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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............to..........
Commission file number 0-10454
UNIVERSAL HEALTH SERVICES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2077891
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (610) 768-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding, as
of April 30, 1996 (adjusted for 2 for 1 stock split).
Class A 2,181,054
Class B 25,508,090
Class C 219,244
Class D 40,368
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Page One of Twelve Pages
2
UNIVERSAL HEALTH SERVICES, INC.
I N D E X
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . Three
Condensed Consolidated Balance Sheets - March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Four
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . Five
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . Six & Seven
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . . . Eight, Nine, Ten & Eleven
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eleven
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Twelve
Page Two of Twelve Pages
3
PART I. FINANCIAL INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except per share amounts)
(unaudited)
THREE MONTHS
ENDED MARCH 31,
-----------------------
1996 1995
-----------------------
Net revenues $271,616 $220,715
Operating charges:
Operating expenses 102,335 84,469
Salaries and wages 94,500 78,021
Provision for doubtful accounts 21,767 17,185
Depreciation and amortization 14,783 11,310
Lease and rental expense 9,405 8,772
Interest expense, net 4,648 1,614
-------- --------
247,438 201,371
-------- --------
Income before income taxes 24,178 19,344
Provision for income taxes 8,677 7,503
-------- --------
NET INCOME $ 15,501 $ 11,841
======== ========
Earnings per common
and common share equivalents $ 0.54 $ 0.42
======== ========
Weighted average number of
common shares and equivalents 28,712 27,884
======== ========
See accompanying notes to these condensed financial statements.
Page Three of Twelve Pages
4
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000s omitted)
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 762 $ 34
Accounts receivable, net 116,400 114,163
Supplies 18,330 18,207
Deferred income taxes 15,304 18,989
Other current assets 5,562 5,529
--------- ---------
Total current assets 156,358 156,922
--------- ---------
Property and equipment 668,037 641,528
Less: accumulated depreciation (256,822) (248,540)
--------- ---------
411,215 392,988
--------- ---------
OTHER ASSETS:
Excess of cost over fair value of net
assets acquired 134,421 136,206
Deferred income taxes 18,717 17,283
Deferred charges 11,801 11,466
Other 35,430 33,186
--------- ---------
200,369 198,141
--------- ---------
$ 767,942 $ 748,051
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,980 $ 7,125
Accounts payable and accrued liabilities 126,871 126,018
Federal and state taxes 6,382 1,874
--------- ---------
Total current liabilities 140,233 135,017
--------- ---------
Other noncurrent liabilities 81,482 78,248
--------- ---------
Long-term debt, net of current maturities 230,401 237,086
--------- ---------
COMMON STOCKHOLDERS' EQUITY:
Class A Common Stock, 2,181,054 shares
outstanding in 1996, 2,181,054 in 1995 22 22
Class B Common Stock, 25,480,886 shares
outstanding in 1996, 25,317,636 in 1995 254 254
Class C Common Stock, 219,244 shares
outstanding in 1996, 219,244 in 1995 2 2
Class D Common Stock, 40,632 shares
outstanding in 1996, 41,006 in 1995 0 0
Capital in excess of par, net of deferred
compensation of $516,000 in 1996
and $941,000 in 1995 92,367 89,742
Retained earnings 223,181 207,680
--------- ---------
315,826 297,700
--------- ---------
$ 767,942 $ 748,051
========= =========
See accompanying notes to these condensed consolidated financial statements.
Page Four of Twelve Pages
5
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted - unaudited)
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,501 $ 11,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 14,783 11,310
Provision for self-insurance reserves 3,044 4,504
Changes in assets & liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable (2,237) (5,693)
Accrued interest (3,447) (1,891)
Accrued and deferred income taxes 8,117 7,262
Other working capital accounts 3,810 (105)
Other assets and deferred charges (3,377) (2,085)
Other 801 529
Payments made in settlement of self-insurance
claims (4,314) (1,566)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32,681 24,106
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net (25,729) (13,286)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (25,729) (13,286)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt (6,830) (10,148)
Issuance of common stock 606 380
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (6,224) (9,768)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 728 1,052
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34 780
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 762 $ 1,832
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 8,095 $ 3,505
======== ========
Income taxes paid, net of refunds $ 782 $ 241
======== ========
See accompanying notes to these condensed consolidated financial statements.
Page Five of Twelve Pages
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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and reflect all adjustments which, in the opinion of
the Company, are necessary to fairly present results for the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the accompanying disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements, accounting
policies and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
(2) EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares
outstanding during the year adjusted to give effect to common stock
equivalents.
In April 1996, the Company declared a two for one stock split in the form of a
100% stock dividend payable on May 17, 1996 to shareholders of record as of
May 6, 1996. All classes of common stock will participate on a pro rata basis.
The weighted average number of common shares and equivalents and earnings per
common and common equivalent share for the three months ended March 31, 1996
and 1995 have been adjusted accordingly, to reflect the two for one stock
split. The number of Class A, B, C and D shares outstanding as of April 30,
1996, March 31, 1996 and December 31, 1995 have also been adjusted to reflect
the two for one stock split.
(3) UNUSUAL ITEMS
Included in net revenues for the three month periods ended March 31, 1996 and
1995 was $1.8 million and $3.8 million, respectively, of additional revenues
received from special Medicaid reimbursements received by two of the Company's
acute care facilities which participate in the Texas Medical Assistance
Program. Upon meeting certain conditions of participation and serving a
disproportionally high share of the state's low income patients, the hospitals
became eligible and received additional reimbursement from the state's
disproportionate share hospital fund. These programs are scheduled to terminate
in August, 1996 and the Company cannot predict whether these programs will
continue beyond the scheduled termination date.
(4) OTHER LIABILITIES
Other noncurrent liabilities include the long-term portion of the Company's
professional and general liability and workers' compensation reserves.
(5) COMMITMENT AND CONTINGENCIES
Under certain agreements, the Company has committed or guaranteed an aggregate
of $22,000,000 related principally to the Company's self-insurance programs
and as support for various debt instruments and loan guarantees.
Page Six of Twelve Pages
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(6) SUBSEQUENT EVENTS
Subsequent to the end of the 1996 first quarter, the Company executed a purchase
agreement to acquire four behavioral health care hospitals located in
Pennsylvania and seven contracts to manage behavioral health programs. This
purchase transaction, which is subject to regulatory approval, is expected to be
completed in June, 1996. The total purchase price for the acquisition of these
hospitals and management contracts is $36.5 million in cash for the operations
and the property, plant and equipment and up to an additional $5 million which
is contingent upon the future operating performance of the acquired assets. In
May of 1996, the Company advanced $36.5 million to the seller pursuant to a term
note, which is secured by the stock of the subsidiaries to be acquired by the
Company. The term note matures upon the earlier of the granting of regulatory
approval and the closing of the purchase transaction, or October 31, 1996. Also
in connection with this transaction, the Company entered into a $7 million loan
agreement which is secured by the stock of the subsidiaries to be acquired by
the Company. The $7 million note, the term of which may be extended upon closing
of the above mentioned purchase transaction, is scheduled to mature upon the
earlier of the granting of regulatory approval and the closing of the purchase
transaction described above, or October 31, 1996.
In May, 1996 the Company completed the acquisition of Northwest Texas
Healthcare System located in Amarillo, Texas for approximately $125 million in
cash and additional amounts payable to the seller based upon performance of the
facility for a seven year period after the closing. Northwest Texas Healthcare
System consists of a 360 licensed bed full service acute care hospital and free
standing behavioral health hospital, two urgent care clinics and other
operations.
The funds used to finance the above mentioned transactions were borrowed under
the Company's revolving credit facility. The required historical and pro forma
financial information resulting from these transactions will be filed within
sixty days.
Page Seven of Twelve Pages
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
The matters discussed in this report as well as the news releases issued from
time to time by the Company contain certain forward-looking statements that
involve risks and uncertainties, including, among other things, that the
majority of the Company's revenues are produced by a small percentage of its
total number of facilities, possible changes in levels and terms of
reimbursement for the Company's charges by government programs or other third
party payors, the ability of the Company to successfully integrate its recent
and proposed acquisitions and the ability to continue to finance its growth on
favorable terms.
RESULTS OF OPERATIONS
Net revenues increased 23% or $51 million for the three months ended March 31,
1996 over the comparable prior year period due primarily to the acquisitions of
a 225-bed acute care facility and a 512-bed acute care facility acquired during
the third quarter of 1995, net of revenue effects of three acute care
facilities divested during the third and fourth quarter of 1995, and revenue
growth at facilities owned during both periods. Net revenues at hospital
facilities owned during both periods increased 4% or $8 million for the three
months ended March 31, 1996 over the comparable prior year period, excluding
the additional revenues received from the special Medicaid reimbursements
received by two of the Company's acute care facilities which participate in the
Texas Medical Assistance Program. Upon meeting certain conditions of
participation and serving a disproportionately high share of the state's low
income patients, the hospitals became eligible and received additional
reimbursements totaling $1.8 million during the first quarter of 1996 and $3.8
million during the first quarter of 1995. These programs are scheduled to
terminate in August, 1996 and the Company cannot predict whether these programs
will continue beyond the scheduled termination date.
Excluding the net revenue effects of the special Medicaid reimbursement
programs mentioned above, earnings before interest, income taxes, depreciation,
amortization and lease and rental expense (EBITDAR) increased 37% or $14
million to $51 million for the three months ended March 31, 1996 as compared to
$37 million in the comparable prior year period. Overall operating margins,
excluding the special Medicaid reimbursements, were 19.0% for the three months
ended March 31, 1996 as compared to 17.2% in the comparable prior year period.
ACUTE CARE SERVICES
Net revenues from the Company's acute care hospitals and ambulatory treatment
centers accounted for 88% and 86% of the consolidated net revenues for the
three month periods ended March 31, 1996 and 1995, respectively. Net revenues
at the Company's acute care hospitals owned during both periods increased 6%
after excluding the revenues received from the special Medicaid reimbursements
described above. Despite the continued shift in the delivery of healthcare
services to outpatient care, the Company's acute care hospitals owned during
both periods experienced a 6% increase in inpatient admissions and a 4%
increase in patient days in 1996 as compared to 1995. Outpatient activity at
the Company's acute care hospitals continues to increase as a result of
advances in medical technologies, which allow more services to be provided on
an outpatient basis, and increased pressure from Medicare, Medicaid, health
maintenance organizations (HMOs), preferred provider organizations (PPOs) and
insurers to reduce hospital stays and provide services, where possible, on a
less expensive outpatient basis. To accommodate the increased utilization of
outpatient services, the Company has expanded or redesigned several of its
outpatient facilities and services.
Page Eight of Twelve Pages
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BEHAVIORAL HEALTH SERVICES
Net revenues from the Company's behavioral health services facilities accounted
for 12% and 14% of the consolidated net revenues for the three month periods
ended March 31, 1996 and 1995, respectively. Net revenues at the Company's
psychiatric hospitals owned during both periods decreased 6% during the three
months ended March 31, 1996 as compared to the comparable prior year period.
Although the admissions, patient days and length of stay at these facilities
increased approximately 1% during the 1996 quarter as compared to the 1995
quarter, the decrease in net revenues resulted primarily from the fact that
residential treatment days, which reimburse the Company at lower rates per day
as compared to other behavioral health care services, constituted a greater
percentage of patient days than in the prior year period. The Company's
behavioral health care facilities have continued to be effected by changes in
the delivery of psychiatric services and continued cost containment pressures
from payors which includes a greater emphasis on the utilization of outpatient
services. Management of the Company has responded to these trends by
developing and marketing new outpatient treatment programs.
OTHER OPERATING RESULTS
Depreciation and amortization expense increased 31% to $3.5 million for the
three months ended March 31, 1996 as compared to the comparable prior year
period due primarily to the Company's acquisition of two acute care hospitals
in July and August of 1995 partially offset by the effect of three acute care
facilities divested in July and October of 1995.
Interest expense increased $3.0 million for the three month period ended March
31, 1996 over the 1995 quarter due primarily to increased borrowings used to
finance the purchase of two acute care hospitals during the third quarter of
1995.
The effective tax rate was 36% and 39% for the three month periods ended March
31, 1996 and 1995, respectively. The decrease in the effective rate was due
primarily to the financing of employee benefit programs.
GENERAL TRENDS
An increased proportion of the Company's revenue is derived from fixed payment
services, including Medicare and Medicaid which accounted for 48% and 43% of
the Company's net patient revenues for the three months ended March 31, 1996
and 1995, respectively, excluding the additional revenues from special
Medicaid reimbursement programs. The Medicare program reimburses the Company's
hospitals primarily based on established rates by a diagnosis related group for
acute care hospitals and by cost based formula for psychiatric hospitals.
In addition other payors continue to actively negotiate the amounts they will
pay for services performed. In general, the Company expects the percentage of
its business from managed care programs to grow, including HMOs, PPOs and
Medicare and Medicaid beneficiaries enrolled in such programs. The consequent
growth in managed care networks and the resulting impact of these networks on
the operating results of the Company's facilities vary among the markets in
which the Company operates.
Page Nine of Twelve Pages
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In addition to the trends described above that continue to have an impact on
operating results, there are a number of other, more general factors affecting
the Company's business. Both the House of Representatives and the Senate are
considering legislation providing for substantial Medicare savings over an
extended period, including reductions in payments to hospitals, which would
limit the rate of growth of the program. The Company can not predict what new
legislation may ultimately be enacted, and if enacted, no assurance can be
given that the implementation of such reforms will not have a material adverse
effect on the Company's business. In Texas, a law has been passed which
mandates that the state senate apply for a waiver from current Medicaid
regulations to allow the state to require that certain Medicaid participants be
serviced through managed care providers. The Company is unable to predict
whether Texas will be granted such a waiver or the effect on the Company's
business of such waiver.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $32.7 million for the three
months ended March 31, 1996 and $24.1 million for the three months ended March
31, 1995. The $8.6 million increase during the 1996 quarter as compared to the
1995 comparable period was primarily due to a $5.7 million increase in the net
income plus the addback of the non-cash charges (depreciation, amortization
and provision for self-insurance reserves). In addition, cash flow from
operating activities in the first quarter of 1995 was adversely impacted by an
increase in accounts receivable resulting from a temporary decline in cash
collections due to information systems conversions at the Company's hospitals.
Partially offsetting these changes was a $2.7 million increase in payments made
in settlement of self-insurance claims. The net cash provided by operating
activities substantially exceeded the scheduled maturities of long-term debt.
During the first three months of 1996, the Company used $25.7 million of its
operating cash flow to finance capital expenditures (including $7 million spent
on the construction of a new medical complex in Summerlin, Nevada) and $6.8
million to reduce outstanding debt.
Subsequent to the end of the 1996 first quarter, the Company executed a
purchase agreement to acquire four behavioral health care hospitals located in
Pennsylvania and seven contracts to manage behavioral health programs. This
purchase transaction, which is subject to regulatory approval, is expected to
be completed in June, 1996. The total purchase price for the acquisition of
these hospitals and management contracts is $36.5 million in cash for the
operations and the property, plant and equipment and up to an additional $5
million which is contingent upon the future operating performance of the
acquired assets. In May of 1996, the Company advanced $36.5 million to the
seller pursuant to a term note, which is secured by the stock of the
subsidiaries to be acquired by the Company. The term note matures upon the
earlier of the granting of regulatory approval and the closing of the purchase
transaction, or October 31, 1996. Also in connection with this transaction,
the Company entered into a $7 million loan agreement which is secured by the
stock of the subsidiaries to be acquired by the Company. The $7 million note,
the term of which may be extended upon closing of the above mentioned purchase
transaction, is scheduled to mature upon the earlier of the granting of
regulatory approval and the closing of the purchase transaction described
above, or October 31, 1996.
In May, 1996 the Company completed the acquisition of Northwest Texas
Healthcare System located in Amarillo, Texas for approximately $125 million in
cash. Northwest Texas Healthcare System consists of a 360 licensed bed full
service acute care hospital and free standing behavioral health hospital, two
urgent care clinics and other operations. The funds used to finance the above
mentioned transactions were borrowed under the Company's revolving credit
facility.
Page Ten of Twelve Pages
11
The Company expects to finance all capital expenditures and acquisitions with
internally generated funds, borrowed funds or the sale of debt or equity
securities. As of March 31, 1996, after including the $168.5 million of
additional borrowings for the purchase transactions described above, the
Company had $42 million of unused borrowing capacity under its commercial paper
and revolving credit facilities.
PART II. OTHER INFORMATION
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Asset Purchase Agreement dated as of April 19, 1996 by and among
UHS of PENNSYLVANIA, INC., a Pennsylvania corporation, and subsidiary of
UNIVERSAL HEALTH SERVICES, INC., a Delaware corporation, UHS, UHS OF DELAWARE,
INC., a Delaware corporation and subsidiary of UHS, WELLINGTON REGIONAL MEDICAL
CENTER, INC., a Florida corporation and subsidiary of UHS, FIRST HOSPITAL
CORPORATION, a Virginia corporation, FHC MANAGEMENT SERVICES, INC., a Virginia
corporation, HEALTH SERVICES MANAGEMENT, INC., a Pennsylvania corporation,
HORSHAM CLINIC, INC., d/b/a THE HORSHAM CLINIC, a Pennsylvania corporation,
CENTRE VALLEY MANAGEMENT, INC. d/b/a THE MEADOWS PSYCHIATRIC CENTER, a
Pennsylvania corporation, CLARION FHC, INC. d/b/a CLARION PSYCHIATRIC CENTER, a
Pennsylvania corporation, WESTCARE, INC. d/b/a ROXBURY, a Virginia corporation
and FIRST HOSPITAL CORPORATION OF FLORIDA, a Florida corporation.
10.2 $36.5 million Term Note dated May 3, 1996 between Universal Health
Services, Inc., a Delaware corporation, and First Hospital Corporation, Horsham
Clinic, Inc. d/b/a Horsham Clinic, Centre Valley Management, Inc. d/b/a The
Meadows Psychiatric Center, Clarion FHC. d/b/a Clarion Psychiatric Center,
Westcare, Inc. d/b/a Roxbury, FHC Management Services, Inc., Health Services
Management, Inc., First Hospital Corporation of Florida.
10.3 $7 million Term Note dated May 3, 1996 between Universal Health
Services, Inc. a Delaware corporation and First Hospital Corporation, Horsham
Clinic, Inc. d/b/a Horsham Clinic, Centre Valley Management, Inc. d/b/a The
Meadows Psychiatric Center, Clarion FHC. d/b/a Clarion Psychiatric Center,
Westcare, Inc. d/b/a Roxbury, FHC Management Services, Inc., Health Services
Management, Inc., First Hospital Corporation of Florida.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
11. Statement re computation of per share earnings is set forth on
Page six in Note 2 of the Notes to Condensed Consolidated Financial Statements.
All other items of this Report are inapplicable.
Page Eleven of Twelve Pages
12
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Universal Health Services, Inc.
(Registrant)
Date: May 13, 1996 /s/ Kirk E. Gorman
-----------------------------------------
Kirk E. Gorman, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer).
Page Twelve of Twelve Pages
1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is dated this
19th day of April, 1996, by and among UHS OF PENNSYLVANIA, INC., a Pennsylvania
corporation (the "Buyer"), and subsidiary of UNIVERSAL HEALTH SERVICES, INC., a
Delaware corporation ("UHS"), UHS, UHS OF DELAWARE, INC., a Delaware
corporation ("UHS-DEL") and subsidiary of UHS, WELLINGTON REGIONAL MEDICAL
CENTER, INC., a Florida corporation ("Wellington") and subsidiary of UHS, FIRST
HOSPITAL CORPORATION, a Virginia corporation ("FHC"), FHC MANAGEMENT SERVICES,
INC., a Virginia corporation ("FHC-MSI"), HEALTH SERVICES MANAGEMENT, INC., a
Pennsylvania corporation ("HSMI"), HORSHAM CLINIC, INC. D/B/A THE HORSHAM
CLINIC, a Pennsylvania corporation ("Horsham"), CENTRE VALLEY MANAGEMENT, INC.
D/B/A THE MEADOWS PSYCHIATRIC CENTER, a Pennsylvania corporation ("Meadows"),
CLARION FHC, INC. D/B/A CLARION PSYCHIATRIC CENTER, a Pennsylvania corporation
("Clarion"), WESTCARE, INC. D/B/A ROXBURY, a Virginia corporation ("Roxbury")
and FIRST HOSPITAL CORPORATION OF FLORIDA, a Florida corporation
("FHC-Florida")(Buyer, UHS, UHS-DEL, and Wellington are sometimes hereinafter
referred to collectively as the "UHS Group"; Horsham, Meadows, Clarion and
Roxbury are sometimes hereinafter referred to individually as an "FHC
Affiliate" and collectively as the "FHC Affiliates"; and FHC, FHC-MSI, HSMI,
FHC-Florida and the FHC Affiliates are sometimes hereinafter referred to
individually as a "Seller" and collectively as the "Sellers").
