in the ordinary course of business consistent with past practice, make
any change in its borrowing arrangements or modify or amend or terminate any
material contract or release or assign any material rights or claims;
(j) In connection with any filings to be made by the
Purchaser under the Securities Act of 1933, as amended, the Company shall (i)
provide for inclusion therein the financial and other information and documents
pertaining to the Company required by applicable SEC rules and regulations to
be included therein, (ii) use commercially reasonable efforts to cause the
accountants for the Company to deliver such consents, reports and comfort
letters in connection therewith as the Purchaser may reasonably request and
(iii) generally cooperate with the Purchaser in connection therewith; provided,
however, that all expenses relating to such consents, reports, comfort letters
and cooperation shall be paid directly and promptly by the Purchaser (except
for expenses that the Company would have incurred in any event, such as the
expense of an annual audit);
(k) The Company will continue properly and promptly to
file when due all federal, state and local, foreign, and other tax returns,
reports, and declarations required to be filed by it, and will pay, or make
full and adequate provision for the payment of, all taxes and governmental
charges due from or payable by it;
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(l) The Company will comply with all laws and regulations
applicable to it and its operations;
(m) The Company will maintain in full force and effect
insurance coverage of a type and amount customary in its business, but not less
than that presently in effect;
(n) The Company will not knowingly take any action (or
omit to take any action) which would cause any representation or warranty
contained in Article 3 or Article 4 of this Agreement to be untrue at any time
prior to Closing as if such representation or warranty were made at and as of
such time;
(o) The Company will not make any change in any method of
reporting income or expenses for federal income tax purposes; and
(p) The Company shall not knowingly take any action which
would prevent compliance with any of the conditions in Articles 8 or 9 of this
Agreement.
6.5 Consents and Approvals. The Company shall use commercially
reasonable efforts to obtain all necessary consents and approvals required for
its performance of this Agreement and the transactions contemplated hereby,
including, without limitation, the consents listed on Schedule 4.3. The
Company shall make all filings, applications, statements and reports to all
governmental authorities which are required to be made prior to the Closing
Date by or on behalf of it pursuant to any applicable statute, rule or
regulation in connection with this Agreement and the transactions contemplated
hereby. As required in connection with the performance of this Agreement by
the Company, the Company will promptly provide such other information and
communications to governmental and regulatory authorities as such regulatory
authorities or Purchaser may reasonably request. Between the date hereof and
the Closing Date, the Company shall promptly provide Purchaser with copies of
all correspondence and filings to or from all governmental and regulatory
bodies and officials relating to the Company.
6.6 Publicity. Prior to the Closing, any public statement or
announcement by the Sellers or Company, including but not limited to any
written news releases, pertaining to this Agreement or the transactions
contemplated thereby shall be submitted to Purchaser for review and approval
prior to the release by the Company, and shall be released only in a form
approved by Purchaser, provided, however, that (i) such approval shall not be
unreasonably withheld and (ii) such review and approval shall not be required
of statements and announcements if prior review and approval would prevent the
timely and accurate dissemination of such statements and announcements as
required to comply, in the judgement of counsel, with any applicable
governmental law, rule or regulation. Sellers and Purchaser shall issue a
press release regarding the execution of this Agreement within one day of the
date hereof or such other time as Sellers and Purchaser may mutually agree.
6.7 Financial Information. Sellers will cause the Company to, and
the Company will, deliver as soon as reasonably practicable to Purchaser
unaudited financial statements of the
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Company for each month from and after the date hereof as and when such
financial statements become available in the usual course of business.
6.8 Expenses. All fees and expenses of Counsel to Sellers and all
other advisors or financial consultants to the Sellers or engaged by the
Company on behalf of the Sellers incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by
Sellers and none of such costs and expenses shall be paid by the Company.
Payment of any such fees or expenses of the Sellers paid or incurred by the
Company will be paid at Closing by the Sellers out of the Purchase Price paid
to Sellers on a pro rata basis. Nothing contained herein shall be deemed or
construed to prevent the Company from paying any such fees or expenses in the
event this Agreement is terminated.
6.9 Breach of Representations and Warranties. Promptly upon any
Seller or the Company becoming aware of any breach of any of the
representations and warranties of the Sellers contained in this Agreement, or
any event which would cause the Sellers to be unable to deliver the
certificates contemplated by Section 9.1(e) hereof, the Sellers shall give
detailed written notice thereof to the Purchaser and shall use all commercially
reasonable efforts to prevent or promptly remedy the same.
6.10 No Transfer of Shares. Unless and until this Agreement is
terminated, each Seller shall not, directly or indirectly, exchange, transfer,
assign, pledge or encumber any of the Shares owned by the Seller, nor shall a
Seller grant, directly or indirectly, any right to acquire, dispose of, vote or
otherwise control in any manner such Shares.
6.11 Updating of Schedules. Sellers shall notify Purchaser of any
changes, additions, or events which may cause any change in or addition to the
Schedules delivered by them under this Agreement promptly after the occurrence
of the same and again at the Closing by delivery of appropriate updates to all
such Schedules. No notification of a change or addition to a Schedule made
pursuant to this Section shall be deemed to cure any breach of any
representation or warranty resulting from such change or addition unless
Purchaser specifically agrees thereto in writing, nor shall any such
notification be considered to constitute or give rise to a waiver by Purchaser
of any condition set forth in this Agreement, unless Purchaser specifically
agrees thereto in writing. Nothing contained herein shall be deemed to create
or impose on Purchaser any duty to examine or investigate any matter or thing
for the purposes of verifying the representations and warranties made by
Sellers herein.
6.12 No Employment or Solicitation. In the event this Agreement is
terminated for any reason, neither the Sellers nor the Company shall hire or
attempt to hire any person who is then an officer or other employee of the
Purchaser or any of its direct or indirect subsidiaries or encourage any such
officer or employee to terminate his or her relationship with the Purchaser or
any of its direct or indirect subsidiaries during the period of six (6) months
after the date of such termination.
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ARTICLE 7
COVENANTS OF PURCHASER
Purchaser agrees that from the date hereof through the Closing Date:
7.1 Affirmative Covenants. Subject to the terms and conditions
stated herein, Purchaser will take every action reasonably required of it in
order to satisfy the conditions to Closing set forth in this Agreement and
otherwise to ensure the prompt and expedient consummation of the transactions
substantially as contemplated hereby, and will exert all reasonable efforts to
cause the Agreement promptly to be consummated.
7.2 Cooperation. Purchaser shall cooperate with Sellers and
Counsel to Sellers, their accountants and agents in carrying out the
transaction, and in delivering all documents and instruments deemed reasonably
necessary or useful by Counsel to Sellers.
7.3 Expenses. Except as otherwise expressly provided herein,
whether or not this Agreement is consummated, all costs and expenses incurred
by Purchaser in connection with this Agreement and the transactions
contemplated hereby shall be paid by Purchaser.
7.4 Confidentiality. Prior to Closing, unless otherwise required
by law, Purchaser will hold in confidence all confidential information that has
been disclosed by the Sellers and the Company and will not use any such
confidential information except in connection with the transaction, until such
time as such information is otherwise publicly available; provided, however,
that this sentence will not apply to any information that becomes generally
available to the public, was available on a non-confidential basis to Purchaser
prior to its disclosure pursuant hereto, or becomes available on a
non-confidential basis from a third party who is not bound to keep such
information confidential. In the event of the termination of this Agreement,
Purchaser will, and will cause its representatives to, deliver to the Company
all documents and other written materials, and all copies thereof, obtained by
Purchaser or on its behalf from the Sellers or the Company as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Purchaser agrees that the Company shall have standing and
may avail itself of any remedy at law or in equity, including an action for
injunctive relief, in the event of a breach or threatened breach by Purchaser
of any of the provisions of this Section 7.4. The obligations of Purchaser
under this Section 7.4 shall survive termination of this Agreement for any
reason whatsoever and shall remain in effect until two (2) years from the
Effective Date of this Agreement.
7.5 Publicity. Prior to the Closing, any public statement or
announcement by the Purchaser, including but not limited to any written news
releases by the Purchaser, pertaining to this Agreement or the transactions
contemplated hereby shall be submitted to the Company for review and approval
prior to the release by the Purchaser, and shall be released only in a form
reasonably approved by the Company provided however, that (i) such approval
shall not be unreasonably withheld and (ii) such review and approval shall not
be required of statements and announcements by the Purchaser if prior review
and approval would prevent the timely and accurate dissemination of such
statements and announcements as requested to comply, in the
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judgment of counsel, with any applicable law, rule or policy. Sellers and
Purchasers shall issue a press release regarding the execution and delivery of
this Agreement within one day after the date hereof or such other time as
Sellers and Purchaser may mutually agree.