WHEREAS, FHC owns all of the issued and outstanding shares of
the common stock of each of FHC-MSI, HSMI, Horsham, Meadows, Clarion, Roxbury
and FHC-Florida; and
WHEREAS, each of Horsham, Meadows and Clarion owns and
operates a licensed mental health facility at the locations listed on Exhibit A
hereto and Roxbury owns and operates a licensed substance abuse facility at the
location listed on Exhibit A hereto (individually, a "Facility" and
collectively, the "Facilities"); and
WHEREAS, FHC, either directly or through its subsidiaries,
manages certain mental health facilities through management contracts listed on
Exhibit B hereto and more fully described below (the "Management Contracts");
and
WHEREAS, FHC-Florida owns thirty-three acres of undeveloped
land located adjacent to the Wellington Medical
2
Center in West Palm Beach, Florida (the "Florida Real Property"); and
WHEREAS, (i) the FHC Affiliates, with the consent of FHC,
desire to sell and Buyer desires to purchase, substantially all of the assets
used by the FHC Affiliates in the operation of the Facilities; (ii) HSMI and
FHC-MSI desires to sell and assign and UHS-DEL desires to purchase and assume
certain rights and obligations with respect to the Management Contracts; and
(iii) FHC-Florida desires to sell and Wellington desires to purchase the
Florida Property, all for the consideration and upon the terms and subject to
the conditions hereafter set forth.
NOW, THEREFORE, in consideration of the premises, the
provisions and the respective agreements hereinafter set forth, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 AGREEMENT TO PURCHASE AND SELL FACILITIES
ASSETS. Upon the terms and subject to the conditions set forth in this
Agreement and upon the representations and warranties made herein by each of
the parties to the other, on the Closing Date (as such term is hereinafter
defined), each of the FHC Affiliates shall sell, grant, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase and acquire from each
of the FHC Affiliates, all of the FHC Affiliates' right, title and interest in
and to their respective assets (the "Facilities Assets"), except for the
Excluded Assets as provided in Section 1.2, free and clear of all liens,
charges, claims, pledges, security interests and encumbrances of any nature
whatsoever (collectively, "Liens"), except for Permitted Encumbrances defined
in Section 2.11(i) below. The Facilities Assets shall mean all those personal,
tangible and intangible properties, and the real properties and improvements of
the FHC Affiliates used in connection with the operation of the Facilities as
set forth below, other than the Excluded Assets, including, without limitation,
(i) those more particularly described on the Schedules to this Section 1.1,
(ii) the going concern value of the FHC Affiliates, if any, and (iii) the
following:
(a) all fee or leasehold title to all real property, including the
real property described in Schedule 2.11(a), together with all
improvements, buildings and fixtures located thereon or
therein, including the Facilities and all construction in
progress (such fee titles in real properties hereafter
collectively, the "Facilities Real Property");
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(b) all equipment, computers, computer hardware and software
(subject to any restrictions by the licensor on the assignment
thereof), tools, supplies, furniture, vehicles and other
tangible personal property and assets owned or leased by the
FHC Affiliates related to the Facilities as of the date of
this Agreement, as such items may be modified prior to Closing
in the ordinary course of business, and including without
limitation those items set forth on Schedule 1.1(b);
(c) all items of inventory listed on the June 1995 Balance Sheets
(as defined in Section 2.7 below), as such items maybe
modified prior to Closing in the ordinary course of business;
(d) those prepaid expenses relating to the Facilities which the
Buyer agrees in writing to assume;
(e) all financial, patient, medical staff, research and
development, and other records (including equipment records,
medical/administrative libraries, medical records, documents,
production reports and records, personnel records, catalogs,
books, records, files, equipment logs and operating manuals)
located at the Facilities or necessary for the operation of
the Facilities;
(f) all of Sellers' interest in (including all rights, benefits
and obligations) all commitments, contracts, leases, licenses,
agreements and understandings, and all outstanding offers or
solicitations to enter into any of the foregoing, written or
oral (the "Contracts") described on Schedule 1.1(f), except
for the Excluded Assets (the "Assumed Contracts");
(g) all licenses, permits and other governmental approvals
(including certificates of need), to the extent assignable,
held or used by any of the FHC Affiliates in connection with
the ownership, development and operations of the Facilities
(including any pending or approved governmental approvals
regarding the Facilities);
(h) all marks, names (including the names of the FHC Affiliates
listed in the first paragraph of this Agreement and the
following d/b/a names: "The Horsham Clinic, the Meadows
Psychiatric Center, Clarion Psychiatric Center and Roxbury"
and any variants thereof), trademarks, service marks, patents,
patent rights, assumed names, logos and copyrights (including
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variants thereof and applications therefor but excluding any
marks and names used by FHC containing any of the following,
"FHC", "FHC Health Systems", "First Hospital Corporation",
"Options", "Options Mental Health" and variants thereof
(collectively, "Intellectual Properties"), used in the
business of the Facilities;
(i) the interest in all property, real, personal or mixed,
tangible or, to the extent assignable, intangible, arising or
acquired in the ordinary and regular course of any of the FHC
Affiliates' business in connection with the Facilities between
the date hereof and the Closing Date;
(j) all of the FHC Affiliates' ownership or other interests, to
the extent transferable or assignable by them, in and to any
shares of capital stock of any corporation, partnership
interests in general or limited partnerships, interests in
joint ventures, or other equity or debt instruments in any
Persons (as defined in Section 1.10 below), all as described
on Schedule 1.1(j) (the "Investments"), other than those
Investments (the "Rejected Investments") which are listed on
Schedule 1.2(a) hereto as Excluded Assets or which Buyer
designates not later than ten days prior to the Closing Date
as Excluded Assets;
(k) all insurance proceeds (including applicable deductibles,
copayments or self-insured requirements) arising in connection
with damage to the Facilities Assets occurring prior to the
Closing Date, to the extent not expended for the repair or
restoration of the Facilities Assets;
(l) any claims of the FHC Affiliates against third parties
relating to the Facilities Assets, choate or inchoate, known
or unknown, contingent or otherwise;
(m) all assets included in the June 1995 Balance Sheets generally
as "inventories", "property, plant or equipment", and "other
assets", except for the Excluded Assets;
(n) all accounts and notes receivable (including, without
limitation, any claims, remedies and other rights related
thereto) and rights to payment for services rendered through
the Closing Date; and
(o) all other property of every kind, character or description, to
the extent assignable in the case of
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items of property of a character described in subparagraphs
(g), (i), (j) and (k) above, owned by any of the FHC
Affiliates and used or held for use in the business of the
Facilities, whether or not reflected on the Financial
Statements (as defined in Section 2.7), located at the
Facilities or necessary for the operation of the Facilities
and whether or not similar to the things specifically set
forth above, except the Excluded Assets.
1.2 EXCLUDED ASSETS. The following items are not
part of the sale and purchase contemplated hereunder and are excluded from the
Facilities Assets (collectively, the "Excluded Assets");
(a) short term investments listed on Schedule 1.2(a) hereto, cash
and cash equivalents;
(b) inventory and supplies disposed of or exhausted after the date
hereof and prior to the Closing Date in the ordinary and
regular course of business of the Facilities, and any other
assets transferred or disposed of in accordance with the
ordinary course of business consistent with past practices;
(c) prepaid expenses not assumed by Buyer, claims for refunds and
rights to offset in respect thereof;
(d) personnel records and any other records which any of the FHC
Affiliates is required by law to retain in its possession and
internal records maintained in Norfolk, Virginia by FHC with
respect to the FHC Affiliates, but only to the extent such
records are not necessary for the continued operation of the
Facilities in the manner in which they are currently being
operated;
(e) all worker's compensation and other insurance policies
maintained by the FHC Affiliates as of the Closing Date,
including any prepaid premiums under such policies;
(f) all Contracts listed on Schedule 1.2(f) hereto;
(g) all claims for amounts due, or that may become due from
Medicare, Medicaid or any other health care payment
intermediary resulting solely from the consummation of the
transactions contemplated hereby and arising in connection
with the filing of final cost reports with third party payors;
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(h) any other assets expressly designated in the Schedules to this
Agreement as Excluded Assets;
(i) any and all other assets selected by Buyer in its sole
discretion, as excluded prior to the Closing; and
(j) subject to Buyer's rights of access described in Section
8.4(a) below, the computer hardware not located at the
Facilities and the software related thereto both currently
used and necessary to maintain the books and records of the
FHC Affiliates, FHC-MSI, or HSMI.
1.3 CONTRACT ASSIGNMENTS.
1.3.1 ASSIGNMENT OF INTEREST IN MANAGEMENT
CONTRACTS. At Closing and upon and subject to the terms and conditions set
forth in this Agreement, FHC-MSI and HSMI shall transfer and assign to UHS-DEL
and UHS-DEL shall assume and perform the Management Contracts described on
Exhibit B hereto pertaining to six mental health facilities located within and
outside of the Commonwealth of Pennsylvania and the management of an integrated
delivery system for an eleven (11) county region in northeast Pennsylvania.
1.3.2 CONSENTS TO ASSIGNMENTS. Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an agreement to assign or transfer any of the Assumed Contracts or Management
Contracts or part thereof or right or benefit arising thereunder or resulting
therefrom if an attempted assignment or transfer thereof, without the consent
of a third party thereto, would constitute a breach thereof or in any way
affect the rights of Buyer, UHS-DEL, FHC-MSI or HSMI thereunder. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights of Buyer, UHS-DEL, FHC-MSI or HSMI so
that Buyer or UHS-DEL would not in fact receive all such rights, FHC-MSI and
HSMI (i) shall cooperate with Buyer and UHS-DEL in their request in endeavoring
to obtain such consent promptly at no cost to Buyer or UHS-DEL and (ii) if any
such consent is unobtainable, shall cooperate with Buyer and UHS-DEL in any
reasonable arrangement (the "Assignment Substitute") designed to provide Buyer
and UHS-DEL the benefits under any such Assumed Contract or Management Contract
or part thereof or any right or benefit arising thereunder or resulting
therefrom, including enforcement for the benefit of Buyer and UHS-DEL of any
and all rights of FHC-MSI or HSMI against a third party arising out of the
breach or cancellation by such third party or otherwise. FHC-MSI and HSMI
shall, to the extent necessary, perform under the Assignment Substitute without
a fee to UHS-DEL except the consideration being paid hereunder.
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1.3.3 MANAGEMENT CONTRACTS INDEMNIFICATION. With
respect to any Assignment Substitute pertaining to any of the Management
Contracts, (i) UHS-DEL shall be entitled to receive 100% of the profits
attributable to such Management Contract and shall be responsible for 100% of
the losses attributable to such Management Contracts from and after the Closing
Date and (ii) UHS and UHS-DEL shall jointly and severally indemnify and hold
FHC-MSI, HSMI and FHC, as the case may be, harmless from and against any and
all liabilities, obligations or claims arising out of or relating to events
occurring after the Closing Date under or with respect to such Management
Contract other than those arising from the willful misconduct of FHC-MSI, HSMI
or FHC.
1.4 AGREEMENT TO PURCHASE AND SELL FLORIDA REAL
PROPERTY. At Closing and upon and subject to the terms and conditions set
forth in this Agreement, FHC-Florida shall sell, assign, convey, transfer and
deliver to Wellington, and Wellington shall purchase at the Closing, free and
clear of all Liens, other than the Permitted Encumbrances, all of FHC
Florida's right, title and interest in and to the Florida Real Property
described on Schedule 1.4 hereto.
1.5 INSTRUMENTS OF CONVEYANCE.
(a) On the Closing Date, each of the Sellers shall
deliver to Buyer (or Wellington in the case of the Florida Real Property) such
deeds (in the case of the real property and the improvements thereon described
in Schedules 1.4 and 2.11(a) hereto, a special warranty deed or the equivalent
thereof in use in accordance with local practice), bills of sale, endorsements,
assignments and other good and sufficient instruments of conveyance and
assignment in the forms attached hereto as Appendix I, as shall be effective to
vest in the Buyer (or Wellington) all of the Sellers' right, title and interest
in and to the Purchase Assets (as defined in Section 1.10), free and clear of
all Liens except for the Permitted Encumbrances. Simultaneously with such
delivery, the Sellers will take all additional steps as may be necessary to put
the Buyer in possession of the Purchase Assets, including, all assets which are
not located at the Facilities at the time of Closing. Subject to receiving a
credit against the Purchase Price as provided in Section 10.4 below, Buyer (or
Wellington) shall pay all transfer costs, title insurance fees, recording fees
and transfer or stamp taxes or similar charges payable by either Buyer or
Sellers by reason of the sale, assignment, transfer and delivery hereunder of
the Purchase Assets.
(b) At the Closing, and except as may otherwise be
provided for herein, each of the Sellers shall use all reasonable efforts to
deliver to Buyer (or UHS-DEL in the case of the Management Contracts) all
written consents required under any
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Assumed Contract being assigned to Buyer hereunder or any Management Contract
being assigned to UHS-DEL hereunder. Buyer, UHS and UHS-DEL shall cooperate
with Sellers in procuring such consents to the extent reasonably necessary.
1.6 CONSIDERATION.
1.6.1 PURCHASE PRICE. The purchase price
(the "Purchase Price") to be paid to Sellers on account of the Purchase Assets
and their respective covenants against competition shall be FORTY ONE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($41,500,000), subject to adjustment as set forth
herein, and payable as follows:
(a) In reliance upon the representations,
warranties, covenants and agreements of Sellers contained herein, and in
exchange for the Purchase Assets, on the Closing Date Buyer agrees to pay to
Sellers THIRTY-SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($36,500,000) (the
"Closing Payment"), such Closing Payment to be made by wired Federal funds to
such account as shall be designated by Sellers no later than three business
days prior to the Closing Date, subject, however, to adjustment as provided in
Sections 1.6.2 and 1.6.3 below and to the credit provided in Section 10.4
below.
(b) On the Closing Date, Buyer either (i) shall
deliver to FHC its Promissory Note ("Note") dated as of the Start Date, as
defined in Section 1.6.3(a) below, in the principal amount of FIVE MILLION
DOLLARS ($5,000,000) in substantially the form of Appendix II-A hereto or (ii)
shall deposit in escrow FIVE MILLION DOLLARS ($5,000,000), plus an amount equal
to interest on the $5,000,000 calculated at a rate of interest equal to the
rate of interest under the Note from the Start Date through the Closing Date in
the event UHS funds a Pre-Closing Loan (as defined in Section 6.5 below), with
a mutually acceptable escrow agent (the "Escrow Agent"), under the terms and
provisions of an escrow agreement in substantially the form of Appendix II-B
hereto (the "Escrow Agreement"), which amount shall be held in escrow until
determination and payment of the Deferred Payment as defined in Section 1.6.3
or as otherwise provided in the Escrow Agreement.
1.6.2 PURCHASE PRICE ADJUSTMENT AND
PRORATIONS.
(a) The Purchase Price may be increased or
decreased, as the case may be, to the extent Facilities' Working Capital (as
hereinafter defined) exceeds or is less than $3,025,000 at the Closing Date.
For purposes of this Agreement, "Working Capital" shall mean accounts
receivable net of all accounts receivable reserve (calculated in accordance
with past practice), plus inventory, plus prepaid expenses, less accounts
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payable, less credit balances for patient accounts, less accrued payroll and
related expenses, less other current liabilities (other than those not assumed
by the Buyer as may be agreed), all computed in accordance with generally
accepted accounting principles and prepared on a basis consistent with the June
1995 Balance Sheets, except that any categories of liabilities that Buyer is
not assuming on the Closing Date shall not be included in the Working Capital
calculation. Working Capital shall be estimated on the Closing Date. Working
Capital shall be determined by mutual agreement within sixty (60) days
following the Closing and the Purchase Price adjusted accordingly.
(b) In the event Buyer and Sellers are unable to
agree on the adjustment to the Purchase Price relating to the increase or
decrease in Working Capital, Buyer and FHC shall mutually engage a firm of
independent public accountants of recognized national standing (the
"Independent Auditor") who, using the accounting procedures set forth on
Exhibit C hereto, shall make a determination of the adjustment to the Purchase
Price within sixty (60) days of its engagement and shall deliver its written
report thereon to Buyer and Sellers within such time period. In the event
Buyer and FHC are unable to agree upon the selection of the Independent
Auditor, each shall select a firm of independent public accountants of national
standing and these two firms shall jointly select a third independent firm of
public accountants to serve as the Independent Auditor. The written report of
the Independent Auditor shall be binding upon the parties and the fees and
expenses of the Independent Auditor shall be equally shared by Buyer and
Sellers unless the Independent Auditor determines that Sellers' proposed
adjustment to the Purchase Price is appropriate, in which case Buyer shall pay
all costs of the Independent Auditor.
(c) Payment on account of the adjustment to the
Purchase Price relating to the increase or decrease in Working Capital shall be
made within ten (10) days after the earlier of the determination of the
adjustment by the parties under Section 1.6.2(a) above, or the Independent
Auditor's delivery of its written report under Section 1.6.2(b) above.
(d) On January 10, 1997, Sellers shall reimburse
Buyer for all uncollected receivables included in the Facilities Assets and all
unrecorded current liabilities that were incurred before the Closing Date but
paid after the Closing Date in an amount equal to the aggregate amount of such
uncollected receivables (less the account receivable reserve used in
calculating Working Capital), plus the amount of such unrecorded current
liabilities.
1.6.3 EBITDA ADJUSTMENT. (a) Payments under
the Note or disbursements under the Escrow Agreement (hereinafter the
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"Deferred Payment") are dependent upon "EBITDA" (as defined in Schedule 1.6.3
hereto) during the twelve (12) month period (the "EBITDA Period") commencing on
the earlier of (i) the Closing Date or (ii) the date UHS funds the Pre-Closing
Loan (as defined in Section 6.5) if that date is the 1st of a month or, if it
is not, the first day of the next succeeding month and ending twelve months
thereafter (the date determined under this clause (ii) being the "Start Date").
(b) If EBITDA equals $9.0 million, then Sellers
shall receive the entire Deferred Payment together with all accrued interest
thereon. If EBITDA exceeds $9.0 million, then Sellers shall receive (i) the
entire Deferred Payment together with all accrued interest thereon, plus (ii)
the product of 2.5 multiplied by the amount by which EBITDA exceeds $9.0
million, together with interest on the amount calculated under this clause (ii)
accruing at the rate of interest payable on the Deferred Payment from the Start
Date through the date of payment to Sellers (the "Upside Interest"), but the
amount under this clause (ii) shall not exceed $3.0 million plus the Upside
Interest. If EBITDA is less than $9.0 million, then (x) Buyer shall, as
applicable, receive a credit against the Note in an amount or receive a payment
from the escrow in an amount equal to the product of 4.6 multiplied by the
amount by which $9.0 million exceeds EBITDA, up to a maximum of $5,000,000,
together with the corresponding accrued interest and (y) Seller shall receive
the balance, if any, of the Deferred Payment (after payment under clause (x)
above), together with the corresponding accrued interest.
(c) EBITDA shall be determined by mutual
agreement of Buyer and Sellers on or before the 60th day following the
expiration of the EBITDA Period. In the event Buyer and Sellers are unable to
agree on EBITDA on or prior to such 60th day, Buyer and FHC shall engage an
independent auditor (the "EBITDA Auditor") to determine EBITDA in accordance
with Section 1.6.3(a). The EBITDA Auditor shall be selected in the same manner
as the Independent Auditor and the written report of the EBITDA Auditor shall
be binding upon the parties and the fees and expenses of the EBITDA Auditor
shall be shared equally by Buyer and Sellers.
1.6.4 ASSUMPTION AGREEMENT. In reliance upon the
representations, warranties, covenants and agreements of Sellers contained
herein, and in exchange for the Purchase Assets, on the Closing Date, Buyer
shall deliver an undertaking in the form attached hereto as Appendix III, (the
"Assumption Agreement"), whereby Buyer assumes to pay, perform and discharge
the Assumed Liabilities (as defined in Section 1.7) when due.
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1.6.5 PRORATIONS. Within thirty (30) days following
the Closing Date and to the extent not previously taken into account pursuant
to Section 10.4, Sellers and Buyer or Wellington shall pro rate as of the
Closing Date, ad valorem taxes, if any, on the Purchase Assets, utility charges
and similar expenses.