7.6 No Employment or Solicitation.
(a) In the event this Agreement is terminated for any
reason, Purchaser shall not hire or attempt to hire any person who is then an
officer or other employee of the Company or encourage any such officer or
employee to terminate his or her relationship with the Company or any of its
direct or indirect subsidiaries during the period of six months after the date
of such termination; provided, however, that nothing contained herein shall be
deemed or construed to prevent Purchaser from employing, either before or after
the Effective Date, Xxxxx Xxxxx, an employee of the Company that made inquiry
of employment to Purchaser on an unsolicited basis prior to the Effective Date;
and
(b) In the event this Agreement is terminated for any
reason, the Purchaser shall not solicit, directly or indirectly, any management
contracts with client hospitals of Company on the Effective Date, during the
period of one year after the date of such termination.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLERS
8.1 Conditions to Obligations of Sellers. The obligations of
Sellers to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of the following
conditions, unless Sellers shall waive such fulfillment in whole or in part in
writing:
(a) This Agreement and the transactions contemplated
hereby shall have received all approvals, consents, authorizations, and waivers
from governmental and other regulatory agencies and other third parties
(including lenders, holders of debt securities, and lessors) required by law or
contract to consummate this Agreement and required to keep all agreements and
licenses held by the Company in full force and effect after the Closing
including, without limitation, the consents listed on Schedule 4.3;
(b) There shall not be in effect a restraining order, a
preliminary or permanent injunction or other order by any federal or state
authority which prohibits the consummation of this Agreement and no action or
proceeding shall have been instituted and remain pending before any court
seeking such relief or seeking damages in respect to this Agreement or the
consummation of the transactions contemplated by this Agreement;
(c) Purchaser shall have performed in all material
respects its agreements, covenants and obligations contained in this Agreement
required to be performed at or prior to the Closing;
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(d) The representations and warranties of Purchaser set
forth in this Agreement shall be true in all material respects as of the
Effective Date and as of the Closing Date as if made as of such time;
(e) Sellers shall have received from Purchaser an
officers' certificate, executed by an authorized officer of Purchaser (in his
capacity as such), dated the Closing Date, as to the satisfaction of the
conditions stated in Sections 8.1(c) and (d) above (to the best knowledge of
such officer where appropriate);
(f) Sellers shall have received, on and as of the Closing
Date, an opinion of Counsel to Purchaser, substantially in the form of opinion
set forth in Exhibit B attached hereto and such other closing documents and
instruments as Sellers shall reasonably require, in each case reasonably
satisfactory in form and substance to Counsel to Sellers.
(g) At or prior to the Closing, Purchaser shall enter
into a Consulting Agreement in the form of Exhibit C attached hereto, between
Purchaser and Xxxxx X. Xxxxxx, M.D. (the "Xxxxxx Consulting Agreement");
provided, however, that the execution and delivery of the Xxxxxx Consulting
Agreement shall be at the sole election of Xxxxx X. Xxxxxx, M.D. and, in the
event he elects not to execute such Consulting Agreement, then the execution
and delivery of the Xxxxxx Consulting Agreement by Purchaser shall not
constitute a condition to the obligations of the Sellers under this agreement.
(h) At or prior to the Closing, the Company shall pay in
full those certain monetary obligations owed by the Company to Xxxxx X. Xxxxxx,
M.D. described in Schedule 8.1(h) which monetary obligations are also reflected
on the Company Balance Sheet. The amount of all payments required to fully
satisfy such monetary obligations shall be credited against and reduce the
$5,100,000 amount for the purpose of determining the Purchase Price as
specified in Section 2.2 of this Agreement.
(i) At or prior to the Closing, Purchaser shall perform
the respective obligations of and the actions to be taken by Purchaser at the
Closing as described in Section 10.3 of this Agreement.
(j) On or prior to the Closing, the Company and Ramsay
Healthcare, Inc. shall have renewed and extended on terms and conditions
satisfactory to Purchaser in its sole discretion those two certain Management
Contracts relating to mental health treatment units and programs in hospitals
located in Mesa, Arizona and Nevada, Missouri listed on Schedule 4.13. In the
event that either or both of such contracts cannot be renewed to the
satisfaction of the Purchaser and Seller is unable to provide one or more
replacement contracts acceptable to Purchaser in its sole discretion prior to
Closing, then Purchaser shall have the right to (i) terminate the Agreement,
(ii) waive the condition to provide renewals or replacement contracts for the
Ramsay contracts without a reduction in the Purchase Price or (iii) propose a
reduction in the Purchase Price equal to not more than $300,000 for each Ramsay
contract which is not renewed or replaced. If Purchaser proposes a reduction
in the Purchase Price of any amount due to the Ramsay contracts not being
renewed or replaced, the Seller shall have the
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right to either accept the proposed reduction in the Purchase Price or to
terminate this agreement on written notice to Purchaser. In the event of such
termination by either the Sellers or Purchaser, neither party shall have any
further rights or obligations hereunder except for confidentiality provisions
of Section 7.4 and the no solicitation provisions of Section 6.12 and 7.6 of
this Agreement which provisions shall continue for the time periods specified
in such Sections.
(k) Prior to the Closing, the execution, delivery and
performance of this Agreement by the Company shall have been approved by the
Board of Directors of the Company.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF PURCHASER
9.1 Conditions To Obligations of Purchaser. The obligations of
Purchaser to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of the following
conditions, unless Purchaser shall waive such fulfillment in whole or in part
in writing:
(a) This Agreement and the transactions contemplated
hereby shall have received all approvals, consents, authorizations, and waivers
from governmental and other regulatory agencies and other third parties
(including lenders, holders of debt securities, and lessors) required by law or
contract to consummate this Agreement and required to keep all agreements and
licenses held by the Company in full force and effect after the Closing; and no
material adverse change in the business, operations and condition (financial or
otherwise) of the Company shall have occurred or will occur in the future as a
result of any requirement or condition made to or as a part of such approvals,
consents, authorizations and waivers.
(b) There shall not be in effect a restraining order, a
preliminary or permanent injunction or other order by any federal or state
authority which prohibits the consummation of this Agreement and no action or
proceeding shall have been instituted or remain pending seeking such relief or
seeking damages in respect of this Agreement or the consummation of the
transactions contemplated by the Agreement;
(c) Sellers shall have performed in all material respects
each of their agreements, covenants and obligations contained in this Agreement
and required to be performed on or prior to the Closing and shall have complied
with all material requirements, rules, and regulations of all regulatory
authorities having jurisdiction relating to the transactions contemplated
herein;
(d) The representations and warranties of Sellers set
forth in this Agreement shall be true in all material respects as of the date
of this Agreement and, except in such respects as do not materially and
adversely affect the business, condition (financial or otherwise), operations,
or prospects of the Company as of the Closing Date as if made as of such date;
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(e) Purchaser shall have received from Sellers a
certificate, dated the Closing Date, executed by Sellers, and an officer's
certificate, executed by a duly authorized officer of the Company (in such
capacity), dated the Closing Date, as to the satisfaction of the conditions in
subsections (c) and (d) of this Section 9.1 to the best knowledge of Sellers
where appropriate;
(f) Purchaser shall have received, on and as of the
Closing Date, an opinion of Counsel to Sellers substantially in the form of
opinion set forth in Exhibit E attached hereto and such other closing documents
and instruments as Purchaser shall reasonably request, in each case reasonably
satisfactory in form and substance to Counsel to Purchaser;
(g) Since the date of this Agreement, there shall not
have occurred any material adverse change in, or other event or condition of
any character which in any one case or in the aggregate has materially
adversely affected, or can be reasonably expected in any one case or in the
aggregate to materially adversely affect in the future, the condition
(financial or otherwise), assets, liability, results of operations, business or
prospects of the Company; including, without limitation, any of the following
which shall be considered a material adverse change, to- wit:
(i) The sale, assignment, transfer, termination or
cancellation of any of the management contracts listed in Schedule 4.13
or any material modification or amendment to any such contracts;
(ii) Any default under or breach of any material provision
of any of the management contracts listed in Schedule 4.13 whether such
default is by the Company or any other party thereto;
(iii) The termination of, or default under or breach of,
any contract or agreement between the Company and any medical director
of the mental health treatment programs or units operated by the
Company;
(iv) The termination of the employment of any of the
program directors of the mental health treatment units or programs
managed by the Company on the Effective Date;
(v) a casualty loss which is not covered by insurance in
excess of $10,000;
(vi) litigation or the assertion of a claim against the
Company which is reasonably expected not to have potential liability to
the Company, including costs and expenses of defense, in an amount more
than $10,000.00 (including attorneys' fees for defending such claim) in
excess of insurance coverage maintained by the Company which would be
applicable to such claim; provided, however, that, in the event that the
parties cannot mutually agree as to whether any such litigation or claim
is reasonably expected to have such potential liability to the Company,
then the parties shall seek the opinion of a mutually selected third
party qualified to make such assessment and the opinion of such third
party as to such potential liability shall be binding upon the parties
for the purposes hereof; and
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(h) At or prior to Closing, the Company shall have
received (and delivered copies thereof to Purchaser) duly executed resignation
letters from all directors and officers of the Company designated by Purchaser
pursuant to which such individuals resign as directors and officers of the
Company. Each such resignation shall be effective on or prior to the Closing
Date and shall acknowledge that there are no obligations, liabilities or
amounts due from the Company to such respective individuals except for accrued
salary and other benefits or otherwise as expressly set forth in this
Agreement.
(i) At the Closing, Xxxxx X. Xxxxx, M.D. and any other
Seller that is a director or officer of the Company shall execute and deliver a
release of any and all claims of any kind against the Company in favor of
Purchaser and the Company in the form and substance satisfactory to Counsel to
Purchaser (the "Releases"). Such release shall be in the form of Exhibit F
attached hereto.
(j) On or prior to the Closing, the Company and Ramsay
Healthcare, Inc. shall have renewed and extended on terms and conditions
satisfactory to Purchaser in its sole discretion those two certain Management
Contracts relating to mental health treatment units and programs in hospitals
located in Mesa, Arizona and Nevada, Missouri listed on Schedule 4.13. In the
event that either or both of such contracts cannot be renewed to the
satisfaction of the Purchaser and Seller is unable to provide one or more
replacement contracts acceptable to Purchaser in its sole discretion prior to
Closing, then Purchaser shall have the right to (i) terminate the Agreement,
(ii) waive the condition to provide renewals or replacement contracts for the
Ramsay contracts without a reduction in the Purchase Price or (iii) propose a
reduction in the Purchase Price of not more than $300,000. If Purchaser
proposes a reduction in the Purchase Price of any amount due to the Ramsay
contracts not being renewed or replaced, the Sellers shall have the right to
either accept the proposed reduction in the Purchase Price or to terminate this
agreement on written notice to Purchaser. In the event that the Sellers accept
the proposed reduction in the Purchase Price, then the provisions of Section
11.7 of this Agreement shall apply and continue for the time period specified
in such Section. In the event of such termination by either the Sellers or
Purchaser, neither party shall have any further rights or obligations hereunder
except for confidentiality provisions of Section 7.4 and the no solicitation
provisions of Section 6.12 and 7.6 of this Agreement which provisions shall
continue for the time periods specified in such Sections.
(k) On or prior to the Closing, all unpaid subscriptions
for outstanding shares of capital stock of the Company set forth in Schedule
3.2 shall have been paid in full so that all outstanding shares of capital
stock of the Company shall be fully paid and nonassessable on the date of
Closing. The amount of all such subscriptions actually paid to the Company in
good funds shall increase the $5,100,000 amount for the purposes of determining
the Purchase Price as so specified in Section 2.2 of this Agreement.
(l) At the Closing, all the Sellers shall perform his or
her or its respective obligations of and actions to be taken by all the Sellers
at the Closing as described in Section 10.2 of this Agreement such that, at the
Closing, Purchaser will acquire not less than ninety-five percent (95%) of the
issued and outstanding capital stock of the Company determined
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on a fully converted basis with respect to all outstanding warrants, options,
convertible securities or other rights to acquire capital stock of the Company.
(m) At the Closing, the Sellers shall provide in a
written certificate a representation and warranty as to the Net Worth of the
Company on the date of Closing. For the purposes hereof, "Net Worth" shall be
defined and calculated in accordance with GAAP. Such representation and
warranty of the Sellers as to the Net Worth of the Company provided at the
Closing shall constitute a representation and warranty under Article 4 of this
Agreement for the purposes of Article 11 of this Agreement. In the event that
the Net Worth of the Company on the date of Closing is less than the Net Worth
of the Company reflected in the Company Balance Sheet (i.e. a negative Net
Worth of $686,419), then Purchaser shall have the right to terminate this
Agreement.
(n) The Sellers shall have delivered the Schedules to
this Agreement to Purchaser and Purchaser shall have accepted the Schedules as
delivered by the Sellers as contemplated by Section 1.2(b) of this Agreement.
In the event that the conditions to the obligations of the Purchaser set forth
in Sections 9.1(a), (b), (g), (j), (k), (m) or (n) above are not satisfied,
then the sole right of Purchaser shall be to terminate this Agreement and
Purchaser shall have no right to seek to recover damages or other relief from
Sellers as a result of such condition not being satisfied so long as such did
not result from an intentional or fraudulent act of the Sellers.
ARTICLE 10
CLOSING
10.1 Date of Closing. The Closing shall take place at the offices
of Counsel to Sellers in Knoxville, Tennessee, or at such other location as
Purchaser and Sellers may mutually agree, within ten (10) business days after
the date on which all third party consents necessary for the consummation of
the transactions contemplated by this Agreement, if any, are obtained and all
other conditions to Closing are satisfied but in no event later than April 30,
1997 unless extended by the mutual agreement of the Purchasers and the Sellers,
subject to earlier termination pursuant to the provisions of this Agreement.
In the event that the Closing does not timely occur as stated above, then a
party not in default may immediately terminate this Agreement upon written
notice to the other parties in accordance with Section 13.1 below.
10.2 Actions by Sellers. At the Closing:
(a) Stock. Each Seller shall deliver to Purchaser the
original certificates representing the Shares owned by such Seller duly
endorsed for transfer or with appropriate stock powers with respect thereto
duly endorsed in blank by such Seller.
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(b) Consulting/Release Agreements. Xxxxx X. Xxxxxx, M.D.
shall execute and deliver the Xxxxxx Consulting Agreement and Xxxxx X. Xxxxxx,
M.D. and any other Sellers that are a director or officer of the Company shall
execute and deliver the Releases.
(c) Post-Closing Escrow Agreement. Xxxxx X. Xxxxxx shall
execute and deliver a Post-Closing Escrow Agreement (herein so called) in the
form of Exhibit G attached hereto and the Sellers shall deposit the sum of
$600,000 in the aggregate out of the Purchase Price paid to the Sellers at the
Closing with the escrow agent under the Post- Closing Escrow Agreement.
(d) Other Agreements. Perform or shall have performed
all of the covenants and agreements contained in this Agreement to be performed
or complied with by such Seller at or prior to the Closing hereunder.
10.3 Actions by Purchaser. At the Closing, Purchaser shall:
(a) Payment. Pay the Purchase Price to the Sellers by
certified or cashier's check mailed to the Seller at such Seller's respective
address.
(b) Consulting Agreement. Execute and deliver the
Xxxxxx Consulting Agreement.
(c) Post-Closing Escrow Agreement. Execute and deliver
the Post-Closing Escrow Agreement with the Sellers.
(d) Other Agreements. Perform or shall have performed
all of the covenants and agreements contained in this Agreement to be performed
or complied with by Purchaser at or prior to the Closing hereunder.
10.4 Post-Closing Escrow Account.
(a) Escrow Money. The Sellers expressly agree that the
total amount of Six Hundred Thousand Dollars ($600,000) shall be retained out
of the Purchase Price paid to the Sellers and such $600,000 shall be deposited
in an escrow account to be maintained pursuant to the Post-Closing Escrow
Agreement. The portion of such $600,000 to be withheld out of the Purchase
Price paid to each Seller shall be determined on a pro rata basis as to each
Seller based on the percentage of the total equity ownership of the Company
that the shares of capital stock of the Company owned by such Seller represents
of the aggregate total equity ownership of the Company that the shares of
capital stock of the Company owned by all Sellers. The funds in Post-Closing
Escrow Account shall be used solely for the satisfaction of the liabilities of
the Sellers as specified under Article 11 of this Agreement.