1.7 LIABILITIES ASSUMED BY BUYER. In further
consideration for the sale of the Purchase Assets, on and as of the Closing
Date, Buyer (or UHS-DEL in the case of the Management Contracts) shall assume
and agree to pay, perform and discharge the following liabilities
(collectively, the "Assumed Liabilities"):
(a) all current liabilities of the FHC Affiliates
reflected on the June 1995 Balance Sheets (except for the current portion of
long term debt, accrued interest, pension plan liabilities, employer benefit
plan liabilities, intercompany liabilities and self insurance costs);
(b) all liabilities and obligations of the FHC
Affiliates incurred by the FHC Affiliates in the ordinary course of business
since the June 1995 Balance Sheets to and including the Closing Date, except
for the excluded liabilities described in Section 1.7(a) above, liabilities and
claims arising out of or related to torts, lawsuits and other disputed claims;
(c) all obligations under the Assumed Contracts
and the Management Contracts; and
(d) with respect to the employees of any FHC
Affiliate (other than Excluded Employees as hereinafter defined), all
liabilities and obligations of such FHC Affiliate for accrued or accumulated
employee sick pay or PTO days, and related Taxes thereon, attributable to the
period prior to the Closing Date;
(e) such other liabilities of the FHC Affiliates
which Buyer agrees in writing at or prior to the Closing that Buyer will
assume.
1.8 LIABILITIES NOT ASSUMED. Buyer and UHS-DEL, as
the case may be, shall assume only those liabilities and obligations specified
in Section 1.7 above. Without limiting the generality of the foregoing
sentence, no member of the UHS Group shall assume and FHC, HSMI, FHC-MSI,
FHC-Florida or the FHC Affiliates, as the case may be, shall retain and be
responsible for the following obligations and liabilities:
(a) any and all obligations for the payment of
any long term debt existing at the Closing Date (including the current portion
thereof) relating to FHC, HSMI, FHC-MSI, FHC-
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Florida or the FHC Affiliates and whether or not set forth on the June 1995
Balance Sheets;
(b) any and all accrued interest through the Closing
Date;
(c) liabilities or obligations of any of the FHC
Affiliates arising under Medicare, Medicaid, Blue Cross or other comparable
third party payor programs (the "Government Reimbursement Programs") as a
result of the consummation of the transactions contemplated herein, including
reimbursement recapture or any other adjustments;
(d) liabilities or obligations for Taxes (as
defined in Section 2.10) of any of the Sellers in respect of periods prior to
the Closing Date or resulting from the consummation of the transactions
contemplated herein except as set forth in Section 10.4 herein;
(e) liabilities under any Employee Benefit Plan
(as defined in Section 2.21) of any Seller; and liabilities for any and all
EEOC, wage and hour, unemployment compensation or workers' compensation claims
relating to periods prior to the Closing Date;
(f) liabilities or obligations for any and all
workers' compensation, COBRA, health, disability or other benefits due to or
for the benefit of any employees of any Seller (or their covered dependents),
whether the obligation for payment thereof arises prior to or after Closing,
until the event or episode of care giving rise to the right to any of the
foregoing benefits is completed and the employee (hereinafter, a "Hired
Employee") is actively at work with Buyer;
(g) liabilities or obligations arising as a
result of a breach or default by any Seller of any Contract prior to the
Closing Date;
(h) liabilities arising out of or in connection
with claims, litigations or proceedings described in Section 2.17, and claims,
litigations or proceedings (whether instituted prior to or after Closing) for
acts or omissions which allegedly occurred prior to the Closing Date;
(i) except as expressly set forth in the
Assumption Agreement or Section 1.3.3 above, debts, expenses, obligations or
other liabilities of any Seller arising out of or incurred solely as a result
of (i) any transaction of any Seller occurring on or after the Closing Date or
(ii) any violation by any Seller of any law, regulation or ordinance at any
time,
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including, without limitation, those violations relating to Government
Reimbursement Programs;
(j) except as expressly set forth in the
Assumption Agreement or Section 1.3.3 above, liabilities arising out of the
assignment at Closing of any Assumed Contract or Management Contract;
(k) liabilities, obligations or expenses arising
out of or in connection with any matter which is or should be disclosed in
Schedule 2.7, 2.8 or 2.9;
(l) liabilities attributable to legal, accounting
or brokerage fees, and similar costs incurred by any Seller related to the sale
of any of the Purchase Assets;
(m) liabilities for any payable not historically
accounted for by any Seller as an "account payable", including payables related
to compensation or fringe benefits for any Seller's employees;
(n) except as expressly set forth in the
Assumption Agreement or Section 1.3.3 above, liabilities arising from any
Seller's assignment and Buyer's assumption of the Assumed Liabilities;
(o) liabilities for the payment by any Seller of
any deductibles, copayments or other self-insurance requirements relating to
events occurring prior to the Closing Date;
(p) liabilities arising from uncured defaults in
performance of the Assumed Liabilities during periods prior to the Closing
Date;
(q) intentionally omitted;
(r) intentionally omitted;
(s) any and all liabilities respecting any
intercompany transactions among the FHC Affiliates, FHC, FHC-MSI, HSMI,
FHC-Florida or any other affiliate of FHC, whether or not such transaction
relates to the provision of goods and services, tax sharing arrangements,
payment arrangements, intercompany charges or balances, or the like;
(t) except for Assumed Liabilities, any and all
actual or contingent liabilities or obligations of or demands upon any of the
Sellers arising from acts or omissions of any of the Sellers (actual or
alleged) prior to the Closing Date;
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(u) liabilities or obligations arising out of the
release prior to the Closing Date of petroleum or petroleum products from or in
the area of the underground storage tanks located on any of the Real
Properties;
(v) all liabilities arising out of or in
connection with the existence of Materials of Environmental Concern (as defined
in Section 2.20) upon, about, beneath or migrating to or from any of the Real
Properties on or before the Closing Date or the existence on or before the
Closing Date of any Environmental Claim (as defined in Section 2.20) or any
violation of any Environmental Laws (as defined in Section 2.20) pertaining to
such Real Property or the operation of the Facilities or any other business
operated therefrom;
(w) any liability arising out of any medical
malpractice or similar acts or omissions arising prior to the Closing Date;
(x) sales, income, franchise, use and other taxes
payable with respect to the business or operations of the Sellers through the
Closing Date or the transactions contemplated hereby except as set forth in
Section 10.4; and
(y) except as expressly set forth in the
Assumption Agreement, liabilities for rights or remedies claimed by third
parties under any of the Assumed Liabilities which broaden or vary the rights
and remedies such third parties would have had against any Seller if the sale
and purchase of the Purchase Assets were not to occur.
1.9 CLOSING. The closing of the purchase and sale
of the Purchase Assets provided herein (the "Closing") will be at the office of
Klett Lieber Rooney & Schorling, P.C., 28th Floor, One Logan Square,
Philadelphia, Pennsylvania 19103 at 10:00 a.m., local time, on May 31, 1996, or
at such other place or at such other date and time as Sellers and the UHS Group
may mutually agree. Such date and time of Closing is herein referred to as the
"Closing Date".
1.10 DEFINITIONS. In this Agreement, unless the
context otherwise requires:
"Person" shall mean any individual, company, body
corporate, association, partnership, firm, joint venture, trust and
governmental agency.
"Purchase Assets" shall mean the Facilities Assets,
the Management Contracts and the Florida Real Property.
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"Real Property" shall mean the Facilities Real
Property and the Florida Real Property.
1.11 DESIGNATION OF PURCHASERS. At Closing, Buyer
and UHS shall have the right to designate one or more subsidiaries or
affiliates of Buyer or UHS to take title to all or a portion of the Purchase
Assets and assume all or a portion of the Assumed Liabilities. No such
designation shall have the effect of relieving UHS of any of its obligations
under this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS. In order
to induce the UHS Group to enter into and perform its obligations under this
Agreement, Sellers hereby jointly and severally represent, warrant and agree as
follows:
2.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY.
(a) Each of FHC, FHC-MSI and Roxbury is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia. Each of FHC and Roxbury has all
requisite corporate power and authority to own its properties and carry on its
business as now conducted. The copies of the Articles of Incorporation and
Bylaws of FHC and Roxbury, all as amended to date, which have been delivered to
Buyer are complete and correct and presently in effect. Neither FHC nor
Roxbury has failed to qualify in any jurisdiction, in which property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary and where the failure to so qualify would have a
material adverse effect on it. Neither FHC nor Roxbury is in default with
respect to any order of any court, governmental authority or arbitration board
or tribunal to which it is a party or is subject.
(b) Each of HSMI, Meadows, Horsham and Clarion
(collectively the "PA Entities" and individually a "PA Entity") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. Each of the PA Entities has all
requisite corporate power and authority to own its properties and carry on its
business as now conducted. The copies of the Articles of Incorporation and
Bylaws of each of the PA Entities, all as amended to date, which have been
delivered to Buyer are complete and correct and presently in effect. None of
the PA Entities has failed to qualify in any jurisdiction, in which property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary and where the failure to so qualify would
have a material adverse effect on such PA Entity. None of the PA Entities is
in default with respect to any order
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of any court, governmental authority or arbitration board or tribunal to which
it is a party or is subject.
(c) FHC-Florida is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida. FHC-Florida has all requisite corporate power and authority to own
its properties and carry on its business as now conducted. The copies of the
Articles of Incorporation and Bylaws of FHC-Florida, all as amended to date,
which have been delivered to Buyer are complete and correct and presently in
effect. FHC-Florida has not failed to qualify in any jurisdiction, in which
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary and where the failure to so
qualify would have a material adverse effect on FHC-Florida. FHC-Florida is
not in default with respect to any order of any court, governmental authority
or arbitration board or tribunal to which it is a party or is subject.
2.2 AUTHORIZATION; VALIDITY AND EFFECT OF
AGREEMENTS. The execution, delivery and performance of this Agreement and all
agreements and documents contemplated hereby by each of the Sellers and the
consummation by them of the transactions contemplated hereby, have been duly
and effectively authorized by all necessary action, corporate or otherwise, on
their part. This Agreement constitutes, and all agreements and documents
contemplated hereby when executed and delivered pursuant hereto will constitute
the valid and legally binding obligations of each of the Sellers enforceable in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws of general application now or hereafter in
effect relating to the enforcement of creditors' rights generally and except
that remedies of specific performance, injunction and other forms of equitable
relief are subject to certain tests of equity jurisdiction, equitable defenses
and the discretion of the court before which any proceeding therefor may be
brought. Except as set forth on Schedule 2.2 hereto, the execution and
delivery of this Agreement by each of the Sellers does not and the consummation
of the transactions contemplated hereby will not (i) require the consent,
approval or authorization of any person, corporation, partnership, joint
venture or other business association or governmental, public authority or
accrediting body (except for compliance with the HSR Act (as defined in Section
4.5)); (ii) violate, with or without the giving of notice or the passage of
time, or both, any provisions of law or statute or any rule, regulation, order,
award, judgment, or decree of any court or governmental authority applicable to
any of the Sellers; (iii) result in the breach or termination of any term or
provision of, or constitute a default under, or result in the acceleration of
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or entitle any party to accelerate (whether after the giving of notice or the
lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any part of the property of any of the Sellers pursuant to any provision
of, any order, judgment, arbitration award, injunction, decree, indenture,
mortgage, lease, license, lien, or other agreement or instrument to which any
of the Sellers is a party or by which any of them is bound, or violate any
provision of the Bylaws or Articles of Incorporation of any of the Sellers as
amended to the date of this Agreement; or (iv) result in any suspension,
revocation, impairment, forfeiture or nonrenewal of (a) any License (as defined
in Section 2.19) relating to the ownership and operation of health care
facilities which are the subject of the transactions contemplated hereby;
subject to Buyer obtaining new Licenses for its operation of the facilities; or
(b) any material License relating to the Purchase Assets or Assumed
Liabilities.
2.3 SUBSIDIARIES. (a) Except as set forth on
Schedule 2.3, neither FHC-Florida, HSMI nor FHC-MSI owns, directly or
indirectly, any debt or equity securities issued by any other corporation, or
any interest in any partnership, joint venture or other business enterprise.
(b) Except as set forth on Schedule 2.3, no FHC Affiliate
owns, directly or indirectly, any debt or equity securities issued by any other
corporation, or any interest in any partnership, joint venture or other
business enterprise.
2.4 CAPITALIZATION. The authorized capital stock of
each of the FHC Affiliates is set forth on Schedule 2.4, together with a list
of the number of shares issued and outstanding and owned of record and
beneficially by the each of the shareholders of the FHC Affiliates. Except as
set forth on Schedule 2.4, there are no outstanding or authorized rights,
warrants, options, subscriptions, agreements or commitments of any character
giving anyone any right to require any of the FHC Affiliates to sell or issue,
or FHC to sell, any capital stock or other securities, nor are there any voting
trusts or any other agreements or understandings with respect to the voting
common stock of any of the FHC Affiliates.
2.5 RECORDS. The books, records and work papers of
each of the FHC Affiliates will be made available to Buyer for inspection prior
to the Closing Date and contain the minutes of all meetings of directors and of
shareholders and unanimous written consents reflecting all actions taken by the
directors or shareholders without a meeting, have been maintained in accordance
with good business practice and accurately reflect the basis for the financial
condition and results of operations of
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each of the FHC Affiliates set forth in the financial statements referred to in
Section 2.7 hereof.
2.6 OFFICERS AND DIRECTORS; BANK ACCOUNTS; POWERS OF
ATTORNEY. The officers and directors of each of the FHC Affiliates are as set
forth in Schedule 2.6. Schedule 2.6 also sets forth (i) the name of each bank,
savings institution, financial institution or other person with which each of
the FHC Affiliates has an account or safe deposit box and the names and
identification of all persons authorized to draw thereon or to have access
thereto and (ii) the names of all persons, if any, holding powers of attorney
from each of the FHC Affiliates and a summary statement of the terms thereof.
2.7 FINANCIAL STATEMENTS. The FHC Affiliates have
furnished to Buyer true, complete and correct copies of (i) individual
unaudited balance sheets of the FHC Affiliates as of June 30, 1995 and related
individual statements of income and operations for the year then ended (the
"June 1995 Balance Sheets"); and (ii) the individual unaudited balance sheets
of the FHC Affiliates as of February 29, 1996 and related individual statements
of income and operations for the eight (8) months then ended (the "Interim
Balance Sheets"), copies of which are attached hereto as Schedule 2.7
(collectively the "Financial Statements"). The Financial Statements are in
accordance with the books and records of the FHC Affiliates, are complete and
correct in all material respects, fully and fairly set forth the financial
condition of the FHC Affiliates, as of the dates indicated, and the results of
their respective operations for the periods indicated, and have been prepared
in accordance with generally accepted accounting principles consistently
applied, except as otherwise stated therein and except for normal year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. None of the
FHC Affiliates has any liabilities or obligations of any nature, either
accrued, absolute, contingent or otherwise, which are not reflected or provided
for in the Financial Statements relating to such FHC Affiliates except (i)
those arising after the date of the Interim Balance Sheets which are in the
ordinary course of business, in each case in normal amounts and none of which
is materially adverse, and (ii) as and to the extent specifically described in
Schedule 2.8 hereof. Except as set forth on Schedule 2.8, Sellers do not know
and have no reasonable grounds to know of any reasonable basis, as of the date
hereof, for assertion against any of the FHC Affiliates of any claim or
liability of any nature in excess of $25,000 individually or $50,000 in the
aggregate not fully disclosed in the June 1995 Balance Sheets or the Interim
Balance Sheets.
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2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS SINCE THE
DATE OF THE JUNE 1995 BALANCE SHEETS. Except as otherwise disclosed in
Schedule 2.9, since the date of the June 1995 Balance Sheets no FHC Affiliate
has:
2.9.1 incurred any obligation or liability
(fixed, contingent or otherwise), except normal trade or business obligations
incurred in the ordinary course of business and consistent with past practice,
none of which is materially adverse, and except in connection with this
Agreement and the transactions contemplated hereby;
2.9.2 discharged or satisfied any lien,
security interest or encumbrance or paid any obligation or liability (fixed,
contingent or otherwise), including intercompany obligations and liabilities
except in the ordinary course of business;
2.9.3 mortgaged, pledged or subjected to any
Lien any of its assets or properties (other than mechanic's, materialman's and
similar statutory liens arising in the ordinary course of business and purchase
money security interests arising as a matter of law between the date of
delivery and payment);
2.9.4 sold, assigned, conveyed, transferred,
leased or otherwise disposed of, or agreed to sell, assign, convey, transfer,
lease or otherwise dispose of any of its assets or properties except for a fair
consideration in the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and consistent with past
practice, acquired any assets or properties;
2.9.5 canceled or compromised any debt or
claim in excess of $2,500 for any individual debt or claim or $10,000 in the
aggregate;
2.9.6 waived or released any rights of
material value;
2.9.7 made or granted any wage or salary
increase applicable to any group or classification of employees generally
except merit increases and bonuses pursuant to prior personnel practices (all
of which have been disclosed to Buyer), entered into any employment contract
with, or made any loan to, or entered into any material transaction of any
other nature with any director, officer or employee of such FHC Affiliate, or
been the subject of any material labor dispute or, to its knowledge, threat
thereof;
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2.9.8 entered into any transaction or
Contract, except (i) Contracts listed on Schedule 2.14 and (ii) this Agreement
and the transactions contemplated hereby;
2.9.9 suffered any casualty loss or damage
(whether or not such loss or damage shall have been covered by insurance) which
affects in any material respect its ability to conduct business; or
2.9.10 authorized or effected any amendment
or restatement of its articles of incorporation or bylaws, or taken any steps
looking toward the dissolution or liquidation of such FHC Affiliate; or
2.9.11 suffered any material adverse change
in its operations, earnings, assets, liabilities, properties or business or in
its condition, financial or otherwise other than changes in the general market
conditions and prospects for the Facilities;
2.9.12 made capital expenditures or entered
into any commitment therefore which, in the aggregate, exceed $500,000;
2.9.13 suffered any material adverse change
in its relations with, or any material loss or, to its knowledge, material
adverse threatened loss of any of its material suppliers, managed care
contracts, or Medicare or Medicaid contracts;
2.9.14 written off as uncollectible any
accounts receivable or trade notes in excess of reserves; and
2.9.15 introduced any material change with
respect to the operation of its business, including its method of accounting.
2.10 TAXES. Except as set forth in Schedule 2.10, each of
the Sellers (i) has duly and timely filed or caused to be filed all federal,
state, local and foreign tax returns and reports of "Taxes" (as hereinafter
defined) required to be filed by it prior to the date of this Agreement which
relate to it or with respect to which it or the assets or properties of such
Seller are liable or otherwise in any way subject, (ii) has paid or fully
accrued for all Taxes, interest, penalties, assessments and deficiencies shown
to be due and payable on such returns and reports (which Taxes, interest,
penalties, assessments and deficiencies are all the Taxes, interest, penalties,
assessments and deficiencies due and payable under the laws and regulations
pursuant to which such returns were filed), and (iii) has properly accrued for
all such Taxes accrued in respect of such
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Seller or the assets and properties of such Seller for periods subsequent to
the periods covered by such returns. Except as set forth in Schedule 2.10, no
deficiency in payment of taxes for any period has been asserted by any taxing
body and remains unsettled at the date of this Agreement. Each of the Sellers
has made all withholdings of Taxes required to be made under all applicable
United States, state and local tax regulations and such withholdings have
either been paid to the respective governmental agencies or set aside in
accounts for such purpose, or accrued, reserved against and entered upon the
books of such Seller. Copies of all federal, state, local and foreign tax
returns of each of the Sellers have been made available for inspection by
Buyer. As used herein, the term "Tax" or "Taxes" means any federal, state,
local or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Internal Revenue Code ("Code") Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum or
estimated tax, assessment, charge, levy or fee of any kind whatsoever, which
are due or alleged to be due to any taxing authority, whether disputed or not.
2.11 REAL PROPERTY. Except as set forth on Schedule 2.11:
(a) Schedule 2.11(a) hereto identifies all
interests in real property, including land and improvements held by the FHC
Affiliates and FHC-Florida as of the date hereof, together with the nature of
such interest. FHC-Florida owns fee simple title to the Florida Real Property
and each of the FHC Affiliates owns fee simple title to the tracts of
Facilities Real Property set forth opposite the name of the respective FHC
Affiliates on Schedule 2.11(a). To the extent that any interest in real
property set forth thereon is shared, Schedule 2.11(a) sets forth the nature
and proportion of the sharing arrangement;
(b) the Facilities Real Property comprises all of
the real property associated with or employed in the business of the
Facilities;
(c) intentionally omitted;
(d) except as set forth in the Permitted
Encumbrances, to the best knowledge of Sellers no part of the Real Property
contains, is located within or abuts any navigable water or other body of
water, tideland, wetland, marshland or any other area which is subject to
special state, federal or municipal regulation, control or protection;
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(e) the Real Property adjoins dedicated public
roadways and there is access for motor vehicles from the Real Property to such
roadways by valid public or private easements; and, to the best knowledge of
Sellers, there are no conditions existing which could result in the termination
or reduction of the current access from the Real Property to existing roadways;
(f) all essential utilities (including water,
sewer, electricity and telephone service) are available to the Facilities Real
Property and, to the best knowledge of Sellers, to the Florida Real Property;
(g) to the best knowledge of Sellers the
Facilities and the Facilities Real Property and the businesses conducted
thereon are in material compliance with all applicable planning, zoning and
building codes and ordinances; the consummation of the transactions
contemplated herein will not result in a violation of any applicable planning,
zoning or building code or ordinance, or the termination of any applicable
zoning variances or "grandfathering" now existing;
(h) none of the Sellers has received actual
notice of a violation of any ordinance or other law, order, regulation or
requirement, and none has received actual notice of condemnation or similar
proceedings relating to any part of the Real Property;
(i) the Real Property is subject only to the
Liens described in Schedule 2.11(i), and at Closing will be subject only to the
Liens described on Schedule 2.11(i) which are not designated therein as
"excluded" and any other Liens approved by Buyer in writing on or after the
effective date hereof (the "Permitted Encumbrances");
(j) neither FHC, FHC-Florida nor any FHC
Affiliate has created or may assert any rights in respect of any Liens which
will interfere with Buyer's or Wellington's use of the Real Property after
Closing;
(k) except for those tenants in possession of the
Real Property under Contracts described in Schedule 2.11(k), there are no
parties in possession of, or claiming any possession, adverse or not, to or
other interest in, any portion of the Real Property as lessees, tenants at
sufferance, trespassers or otherwise;
(l) no tenant is entitled to any rebate,
concession or free rent, other than as set forth in the Contract with such
tenant; no commitments have been made to any tenant for repairs or improvements
other than for normal repairs and maintenance in the future or as set forth in
the Contract with
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such tenant; and no rents due under any of the tenant Contracts have been
assigned or hypothecated to, or encumbered by, any Person, other than pursuant
to the encumbrances relating to indebtedness to be satisfied at closing, or
Permitted Encumbrances, as additional security for the payment thereof; and
(m) all painting, repairs, alterations and other
work required to be performed prior to the Closing Date by any Seller as
landlord under each of the tenant Contracts, and all of the other obligations
of any Seller as landlord required to be performed thereunder prior to the
Closing Date, will be fully performed and paid for on or before the Closing
Date.
2.12 TITLE TO PROPERTY AND ASSETS; SUFFICIENCY OF PURCHASE
ASSETS.
(a) Each of the Sellers has good and marketable
title to the Purchase Assets owned by it (including, without limitation, the
properties and assets reflected in the June 1995 Balance Sheets except any
thereof since disposed of for value in the ordinary course of business) except
for the Permitted Encumbrances and none of such properties or assets is, except
as disclosed in the June 1995 Balance Sheets or the Schedules hereto, subject
to a contract of sale not in the ordinary course of business, or, except for
Permitted Encumbrances, subject to any Liens.
(b) Except as described on Schedule 2.12, the
Facilities Assets, constitute, in the aggregate, all the properties and assets
necessary for the operation of the Facilities as currently conducted. All the
properties and assets of each FHC Affiliate necessary or useful in the conduct
of the Facilities are located on the Facilities Real Property.
(c) Copies of the fixed asset registers of each
of the FHC Affiliates have been delivered to Buyer and each such register sets
forth a true, correct and complete listing of such FHC Affiliate's fixed assets
as of the date specified.
2.13 CONDITION OF PROPERTY. All buildings on the Facilities
Real Property and all items of tangible personal property, equipment, fixtures
and inventories included within the assets and properties of each of the FHC
Affiliates or required to be used in the ordinary course of its business are
being sold to Buyer on an "as is, where is" basis with no representations or
warranties express or implied as to their physical condition and WITHOUT ANY
WARRANTIES FROM SELLERS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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2.14 LIST OF CONTRACTS AND OTHER DATA. Schedule 2.14 sets
forth the following information with respect to all of the properties and
assets of each of the FHC Affiliates (indicating in each case, where
appropriate, whether or not consent by a third party is required for the
transfer to Buyer):
2.14.1 description of all real property owned of
record or leased by any of the FHC Affiliates and all leases of real property
to which any of the FHC Affiliates is a party;
2.14.2 a list of all personal property owned of
record or beneficially by any of the FHC Affiliates having a value per item or
group of items in excess of $500 and all leases of personal property, licenses,
permits, franchises, concessions, certificates of public convenience or the
like to which any of the FHC Affiliates is a party;
2.14.3 a list of (i) all United States and foreign
patents, trademarks and trade names, trademark and trade name registrations,
service marks and service mark registrations, copyrights and copyright
registrations, unexpired as of the date hereof, all United States and foreign
applications pending on said date for patents, for trademark or trade name
registrations, for service mark registrations, or for copyright registrations,
and all trademarks, trade names, service marks, labels and other trade rights
in use on said date, all of the foregoing being owned in whole or in part as
noted thereon on said date by an FHC Affiliate, (ii) a description of all
action taken by each of the FHC Affiliates to protect all tradenames used by
any of them, and (iii) all licenses granted by or to any of the FHC Affiliates
and all other agreements to which any of the FHC Affiliates is a party, which
relate in whole or in part to any items of the categories mentioned in clause
(i) above or to any other proprietary rights, whether owned by any of the FHC
Affiliates or otherwise;
2.14.4 a list of all existing contracts and
commitments to which any of the FHC Affiliates is a party or by which any of
the FHC Affiliates or any of their respective properties or assets is bound,
except for contracts or commitments involving the payment by or to any of the
FHC Affiliates of less than $5,000 with respect to any one contract or
commitment, or $10,000 with respect to any group of related contracts or
commitments; and
2.14.5 a list of (i) all collective bargaining
agreements, multi-employer pension plans, employment, consulting and separation
agreements, executive compensation plans, bonus plans, incentive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock option
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plans and hospitalization insurance or other plans or arrangements providing
for benefits for employees or former employees of any of the FHC Affiliates
(indicating, with respect to each of the individuals named on Schedule 2.21.2
below, the amount received in the year ended June 30, 1994 and the period ended
June 30, 1995 under each such agreement, plan or arrangement) and (ii) all
Multiemployer Plans (as defined in ERISA as hereinafter defined) which any of
the Sellers maintains or has maintained or to which any of the Sellers makes,
is required to make, has made or has been required to make a contribution.
True and complete copies of all documents, including
all amendments thereto, referred to in this Section 2.14 have been made
available to Buyer. All documents, rights, obligations and commitments
referred to in this Section 2.14 are, to the best knowledge of Sellers, valid
and enforceable in accordance with their terms for the period stated therein
and there is not under any of them any existing breach, default, event of
default or event which with the giving of notice or lapse of time, or both,
would constitute a default, by any of the Sellers or, to Sellers' knowledge, by
any other party thereto, nor, except as set forth on Schedule 2.14, has any
party thereto given notice of or made a claim with respect to any breach or
default. There are no existing laws, regulations or decrees, nor to Sellers'
knowledge are there any proposed laws, regulations or decrees, which adversely
affect any of such documents, rights, obligations or commitments. Except as
set forth on Schedule 2.14, no part of the business or operations of any of the
FHC Affiliates is dependent to any material extent on any patent, trademark,
copyright, or license or any assignment thereof or any secret processes or
formulae. Except as set forth on Schedule 2.14, none of the rights of any FHC
Affiliate under such documents, rights, obligations or commitments is subject
to termination or modification as a result of the transactions contemplated
hereby.
2.15 NO BREACH OR DEFAULT. None of the Sellers is in default
under any Contract to which it is a party or by which it is bound, nor has any
event occurred which, after the giving of notice or the passage of time or
both, would constitute a default under any such Contract except as set forth in
Schedule 2.15. None of Sellers have any reason to believe that the parties to
such Contracts will not fulfill their obligations under such Contracts in all
material respects or are threatened with insolvency.
2.16 LABOR CONTROVERSIES. None of the FHC Affiliates,
FHC-MSI, HSMI nor any of their respective employees is a party to any
collective bargaining agreement. There are not any controversies pending or,
to Sellers' knowledge, threatened
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between any of the FHC Affiliates, FHC-MSI or HSMI and any of their respective
employees which might reasonably be expected to materially adversely affect the
conduct of their respective businesses, or any unresolved labor union
grievances or unfair labor practice or labor arbitration proceedings pending
or, to Sellers' knowledge, threatened relating to their respective businesses,
and to Sellers' knowledge there are not any organizational efforts presently
being made or threatened involving any of the employees of any of the FHC
Affiliates, FHC-MSI or HSMI. Except as set forth on Schedule 2.16, none of the
FHC Affiliates, FHC-MSI or HSMI has received notice of any claim that it has
not complied with any laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining, the payment
of social security and similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that any of the FHC Affiliates,
FHC-MSI or HSMI is liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing.
2.17 LITIGATION. Except as set forth in Schedule 2.17, there
are no claims, actions, suits or proceedings or, to Sellers' knowledge,
investigations with respect to any of the FHC Affiliates, HSMI, FHC-Florida or
FHC-MSI involving claims by or against any of the FHC Affiliates, HSMI,
FHC-Florida or FHC-MSI which are pending or, to Sellers' knowledge, threatened
against any of the FHC Affiliates, HSMI, FHC-Florida or FHC-MSI, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, or before the
internal grievance mechanisms of any of the FHC Affiliates, HSMI, FHC-Florida
or FHC-MSI. To Sellers' knowledge no basis for any action, suit or proceeding
exists, and there are no orders, judgments, injunctions or decrees of any court
or governmental agency with respect to which any of the FHC Affiliates, HSMI,
FHC-Florida or FHC-MSI has been named or to which any of the FHC Affiliates,
HSMI or FHC-MSI is a party, which directly apply, in whole or in part, to the
business of any of the FHC Affiliates, HSMI, FHC-Florida or FHC-MSI, or to any
of the assets or properties of any of the FHC Affiliates, HSMI, FHC-Florida or
FHC-MSI or which would result in any material adverse change in the business of
any of the FHC Affiliates, HSMI, FHC-Florida or FHC-MSI.
2.18 PATENTS; TRADEMARKS, ETC. No patents, trademarks, trade
names, copyrights, registrations or applications are necessary for the conduct
of the business of the FHC Affiliates as now conducted, other than those listed
in Schedule 2.14 hereto. Except as described in Schedule 2.14 hereto, all such
patents, trademarks, trade names, copyrights and registrations are in good
standing, are valid and enforceable and are free from any default on the part
of any of the FHC
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Affiliates. None of the FHC Affiliates is a licensor in respect of any
patents, trademarks, trade names, copyrights or registrations or applications
therefor. None of the FHC Affiliates is in violation of any patent, patent
license, trade name, trademark, or copyright of others. No director, officer
or employee of any of the Sellers owns, directly or indirectly, in whole or in
part, any patents, trademarks, trade names, copyrights, registrations or
applications therefor or interests therein which any FHC Affiliate has used, is
presently using, or the use of which is necessary for its business as now
conducted.
2.19 LICENSES; PERMITS; AUTHORIZATIONS. Schedule 2.19 hereto
is a schedule of all rights, approvals, authorizations, consents, licenses,
orders, accreditations, franchises, concessions, certificates and permits of
all governmental agencies, whether United States, state or local, and
accrediting bodies, (collectively, the "Licenses") required by the nature of
the business conducted by each of the FHC Affiliates, HSMI, FHC-Florida and
FHC-MSI, to permit the continued operation of such business in the manner in
which it was conducted as of the date hereof (indicating in each case, where
appropriate, whether or not the consent by a third party to the transfer to
Buyer, UHS-DEL or Wellington, as the case may be, is required). Each of the
FHC Affiliates, HSMI, FHC-Florida and FHC-MSI has all Licenses required to
permit the operation of its business as presently conducted, each of the FHC
Affiliates', HSMI's, FHC-Florida's and FHC-MSI's businesses is and has been
operated in all material respects in compliance therewith and all such Licenses
are in full force and effect and no action or claim is pending, nor to the
knowledge of Sellers, is threatened to revoke, terminate or declare invalid any
of the foregoing.
2.20 COMPLIANCE WITH APPLICABLE LAW; ENVIRONMENTAL LAWS.
(a) Except as set forth on Schedule 2.20 hereto,
the conduct of the business of each of the FHC Affiliates, FHC-MSI,
FHC-Florida and HSMI does not (i) violate or infringe any domestic or foreign
laws, statutes, rules or regulations or any material ordinances, including,
without limitation, any of the foregoing that pertain to or regulate the
operation of a hospital, mental health facility or licensed substance abuse
facility or consumer protection, health and safety or occupational safety
matters, or (ii) violate or infringe any right or patent, trademark, trade
name, service mark, copyright, know-how or other proprietary right of third
parties, the enforcement of which would adversely affect the business of any of
the FHC Affiliates, FHC-MSI, FHC-Florida or HSMI or the value of its properties
or assets.
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(b) None of the FHC Affiliates, FHC-MSI and HSMI
or any of their respective employees, officers and directors in their
capacities as such, or, to the knowledge of Sellers, any agent of an FHC
Affiliate, FHC-MSI or HSMI acting in its capacity as such, have engaged in any
activities which are prohibited under any federal laws, or the regulations
promulgated pursuant to such laws or related state or local laws, statutes or
regulations or which are prohibited by rules of professional conduct, including
but not limited to the following: (i) knowingly and willfully making or
causing to be made a false statement or representation of a material fact in
any application for any benefit or payment; (ii) knowingly and willfully making
or causing to be made any false statement or representation of a material fact
for use in determining rights to any benefit or payment; (iii) presenting or
causing to be presented a claim for reimbursement for services under Medicare,
Medicaid or other state health care programs that is for an item or service
that is known or should be known to be (a) not provided as claimed, or (b)
false or fraudulent; (iv) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf on or behalf of another, with intent to
fraudulently secure such benefit or payment; (v) knowingly and willfully
offering, paying, soliciting, or receiving any remuneration (including any
kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind (a) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare, Medicaid or other state
health care program, or (b) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service, or item for which payment may be made in whole or in part by
Medicare, Medicaid or other state health care program; (vi) knowingly making a
payment, directly or indirectly, to a physician as an inducement to reduce or
limit necessary services to individuals who are under the direct care of the
physician and who are entitled to benefits under Medicare, Medicaid, or other
state health care programs; (vii) providing to any person information that is
known or should be known to be false or misleading that could reasonably be
expected to influence the decision when to discharge a patient from a Facility;
(viii) knowingly and willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statement contained therein not misleading) of a material fact with
respect to (a) the conditions or operations of a Facility in order that the
Facility may qualify for Medicare, Medicaid or other state health care program
certification, or (b) information required to be provided under Section 1124A
of the Social Security Act (42 U.S.C. Section 1320a-3); or (ix) knowingly and
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willfully (a) charging for any Medicaid service money or other consideration at
a rate in excess of the rates established by the state, or (b) charging,
soliciting, accepting or receiving, in addition to amounts paid by Medicaid,
any gift money, donation or other consideration (other than a charitable,
religious or other philanthropic contribution from an organization or from a
person unrelated to the patient) (1) as a precondition of admitting the
patient, or (2) as a requirement for the patient's continued stay in the
Facility.
(c) All Licenses currently held by FHC,
FHC-Florida and each of the FHC Affiliates pursuant to the Environmental Laws
are identified in Schedule 2.20.
(d) Each of the Sellers is in compliance in all
material respects with all applicable Environmental Laws except as disclosed in
Schedule 2.20.
(e) In regards to the Facilities and the Florida
Real Property, there is no Environmental Claim pending or, to the Sellers'
knowledge, threatened against FHC, FHC-Florida or any of the FHC Affiliates or,
to the Sellers' best knowledge after due inquiry, any other Person whose
liability for any Environmental Claim FHC, FHC-Florida or any of the FHC
Affiliates has retained or assumed contractually; to the Sellers' knowledge,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including the release, emission, discharge or disposal of
any Materials of Environmental Concern, that could form the basis of any
Environmental Claim against FHC, FHC-Florida or any of the FHC Affiliates or
against any Person whose liability for any Environmental Claim FHC, FHC-Florida
or any of the FHC Affiliates has retained or assumed contractually; and neither
FHC, FHC-Florida nor any of the FHC Affiliates has received any written
communication, whether from a governmental authority or otherwise, that alleges
that FHC, FHC-Florida or any of the FHC Affiliates is not in full compliance
with all applicable Environmental Laws.
(f) In regards to the Facilities and the Florida
Real Property, without in any way limiting the generality of the foregoing, (i)
all on-site and off-site locations where FHC, FHC-Florida or any of the FHC
Affiliates has stored, disposed or arranged for the disposal of Materials of
Environmental Concern are identified in Schedule 2.20, (ii) all Contracts
dealing with the removal, storage, disposal and handling of Materials of
Environmental Concern are with properly licensed and registered vendors, (iii)
all underground storage tanks, and the capacity and contents of such tanks,
located on the Real Property are identified in Schedule 2.20, (iv) except as
set forth on Schedule 2.20, there is no asbestos contained in or forming part
of the Real Property, and (v) except as set forth on Schedule 2.20, no
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polychlorinated byphenyls (PCBs) are used or stored on the Real Property.
(g) As used herein: (i) "Environmental Claim"
means any written notice by a Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from, directly or
indirectly, the presence, or release into the environment, of any Materials of
Environmental Concern (as defined below); (ii) "Environmental Laws" means any
and all federal, state, local and foreign laws and regulations (including
common law) relating to pollution or protection of human health or the
environment (including ground water, land surface or subsurface strata),
including laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling, reporting or handling of Materials of
Environmental Concern; and (iii) "Materials of Environmental Concern" means
chemicals, pollutants, contaminants, wastes (including medical waste), toxic
substances, petroleum and petroleum products.
2.21 EMPLOYEE BENEFIT PLANS; EMPLOYEES AND EMPLOYEE
RELATIONS.
2.21.1 Attached hereto is an accurate list (Schedule
2.21.1) of all "employee welfare benefit plans" and "employee pension benefit
plans" (collectively, "Qualified Plans"), as such terms are defined by the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"), and
any other group employee benefit plan, agreement, arrangement or understanding
maintained for the benefit of any of the FHC Affiliates (the Qualified Plans,
together with such other plans, arrangements and understandings, collectively,
the "Employee Benefit Plans"). To the extent available, complete and genuine
copies of the summary plan descriptions have been provided to Buyer, which
summary plan descriptions accurately summarize the material provisions of the
Employee Benefit Plans. None of FHC, the FHC Affiliates, FHC-MSI, HSMI or any
other members of the Controlled Group of Corporations (as defined in Section
1563 of the Code) that includes FHC contributes to, ever has contributed to, or
ever has been required to contribute to any Multiemployer Plan (as defined in
Section 3(37) of ERISA) or has any liability (including withdrawal liability)
under any Multiemployer Plan. There is no lien, encumbrance or claim of any
type on the Purchase Assets or against FHC, FHC-MSI, HSMI or any of the FHC
Affiliates with respect to the Employee Benefit Plans, and neither FHC,
FHC-MSI, HSMI or any of the FHC Affiliates or any affiliate of FHC has taken
any action, or omitted to take any
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action, with respect to the Employee Benefit Plans (or has any knowledge of the
same) that would or could be expected to result in a Lien on the Purchase
Assets or against FHC, FHC-MSI, HSMI or any of the FHC Affiliates or any
affiliates of FHC.
2.21.2 Schedule 2.21.2 sets forth a complete list
(as of the date set forth therein) of names, positions, current annual salaries
or wage rates, and bonus and other compensation arrangements of all full-time
and part-time employees of (i) each of the FHC Affiliates employed in the
conduct of the business of the Facilities and (ii) each of HSMI and FHC-MSI
(indicating whether each employee is part-time or full-time). Schedule 2.21.2
also sets forth a complete list of employees whose employment with any of the
FHC Affiliates, HSMI or FHC-MSI has terminated for any reason at any time
during the 90 day period ending on (and including) the date hereof.
2.21.3 Subject to Buyer's obligation for liabilities
under the Worker Adjustment and Retraining Action, 29 U.S.C. Sec. 2101-2109
(the "WARN Act"), as more particularly described in Section 5.3, Buyer will not
be subject to any claim or liability for severance pay as a result of the
transactions contemplated by this Agreement. Except as disclosed on Schedule
2.21.3 and as accrues in the ordinary course prior to the Closing Date, no
present or former employee of any of the FHC Affiliates, HSMI or FHC-MSI has
any claim against any of the FHC Affiliates, HSMI or FHC-MSI on the account of
or for (i) overtime pay for any period on or before the Closing Date, (ii)
wages, salary, bonuses or amounts accruing under any Employee Benefit Plan, or
(iii) sick pay, severance pay, claim for unlawful discharge, holiday or
vacation pay or paid time off.