(b) Limited Power of Attorney. Each Seller, jointly and
severally, makes, constitutes and appoints Xxxxx X. Xxxxxx, M.D., (referred to
herein as "Sellers Agent"), as agent and attorney-in-fact, with full power of
substitution, in his, her or its name, place and
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stead to (i) retain and engage an escrow or trust company and escrow agent or
trustee in connection with the Post- Closing Escrow Account, (ii) retain and
engage counsel and other professional consultants which, in the sole opinion of
Sellers Agent, are required in connection with the establishment, maintenance
and operation of the Post-Closing Escrow Account, or required to defend any
real, actual, threatened or pending claim, demand or action brought by
Purchaser or any other person in connection with the satisfaction of
liabilities of the Sellers under Article 11 of this Agreement ("Post-Closing
Claims"), (iii) pay all fees, costs and expenses incurred in association with
the establishment, management and operation of the Post-Closing Escrow Account,
(iv) pay all fees, costs, expenses, judgments, damages and awards incurred in
connection with any Post-Closing Claims, (v) make, execute, sign, acknowledge,
swear to, record and file on each Seller's behalf (a) any escrow or trust
instructions in connection with the establishment, management and operation of
the Post-Closing Escrow Account, (b) all instruments that effect an amendment
or modification of the Post- Closing Escrow Account instructions, (c) any
documents, instruments or filings required to explain, protect against, defend
or resolve any Post-Closing Claims, and (vi) take such other actions, execute
such instruments and incur and pay such fees, costs and expenses as are
necessary to effect the purpose and intent of this Section 10.4. Any
instructions delivered to the escrow agent may vary the terms and provisions of
this Section 10.4 as Sellers Agent reasonably determines necessary to meet any
requirements of the escrow agent or trustee, provided the purpose, intent and
effect of this Section 10.4 shall be at all times maintained.
(c) Additional Provisions of Limited Power of Attorney.
The foregoing limited power of attorney:
(i) is coupled with an interest and shall be irrevocable
and survive the death or incapacity of each Seller;
(ii) may be exercised either by signing separately as
attorney-in-fact for each Seller or, after listing all of the Sellers
executing an instrument, by a single signature of the person acting as
attorney-in- fact for all of them; and
(iii) shall survive the delivery of an assignment by a
Seller of the whole or any portion of a Seller's interest;
10.5 Funding of Certain Company Obligations. It is understood that
the Company will not have sufficient cash on the date of Closing to pay the
monetary obligations owed by the Company to Xxxxx X. Xxxxxx, M.D. described in
Schedule 8.1(h). Purchaser covenants and agrees that, since such payments
constitute a deduction to the Purchase Price, it shall loan or otherwise
advance such funds to the Company on the date of Closing so that the Company
may satisfy the condition to the obligations of the Sellers set forth in
Section 8.1(h).
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ARTICLE 11
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNITY; POST-CLOSING MATTERS
11.1 Representations and Warranties to Survive.
(a) Survival. All statements contained in any agreement,
certificate, instrument, schedule, or document delivered by or on behalf of any
of the parties pursuant to this Agreement and the transactions contemplated
hereby shall be deemed representations and warranties by the delivering party
hereunder. All representations, warranties, covenants and agreements made by
the parties each to the other in this Agreement shall be true at the Closing
and shall survive the consummation of this Agreement and the Closing hereunder
for a period of one year, ending at midnight on the first anniversary of the
Closing Date; provided, however, that if, prior to the expiration of such one
year period, a state of facts shall have become known which threatens to give
rise to a liability against which any party hereto would be entitled to
indemnification hereunder and the indemnified party shall have given notice of
such facts to the indemnifying party, then the rights of the indemnified party
to indemnification with respect to such liability shall continue until such
liability shall have been finally determined and disposed of (including
disposition by the expiration of the applicable statute of limitations with
respect to such liability); provided further, however, that if a claim for
indemnification is made pursuant to this Article 11, then such claim for
indemnification or any claim arising out of the wrongful failure to comply with
the provisions of this Article 11 shall survive until the expiration of the
applicable period of limitations with respect to such claim for
indemnification; and provided further, however, that such one year limitation
specified above shall not apply to the matters described in Section 11.4(d)
below. With respect to the representations and warranties of the parties, such
representations and warranties shall be true as of and at the date of the
Closing but nothing contained herein shall be deemed to require or imply that
the accuracy of such representations and warranties shall apply on a continuing
basis as to facts existing after the date of the Closing. Except to the extent
set forth in sub-paragraph (b) below, no investigation or examination made by
any party hereto shall constitute a waiver of any representation or warranty
and no representation or warranty shall be merged into the Closing hereunder.
(b) Waiver. Purchaser shall be deemed to have waived any
misrepresentation or breach of warranty by the Sellers or any failure to
fulfill any agreement or covenant of the Sellers to be performed on or prior to
the Closing of which the Purchaser had actual knowledge at or prior to the
Closing. For the purposes hereof, "actual knowledge of the Purchaser" shall
mean the actual knowledge of either Xxxxx Xxx Xxxxxx, President of Purchaser,
or Xxxxx X. XxXxxx, Executive Vice President of Purchaser, of the specific
misrepresentation, breach of warranty or unfulfilled agreement or covenant.
11.2 Indemnity. Subject to the limitations set forth in Section
11.4 below,
(a) Sellers. Each Seller, jointly and severally (except
as to the representations and warranties contained in Article 3 which shall be
several and not joint), agrees to indemnify and hold harmless the Company,
Purchaser and the subsidiaries, shareholders, partners,
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directors, officers, employees and agents of Purchaser, from, against, and in
respect of, any loss, liability, claim, demand, or expense, including but not
limited to attorney, investigation and consultant fees and costs, and of any
other kind whatsoever arising out of or resulting from any of the following:
(i) Any misrepresentation, breach of warranty, or failure
to fulfill any agreement or covenant of the Sellers and the Company
under this Agreement or under any other agreement or document delivered
by the Sellers at Closing hereunder; and
(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and legal and other expenses incident to
any of the foregoing.
(b) Purchaser. Purchaser shall indemnify and hold each
Seller harmless from, against, and in respect of, any loss, liability, claim,
demand, or expense, including but not limited to attorney's fees and costs, of
any kind whatsoever, arising out of or resulting from any of the following:
(i) Any misrepresentation, breach of warranty, or failure
to fulfill any agreement or covenant of Purchaser under this Agreement
or under any other agreement or document delivered by Purchaser to
Sellers at Closing hereunder; and
(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs, and legal and other expenses incident to
any of the foregoing.
11.3 Indemnity Procedures. In case any claim, demand or action
shall be brought by any third party including, without limitation, any
governmental authority, against a party entitled to indemnity under Section
11.2(a) or 11.2(b) above, such party shall promptly notify the other party or
parties, as the case may be, from whom indemnity is or may validly be sought in
writing and the indemnifying party or parties shall assume the defense thereof,
including the employment of counsel. In addition, in case a party hereto shall
become aware of any facts which might result in any such claim, demand or
action, such party shall promptly notify the other party or parties who would
be obligated to provide indemnity hereunder with respect to such claim, demand
or action, and such other party or parties shall have the right to take such
action as it or they may deem appropriate to resolve such matter. The
indemnified party or parties shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties, unless the employment of such counsel has been specifically authorized
by the indemnifying party or parties. Any settlement of any action subject to
indemnity hereunder shall require the consent of the indemnified and the
indemnifying party which consent shall not be unreasonably withheld and shall
be given within five (5) days following the giving of notice thereof. The
indemnifying party or parties shall not be liable for any settlement of any
action effected without its or their consent, but if settled with the consent
of the indemnifying party or parties or if there be a final judgment for the
plaintiff in any such action, the indemnifying party or parties shall indemnify
and hold harmless the indemnified party from and against any loss or liability
by reason of such settlement or judgment. If requested by
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the indemnifying party, the indemnified party shall cooperate with the
indemnifying party and its counsel and use its best efforts in contesting any
such claim or, if appropriate, in making any counter-claim or cross-complaint
against the party asserting the claim, provided that the indemnifying party
will reimburse the indemnified party for reasonable expenses incurred in so
cooperating upon presentation of receipts or other evidence of such expense.
The indemnifying party and its representatives shall have full and complete
access during reasonable hours to all books, records and files of the
indemnified party expressly related to the defense of any claim for
indemnification undertaken by the indemnifying party pursuant to this Article
11, or for any other purpose in connection therewith; provided that the
indemnifying party shall safeguard and maintain the confidentiality of all such
books, records and files.
11.4 Limitations on Indemnification.
(a) General Threshold. Neither the Sellers nor the
Purchaser shall be obligated to indemnify the other party except to the extent
that the cumulative amount of all indemnifiable losses exceeds Ten Thousand
Dollars ($10,000.00) (the "Threshold"), which excess amount shall be
recoverable in accordance with the terms hereof; provided, however, that such
limitation set forth in this Section 11.4(a) shall not apply to the matters
described in Section 11.4(d) and provided further, however, that such
limitation set forth in this Section 11.4(a) shall not apply to matters arising
out of a breach of a representation or warranty of a Seller contained in
Article 3 of this Agreement.