2.22 ADVERSE AGREEMENTS; NO ADVERSE CHANGE.
(a) None of the FHC, FHC Affiliates, HSMI,
FHC-MSI or FHC-Florida is a party to or subject to any agreement or instrument
or subject to any charter or other corporate restriction or any judgment,
order, writ, injunction, decree or rule specifically naming such FHC, FHC
Affiliate, HSMI, FHC-MSI or FHC-Florida which adversely affects the business,
operations, properties, assets or conditions, financial or otherwise, of any of
the FHC Affiliates, HSMI, FHC-MSI or FHC-Florida.
(b) Except as disclosed in Schedule 2.22 hereto,
to the best of Sellers' knowledge there has not been any material adverse
change in, or development materially adversely affecting the business, assets,
financial position or results of operations of any of the FHC Affiliates since
the Interim Balance Sheet date.
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2.23 TRADE NOTES AND ACCOUNTS RECEIVABLE; TRADE NOTES AND
ACCOUNTS PAYABLE; PREPAID CONTRACTS.
(a) Except as set forth on Schedule 2.23 hereto,
the trade notes and accounts receivable of each of the FHC Affiliates reflected
on the June 1995 Balance Sheets and all trade notes and accounts receivable
arising thereafter and prior to the Closing Date arose and will arise from bona
fide transactions in the ordinary course of business of the FHC Affiliates, and
are (except for normal claims and allowances which are consistent with past
experience of the FHC Affiliates and which in the aggregate are not material)
current, arose in the usual and ordinary course of business of the FHC
Affiliates from arms-length transactions, are not subject to any defenses,
counterclaims or set-offs which would materially adversely affect such trade
notes and accounts receivable, and, to Sellers' knowledge, are fully
collectible, less the applicable allowance for doubtful accounts. The FHC
Affiliates have fully performed all obligations with respect to such trade notes
and accounts receivable which they were obligated to perform prior to the date
hereof and Schedule 2.23 sets forth an aging schedule, as of March 31, 1996, for
all such trade notes and accounts receivable.
(b) The trade notes and accounts payable of the
FHC Affiliates reflected on the June 1995 Balance Sheets and all trade notes and
accounts payable arising thereafter and prior to the Closing Date arose and will
arise from bona fide transactions in the ordinary course of business of the FHC
Affiliates and were paid or are not yet due and payable.
(c) Schedule 2.23 hereto sets forth the amounts
and dates of all payments (the "Prepayments") received by any of the FHC
Affiliates or FHC-MSI or HSMI which relate to services to be performed by any of
the FHC Affiliates or FHC-MSI or HSMI subsequent to the Closing Date under any
of the Contracts or Management Contracts, including, without limitation, all
such payments expressly authorized to be made in advance by any of the terms of
such Contracts or Management Contracts.
2.24 INVENTORIES AND SUPPLIES. All inventories and supplies
of the FHC Affiliates, whether or not reflected in the June 1995 Balance
Sheets, consist of a quality and quantity useable and salable in the ordinary
course of business, without discount or reduction, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value in the June 1995 Balance Sheets. All
inventories and supplies not written off are valued at the lower of cost
(applied on a first in, first out basis) or market in accordance with generally
accepted accounting principles. The present quantities of inventory and
supplies are not excessive and are reasonable and consistent with the past
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inventory and supply practices of each of the FHC Affiliates. FHC-MSI, HSMI
and FHC-Florida have no inventory or supplies.
2.25 ILLEGAL PAYMENTS. None of the Sellers have, nor to the
knowledge of the Sellers, have any of their respective directors or officers,
in their capacity as such, either directly or indirectly made any illegal
payments to, or provided any illegal benefit or inducement for, any Person
pursuant to an action illegal under any federal, state or local law.
2.26 INSURANCE POLICIES. (a) Schedule 2.26 contains a
correct and complete description of all insurance policies of the FHC
Affiliates, HSMI or FHC-MSI covering the FHC Affiliates, HSMI or FHC-MSI and
their respective employees, agents and assets. Each such policy is in full
force and effect and, to the knowledge of the Sellers, is reasonably adequate
in coverage and amount to insure against customarily insured risks to which the
FHC Affiliates, HSMI or FHC-MSI and their employees, businesses, properties and
other assets may likely be exposed in the operation of their respective
business. All premiums with respect to such insurance policies have been paid
on a timely basis, and no notice of cancellation or termination has been
received with respect to any such policy. To the best knowledge of Sellers,
none of the FHC Affiliates, HSMI or FHC-MSI has failed to give any notice or
present any claim thereunder in due and timely fashion. To the knowledge of
Sellers, and except as set forth on Schedule 2.26, there are no pending claims
against such insurance by any FHC Affiliate, HSMI or FHC-MSI as to which the
insurers have denied coverage or otherwise reserved rights. Since January 1,
1993, none of the FHC Affiliates, HSMI, or FHC-MSI has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited, by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance.
(b) Schedule 2.26 contains a correct and complete
description of all insurance policies of FHC or FHC-Florida covering the
Florida Real Property. Each such policy is in full force and effect and, to
the knowledge of FHC and FHC-Florida, is reasonably adequate in coverage and
amount to insure against customarily insured risks with respect to property of
this type. All premiums with respect to such insurance policies have been paid
on a timely basis, and no notice of cancellation or termination has been
received with respect to any such policy. Neither FHC nor FHC-Florida has
failed to give any notice or present any claim thereunder in due and timely
fashion. Except as set forth on Schedule 2.26, there are no pending claims
against such insurance by FHC or FHC-Florida as to which the insurers have
denied coverage or otherwise reserved rights.
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2.27 PROFESSIONAL STAFF, MEDICARE, MEDICAID AND OTHER HEALTH
CARE PROGRAMS.
(a) The professional licensed provider staff of
each of the Facilities consists of the persons whose names and status are set
forth on Schedule 2.27 hereto.
(b) Except as set forth on Schedule 2.27 hereto,
each FHC Affiliate is certified for participation in the Medicare and
Pennsylvania Medical Assistance ("Medicaid") programs, and has a current and
valid provider contract with such programs.
(c) Except as set forth on Schedule 2.27 hereto,
the FHC Affiliates have timely filed or caused to be timely filed all cost
reports and other reports of every kind whatsoever required by any governmental
or other entity to be made by them with respect to the purchase of services by
third-party purchasers, including but not limited to Medicare and Medicaid
programs and other insurance carriers, and all such reports are complete and
accurate in all material respects. The FHC Affiliates have paid or caused to
be paid all refunds, discounts or adjustments which have become due in
accordance with said reports as filed and, except as set forth on Schedule
2.27, have not been notified that there is any further liability now due
(whether or not disclosed in any report heretofore or hereafter made) for any
such refund, discount or adjustment, or any interest or penalties accruing with
respect thereto. The FHC Affiliates have delivered to the Buyer complete
copies of all of their Medicare and Medicaid Cost Reports submitted by the FHC
Affiliates for the two most recent fiscal years.
(d) Each FHC Affiliate and, to the knowledge of
Sellers, their respective officers, directors, employees or agents (acting in
their capacities as such), have not engaged in any activities which (i) could
subject such person to sanctions under 42 U.S.C. Section 1320a-7 (other than
subparagraph (b)(7) thereof) or (ii) at the time such activities were engaged
in were known or reasonably could have been known to be prohibited under
Federal Medicare and Medicaid statutes, 42 U.S.C. Sections 1320a-7a
and 1320a-7b, or the regulations promulgated pursuant to such statutes or
related state or local statutes or regulations or which are prohibited by rules
of professional conduct.
2.28 FACILITY SURVEYS. True and complete copies of any and
all licensure survey reports and any and all Medicare and/or Medicaid and JCAHO
or other accreditation survey reports issued within the 24-month period
preceding the execution of this Agreement with respect to each Facility for
which surveys are conducted by the appropriate state or Federal agencies having
jurisdiction thereof and JCAHO or accreditation bodies have been furnished to
the Buyer, along with true and complete copies of
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any and all plans of correction which the agencies required to be submitted in
response to said survey reports.
2.29 SUPPLIERS AND PROVIDERS OF SERVICES.
(a) Schedule 2.29 lists all suppliers of goods
to, and providers of services to, any of the FHC Affiliates to which an FHC
Affiliate made payments during the fiscal year ended June 30, 1995, in excess
of five percent of such FHC Affiliate's operating expenses as reflected on its
statement of operations for such year (collectively, "Suppliers").
(b) Except as set forth on Schedule 2.29, no FHC
Affiliate has any information which might reasonably indicate that any of the
Suppliers listed on Schedule 2.29 intends to cease selling or rendering
services to, or dealing with, any of the FHC Affiliates, nor has any
information been brought to their attention which might reasonably lead them to
believe any such Supplier intends to alter in any material respect the amount
of sales or service or the extent of dealings with Buyer, or would alter in any
material respect the sales or service or dealings in the event of the
consummation of the transactions contemplated hereby.
(c) Except as set forth at Schedule 2.29, no FHC
Affiliate or any entity controlled by FHC or any FHC Affiliate nor, to the
knowledge of Sellers, any of their respective executive officers or directors
(or any entity controlled by any executive officer or director) owns, directly
or indirectly, any interest in (excepting less than 2% stock holdings for
investment purposes in securities of publicly held and traded companies), or is
an officer, director, employee, partner or consultant of, any Person which is,
or is engaged in business as, a competitor, lessor, lessee or Supplier of any
of the FHC Affiliates.
2.30 RELATED PARTY TRANSACTIONS. To the knowledge of
Sellers, except as set forth in Schedule 2.30, and except for compensation to
employees for services rendered, no current director or officer of any FHC
Affiliate is presently, or during the last fiscal year has been, (a) a party to
any material transaction with such Facility (including, but not limited to, any
Contract or other arrangement providing for the furnishing of service by, or
rental of real or personal property from, or otherwise requiring payments to,
any such director, officer, or shareholder, or (b) the direct or indirect owner
of any interest in any Person which is a present competitor, supplier or
customer of such FHC Affiliate with respect to the business, nor does any such
person receive income from any source other than such FHC Affiliate which
should properly accrue to such FHC Affiliate.
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2.31 MANAGEMENT CONTRACTS AND RELATED AGREEMENTS. Schedule
2.31 lists all Contracts pertaining to the Management Contracts (the "Related
Contracts"). FHC-MSI and HSMI have made available to UHS-DEL copies of all of
the Management Contracts and all such Related Contracts, including all
amendments thereto. All of the Management Contracts and Related Contracts are
valid, binding and in full force and effect and, except as set forth on
Schedule 2.31, have not been amended or modified. Neither HSMI nor FHC-MSI is
in default, and no notice of alleged default has been received by either of
them, under any of the Management Contracts or Related Contracts. To the best
of Sellers' knowledge no party to any such contract is in default or alleged to
be in default thereunder, and no condition or event has occurred that, after
notice or lapse of time or both, would constitute a default by any party
thereto. The rights of FHC-MSI and HSMI under all of the Management Contracts
and Related Contracts are owned by FHC-MSI and HSMI free and clear of all Liens
except as set forth on Schedule 2.31. Except as set forth in Schedule 2.31,
there has been no cancellation, or threat to cancel any of the Management
Contracts and Related Contracts by any other party thereto. Except as set
forth on Schedule 2.31 hereto, none of the rights of FHC-MSI or HSMI under any
of the Management Contracts or Related Contracts is subject to termination or
modification as a result of the transactions contemplated hereby.
2.32 NO BROKERS. Except as set forth on Schedule 2.32, none
of Sellers has entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of Buyer, UHS, UHS-DEL,
Wellington, FHC-Florida, FHC, FHC-MSI, HSMI or any of the FHC Affiliates to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, and none of FHC, FHC-Florida, FHC-MSI,
HSMI or any of the FHC Affiliates is aware of any claim or basis for any claim
for payment of any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby.
2.33 NO MISREPRESENTATION OR OMISSION. No representation or
warranty by Sellers in this Article 2 or in any other Article or Section of
this Agreement, or in any certificate or other document furnished or to be
furnished by or on behalf of Sellers pursuant hereto, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
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3. REPRESENTATIONS AND WARRANTIES OF BUYER AND UHS. In order
to induce Sellers to enter into and perform this Agreement, the Buyer and UHS,
jointly and severally, represent and warrant as follows:
3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY.
Each of Buyer, UHS-DEL, Wellington and UHS is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each of Buyer, UHS-DEL, Wellington and UHS is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of all other jurisdictions in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where such failure to qualify would not
have a material adverse effect on Buyer, UHS-DEL, Wellington or UHS. Each of
Buyer, UHS-DEL, Wellington and UHS has all requisite corporate power and
authority to own its properties and carry on its business as now conducted.
Neither Buyer nor UHS, UHS-DEL or Wellington is in default with respect to any
order of any court, governmental authority or arbitration board or tribunal to
which either is a party or is subject.
3.2 AUTHORIZATION; VALIDITY AND EFFECT OF
AGREEMENTS. The execution and delivery of this Agreement and all agreements
and documents contemplated hereby by Buyer, UHS-DEL, Wellington and UHS, and
the consummation by them of the transactions contemplated hereby, have been
duly authorized by all requisite corporate action. This Agreement constitutes,
and all agreements and documents contemplated hereby when executed and
delivered pursuant hereto for value received will constitute, the valid and
legally binding obligations of each of UHS, UHS-DEL, Wellington and Buyer
enforceable in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws of general application now or
hereafter in effect relating to the enforcement of creditors' rights generally
and except that remedies of specific performance, injunction and other forms of
equitable relief are subject to certain tests of equity jurisdiction, equitable
defenses and the discretion of the court before which any proceeding therefor
may be brought. Except as set forth on Schedule 3.2 hereto, the execution and
delivery of this Agreement by Buyer, UHS-DEL, Wellington and UHS does not and
the consummation of the transactions contemplated hereby will not (i) require
the consent of any third party (except for compliance with the HSR Act), (ii)
result in the breach of any term or provision of, or constitute a default
under, or result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of any lien,
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charge, pledge, security interest or other encumbrance upon any part of the
property of Buyer and UHS pursuant to any provision of, any order, judgment,
arbitration award, injunction, decree, indenture, mortgage, lease, license,
lien, or other agreement or instrument to which Buyer, UHS-DEL, Wellington or
UHS is a party or by which any of them is bound, and (iii) violate or conflict
with any provision of the Bylaws or Articles of Incorporation of Buyer,
UHS-DEL, Wellington or UHS as amended to the date of this Agreement.
3.3 NO BROKERS. Except as set forth in Schedule 2.32,
neither Buyer nor UHS, UHS-DEL or Wellington has entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Buyer, UHS, UHS-DEL or Wellington or any Seller to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, and neither Buyer nor UHS, UHS-DEL or
Wellington is aware of any claim or basis for any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
3.4 BUYER'S PRE-CLOSING INVESTIGATION. On the basis of its
due diligence investigation of the Purchase Assets, Senior Management of UHS
(as hereinafter defined) has not affirmatively determined and concluded that,
as of the date of this Agreement, the UHS Group has a Rep and Warranty Claim
(as defined in Section 7.3) against Sellers which would give rise to
indemnification rights under Section 7.3. Nothing contained in the preceding
sentence shall in any way limit, restrict or otherwise modify the rights of the
UHS Group to indemnification under Section 7.3, but a breach hereof shall
permit Sellers to exercise rights under Section 7.7. For purposes of this
agreement, the term "Senior Management of UHS" shall mean the following
persons(s): Alan B. Miller, Kirk E. Gorman, Michael Servais, Thomas J. Bender,
Steve G. Filton, Bruce R. Gilbert and Richard C. Wright, and does not include
any other person and the knowledge and awareness or conclusions of any other
person shall not be imputed to any of the foregoing named persons.
4. COVENANTS OF SELLERS.
4.1 ACCESS TO FACILITIES AND ADDITIONAL INFORMATION.
4.1.1 From the date hereof until the Closing Date,
Sellers shall provide, and cause their respective agents (including counsel and
accountants) to provide, to the officers and agents of Buyer, UHS-DEL,
Wellington and UHS reasonable
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access to and the right to inspect the Purchase Assets and books and records of
the FHC Affiliates and the books and records of FHC, FHC-MSI, HSMI and
FHC-Florida pertaining to the Purchase Assets, and will furnish and cause to be
furnished to Buyer, UHS-DEL, Wellington and UHS all material information
concerning the FHC Affiliates or the business of the FHC Affiliates not
otherwise disclosed pursuant to this Agreement, and such additional financial,
operating and other data and information regarding the FHC Affiliates, the
business of the FHC Affiliates and the Purchase Assets as Buyer, UHS-DEL,
Wellington and UHS may from time to time reasonably request, without regard to
where such information may be located.
4.1.2 Within 20 days following the end of each
calendar month prior to the Closing Date, and within 30 days following the end
of each calendar quarter prior to the Closing Date, the FHC Affiliates will
deliver to Buyer true and complete copies of the unaudited balance sheet and
the related unaudited statements of income and operations of the FHC Affiliates
for each such month or quarter then ended, together with any notes thereto.
4.1.3 From the date hereof until the Closing Date,
each of the FHC Affiliates, HSMI and FHC-MSI, as the case may be, shall cause
its officers, partners and employees to keep Buyer reasonably informed of
operational matters in respect of the business of the Facilities, Management
Contracts and the general status of on-going operations. Each of the FHC
Affiliates, HSMI and FHC-MSI, as the case may be, shall notify Buyer in writing
and keep Buyer informed of the status of any material changes in the
operations, financial condition or business of the Facilities, Management
Contracts, any FHC Affiliate, HSMI or FHC-MSI and of any complaints,
investigations, hearings or adjudicatory proceedings (or communications
indicating that the same may be contemplated).
4.1.4 FHC will cooperate and cause its independent
accountants to cooperate (a) in assisting UHS to prepare an audit of the
Facilities' financial statements and the Management Contracts and (b) with UHS
in filing such financial statements with UHS's filings with the Securities and
Exchange Commission, if requested by UHS. The costs of such audit shall be the
responsibility of UHS.
4.1.5 Promptly after the execution of this
Agreement, Sellers shall deliver to UHS, to the extent not already delivered to
UHS, copies of all title insurance policies and binders in the possession of
any Seller for any of the Real Property and copies of all surveys of any of the
Real Property in the possession of any Seller.
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4.2 OPERATIONS. From the date hereof until the Closing Date
and except as otherwise expressly provided in this Agreement, each FHC
Affiliate, FHC-Florida, HSMI and FHC-MSI with respect to the Management
Contracts, will:
(a) carry on its business, and cause all
hospitals under Management Contracts to carry on their business, in
substantially the same manner as heretofore and not make any material change in
its personnel, operations, finances, accounting policies, or real or personal
property or in the personnel, operations, finances, accounting policies, or
real or personal properties of the hospitals under Management Contracts;
(b) maintain the Purchase Assets and all parts
thereof in their current condition, ordinary wear and tear excepted;
(c) perform all of its obligations under
Contracts relating to or affecting the Purchase Assets or the business of its
Facility;
(d) use their reasonable best efforts to obtain
appropriate releases, consents, estoppels and other instruments as Buyer may
reasonably request;
(e) keep in full force and effect present
insurance policies or other comparable insurance and maintain sufficient liquid
reserves to meet all deductible, self-insurance and copayment requirements
under present insurance policies;
(f) maintain and preserve its business
organizations and operations intact, deal with the present employees at its
Facility in a manner consistent with its existing personnel policies; maintain
its relationships with physicians, suppliers and other Persons having business
relations with it; and cooperate with Buyer by taking such actions as are
reasonably necessary to facilitate the smooth, efficient and successful
transition to Buyer of such business organizations and operations and employee
and other relations at Closing; and
(g) permit and allow reasonable access by Buyer
to discuss post-closing employment with any of its personnel and to establish
relationships with physicians, suppliers and others having business relations
with it.
4.3 NEGATIVE COVENANTS. From the date hereof until the
Closing Date, except as otherwise expressly provided in this Agreement or
without the prior written consent of Buyer, none of the FHC Affiliates,
FHC-Florida, or HSMI or FHC-MSI will:
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(a) amend or terminate any of the Assumed
Contracts or Management Contracts, enter into any Contract or incur or agree to
incur any liability, except in the ordinary and regular course of business, and
in no event that requires the payment by such entity prior to Closing or Buyer
after Closing of an amount greater than TEN THOUSAND DOLLARS ($10,000) per
Contract, or that is not terminable without cause or penalty within thirty (30)
days following the Closing Date;
(b) make offers to any of its employees for
employment with it, FHC, any other FHC Affiliate or any other affiliate of FHC
after the Closing, except those persons whose names are set forth in Schedule
4.3 (the "Excluded Employees");
(c) increase compensation payable or to become
payable to, make a bonus payment to, or otherwise enter into one or more bonus
agreements with, any of its employees or agents, except in the ordinary and
regular course of business in accordance with existing personnel policies;
(d) create, assume or permit to exist any new Lien
upon any of the Purchase Assets other than purchase money liens arising in the
ordinary course of business;
(e) sell, assign, transfer, distribute or
otherwise dispose of any property, plant or equipment, except in the ordinary
and regular business of the Facilities with comparable replacement thereof;
(f) take any action outside the ordinary and
regular course of business;
(g) take any action relating to its liquidation
or dissolution; or
(h) create, incur, assume, guarantee or otherwise
become liable for, cancel, pay, agree to cancel or pay, provide for a complete
or partial discharge in advance of a scheduled payment date with respect to, or
waive any right to receive any direct or indirect payment or other benefit
under, any liability except in the ordinary and regular course of business and
in an amount not exceeding $2,500 individually or $10,000 in the aggregate.