(b) Specific Limitations. The following specific
limitations shall apply to the obligations of the Sellers to indemnify the
Purchaser, to-wit:
(i) The obligations of all Sellers under this Article 11
with respect to the representations and warranties of a Seller in
Article 3 of this Agreement shall be limited to the Purchase Price paid
to such Seller for the shares owned by such Seller paid by Purchaser;
(ii) The obligations of each Seller, other than Xxxxx X.
Xxxxxx, M.D., under this Article 11 with respect to the representations
and warranties of the Sellers under Article 4 of this Agreement or the
failure to perform any agreement or covenant of the Sellers under
Article 6 of this Agreement shall be limited to the portion of the
Purchase Price paid to such Seller deposited into the Post-Closing
Escrow Account by such Seller.
(iii) The obligations of Xxxxx X. Xxxxxx, M.D. under this
Article 11 with respect to the representations and warranties of the
Sellers contained in Article 4 of this Agreement or the failure to
perform any agreement or covenant of the Sellers under Article 6 of this
Agreement shall be limited to the funds deposited in the Post-Closing
Escrow Account by Xxxxx X. Xxxxxx, M.D. plus in the case of all such
Article 4 representations and warranties except and excluding
representations and warranties contained in Section 4.13(c), $400,000;
provided, however, that in the event that the funds deposited in the
Post-Closing Escrow Account are used to satisfy liabilities of the
Sellers arising out of the representations and warranties of the Sellers
under Article 4, other than
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the representations and warranties contained in Section 4.13(c) of this
Agreement, then the obligations of Xxxxx X. Xxxxxx, M.D. under this
Article 11 with respect to the representations and warranties of the
Sellers contained in Article 4.13(c) of this Agreement shall be limited
to the funds deposited in the Post-Closing Escrow Account by Xxxxx X.
Xxxxxx, M.D. plus an amount equal to the funds deposited in the
Post-Closing Escrow Account by all Sellers (including Xxxxx X. Xxxxxx,
M.D.) used to satisfy the obligation of the Sellers under this Article
11 with respect to the representation and warranties of the Sellers
contained in Article 4, other than Section 4.13(c), up to a maximum of
$400,000;
(iv) In the event any liability arises under this Article
11 for which Purchaser is entitled to indemnification, then Purchaser
shall first seek and apply the funds deposited in the Post-Closing
Escrow Account before seeking recourse directly against Xxxxx X. Xxxxxx,
M.D.; provided; however, that in the event that such liability arises
out of a breach of a representation or warranty under Article 3, then
Purchaser shall only have recourse to the funds deposited in the
Post-Closing Escrow Account by such Seller but shall not be limited to
only such funds in its recourse against such Seller; and
(v) With respect to the breach of a representation and
warranty contained in Article 4.13(c) of this Agreement, the Sellers
shall not be obligated to indemnify the Purchaser unless and until the
Company becomes liable for a payment arising out of (1) a final court
judgment from a legal proceeding, (2) a settlement of a legal proceeding
to which the Sellers have agreed, or (3) a settlement of threatened
legal proceedings to which the Sellers have agreed.
(c) Time Limits for Claims. No claim for indemnification
may be made by any indemnified party in respect of indemnifiable losses unless
written notice thereof shall have been received by the indemnifying party on or
prior to one year after the date hereof; provided, however, that the one-year
limitation set forth in Section 11.1 and this Section 11.4(c) shall not apply
to the matters described in Section 11.4(d) as to which the indemnification
obligations hereunder shall expire six (6) months after the termination of the
applicable statute of limitations relating to the subject matter covered by
such provisions; and provided further, however, that in each case if, prior to
the applicable date of expiration, a specific state of facts shall have become
known which is reasonably likely to constitute or give rise to any
indemnifiable loss as to which indemnity may be payable and the indemnified
party shall have given notice of such facts to the indemnifying party and made
a claim for indemnification within such one-year period, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of and any indemnification due
in respect thereof shall have been paid.
(d) Certain Matters. The following are the matters
referred to in Section 11.4(a) and Section 11.4(c):
(i) Losses arising from fraud or an intentional
misrepresentation on the part of any Seller; and
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(ii) Losses arising from the intentional breach of any
covenant or agreement by a Seller contained in this Agreement.
11.5 Remedies; Default; Notice and Cure. In the event of a breach
of this Agreement prior to the Closing, the non-breaching party shall have all
rights and remedies available at law, in equity or under the terms of the
Agreement. If the Closing occurs, indemnification pursuant to this Article 11
is the sole and exclusive remedy of the parties after the Closing for matters
arising out of the representations, warranties, covenants and agreements of the
Sellers and the Purchaser set forth in this Agreement (without limiting the
rights of the parties under any other agreement), except as otherwise expressly
provided in this Agreement. No party shall be deemed in breach of its
obligations hereunder unless it has received written notice from the other
party of noncompliance with a term or provision of this Agreement and has
failed to cure such noncompliance within ten (10) days after receipt of such
notice.
11.6 Severance Benefits. On or prior to the Closing, Purchaser and
the Company shall determine which corporate level employees of the Company will
be terminated on the Closing Date. Purchaser agrees that, as to all such
employees, there shall be a fund established by the Company in an aggregate
amount equal to the total of the amount of six months base salary on the
Effective Date for each such employee up to a maximum aggregate amount of
$225,000 and that, from such fund, severance benefits in amounts determined by
Xxxxx X. Xxxxxx, M.D. up to a maximum amount equal to six months base salary
for the employee shall be paid by the Company to such employees; provided,
however, that each such employee shall receive a severance payment equal to not
less than one month base salary. Severance pay shall be in addition to all
accrued but unused vacation leave and any other vested accrued benefits due as
a result of termination to such employee.
11.7 Certain Post-Closing Management Contracts. In the event that
the Purchase Price to the Sellers is determined by taking into account the
$300,000 reduction as contemplated by Section 9.1(j), then the Purchaser
further covenants and agrees that, in the event the Company or the Purchaser or
any subsidiary of the Purchaser enters into a management contract relating to
the operation of a mental health treatment unit and programs at any of the
hospitals listed on Schedule 11.7 after the Closing but on or before August 17,
1997, then Purchaser agrees that, as soon as reasonably practicable after the
execution of such management contract but in no event more than thirty (30)
days thereafter, it shall pay to the Sellers an amount equal to the amount
which the Sellers would have been entitled to receive at the Closing if such
$300,000 reduction had not been made in the calculation of the Purchase Price.
No payment shall be due and the provisions of this Section 11.7 shall not apply
in the event such $300,000 reduction is not made at the Closing. Additionally,
no payment shall be due and the provisions of this Section 11.7 shall not apply
with respect to any such management contract executed after August 17, 1997 or
with respect to any other management contract with a hospital not listed in
Schedule 11.7. In the event Purchaser enters into more than one management
contract with any of the hospitals listed on Schedule 11.7, Purchaser shall
nevertheless not be required to make any further payments to the Sellers beyond
the payment specified above applicable in the event any one management contract
is executed with any of such hospitals.
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ARTICLE 12
NON-COMPETITION
12.1 Covenant Not to Compete; Non-Solicitation. For and in
consideration of the purchase by the Purchaser of the Shares pursuant to this
Agreement, and the payments payable by the Purchaser pursuant to this
Agreement, Xxxxx X. Xxxxxx, M.D., the principal shareholder and chief
executive officer of the Company, covenants and agrees that he shall not,
directly or indirectly, as an employer, consultant, creditor, investor, owner,
agent, principal, partner, shareholder, or through any other kind of ownership
(other than ownership of securities of any publicly held entity in which
Xxxxxx, directly or indirectly, in the aggregate beneficially owns less than
two percent (2%) of any class of outstanding securities), or in any other
representative or individual capacity, do any of the following:
(i) for a period until the later of the expiration of two
(2) years from the date of this Agreement or one (1) year after the
termination date of the Xxxxxx Consulting Agreement, engage in the
operation or management of a mental health treatment unit or program
operated in or in association with a general acute care hospital (the
"Business") in the continental United States (the "Restricted Area");
(ii) for a period until the later of the expiration of two
(2) years from the date of this Agreement or one (1) year after the
termination date of the Xxxxxx Consulting Agreement, engage in any
business which calls upon, solicits, diverts or takes away any customer
or customers of Purchaser or the Company in the Restricted Area for the
purpose of selling or attempting to sell to any of said customers any
products or services similar to any products or services heretofore sold
or provided to any of such customers by Purchaser or the Company; and
(iii) for a period until the later of the expiration of six
(6) months from the date of this Agreement or six (6) months after the
termination date of the Xxxxxx Consulting Agreement, engage in any
business which solicits any present or future employee of Purchaser or
the Company or initiates discussions with any such employee regarding
his or her termination or resignation from employment with the Purchaser
or the Company, so that such employee may accept employment with, or
engagement as a partner, investor, shareholder, employee, agent or
consultant with Xxxxxx, directly or indirectly, as specified above;
provided, however, that Xxxxxx shall not be prohibited by this Agreement
from employing or soliciting the employment of Xxxxx X. Xxxxxxx or the
employment of any other employee that the Purchaser or the Company
terminates so long as such employment or solicitation of employment
occurs after the date of such termination.
12.2 Non-Disclosure. Xxxxxx further covenants and agrees that all
information concerning the Company, including without limitation (i)
information regarding prices or premiums charged for products and services,
(ii) the assets, liabilities and financial condition of the Company, (iii) the
names and identities of customers and analyses of the amount and types of
products and services purchased by each such customer, (iv) the suppliers
utilized by the Company and its subsidiaries and the financial arrangements
with such providers, and (v) the
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amount of compensation to employees, constitute trade secrets and confidential,
proprietary business information which is the property of the Company and that,
unless otherwise required by law, from and after the date of this Agreement:
(a) Xxxxxx shall use his best efforts and exercise utmost
diligence to protect and safeguard all of such trade secrets and
confidential, proprietary information;
(b) Xxxxxx shall not, directly or indirectly, use, sell,
license, publish, disclose or otherwise transfer or make available to
others any of such trade secrets or confidential, proprietary
information;
(c) Without the prior written consent of the Company,
Xxxxxx shall not, directly or indirectly, disclose any of such trade
secrets or confidential, proprietary information; and
(d) Xxxxxx shall not, directly or indirectly, use for his
own benefit or for the benefit of another, any of such trade secrets or
confidential, proprietary information.
It is expressly understood, however, that the foregoing shall not apply to any
information that was generally available to the public on a non-confidential
basis prior to the date of this Agreement or was or becomes generally available
to the public on a non-confidential basis from a third party who is not bound
to keep such information confidential.
12.3 Nondisparagement. For a period until the later of the
expiration of two (2) years and after the date of this Agreement or one (1)
year after the termination date of the Xxxxxx Consulting Agreement, Xxxxxx
further agrees that he shall not make or publish any statement, written or
oral, disparaging the reputation of Purchaser or the Company or their
respective subsidiaries, executive officers of the Purchaser or any of the
business services or products of the Purchaser or the Company or solicit or
encourage any hospital having a management contract with the Purchaser, its
subsidiaries or the Company to terminate such management contract.
12.4 Reasonableness; Reformation. Xxxxxx acknowledges and agrees
that (i) the provisions of this Article 12 are ancillary to the transaction
pursuant to which Xxxxxx sold and the Purchaser acquired the Shares, (ii) the
provisions of this Agreement contain reasonable limitations as to time,
geographical area and scope of activities to be restrained and do not impose a
greater restraint than is necessary to protect goodwill and other business
interests of the Company and its subsidiaries, (iii) if any portion of the
covenants and agreements set forth in this Agreement are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible as to time, scope of activities
covered, and geographical area, and (iv) if any court of competent jurisdiction
determines the specified time period, scope of activities covered, or the
specified geographical area applicable to any provision of this Agreement to be
invalid, unreasonable, arbitrary or against public policy, a lesser time
period, scope of activities covered, and/or geographical area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against Xxxxxx.
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12.5 Remedies for Breach. If Xxxxxx has failed to satisfactorily
cure any breach or threatened breach of any covenant or agreement contained
herein within ten (10) days after written notice of such breach or threatened
breach given by the Purchaser to Xxxxxx, any one or more of the following
remedies, as selected by the Purchaser in its sole discretion, shall be
available to the Purchaser in the event of a breach of this Agreement by Xxxxxx
hereunder:
(a) Specific Performance. In the event of a breach or
threatened breach of any covenant or agreement of Xxxxxx in this
Agreement, remedies at law will not adequately compensate the
Purchaser for its injuries incurred as a result thereof.
Accordingly, injunctive and/or equitable relief shall be available to
the Purchaser to specifically enforce this Agreement and prevent such
breach and any continued breach of any covenant and agreement herein.
(b) Suit for Damages. In addition to the remedies stated
in Section 12.5(a) above, in the event of any breach of any covenant
or agreement of Xxxxxx herein, Purchaser may xxx for damages arising
out of such breach and otherwise enforce this Agreement and obtain all
other remedies available to the Seller under applicable law.
ARTICLE 13
TERMINATION; WAIVER
13.1 Termination. This Agreement may be terminated, and the
transaction may be abandoned, at any time prior to the Closing, as follows and
in no other manner:
(a) Mutual Consent. By the mutual consent of Purchaser
and the Sellers;
(b) By Purchaser or Sellers: Condition Precedent. By
Purchaser or Sellers, upon written notice to the other, if the conditions to
the obligations of such canceling party or parties to consummate the
transaction, in the case of the Sellers, as provided in Article 8 or, in the
case of Purchaser, as provided in Article 9, were not, or cannot reasonably be,
satisfied on or before April 30, 1997 unless the failure of the condition is
the result of the material breach of this Agreement by the party seeking to
terminate.
(c) By Purchaser or Sellers: Representations, Warranties
and Covenants. By Purchaser, on the one hand, or Sellers, on the other, if (i)
any representation or warranty of the other hereunder shall not have been true
and correct in all material respects at the time at which made, or (ii) default
shall be made by the other in the due and timely observance or performance of
any of its covenants and agreements herein contained, but in such event only if
such representation or warranty cannot be made true and correct or such default
cannot be cured on or prior to the earlier of (x) sixty (60) days after the
non-defaulting or non-breaching party notifies the other in writing of such
default or breach, specifying the nature thereof or (y) April 30, 1997, unless
such date is extended by mutual agreement of Purchaser and Sellers.
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No termination of this Agreement shall affect the liability of any party hereto
for any breach hereof arising at, prior to or out of such termination. Any
public announcement of the termination of this Agreement shall be made only by
means of a press release issued jointly by Purchaser and the Company.
13.2 Waiver. At any time at or prior to the Closing, Purchaser, on
the one hand, or Sellers, on the other, may (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE 14
CERTAIN DEFINED TERMS
14.1 Affiliate. When used with respect to a person, an "Affiliate"
of such person is a person controlling, controlled by, or under common control
with such person.
14.2 Agreement. This Stock Purchase Agreement, including all
Schedules and Exhibits hereto, and all other documents specifically referred to
in this Agreement that have been or, are to be delivered by a party to this
Agreement to another such party in connection with this Agreement, and
including all duly adopted amendments, modifications, and supplements to or of
this Agreement and such Schedules, Exhibits, and other documents.
14.3 Closing. The completion of the transaction to take place as
described in Article 10.
14.4 Closing Date. The date on which the Closing actually occurs.
14.5 Closing Time. The time at which the Closing actually occurs.
All events that are to occur at the Closing Time shall, for all purposes, be
deemed to occur simultaneously, except to the extent, if at all, that a
specific order of occurrence is otherwise described.
14.6 Code. The Internal Revenue Code of 1986, as amended and in
effect on the date of this Agreement.
14.7 Control. Generally, the power to direct the management or
affairs of an entity.
14.8 Counsel to Sellers. Baker, Donaldson, Bearman & Xxxxxxxx,
2200 Riverview Tower, 000 Xxxxx Xxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000,
telephone number (000) 000-0000, facsimile number (000) 000-0000.
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14.9 Counsel to Purchaser. Xxxxxxxxxxx & Price, L.L.P., 000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, telephone number (000) 000-0000,
facsimile number (000) 000-0000.
14.10 ERISA. The Employee Retirement Income Security Act of 1974,
as amended and in effect on the date of this Agreement.
14.11 GAAP. Generally accepted accounting principles, as in effect
on the date of any statement, report, or determination that purports to be, or
is required to be, prepared or made in accordance with GAAP. All references
herein to financial statements prepared in accordance with GAAP shall mean in
accordance with GAAP consistently applied throughout the periods to which
reference is made.
14.12 Knowledge. As used in this Agreement, the term "knowledge" or
the phrase "to the knowledge of" or "known to" shall mean the existence of
actual or constructive knowledge by such party; provided, however, that no
party shall be deemed to have been performed, or be obligated to perform, an
independent investigation or inquiry with respect to the matter to which such
knowledge pertains.