4.4 GOVERNMENTAL APPROVALS. From the date hereof until the
Closing Date, Sellers shall (a) promptly apply for and use their reasonable
best efforts to obtain prior to Closing all consents, approvals, authorizations
and clearances of governmental and regulatory authorities required of them to
consummate the transactions contemplated hereby, (b) provide such information
and communications to governmental and regulatory
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authorities as the UHS Group or such authorities may reasonably request, and
(c) assist and cooperate with the UHS Group to obtain all consents, licenses,
permits, approvals, authorizations and clearances of governmental and
regulatory authorities that Buyer or UHS reasonably deems necessary or
appropriate, and to prepare any document or other information required of any
Seller by any such authorities, in order to consummate the transactions
contemplated herein.
4.5 FTC NOTIFICATION. Promptly after the execution of this
Agreement, Sellers will file with the Federal Trade Commission ("FTC") and the
United States Department of Justice ("Justice Department") the Notification and
Report Form required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). From the date hereof until the Closing Date,
Sellers shall file all reports or other documents required or requested by the
FTC and Justice Department under the HSR Act concerning the transactions
contemplated hereby, and comply promptly with any requests by the FTC or
Justice Department for additional information concerning such transactions, so
that the waiting period specified in the HSR Act will expire as soon as
reasonably possible after the effective date of this Agreement. Sellers shall
furnish to the UHS Group such information concerning Sellers as the UHS Group
needs to perform their obligations under Section 5.1. All filing fees under
the HSR Act shall be shared equally by UHS and FHC.
4.6 NO-SHOP CLAUSE AND TERMINATION FEES. (a) From the date
hereof until the earlier of the termination of this Agreement or April 1, 1997
(unless the Closing Date is extended beyond such date by the parties) and
except as permitted by Section 4.3(e) or except in connection with one of the
following transactions (a "Parent Transaction") involving FHC: (a) a tender or
exchange offer, (b) a merger, consolidation or other business combination or
(c) the sale of all or substantially all of the assets of FHC to a third party,
Sellers shall not, and will not permit any Person acting for or on behalf of
Sellers to, without the prior written consent of UHS: (i) offer for sale the
Purchase Assets, or any portion thereof, (ii) solicit offers to buy the
Purchase Assets, or any portion thereof, (iii) hold discussions with any Person
looking toward such an offer or solicitation, or looking toward a merger,
consolidation or other combination with any FHC Affiliate, (iv) enter into any
contract with any Person with respect to the sale of the Purchase Assets, or
any portion thereof, or with respect to any merger, consolidation, or other
combination with any FHC Affiliate or (v) furnish or permit or cause to be
furnished any information to any Person that Sellers know or have reason to
believe is in the process of considering any one of the transactions described
above. If Sellers or any Person acting for or on behalf of any of the
foregoing, receives from any Person (other than Buyer, UHS
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or a representative thereof) any offer, inquiry or informational request
referred to above, Sellers will promptly (x) advise such Person, by written
notice, of the substantive terms of this Section, (y) advise Buyer and UHS of
such offer, inquiry or request, and (z) deliver to Buyer and UHS a copy of such
notice together with a copy of all documents that constitute, relate or refer
to any and all responses to such offer, inquiry or request.
(b) If the UHS Group is unable to acquire any of
the Purchase Assets as a result, either directly or indirectly, of a Parent
Transaction or the shopping of the Purchase Assets by Sellers in violation of
Section 4.6(a), either of which occurs prior to April 1, 1997, Sellers shall pay
Buyer TWO MILLION DOLLARS ($2,000,000) upon the earlier of April 1, 1997 or the
consummation of the Parent Transaction or the close of the sale of the Purchase
Assets to a third party, as applicable. The parties acknowledge and agree that
the foregoing $2,000,000 payment shall be a transaction termination fee (the
"Termination Fee"). The payment by Sellers to Buyer of the Termination Fee
shall terminate all obligations of the parties under this Agreement other than
those set forth in Section 10.6 below.
(c) If Buyer fails to acquire the Purchase Assets
prior to April 1, 1997 solely as a result of the failure of the Board of
Directors of UHS to approve and authorize consummation of the transactions
contemplated by this Agreement at the first meeting of the Board of Directors
of UHS following the completion of this Agreement in full, including final
Schedules, Appendices and Exhibits (the "Approval Meeting"), UHS shall pay to
Sellers TWO MILLION DOLLARS ($2,000,000) upon the earlier of April 1, 1997 or
the second business day following the Approval Meeting. The parties
acknowledge and agree that the foregoing $2,000,000 payment shall be a
transaction termination fee (the "UHS Termination Fee"). The payment by UHS to
Sellers of the UHS Termination Fee shall terminate all obligations of the
parties under this Agreement other than those set forth in Section 10.6 below.
4.7 INSURANCE RATINGS. From the date hereof until the
Closing Date, the FHC Affiliates will take all action reasonably requested by
Buyer to enable Buyer to succeed to the worker's compensation and unemployment
insurance ratings, insurance policies, deposits and other interests of the FHC
Affiliates and the Facilities for insurance or other purposes. Buyer shall not
be obligated to succeed to any such rating, insurance policy, deposit or other
interest, except as it may elect to do so.
4.8 EMPLOYEES; EMPLOYEE BENEFIT PLANS. Sellers shall retain
all liabilities and obligations for all benefits under the Employee Benefit
Plans except as expressly set forth in Section 8.4(c) below, regardless of
whether any such liabilities and
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obligations are disclosed on the June 1995 Balance Sheets (including, without
limitation, any and all workers' compensation, COBRA, health, disability or
other benefits due to or for the benefit of any employees of the FHC Affiliates
or their covered dependents). As of the Closing, FHC or the FHC Affiliates, as
the case may be, shall terminate the participation of all Hired Employees in
any Employee Pension Benefit Plan in which any of the Sellers participates, and
provide for distributions pursuant to the terms of the plans, ERISA and the
Code. None of the Sellers shall terminate the employment of any of the
Excluded Employees retained by any of the Sellers for a period of not less than
90 days after the Closing Date without prior written notice given to the Buyer
at least ten days prior to such termination. If Buyer notifies such Seller
within such ten-day period that the termination by such Seller of one or more
of such Excluded Employees may constitute a "mass layoff" or "plant closing"
under the WARN Act, Sellers shall pay all liability of such Seller and Buyer
under the WARN Act resulting from such Seller's termination of the Excluded
Employees retained by such Seller.
4.9 FURTHER ACTS AND ASSURANCES. At any time and from time
to time at and after the Closing, upon request of Buyer, Sellers shall do,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged
and delivered, such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, confirmations and assurances as Buyer may reasonably
request to more effectively convey, assign and transfer to and vest in Buyer,
UHS-DEL or Wellington, or their respective successors and assigns, full legal
right, title and interest in and actual possession of the Purchase Assets and
the business of the FHC Affiliates, to confirm each Seller's capacity and
ability to perform its post-closing covenants and agreements under this
Agreement, and to generally carry out the purposes and intent of this
Agreement. Each Seller shall also furnish Buyer with such information and
documents in its possession or under its control, or which such Seller can
execute or cause to be executed, as will enable Buyer, UHS-DEL or Wellington,
as the case may be, to prosecute any and all petitions, applications, claims
and demands by or against third parties relating to or constituting a part of
the Purchase Assets and the business of the FHC Affiliates.
5. COVENANTS OF THE UHS GROUP.
5.1 FTC NOTIFICATION. Promptly after the execution
of this Agreement, UHS will file with the FTC and the Justice Department the
Notification and Report Form required by the HSR Act. From the effective date
hereof until the Closing Date, UHS shall file all reports or other documents
required or requested by the FTC or the Justice Department under the HSR Act
concerning the transactions contemplated hereby, and comply
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promptly with any request by the FTC or Justice Department for additional
information concerning such transactions, so that the waiting period specified
in the HSR Act will expire as soon as reasonably possible after the effective
date of this Agreement. The UHS Group shall furnish to Sellers such
information concerning the UHS Group as Sellers need to perform their
obligations under Section 4.6. All filing fees under the HSR Act shall be
shared equally by UHS and FHC.
5.2 REGULATORY APPROVALS. From the effective date
hereof until the Closing Date, each member of the UHS Group shall (a) promptly
apply for and use its reasonable best efforts to obtain prior to Closing all
consents, licenses, permits, approvals (including planning approvals),
authorizations and clearances of governmental and regulatory authorities
required of it to consummate the transactions contemplated hereby, (b) provide
such information and communications to governmental and regulatory authorities
as Sellers or such authorities may reasonably request, and (c) assist and
cooperate with Sellers to obtain all consents, approvals, authorizations and
clearances of government and regulatory authorities that Sellers reasonably
deem necessary or appropriate, and to prepare any document or other information
required of the UHS Group by any such authorities, in order to consummate the
transactions contemplated hereby.
5.3 EMPLOYEE MATTERS.
(a) Subject to the exclusions set forth in this
Section, and in reliance upon the representations and warranties of Sellers
made in Section 2.21 and the covenants of Sellers made in Section 4.8, Buyer
will offer to employ as of the Closing Date a sufficient number of employees
working at the Facilities immediately prior to Closing so that Sellers may
avoid the imposition of any liability under the WARN Act and shall pay all
liability of the Sellers under the WARN Act resulting from the Buyer's failure
to do so. Notwithstanding the foregoing, Buyer shall have no obligation to
offer employment to (i) any employee who is not actively at work at the
Facilities on the Closing Date, unless and until such employee returns to
active work, (ii) those employees who are "part-time employees" (as defined in
the WARN Act), (iii) those employees who voluntarily elect to leave the
employment of any Seller or (iv) those Excluded Employees who accept the offer
of retained employment with any Seller, and Sellers shall pay all liability
under the WARN Act resulting from the termination of the Excluded Employees
retained by any Seller.
(b) Sellers acknowledge that, if the Excluded
Employees accept Sellers' offer of retained employment, Buyer may be unable to
employ replacement personnel as of the Closing. As a result and for the
purpose of ensuring a smooth and orderly
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transition of the business of the Facilities to Buyer, Sellers shall cause the
Excluded Employees who accept a Seller's offer of retained employment to assist
and cooperate with Buyer for a reasonable period after Closing in operating the
Facilities and training the replacement personnel in the functions and services
performed by the Excluded Employees.
(c) It is the present intention of Buyer to offer
employment to all of the staff at the Roxbury Facility. Nothing contained in
the foregoing sentence shall give rise to any obligation on the part of Buyer
or create any third party beneficiary or other rights.
5.4 FURTHER ACTS AND ASSURANCES. At any time and
from time to time at and after the Closing, upon request ofSellers, each of the
UHS Group shall do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledge and delivered such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, confirmations and assurances as
Sellers may reasonably request to confirm the capacity and ability of each of
the UHS Group to perform its post-closing covenants and agreements under this
Agreement, and to generally carry out the purposes and intent of this
Agreement. The UHS Group shall also furnish Sellers with such information and
documents in its possession or under its control, or which it can execute or
cause to be executed, as will enable Sellers to prosecute any and all
petitions, applications, claims and demands by or against third parties
relating to or constituting a part of the Purchase Assets and the business of
the Facilities for which any Seller is liable hereunder or relating to
Government Reimbursement Programs.
6. CONDITIONS OF CLOSING; ALLOCATION OF PURCHASE PRICE;
HIRING PROHIBITIONS; LOAN.
6.1 UHS GROUP'S CONDITIONS OF CLOSING. The obligation
of the UHS Group to purchase and pay for the Purchase Assets shall be subject to
and conditioned upon the satisfaction at the Closing of each of the following
conditions:
6.1.1 All representations and warranties of
Sellers contained in this Agreement and the Schedules hereto shall be true and
correct in all material respects at and as of the Closing Date, Sellers shall
have performed in all material respects all agreements and covenants and
satisfied all conditions on their part to be performed or satisfied by the
Closing Date pursuant to the terms of this Agreement, and the UHS Group shall
have received a certificate of FHC and each FHC Affiliate dated the Closing
Date to such effect.
6.1.2 Except as caused solely by any change
in the relevant market conditions and prospects, for which the
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UHS Group shall assume all risk, there shall have been no material adverse
change since the date of the June 1995 Balance Sheets in the financial
condition, business or affairs of each FHC Affiliate and each hospital under a
Management Contract; and each FHC Affiliate and each hospital under a
Management Contract shall not have suffered any material loss (whether or not
insured) by reason of physical damage caused by fire, earthquake, accident or
other calamity which substantially affects the value of its assets, properties
or business the insurance proceeds related to which are not, in the reasonable
opinion of Buyer and UHS-DEL, adequate to repair such damage and compensate for
any lost business related thereto. The UHS Group shall have received a
certificate of FHC, HSMI, FHC-MSI and each FHC Affiliate dated the Closing Date
that the statements set forth in this Section 6.1.2 are true and correct.
6.1.3 Sellers shall have delivered to the
UHS Group a Certificate of the Secretary of State (or other authorized officer)
of the State of Florida and Commonwealths of Pennsylvania and Virginia, as the
case may be, and certifying as of a date reasonably close to the Closing Date
that each of FHC, HSMI and FHC-MSI, FHC-Florida and the FHC Affiliates has
filed all required reports, paid all required fees and taxes, and is, as of
such date, in good standing and authorized to transact business as a domestic
corporation.
6.1.4 (a) FHC shall have delivered to the
UHS Group a certificate of its corporate Secretary certifying:
(i) The Resolutions of its Board of
Directors authorizing execution, performance and delivery of this Agreement and
the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby;
(ii) The incumbency of its officers
executing this Agreement and all agreements and documents contemplated hereby;
and
(iii) That the Articles of
Incorporation and Bylaws of FHC attached to such certificate are complete and
correct and in effect as of the date of such certification.
(b) The Secretary of each of the FHC
Affiliates shall have delivered to the UHS Group a certificate certifying:
(i) The Resolutions of its Board of
Directors authorizing execution, performance and delivery of this Agreement and
the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby;
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(ii) The incumbency of its officers
executing this Agreement and all agreements and documents contemplated hereby;
and
(iii) That the Articles of
Incorporation and Bylaws of each FHC Affiliate attached to such certificate are
complete and correct and in effect as of the date of such certification.
(c) Each of HSMI, FHC-Florida and FHC-MSI
shall have delivered to the UHS Group a certificate of their respective
corporate Secretary certifying:
(i) The Resolutions of its Board of
Directors authorizing execution, performance and delivery of this Agreement and
the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby;
(ii) The incumbency of its officers
executing this Agreement and all agreements and documents contemplated hereby;
and
(iii) That the Articles of
Incorporation and Bylaws of HSMI, FHC-Florida or FHC-MSI attached to such
certificate are complete and correct and in effect as of the date of such
certification.
6.1.5 The UHS Group shall have received from
counsel for Sellers (which may be house counsel), an opinion, dated the Closing
Date, satisfactory to the UHS Group in the form attached hereto as Exhibit D.
6.1.6 The waiting period under the HSR Act
shall have expired or been terminated and all material authorizations,
consents, waivers, approvals, orders, registrations, qualifications,
designations, declarations, filings or other actions required with or from any
governmental entity (including without limitation receipt of licenses (or
commitments to issue licenses) to own and operate the Facilities in
Pennsylvania and for Buyer to conduct the business of the FHC Affiliates as
currently conducted, approvals of the U.S. Department of Justice, the Federal
Trade Commission and the Pennsylvania agencies responsible for mental health
hospital/facility licensure and certificates of need or nonaction of the U.S.
Department of Justice and the Federal Trade Commission within the applicable
waiting period) in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
shall have been duly obtained and shall be reasonably satisfactory to the UHS
Group and its counsel, and copies thereof shall be delivered to the UHS Group
no later than three (3)
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business days prior to the Closing. No such consent or approval (a) shall be
conditioned on the material modification, cancellation or termination or any
material Assumed Contract, or (b) shall impose on Buyer or UHS-DEL, in the case
of the Management Contracts, any condition or provision or requirement with
respect to the Facilities or their operation or the Management Contracts that
is more restrictive in any material respect than or different in any material
respect from the conditions imposed upon such operation or the Management
Contracts prior to Closing, unless Buyer or UHS-DEL, as the case may be, give
their prior written approval.
6.1.7 On the Closing Date, no injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such transactions
unlawful and no action or proceeding shall have been instituted and remain
pending before a governmental entity to restrain or prohibit the transactions
contemplated by this Agreement and no adverse decision shall have been made by
any such governmental entity which is reasonably likely to materially adversely
affect the FHC Affiliates or the Purchase Assets. No federal, state or local
statute, rule or regulation shall have been enacted the effect of which would
be to prohibit, materially restrict, impair or delay the consummation of the
transactions contemplated hereby or materially restrict or impair the ability
of the UHS Group to own the Purchase Assets or to conduct the businesses
relating thereto.
6.1.8 Buyer and Wellington shall have
received such property tax records of FHC, FHC-Florida and the FHC Affiliates
as they shall have reasonably requested, and the UHS Group shall have obtained
an appraisal of the Purchase Assets (including the Real Property but not the
leased property) solely for the purpose of allocating the agreed Purchase Price
by a qualified appraiser, reasonably satisfactory to Sellers and to the UHS
Group, which records and appraisal shall have been used in arriving at and
supporting the allocation of the Purchase Price for the Purchase Assets
referred to in Section 6.3 hereof. The cost of the appraisal shall be the
responsibility of Buyer.
6.1.9 Intentionally omitted.
6.1.10 With respect to the Assumed Contracts
and Management Contracts requiring consent by the other party to an assignment
by the FHC Affiliates, Buyer and UHS-DEL shall have received those consents
each deems necessary to allow it to conduct business with the Purchase Assets
after the Closing Date in substantially the same manner as such business was
conducted by the FHC Affiliates, HSMI and FHC-MSI on the date hereof.
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6.1.11 Consummation of the transactions
contemplated by this Agreement shall have been approved and authorized by the
Board of Directors of UHS.
6.1.12 At the Closing, the FHC Affiliates
shall execute and deliver to Buyer affidavits complying in all respects with
Section 1445(b)(2) of the Code and Buyer agrees that, except as otherwise
provided in Section 1445(b)(7) of the Code and the Treasury Regulations
promulgated pursuant thereto, upon the execution and delivery of such
affidavits to Buyer, no deduction shall be made or claimed against the Purchase
Price by reason of the requirements of Section 1445 of the Code.
6.1.13 Intentionally omitted.
6.1.14 The Working Capital shall not be less
than $2,500,000 at the Closing Date.
6.1.15 Buyer's receipt of standard ALTA fee
owner's title insurance policies (the "Title Policies") insuring title (at
standard market rates for fee simple title) to each parcel of Real Property in
Buyer and Wellington, as the case may be, as fee owner, subject only to the
Permitted Encumbrances, in the aggregate amount of no more than the Purchase
Price, and issued by a national title insurance company (the "Title Company").
6.1.16 Execution and delivery by Sellers to
the UHS Group of the Instruments of Conveyance set forth in Section 1.5
6.2 SELLERS' CONDITIONS OF CLOSING. The obligation
of Sellers to sell the Purchase Assets and consummate the other transactions
contemplated by this Agreement shall be subject to and conditioned upon the
satisfaction at the Closing of each of the following conditions:
6.2.1 All representations and warranties of
the UHS Group contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date and the UHS Group shall have
performed in all material respects all agreements and covenants and satisfied
all conditions on their respective parts to be performed or satisfied by the
Closing Date pursuant to the terms of this Agreement, and Sellers shall have
received a certificate of the UHS Group dated the Closing Date to such effect.
6.2.2 Each of UHS Group shall have delivered
to Sellers a certificate of their respective corporate secretaries certifying:
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(a) The Resolutions of its Board of
Directors authorizing execution, performance and delivery of this Agreement and
the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby; and
(b) The incumbency of its officers executing
this Agreement and all agreements and documents contemplated hereby.