14.13 Liabilities. At any point in time (the "Determination Time"),
the obligations of a person or entity, whether known or unknown, accrued,
absolute or contingent, or recorded on its books or not, arising or resulting
in any way from facts, events agreement, obligations, or occurrences that
existed or transpired at a prior time, or resulted from the passage of time to
the Determination Time, but not including obligations accruing or payable after
the Determination Time to the extent (but only to the extent) that such
obligations (i) arise under previously existing agreements for services,
benefits, or other considerations, and (ii) accrue or become payable with
respect to services, benefits or other considerations received by the person or
entity after the Determination Time.
14.14 Multiemployer Plan. A "multiemployer plan," as defined in
ERISA Section 3(37) or Section 414(f) of the Code, or, in either case,
successor provisions to such provisions adopted by amendments to ERISA or the
Code, as the case may be, and including, in each case, other provisions of
ERISA, of the Code, or of other law, and regulations adopted under ERISA or the
Code or such other law, modifying, amending, interpreting, or otherwise
affecting the application of such provisions, either in general or as applied
to the nature or circumstances of a particular entity that is a party to, or is
affected by or is involved in, the Agreement and with respect to which entity
the use of the term in this Agreement, or in particular location in this
Agreement, is relevant.
14.15 Payables. Liabilities of a party arising from the borrowing
of money or the incurring of obligations for merchandise, goods or services
purchased appearing as liabilities on the books of the Company or any
Subsidiary, or customarily required to be reflected as liabilities in the
balance sheets of the Company or any Subsidiary prepared in accordance with
GAAP, indicating monies owed by the Company or such Subsidiary.
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14.16 PBGC. The Pension Benefit Guaranty Corporation.
14.17 Pension Plan. A "pension plan" or "employee pension benefit
plan," as defined in Section 3(2) of ERISA or successor provisions to such
provision adopted by amendments to ERISA and including other provisions of
ERISA or of other law, and regulations adopted under ERISA or such other law,
modifying, amending, interpreting or otherwise affecting the application of
such provisions, either in general or as applied to the nature or circumstances
of a particular entity that is a party to, or is affected by or is involved in,
the Agreement and with respect to which entity the use of the term in this
Agreement, or in the particular location in this Agreement, is relevant. A
reference to a Pension Plan shall include the trust, if any, forming a part
thereof.
14.18 Receivables. Accounts receivable, notes receivable, and other
obligations appearing as assets on the books of the Company or any Subsidiary,
or customarily required to be reflected as assets in balance sheets of the
Company or any Subsidiary prepared in accordance with GAAP, indicating moneys
owed to the Company or such Subsidiary.
14.19 Welfare Plan. A "welfare plan" or an "employee welfare
benefit plan," as defined in Section 3(1) of ERISA or successor provisions to
such provision adopted by amendments to ERISA and including other provisions of
ERISA or of other law, and regulations adopted under ERISA or such other law,
modifying, amending, interpreting or otherwise affecting the application of
such provision, either in general or as applied to the nature or circumstances
of a particular entity that is a party to, or is affected by or is involved in,
the Agreement and with respect to which entity the use of the term in this
Agreement, or in the particular location in this Agreement, is relevant.
ARTICLE 15
MISCELLANEOUS
15.1 Further Instruments. The parties hereto agree to execute and
deliver such instruments and take such other action as shall be reasonably
necessary, or as shall be reasonably requested by any other party, in order to
carry out the transactions, agreements and covenants contemplated in this
Agreement at or prior to the Closing Date.
15.2 Notices. Any notices, claims or demands which any party is
required or may desire to give to another under or in conjunction with this
Agreement shall be in writing, and shall be given by addressing the same to
such other party(ies) at the address set forth below, and by (i) depositing the
same so addressed, postage prepaid, first class, certified or registered, in
the United States mail (herein referred to as "Mailing"), (ii) overnight
delivery by a nationally recognized overnight courier service (e.g. UPS,
Federal Express), (iii) delivering the same personally to such other
party(ies), or (iv) transmitting by facsimile and Mailing the original. Any
notice shall be deemed to have been given five (5) U.S. Post Office delivery
days following the date of Mailing; one day after timely delivery to an
overnight courier; if by personal
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delivery, upon such delivery; or if by facsimile, the day of transmission if
made within customary business hours, or if not transmitted within customary
business hours, the following business day.
(a) If to Sellers:
To the respective address of such Seller set forth on
the signature page hereto executed by such Seller
With a copy to Counsel to Sellers, Attention: Xxxxx
X. Xxxxxxx.
(b) If to Purchaser:
Horizon Mental Health Management, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxx Xxxxxx, President
Facsimile: (000) 000-0000
With a copy to Counsel to Purchaser, Attention:
Xxxxx X. Xxxxxxxxx.
Any party may change the address or facsimile telephone number for notices to
be sent to it by written notice delivered pursuant to the terms of this Section
15.2.
15.3 Entire Agreement; Amendments. This Agreement and the
documents to be delivered at Closing hereunder set forth the entire
understanding of the parties and supersede all prior agreements or
understandings, whether written or oral, with respect to the subject matter
hereof. This Agreement may be amended, modified or supplemented only by a
written agreement executed by Purchaser and Sellers owning a majority of the
shares of capital stock of the Company owned by all the Sellers. It is
expressly understood that Sellers owning a majority of the shares of capital
stock of the Company owned by all the Sellers may amend or modify this
Agreement, in any respect, including, without limitation, changing the purchase
price of the shares so long as any such amendment applies equally to all the
Sellers.
15.4 Binding Effect/Assignability. This Agreement shall extend to
and be binding upon and inure to the benefit of the parties hereto, their
respective heirs, legal representatives, successors and assigns. Purchaser
shall have the right at any time to assign this Agreement to any affiliate of
Purchaser without the necessity of seeking the consent of the Sellers;
provided, however, that Purchaser shall not be relieved of any obligations as a
result of such assignment and that, in addition to Purchaser remaining liable,
any such assignee shall assume and become liable for any and all of Purchaser's
obligations under this Agreement. None of the Sellers shall be entitled to
assign any of their respective rights or obligations under this Agreement;
provided, however, that the rights and obligations of a Seller may be assigned
by operation of law or may be assigned to an individual retirement account,
pension plan, trust or other entity under the control of such Seller but any
such assignment shall not relieve or release such Seller of any
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obligations hereunder as a result of such assignment and that, in addition to
such Seller remaining liable, any such assignee shall assume and become liable
for any and all of such Seller's obligations under this Agreement. In
connection with any such assignment, a Seller may transfer all or any portion
of the Shares owned by the Seller and thereby effect an assignment on the basis
specified above.
15.5 Exhibits/Schedules. All Exhibits and Schedules referenced in
this Agreement are incorporated herein by reference and shall constitute a part
of this Agreement.
15.6 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof with the remaining
provisions remaining in full force and effect and not affected by the illegal,
invalid or unenforceable provision or by severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as part of this Agreement a provision similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and still be
legal, valid and enforceable.
15.7 Headings/Captions. The captions to sections and subsections
of this Agreement have been inserted solely for convenience and reference, and
shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
15.8 Waiver; Remedies. Waiver by any party hereto of any breach of
or exercise of any rights under this Agreement shall not be deemed to be a
waiver of similar or other breaches or rights or a future breach of the same
duty. The failure of a party to take any action by reason of any such breach
or to exercise any such right shall not deprive any party of the right to take
any action at any time while such breach or condition giving rise to such right
continues. Except as expressly limited by this Agreement, the parties shall
have all remedies permitted to them by this Agreement or law, and all such
remedies shall be cumulative.
15.9 Attorney's Fees and Costs. In the event of a breach by any
party to this Agreement and commencement of a subsequent legal action in a
court of law or forum of arbitration, or in the event legal counsel is
consulted in the event of any such breach or in anticipation of any such
prospective legal action, the prevailing party in any such dispute shall be
entitled to reimbursement of reasonable attorney's fees and court costs,
including, but not limited to, the costs of expert witnesses, transportation,
lodging and meal costs of the parties and witnesses, costs of transcript
preparation and other reasonable and necessary direct and incidental costs of
such dispute.
15.10 Time. Time is of the essence under this Agreement.
15.11 Governing Law. This Agreement shall be construed under and
governed by the internal laws, and not the law of conflicts, of the State of
Tennessee.
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15.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above.
PURCHASER: SELLERS:
HORIZON MENTAL HEALTH
MANAGEMENT, INC. /s/ Xxxxx X. Xxxxxx, M.D.
---------------------------
Xxxxx X. Xxxxxx, M.D.
By:/s/ Xxxxx X. XxXxxx Address: 0000 X. Xxxxxxx Xx., Xxxxx 000
------------------------------- Xxxxxxxxx, XX 00000
Xxxxx X. XxXxxx,
Executive Vice President
/s/ Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx
Address: 000 Xxxxxxxxxx Xx.
COMPANY: Xxxxxxxxx, XX 00000
Geriatric Medical Care, Inc.
/s/ E. Xxxxxxx Xxxxx
By: /s/ Xxxxx X. Xxxxxx, M.D. ----------------------------
-------------------------- E. Xxxxxxx Xxxxx
Its: CEO Address: 0000 Xxxx Xxxx Xx.
Address: 0000 X. Xxxxxxx Xx., Xxxxxxxxx, XX 00000
Xxxxx 000
Xxxxxxxxx, XX 00000
THE CENTER FOR HEALTH & CREATIVE AGING,
P.C. PROFIT SHARING PLAN
By:/s/ Xxxxx X. Xxxxxx, M.D., Trustee
----------------------------------
Address: 0000 X. Xxxxxxx Xx.,
Xxxxx 000
Xxxxxxxxx, XX 00000
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FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (the "First
Amendment") is made on March 14, 1997 by and between Horizon Mental Health
Management, Inc. ("Purchaser"), Xxxxx X. Xxxxxx, M.D. ("Xxxxxx") and Geriatric
Medical Care, Inc. ("the "Company").
WHEREAS, the Purchaser, Xxxxxx and other shareholders of the Company,
and the Company entered into that certain Stock Purchase Agreement (the "Stock
Purchase Agreement') dated as of February 24, 1997 relating to the sales of
shares of capital stock of the Company; and
WHEREAS, the Stock Purchase Agreement may be amended by an agreement
in writing between the Purchaser, the Company and Sellers (as such term is
defined in the Stock Purchase Agreement) owning a majority of the shares of
capital stock of the Company owned by all the Sellers that are parties to the
Stock Purchase Agreement, so long as such amendment applies equally to all the
Sellers; and
WHEREAS, Xxxxxx owns a majority of the outstanding shares of capital
stock of the Company; and
WHEREAS, the parties desire to amend the Stock Purchase Agreement as
hereinafter set forth and such amendment shall apply equally to all the
Sellers;
NOW, THEREFORE, in consideration of the premises and mutual terms and
conditions herein contained, the parties hereby agree as follows:
1. Effective Time. The parties acknowledge that, although the
Closing under the Stock Purchase Agreement is being held on March 14, 1997, the
effective time of the transaction shall be as of 12:01 a.m. March 15, 1997.
2. Exhibit A to Stock Purchase Agreement. The parties hereby
agree that Exhibit A to the Stock Purchase Agreement is hereby amended in its
entirety and that Exhibit A attached to this First Amendment shall be and
hereby is substituted as the Exhibit A to the Stock Purchase Agreement in all
respects.
3. Disputed Instruments. The parties hereby agreed, in order to
resolve all issues relating to the disputed instruments described in Section
2.6 of the Stock Purchase Agreement, as follows:
(a) The exercise price of the Ramsay Warrant and the
outstanding principal balances of the Convertible Notes have been included as
additional amounts in determining the Purchase Price pursuant to Section 2.2 of
the Stock Purchase Agreement.
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(b) In no event shall the Sellers be entitled to receive
or be paid all or any portion of the Purchase Price attributable to the Ramsay
Warrant which otherwise would have been paid to Sellers if the Ramsay Warrant
had not been outstanding on the date of Closing whether pursuant to Section 2.6
of the Stock Purchase Agreement or any other provision thereof.
(c) Sellers have acknowledged and agreed that the holders
of the Convertible Notes have retained the right to convert the Convertible
Notes. Sellers shall have no right to all or any portion of the Purchase Price
attributable to the Convertible Notes which otherwise would have been paid to
Sellers if the holders of the Convertible Notes had not retained the right to
convert such Convertible Notes. Instead, the holders of the Convertible Notes
shall have the right to participate as a Seller under the Stock Purchase
Agreement upon exercising such right of conversion.
4. Payment of Purchase Price. The parties have agreed that
Purchaser shall pay the Purchase Price due to Sellers at the closing by wire
transfer to the trust account of Counsel to the Sellers. Counsel to the
Sellers shall distribute to the Sellers by check their respective portions of
the Purchase Price. Purchaser shall have no obligation or liability for the
distribution of such proceeds to the Sellers. Purchaser agrees to advance to
such trust account the full portions of the Purchase Price attributable to all
the Convertible Notes even though all the holders thereof have not exercised
the right to convert on prior to the Closing. The parties agreed that such
holders may exercise such right to convert after the date of Closing and
participate as a Seller under the Stock Purchase Agreement. However, such
holders shall not be paid their respective portion of the Purchase Price until
such right to convert has been properly exercised and, if any holder does not
exercise such right to convert and instead the principal amount of the
Convertible Note is paid to such Seller, then the portion of the Purchase Price
attributable to such Convertible Note shall be returned by Counsel to the
Seller to Purchaser. A properly exercised Convertible Note shall include a
written election to convert, a duly endorsed original Convertible Note and an
executed Signature Page and Joinder Agreement. Upon receipt of the foregoing
documents, Counsel for the Sellers shall have the authority to make payment to
the converting holder of the Convertible Notes without further authorization by
either Sellers, the Company or Purchaser. Upon such payment to the converting
holders of the Convertible Notes, the Counsel for Sellers shall promptly send
to Purchaser the originals of the election to convert, the endorsed Convertible
Note and the executed Signature Page and Joinder Agreement.
In the event that the provisions of Section 11.7 of the Stock Purchase
Agreement are satisfied by the execution of a qualifying management agreement,
the Purchaser shall be obligated to pay $270,000 to the Seller which payment
shall be made within ten (10) days after execution of the management agreement.
Payment shall be made by wire transfer to the trust account of Counsel to the
Sellers which shall distribute such additional payment to the Sellers on a pro
rata basis.
5. Post-Closing Escrow. Purchaser and Sellers have agreed that
(a) in consideration of the waiver of the Sellers to any claim to the portion
of the Purchase Price attributable to the Ramsay Warrant (even if the Ramsay
Warrant is subsequently determined not to be outstanding
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or otherwise exercisable), the amount of the Post-Closing Escrow Account shall
be reduced to $540,000 and (b) in consideration of the reduction in the Net
Worth of the Company on the date of Closing, the amount of $60,000 shall not be
deposited in the Post-Closing Escrow Account, but shall be paid to the Company
for working capital purposes. As such, the $540,000 escrow funds shall be paid
by Purchaser in the amount of $480,000 to the escrow account and $60,000 to the
Company, as to which $60,000 neither Purchaser nor the Company shall have any
obligation or liability of any kind under any circumstances to repay or refund
such amount to Sellers. In consideration of such agreement by the Sellers,
Purchaser has waived satisfaction of the condition precedent to its obligations
under Section 9.1(m) of the Stock Purchase Agreement.
6. Non-Competition. For the purposes of clarifying Section 12.1
of the Stock Purchase Agreement, Purchaser expressly agrees that (a) Xxxxxx may
solicit the employment of and employ Xxxxx X. Xxxxxxx at any time, whether or
not employed by Purchaser at such time and (b) Xxxxxx may continue his
ownership of The Center for Health and Creative Aging, P.C. provided that such
professional corporation only continue to engage in the business activity in
which it is currently engaged and expressly does engage in the management of
mental health treatment units or program for general acute care or specialty
hospitals.
7. Except as modified by this First Amendment, the provisions of
the Stock Purchase Agreement that are not inconsistent with the provisions of
this First Amendment shall remain in full force and effect in accordance with
the terms thereof. As amended by this First Amendment, the Stock Purchase
Agreement is hereby ratified and confirmed in all respects.
8. This First Amendment shall extend to and be binding upon and
inure to the benefit of the parties hereto, their respective heirs,
administrators, executors, successors and assigns.
9. This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Stock Purchase Agreement as of the day and year first written above.
PURCHASER: XXXXXX:
HORIZON MENTAL HEALTH
MANAGEMENT, INC. /s/ Xxxxx X. Xxxxxx, M.D.
--------------------------
Xxxxx X. Xxxxxx, M.D.
By:/s/ Xxxxx X. XxXxxx
----------------------------
Xxxxx X. XxXxxx,
Executive Vice President
COMPANY:
GERIATRIC MEDICAL CARE, INC.
By: /s/ Xxxxx X. Xxxxxx, M.D.
----------------------------
Xxxxx X. Xxxxxx, M.D.
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