(c) That the articles of incorporation
and bylaws of such entity attached to such certificate are complete and correct
and in effect as of the date of such certificate.
6.2.3 Sellers shall have received from
counsel for the UHS Group (which may be house counsel), an opinion, dated the
Closing Date, in the form attached hereto as Exhibit E.
6.2.4 The approval and all consents from
third parties and governmental entities required to consummate the transactions
contemplated hereby shall have been obtained without restrictions, conditions
or provisions, except as approved by FHC, such approval not to be unreasonably
withheld, and the written approval of the transaction by the institutional
lenders listed on Schedule 6.2.4 shall have been received by Sellers.
6.2.5 No suit, action, investigation,
inquiry or other proceeding by any governmental entity or other person or legal
or administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby. On
the Closing Date, no injunction or order shall be in effect prohibiting
consummation of the transactions contemplated hereby or which would make the
consummation of such transactions unlawful and no action or proceeding shall
have been instituted and remain pending before a governmental entity to
restrain or prohibit the transactions contemplated by this Agreement and no
adverse decision shall have been made by any such governmental entity which is
reasonably likely to materially adversely affect the FHC Affiliates and the
Facilities. No federal, state or local statute, rule or regulation shall have
been enacted the effect of which would be to prohibit, materially restrict,
impair or delay the consummation of the transactions contemplated hereby or
materially restrict or impair the ability of Buyer to own or conduct the
business of the FHC Affiliates.
6.2.6 UHS and Buyer (i) shall have obtained
the release of Sellers from all of the Assumed Liabilities or (ii) shall have
delivered to Sellers an undertaking in the form
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attached hereto as Appendix IV, indemnifying Sellers from and against all of
the Assumed Liabilities.
6.2.7 The execution and delivery at Closing
of the Assumption Agreement.
6.2.8 The delivery to FHC and the FHC
Affiliates of the guaranty of UHS with respect to Buyer's obligations under,
arising out of, or in connection with this Agreement, which guaranty shall be
in the form of Exhibit F hereto.
6.2.9 The payment of the Purchase Price by
the UHS Group to the Sellers in the form of $36,500,000 in wired federal funds
and the delivery of the Note or the deposit of $5,000,000 with the Escrow Agent
pursuant to the Escrow Agreement.
6.3 ALLOCATION OF PURCHASE PRICE. The Purchase
Price shall be allocated in its entirety among the Purchase Assets and the
Non-competition Agreement in Section 8.2 in accordance with Schedule 6.3 hereto
and as required by Section 1060 of the Code and Treasury Regulations
promulgated thereunder. Sellers and the UHS Group shall file all information
and tax returns (and any amendments thereto) in a manner consistent with this
Section 6.3 and comply with the applicable information reporting requirements
of Section 1060 of the Code and Treasury Regulations promulgated thereunder.
If, contrary to the intent of the parties hereto as expressed in this Section
6.3 any taxing authority makes or proposes an allocation different from that
contained in this Section 6.3, Sellers and the UHS Group shall cooperate with
each other in good faith to contest such taxing authority's allocation (or
proposed allocation), provided, however, that, after consultation with the
party adversely affected by such allocation (or proposed allocation), another
party hereto may file such protective claims or returns as may reasonably be
required to protect its interests.
6.4 HIRING PROHIBITION. (a) Except as permitted
under the terms of this Agreement, during the period from the date hereof
through the period six months following the date (i) of the Closing or (ii)
this Agreement is terminated pursuant to Section 9.1, no party to this
Agreement shall solicit or hire any employee of any other party without the
advance written consent of such other party; provided, however, that if an
employee independently applies for a position without solicitation, the
restrictions of this Section 6.4 shall not apply.
(b) FHC and Buyer agree that Mark Benz will be
engaged to manage the Facilities Assets during the period of time when EBITDA
is measured pursuant to Section 1.6.3(a). If Buyer
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finds it necessary, in its sole discretion, to terminate Mark Benz, Buyer will
use its reasonable efforts to locate a manager reasonably acceptable to FHC and
will permit such manager to earn incentive compensation from FHC for producing
specified results. FHC agrees that Buyer will be made aware and approve the
terms of any incentive compensation for Mark Benz or his designated
replacement. Nothing herein creates any third-party beneficiary or other
rights in favor of Mark Benz or any other person.
6.5 LOANS. (a) Prior to the Closing hereunder,
Buyer, in its sole discretion, may make a loan (the "Pre-Closing Loan") to
Sellers in the amount of $41,500,000. This Pre-Closing Loan will be used to
pay off the existing loans currently encumbering any of the assets to be
purchased by Buyer from Sellers under this Agreement and will be secured by a
first lien position on those assets and such other collateral mutually agreed
upon by the parties. The Pre-Closing Loan will be under terms mutually agreed
to by Buyer and Sellers, which will include, without limitation (i) that the
Pre-Closing Loan will be satisfied in full by transfer to Buyer of the Purchase
Assets in the Closing of the transactions contemplated hereunder and delivery
to Buyer of $5,000,000 from the Post Closing Loan, (as defined in Section
6.5(b) below) (ii) EBITDA from the Facilities Assets from and after the date
FHC receives the full funding of the Pre-Closing Loan shall belong to Buyer.
(b) Buyer agrees that it will make a secured loan
(the "Post Closing Loan") to Sellers in an amount not to exceed $7.0 million.
This Post Closing Loan will be subject to terms outlined on Exhibit G attached
hereto. In the event Buyer makes a loan to Sellers under Section 6.5(a) above,
$5.0 million of any Post-Closing Loan made under this Section 6.5(b) shall
partially fund the full satisfaction of the Pre-Closing Loan as set forth in
Section 6.5(a).
7. NATURE AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION.
7.1 EVENTS OF DEFAULT -- SELLERS. A breach of
any representation or warranty by Sellers or a breach as a result of the
failure of Sellers to perform any of their respective agreements, covenants and
obligations under this Agreement, shall be considered a default hereunder
giving rise to the indemnification set forth in Section 7.3 hereof.
7.2 SURVIVAL OF REPRESENTATIONS, ETC. All
representations and warranties made by Sellers in this Agreement or in any
exhibit, schedules, certificate, document or instrument delivered pursuant to
the provisions hereof or in connection with the transactions contemplated
hereby, and the remedies of the UHS
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Group with respect thereto, shall survive the Closing hereunder for the
following periods:
(a) With respect to the representations and
warranties of Sellers (other than those representations and warranties in
Sections 2.1, 2.2, 2.10, 2.20, 2.21, 2.25, 2.27 and 2.32) and all related
exhibits, schedules, certificates, documents and instruments, any claim arising
thereunder must be brought within a period of twenty-four (24) months following
the Closing Date.
(b) With respect to the representations and
warranties of Sellers contained in Sections 2.10, 2.20, 2.21, 2.25, 2.27 and
2.32 and all related exhibits, schedules, certificates, documents and
instruments, any claim arising thereunder must be brought within the period of
the applicable statutes of limitations, including any extensions thereof.
(c) With respect to the representations and
warranties of Sellers contained in Sections 2.1 and 2.2 and all related
exhibits, schedules, certificates, documents and instruments, such
representations and warranties shall survive the Closing and any claim arising
thereunder may be brought at any time.
7.3 INDEMNIFICATION TO THE UHS GROUP. From and
after the Closing Date, Sellers jointly and severally shall, up to a maximum
aggregate payment equal to the Purchase Price, indemnify and hold the UHS Group
and their respective affiliates, agents and representatives, harmless from and
against any and all claims, losses, expenses, damages or liabilities arising
out of or relating to any of the following: (i) the representations and
warranties set forth in this Agreement or in any other document, exhibit,
schedule, instrument or certificate furnished to the UHS Group by or on behalf
of any of the Sellers in connection herewith not being true and correct in all
respects on the Closing Date; (ii) any breach, violation or nonperformance of a
covenant, agreement or obligation to be performed hereunder on the part of any
of the Sellers; (iii) any claims against, or liabilities or obligations of any
of the Sellers not specifically assumed by any of the UHS Group pursuant to
this Agreement; or (iv) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceedings, commenced or threatened)
incident to any of the
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foregoing or the enforcement of this Section. Notwithstanding the foregoing,
Sellers shall not be liable for any claims, losses, expenses, damages or
liabilities under clause (i), and the corresponding costs and expenses under
clause (iv), of the preceding sentence ("Rep and Warranty Claims") until the
amount thereof exceeds $112,500 ("Basket Amount") in the aggregate and then
Sellers shall be liable for the entire excess. An individual Rep and Warranty
Claim with respect to which the amount of the claims, losses, expenses, damages
or liabilities relating to such individual Rep and Warranty Claim does not
exceed $5,000 (such claim being a "Small Claim") shall not be included in the
calculation of the Basket Amount until the aggregate amount of all Small Claims
exceeds $200,000 (the "Small Claim Basket Amount"). In addition, the UHS Group
may not bring an indemnification claim under this Section 7.3 for a Small Claim
until both the Basket Amount and Small Claim Basket Amount are met, after which
Sellers shall be liable for the entire excess. However, Sellers shall be
liable for the full amount of all claims, losses, expenses, damages and
liabilities pursuant to clauses (ii) and (iii), and corresponding costs and
expenses under clause (iv), of the first sentence of this Section 7.3.
7.4 REPRESENTATION, COOPERATION AND SETTLEMENT. (a)
The UHS Group agrees to give prompt written notice to Sellers of any claim
against the UHS Group which might give rise to a claim by the UHS Group against
Sellers based on the indemnity agreement contained in Section 7.3 hereof,
stating the nature and basis of the first-mentioned claim and the amount
thereof.
(b) The Sellers shall have full responsibility and
authority with respect to the payment, settlement, compromise or other
disposition of any third party dispute, action, suit or proceeding in excess of
the Basket Amount subject to indemnification by Sellers hereunder, including,
without limitation, the right to conduct and control all negotiations with
respect to the settlement, compromise or other disposition thereof, and the UHS
Group agrees to cooperate with the Sellers in any reasonable manner requested
by the Sellers in connection with any such negotiations. The UHS Group shall
have the right, without prejudice to the Sellers' rights under this Agreement,
at the UHS Groups' sole expense, to be represented by counsel of their own
choosing and with whom counsel for the Sellers shall confer in connection with
the defense of any such action, suit or proceeding. The parties agree to
render to each other such assistance as may reasonably be requested in order to
insure the proper and adequate defense of any such action, suit or proceeding.
Notwithstanding the foregoing, Sellers may compromise and settle any claim,
action, or suit to which it must indemnify the UHS Group hereunder, provided
that it gives the UHS Group advance notice of any proposed compromise or
settlement and
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shall obtain the consent of the UHS Group to such proposed compromise or
settlement, which consent shall not be unreasonably withheld.
7.5 EVENTS OF DEFAULT -- UHS GROUP. A breach of
any representation or warranty by any of the UHS Group or a breach as a result
of the failure of any of the UHS Group to perform any of its agreements,
covenants and obligations under this Agreement, shall be considered a default
hereunder giving rise to the indemnification set forth in Section 7.7 hereof.
7.6 SURVIVAL OF REPRESENTATIONS, ETC. All
representations and warranties made by any of the UHS Group in this Agreement
or in any exhibit, schedule, certificate, document or instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, and the remedies of Sellers with respect thereto, shall
survive the Closing hereunder.
7.7 INDEMNIFICATION TO SELLERS. From and after
the Closing Date, the UHS-Group jointly and severally shall, up to a maximum
aggregate equal to the Purchase Price, indemnify and hold Sellers, and their
respective affiliates, agents and representatives, harmless from and against
any and all claims, losses, expenses, damages or liabilities arising out of or
relating to any of the following: (i) the representations and warranties set
forth in this Agreement or in any other document, exhibit, schedule, instrument
or certificate furnished to Sellers by or on behalf of any of the UHS Group in
connection herewith not being true and correct in all respects on the Closing
Date; (ii) any breach, violation or nonperformance of a covenant, agreement or
obligation to be performed hereunder or in connection herewith on the part of
any of the UHS Group; (iii) any act or omission in the operations or use of the
Facilities Assets or the performance of the Assumed Contracts, including
without limitation the Management Contracts, following the Closing so long as
such act or omission is not, directly or indirectly, attributable to or the
responsibility of any Seller (except that in regards to the assignment of the
Management Contracts or performance under the Assignment Substitute, this
proviso regarding attribution of an act or omission to any Seller shall not
apply and Section 1.3.3 shall control); or (iv) any actions, judgments, costs
and expenses (including reasonable attorneys' fees and all other expenses
incurred in investigating, preparing or defending any litigation or
proceedings, commenced or threatened) incident to any of the foregoing or the
enforcement of this Section. Notwithstanding the foregoing, the UHS Group
shall not be liable for any claims, losses, expenses, damages or liabilities
under clause (i), and the corresponding costs and expenses under clause (iv),
of the preceding sentence until the amount thereof exceeds $112,500 in the
aggregate and
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then the UHS Group shall be liable for the entire excess. However, the UHS
Group shall be liable for the full amount of all claims, losses, expenses,
damages and liabilities pursuant to clauses (ii) and (iii), and corresponding
costs and expenses under clause (iv), of the first sentence of this Section
7.7.
7.8 REPRESENTATION, COOPERATION AND SETTLEMENT. (a)
Sellers agree to give prompt written notice to the UHS Group of any claim
against Sellers which might give rise to a claim by Sellers against the UHS
Group based on the indemnity agreement contained in Section 7.7 hereof, stating
the nature and basis of the first-mentioned claim and the amount thereof.
(b) The UHS Group shall have full responsibility and
authority with respect to the payment, settlement, compromise or other
disposition of any dispute, action, suit or proceeding subject to
indemnification by the UHS Group hereunder, including, without limitation, the
right to conduct and control all negotiations with respect to the settlement,
compromise or other disposition thereof, and the Sellers agree to cooperate
with the UHS Group in any reasonable manner requested by the UHS Group in
connection with any such negotiations. The Sellers shall have the right,
without prejudice to the UHS Groups' rights under this Agreement, at the
Sellers' sole expense, to be represented by counsel of their own choosing and
with whom counsel for the UHS Group shall confer in connection with the defense
of any such action, suit or proceeding. The parties agree to render to each
other such assistance as may reasonably be requested in order to insure the
proper and adequate defense of any such action, suit or proceeding.
Notwithstanding the foregoing, the UHS Group may compromise and settle any
claim, action, or suit to which it must indemnify the Sellers hereunder,
provided that it gives the Sellers advance notice of any proposed compromise or
settlement and shall obtain the consent of the Sellers to such proposed
compromise or settlement, which consent shall not be unreasonably withheld.
8. TRANSACTIONS SUBSEQUENT TO THE CLOSING DATE
8.1 ACCESS TO RECORDS. From time to time after the
Closing Date, upon the request of the UHS Group, Sellers will make available to
the UHS Group any records, documents and data relating to the Purchase Assets
or any of the FHC Affiliates retained by any of the Sellers whether located at
FHC's headquarters or any other location. From time to time after the Closing
Date, upon the request of FHC, any of the UHS Group will make available to FHC
any records, documents and data relating to the Purchase Assets acquired by the
UHS Group. For a period of seven (7) years following the Closing Date, neither
Sellers nor the UHS Group shall discard, destroy or otherwise dispose of
records, documents and data relating to Purchase Assets or the
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FHC Affiliates without first making such records, documents and data available
to the other party for inspection and copying.
8.2 NON-COMPETITION. FHC, HSMI, FHC-MSI and the
FHC Affiliates each agrees that neither it nor any of its affiliated entities
will for a period of five (5) years from the Closing Date directly or
indirectly (i) own, build, invest in, assist in the development of, or have any
management or administrative role in, any firm, corporation, business or other
organization or enterprise engaged, directly or indirectly, in the provision of
health care services within thirty (30) miles of any Facility, (ii) solicit for
employment any employee of the Facilities purchased by Buyer or any facility
under a Management Contract pursuant to the terms of this Agreement, or (iii)
interfere with, disrupt or attempt to disrupt the relationship between UHS and
Buyer or any of their affiliates and any of their respective lessors, lessees,
contractors, licensors, licensees, customers or suppliers pertaining to the
Facilities.
The performance by FHC or any FHC Affiliate under the
contract between City of Philadelphia Department of Human Services and First
Corrections Corporation to be performed in Pennsylvania is expressly permitted
and will not violate this non-competition provision.
Notwithstanding anything to the contrary provided in
this Section 8.2, the conduct of any of the following activities by FHC shall
not constitute a violation of the non-competition provisions contained in this
Section 8.2:
(a) the provision of traditional managed care
administrative services;
(b) the performance of services pursuant to any
contract which has been awarded to FHC prior to the Closing Date and is listed
on Schedule 8.2(b) hereto;
(c) the operation of any FHC enterprise that is
in existence on the Closing Date and is listed on Schedule 8.2(c) hereto; and
(d) the development of any project in New Jersey
or Delaware within the geographical area covered by the non- competition
agreement in this Section 8.2 if UHS is offered the opportunity, on the same
terms and conditions as FHC or any affiliated entity, to acquire a substantial
equity participation in any such project.
If any court determines that any of the restrictive
covenants set forth in this Section 8.2, or any part of such covenants, is
unenforceable because of the duration of
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such provision or the area covered thereby, such court shall have the power to
reduce the duration or area of such provision and, in its reduced form, such
provisions shall then be enforceable and shall be enforced. FHC, HSMI, FHC-MSI
and the FHC Affiliates acknowledge that the remedy at law for any breach or
threatened breach of the provisions of this Section by any of them will be
inadequate, and that, accordingly, the UHS Group shall, in addition to all
other available remedies, be entitled to injunctive relief, without being
required to post bond or other security and without having to prove the
inadequacy of the available remedies at law. FHC, HSMI, FHC-MSI and the FHC
Affiliates agree not to plead or defend on any grounds of adequate remedy at
law or any similar defense in any action by any of the UHS Group against any of
them for injunctive relief or for specific performance of any of its
obligations under this Section. Nothing contained herein shall be construed as
prohibiting any of the UHS Group from pursuing any other remedies for such
breach or threatened breach.
8.3 PROVIDER RELATIONSHIP. From and after the
Closing Date and subject to satisfaction of customary credentialing
requirements, FHC, on behalf of itself and all of its subsidiaries and
affiliates, including FHC Options, Inc. (collectively, the "FHC System
Entities"), shall accept and contract with UHS and any and all subsidiaries and
affiliates of UHS (collectively, the "UHS System Entities") to be preferred
providers for any of the FHC System Entities in the markets serviced from time
to time by the UHS System Entities. In addition, to the extent permitted by
law and subject to satisfaction of customary credentialing requirements and the
UHS System Entities willingness to offer services at market prices, except when
specifically instructed to the contrary by any client, FHC shall cause the FHC
System Entities to use their best efforts to direct patients to facilities
operated by UHS System Entities. FHC will notify UHS if a client specifically
instructs an FHC System Entity to exclude a UHS System Entity as a provider.
8.4 TRANSITION COVENANTS.
(a) For a period of one hundred twenty (120)
days following the Closing Date, Sellers shall permit the UHS Group to utilize
the information systems currently servicing the Facilities and the Management
Contracts, free of all costs other than external, out-of-pocket costs incurred
by Sellers and payable to third parties unrelated to Sellers to the extent the
same arise out of the UHS Group's use of Sellers' information systems. Each of
the UHS Group agrees to use its best efforts to convert the Facilities and
Management Contracts to a UHS maintained information system as soon as
practicable.
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(b) To assist Sellers in connection with
filing reports relating to Government Reimbursement Programs, for a reasonable
period following the Closing Date not to exceed six (6) months, Buyer shall
cause certain of its employees to assist Sellers in obtaining the information
necessary to file such reports so long as such assistance does not unreasonably
interfere with Buyer's business.
(c) Notwithstanding anything in the
Agreement to the contrary, for a period of one hundred twenty (120) days
following the Closing Date, at the request of Buyer, Sellers shall continue to
provide current levels of health and other similar benefits to the Hired
Employees and Buyer shall reimburse Sellers for the out-of-pocket costs of
providing such benefits. Buyer agrees to use its best efforts to implement a
benefit plan for the Hired Employees as soon as practicable.
8.5 EQUITY INVESTMENT. For a period of two (2)
years following the Closing Date, UHS is willing to consider participation (but
shall not be obligated to participate) as an equity joint venture partner of
FHC in certain future large managed care contract arrangements acceptable to
UHS in its sole discretion. The terms and conditions of such equity joint
venture participation shall be upon mutually acceptable terms to be negotiated
by UHS and FHC. This Section 8.5 is simply a statement of interest and neither
party shall have any obligation to the other of any kind whatsoever in regard
to this Section.
8.6 COLLECTION OF RECEIVABLES. Between the Closing
Date and December 31, 1996, Buyer will use reasonable diligence consistent with
standard practices of UHS entities to collect the accounts receivable
transferred to Buyer hereunder.
9. TERMINATION.
9.1 METHODS OF TERMINATION. The transactions
contemplated herein may be terminated at any time before or after approval
thereof by Sellers and the UHS Group, but not later than the Closing:
(i) By mutual consent of the
UHS Group and Sellers; or
(ii) By the UHS Group after June
30, 1996, if any of the conditions provided for in Section 6.1 hereof shall not
have been met or waived in writing by the UHS Group prior to such date; or
(iii) By Sellers after June 30,
1996, if any of the conditions provided for in Section 6.2 hereof shall
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not have been met or waived in writing by Sellers prior to such date.
9.2 PROCEDURE UPON TERMINATION. In the event of
termination by the UHS Group or Sellers, pursuant to Section 9.1 hereof,
written notice thereof shall forthwith be given to the other parties and the
transactions contemplated by this Agreement shall be terminated, without
further action by the UHS Group or Sellers. If the transactions contemplated
by this Agreement are terminated as provided herein:
(i) Each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same; and
(ii) No party hereto shall have any liability or
further obligation to any other party to this Agreement other than the
confidentiality obligations set forth in Section 10.6 hereof.
10. MISCELLANEOUS.
10.1 NOTICE. Any notice required or permitted
hereunder shall be in writing and shall be sufficiently given if personally
delivered or mailed by certified or registered mail, return receipt requested,
addressed as follows:
IF TO THE Thomas J. Bender
UHS GROUP: Vice President
Universal Health Services, Inc.
367 South Gulph Road
Box 61558
King of Prussia, Pennsylvania 19406
COPIES TO: Bruce Gilbert, Esq.
General Counsel
Universal Health Services, Inc.
367 South Gulph Road
Box 61558
King of Prussia, Pennsylvania 19406
AND
Klett Lieber Rooney & Schorling
A Professional Corporation
40th Floor, One Oxford Centre
Pittsburgh, Pennsylvania 15219
Attention: Robert T. Harper, Esq.
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IF TO SELLERS: Ronald I. Dozoretz, M.D.
First Hospital Corporation
240 Corporate Boulevard
Norfolk, Virginia 23502
COPIES TO: Philip H. Goodpasture, Esq.
Christian & Barton
909 East Main Street, Suite 1200
Richmond, Virginia 23219-3095
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered or mailed.
10.2 EXECUTION OF ADDITIONAL DOCUMENTS. The parties
hereto will at any time, and from time to time after the Closing Date, upon
request of the other party, execute, acknowledge and deliver all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required to carry out the intent of this Agreement and to
transfer and vest title to any Purchase Assets being transferred hereunder, and
to protect the right, title and interest in and enjoyment of all of the
Purchase Assets sold, granted, assigned, transferred, delivered and conveyed
pursuant to this Agreement; provided, however, that this Agreement shall be
effective regardless of whether any such additional documents are executed.
10.3 WAIVERS AND AMENDMENT.
(a) Sellers or the UHS Group may, by
written notice to the other executed by a properly authorized officer, (i)
extend the time for the performance of any of the obligations or other actions
of the other; (ii) waive any inaccuracies in the representations or warranties
of the other contained in this Agreement; (iii) waive compliance with any of
the covenants of the other contained in this Agreement; and (iv) waive or
modify performance of any of the obligations of the other.
(b) This Agreement may be amended,
modified or supplemented only by a written instrument executed by all the
parties hereto. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
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10.4 EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, the UHS Group shall pay the
fees and expenses of their counsel, accountants, other experts and all other
expenses incurred by them incident to the negotiation, preparation and
execution of this Agreement, and Sellers shall pay any and all such fees and
expenses incurred by them incident to the negotiation, preparation and
execution of this Agreement and the performance by them of their obligations
hereunder. Notwithstanding the foregoing, the UHS Group shall be responsible
for paying closing costs arising in connection with costs for the Title
Policies, surveys, appraisals, recording fees and transfer or stamp taxes and
other taxes and costs arising from the transactions contemplated hereby;
provided, however, that the UHS Group shall receive a credit against the
Purchase Price of one-half of the amount of recording fees and transfer or
stamp taxes and other taxes and costs arising from the transactions
contemplated hereby.
10.5 OCCURRENCE OF CONDITIONS PRECEDENT. Each of
the parties hereto agrees to use its reasonable best efforts to cause all
conditions precedent to its obligations under this Agreement to be satisfied.
10.6 CONFIDENTIALITY OBLIGATIONS; PUBLIC
ANNOUNCEMENTS.
(a) Each party agrees that it will treat in
confidence all documents, materials and other information which it shall have
obtained regarding the other party during the course of the negotiations
leading to the consummation of the transactions contemplated hereby (whether
obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other party all copies of non-public
documents and materials which have been furnished in connection therewith. The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) such
party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (ii) is known to the public and did not
become so know through any violation of a legal obligation, (iii) became known
to the public through no fault of such party or (iv) is later lawfully acquired
by such party from other sources. Except as required by law and except for
disclosures to its advisors, who shall be advised of the confidentiality
requirements herein, Sellers shall not disclose to any Person the identity of
any of the UHS Group, the Purchase Price, the terms or provisions of this
Agreement or the content of any discussions or communications between Sellers
and UHS Group.
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(b) Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as UHS determines. Unless
consented to by UHS in advance or required by law, prior to the Closing,
Sellers and the UHS Group shall keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Sellers and the
UHS Group will consult with each other concerning the means by which the FHC
Affiliates' employees, customers, and suppliers and others having dealings with
the FHC Affiliates, FHC, HSMI or FHC-MSI will be informed of the transactions
contemplated by this Agreement and the UHS Group will have the right to be
present for any such communication.
10.7 BINDING EFFECT; BENEFITS. Subject to Section
10.14, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, successors, executors,
administrators and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.8 ENTIRE AGREEMENT. This Agreement, together
with the Exhibits, Schedules and other documents contemplated hereby,
constitute the final written expression of all of the agreements between the
parties, and is a complete and exclusive statement of those terms. It
supersedes all prior understandings and negotiations (written and oral)
concerning the matters specified herein. Any representations, promises,
warranties or statements made by either party that differ in any way from the
terms of this written Agreement and the Exhibits, Schedules and other documents
contemplated hereby, shall be given no force or effect. The parties
specifically represent, each to the other, that there are no additional or
supplemental agreements between them related in any way to the matters herein
contained unless specifically included or referred to herein. No addition to
or modification of any provision of this Agreement shall be binding upon any
party unless made in writing and signed by all parties.
10.9 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania exclusive of the conflict of law provisions thereof.
10.10 COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original but
all of which shall constitute one and the same instrument.
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10.11 HEADINGS. Headings of the Articles and
Sections of this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
10.12 INCORPORATION OF EXHIBITS AND SCHEDULES. All
Exhibits and Schedules attached hereto are by this reference incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
10.13 SEVERABILITY. If for any reason whatsoever,
any one or more of the provisions of this Agreement shall be held or deemed to
be inoperative, unenforceable or invalid as applied to any particular case or
in all cases, such circumstances shall not have the effect of rendering such
provision invalid in any other case or of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid.
10.14 ASSIGNABILITY. Except with respect to an
assignment by Buyer or UHS to any subsidiary or affiliate of Buyer or UHS as
provided in Section 1.11, neither this Agreement nor any of the parties' rights
hereunder shall be assignable by any party hereto without the prior written
consent of the other parties hereto.
[SIGNATURES ARE ON THE NEXT FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the day and year
hereinabove first set forth.
SELLERS:
FIRST HOSPITAL CORPORATION
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
HORSHAM CLINIC, INC. d/b/a HORSHAM CLINIC
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
CENTRE VALLEY MANAGEMENT, INC.
d/b/a THE MEADOWS PSYCHIATRIC CENTER
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
CLARION FHC, INC. d/b/a
CLARION PSYCHIATRIC CENTER
By: /s/ Ronald I. Dozoretz
---------------------------------
Title: President
----------------------------
WESTCARE, INC. d/b/a ROXBURY
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
FHC MANAGEMENT SERVICES, INC.
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
HEALTH SERVICES MANAGEMENT, INC.
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
66
67
FIRST HOSPITAL CORPORATION OF FLORIDA
By: /s/ Ronald I. Dozoretz
------------------------------
Title: President
----------------------------
BUYER:
UNIVERSAL HEALTH SERVICES, INC.
By: /s/ Thomas J. Bender
------------------------------
Title: Vice President
----------------------------
UHS OF PENNSYLVANIA, INC.
By: /s/ Thomas J. Bender
------------------------------
Title: Vice President
----------------------------
UHS OF DELAWARE, INC.
By: /s/ Thomas J. Bender
------------------------------
Title: Vice President
----------------------------
WELLINGTON REGIONAL MEDICAL
CENTER, INC.
By: /s/ Steve Filton
------------------------------
Title: Vice President
----------------------------
67
1
EXHIBIT 10.2
TERM NOTE
$36,500,000 May 3, 1996
FOR VALUE RECEIVED, intending to be legally bound hereby, the
Undersigned, jointly and severally, promise to pay to the order of UNIVERSAL
HEALTH SERVICES, INC., a Delaware corporation, its successors and assigns (the
"Holder"), the principal sum of $36.5 MILLION, together with interest on the
unpaid balance of the principal of this Note from the date of this Note until
this Note is paid in full equal to the amount of (i) in the case that the
Closing does not occur on or before June 30, 1996 or on such later date as may
be agreed to by the UHS Group and Sellers as the last day upon which the
Closing may occur (such later date being hereinafter referred to as the
"Termination Date"), interest on the principal balance accrued at the annual
rate of nine and one-quarter percent (9.25%) per annum through August 31, 1996
and at eleven percent (11%) per annum from and after September 1, 1996
(computed on the basis of a year of 360 days and actual days elapsed) or (ii)
in the case of a Closing on or before June 30, 1996 or the Termination Date,
whichever is applicable, EBITDA from the Facilities Assets from and after May
1, 1996, whichever is applicable. The aforesaid interest calculation shall
continue to apply whether or not judgment shall be entered on this Note.
This Note evidences a portion of the Pre-Closing Loan as
defined in that certain Asset Purchase Agreement, dated as of April 19, 1996,
among UHS of Pennsylvania, Inc., Universal Health Services, Inc. ("UHS"), UHS
of Delaware, Inc. and Wellington Regional Medical Center, Inc. (collectively,
the "UHS Group") and First Hospital Corporation ("FHC"), FHC Management
Services, Inc. ("FHC-MSI"), Health Services Management, Inc. ("HSMI"), Horsham
Clinic, Inc. d/d/a The Horsham Clinic ("Horsham"), Centre Valley Management,
Inc. d/b/a The Meadows Psychiatric Center ("Meadows"), Clarion FHC, Inc. d/b/a
Clarion Psychiatric Center ("Clarion"), Westcare, Inc. d/b/a Roxbury
("Roxbury"), and First Hospital Corporation of Florida ("FHC-Florida")
(collectively, the "Sellers") (the "Purchase Agreement"). Any initial capital
term used in this Note and not otherwise defined shall have the meaning
ascribed to such term in the Purchase Agreement.
Commencing on July 1, 1996, and continuing on the first day of
each successive month thereafter until payment of the principal in full,
Undersigned shall pay to Holder monthly in arrears interest as set forth above.
2
This Note shall mature on the date (the "Maturity Date") of
the earlier to occur of (i) the Closing Date or (ii) October 31, 1996. On the
Maturity Date, this Note shall mature and the entire unpaid principal balance
of this Note, together with accrued but unpaid interest amounts shall become
immediately due and payable.
On the Closing Date, this Note shall be satisfied in full by
the consummation of the transactions contemplated by the Purchase Agreement and
payment of all interest amounts due under this Note. In the absence of the
Closing, this Note shall be satisfied in full by the payment of the entire
principal sum hereof together with all interest accrued hereunder.
The Undersigned shall have the right to prepay this Note in
full or in part without premium or penalty.
This Note is issued in consideration for (among other things)
and is secured by that certain Stock Pledge Agreement of even date herewith
issued by FHC to UHS (the "Stock Pledge") and that certain Interim operating
Agreement of even date herewith among UHS and the Undersigned (the "Interim
Operating Agreement).
All payments of principal and interest shall be made in
immediately available funds, in lawful money of the United States of America at
such place as the Holder may direct.
The unpaid balance of principal, together with accrued but
unpaid interest and all other sums, due under this Note shall, at the option of
the Holder, without any prior notice, presentment or demand, become immediately
due and payable in full if either: (i) payment of principal or interest under
this Note is not paid when due, whether by declaration, acceleration or
otherwise; (ii) on or before May 20, 1996, the Undersigned fails to deliver to
UHS evidence, satisfactory to UHS in its reasonable discretion, that the
Facilities Assets and Management Contracts are free and clear of all Liens
under that certain Amended and Restated Credit Agreement dated November 21,
1994, as amended by an amendment dated March 29, 1996, with NationsBank of
Tennessee, N.A., National Westminster Bank USA, and Signet Bank/Virginia as
Lenders and NationsBank of Virginia, N.A. and NationsBank of Tennessee, N.A. as
agents for the Lenders (the "Credit Facility"); (iii) on or before May 8,
1996, the Undersigned fails to deliver to UHS evidence, satisfactory to UHS, of
payment in full of all amounts due and owing under and with respect to the
Credit Facility; (iv) without the Holder's consent, the Undersigned and any of
their respective subsidiaries or affiliates, taken as a whole, incur, after the
date hereof, Debt (as defined below) that exceeds $20.0 Million in the
aggregate; (v) Sellers breach their covenants under Sections 4.1, 4.2 or 4.3
2.
3
of the Purchase Agreement, which covenants shall survive any termination of the
Purchase Agreement, the Stock Pledge or the Interim Operating Agreement; or
(vi) the Undersigned default under that certain $7 million Term Note of even
date herewith issued by the Undersigned to UHS (items (i), (ii), (iii), (iv),
(v) and (vi) being a "default" under this Note).
For purposes of this Note, "Debt" means: (i) indebtedness or
liability for borrowed money, or for the deferred purchase price of property or
services, whether such indebtedness or liability is matured or unmatured,
liquidated or unliquidated, direct or contingent, and joint or several; (ii)
amounts payable with respect to the lease of property that is required by
generally accepted accounting principles to be reflected as a liability on the
face of the lessee's balance sheet; (iii) obligations under letters of credit;
(iv) all guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase, to
provide funds for payment, to supply funds for investment in any person or
entities or otherwise to assure a creditor against loss; (v) obligations
secured by any lien on property owned by such person or entity, whether or not
the obligations have been assumed; (vi) all liabilities in respect of unfunded
vested benefits under any Qualified Plan; and (vii) the present value of
amounts payable under any operating leases entered into after the date hereof.
No delay by Holder, its successors or assigns in exercising
any power or right hereunder, and no partial exercise of such power or right,
shall operate in any way as a waiver of any subsequent exercise thereof.
Holder, it successors or assigns shall not be liable for or prejudiced by
failure to collect or lack of diligence in bringing suit on this Note. This
Note shall be governed and construed under the laws of the Commonwealth of
Pennsylvania.
The Undersigned waives demand, presentment, protest, notice of
dishonor, and notice of default and acceleration in connection with the
delivery, acceptance, performance, default or enforcement of this Note. If
this Note is not paid promptly in accordance with its terms and is placed in
the hands of an attorney for collection, the Undersigned agrees to pay, in
addition to the unpaid balance hereof, all reasonable costs and expenses of
collection, including, without limitation, reasonable attorney's and
paralegal's fees.
This Note shall bind Undersigned and the successors and
assigns of Undersigned and the benefits hereof shall inure to the benefit of
Holder, its successors and assigns. All references herein to "Undersigned"
shall be deemed to apply to each of the
3.
4
Undersigned, jointly and severally, and to each of their respective successors
and assigns, and all references herein to "Holder" shall be deemed to apply to
Holder and its successors and assigns.
UNDERSIGNED DOES HEREBY EMPOWER THE PROTHONOTARY OR ANY
ATTORNEY OF ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA TO
APPEAR FOR UNDERSIGNED AND, WITH OR WITHOUT ONE OR MORE COMPLAINTS FILED,
CONFESS JUDGMENT OR JUDGMENTS AGAINST UNDERSIGNED IN ANY COURT OF RECORD WITHIN
THE COMMONWEALTH OF PENNSYLVANIA AT ANY TIME AFTER DEFAULT ON THIS NOTE IN
FAVOR OF HOLDER, ITS SUCCESSORS AND ASSIGNS, FOR THE UNPAID PRINCIPAL BALANCE
OF THIS NOTE AND ALL INTEREST ACCRUED HEREON, TOGETHER WITH COSTS OF SUIT AND
REASONABLE ATTORNEYS' FEES FOR COLLECTION OF SUCH SUMS, AND UNDERSIGNED HEREBY
FOREVER WAIVES AND RELEASES ANY AND ALL ERRORS IN SAID PROCEEDINGS AND WAIVES
STAY OF EXECUTION AND STAY, CONTINUANCE OR ADJOURNMENT OF SALE ON EXECUTION.
THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE
UNDERSIGNED SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, AND MAY BE
EXERCISED FROM TIME TO TIME AND AS OFTEN AS HOLDER OR ITS SUCCESSORS AND
ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE.
Executed by a duly authorized officer of each of the
Undersigned on the day and year first above written.
FIRST HOSPITAL CORPORATION
Name: /s/ Ronald I. Dozoretz
-----------------------
Title: President
--------------------
HORSHAM CLINIC, INC. d/b/a
HORSHAM CLINIC
By: /s/ Ronald I. Dozoretz
-----------------------
Title: President
--------------------
CENTRE VALLEY MANAGEMENT, INC.
d/b/a THE MEADOWS PSYCHIATRIC CENTER
4.
5
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
---------------------
CLARION FHC, INC. d/b/a CLARION
PSYCHIATRIC CENTER
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
--------------------
WESTCARE, INC. d/b/a ROXBURY
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
---------------------
FHC MANAGEMENT SERVICES, INC.
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
---------------------
HEALTH SERVICES MANAGEMENT,
INC.
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
---------------------
FIRST HOSPITAL CORPORATION OF
FLORIDA
By: /s/ Ronald I. Dozoretz
------------------------
Title: President
---------------------
5.
1
EXHIBIT 10.3
TERM NOTE
$7,000,000 May 3, 1996
FOR VALUE RECEIVED, intending to be legally bound hereby, the
Undersigned, jointly and severally, promise to pay to the order of UNIVERSAL
HEALTH SERVICES, INC., a Delaware corporation, its successors and assigns (the
"Holder"), the principal sum of $7.0 MILLION, together with interest on the
unpaid balance of the principal of this Note from the date of this Note until
this Note is paid in full at the annual rate of nine and one-quarter percent
(9.25%) per annum through August 31, 1996 and at eleven percent (11%) per annum
from and after September 1, 1996 (computed on the basis of a year of 360 days
and actual days elapsed). The aforesaid interest calculation shall continue to
apply whether or not judgment shall be entered on this Note.
This Note evidences a portion of the Pre-Closing Loan as
defined in that certain Asset Purchase Agreement, dated as of April 19, 1996,
among UHS of Pennsylvania, Inc., Universal Health Services, Inc. ("UHS"), UHS
of Delaware, Inc. and Wellington Regional Medical Center, Inc. (collectively,
the "UHS Group") and First Hospital Corporation ("FHC"), FHC Management
Services, Inc. ("FHC-MSI"), Health Services Management, Inc. ("HSMI"), Horsham
Clinic, Inc. d/d/a The Horsham Clinic ("Horsham"), Centre Valley Management,
Inc. d/b/a The Meadows Psychiatric Center ("Meadows"), Clarion FHC, Inc. d/b/a
Clarion Psychiatric Center ("Clarion"), Westcare, Inc. d/b/a Roxbury
("Roxbury"), and First Hospital Corporation of Florida ("FHC-Florida")
(collectively, the "Sellers") (the "Purchase Agreement"). Any initial capital
term used in this Note and not otherwise defined shall have the meaning
ascribed to such term in the Purchase Agreement.
Commencing on June 1, 1996, and continuing on the first day of
each successive month thereafter until payment of the principal in full,
Undersigned shall pay to Holder monthly in arrears interest as set forth above.
This Note shall mature on the date (the "Maturity Date") of
the earlier to occur of (i) the Closing Date or (ii) October 31, 1996. On the
Maturity Date, this Note shall mature and the entire unpaid principal balance
of this Note, together with accrued but unpaid interest amounts shall become
immediately due and payable.
The Undersigned shall have the right to prepay this Note
2
in full or in part without premium or penalty.
This Note is issued in consideration for (among other things)
and is secured by that certain Stock Pledge Agreement of even date herewith
issued by FHC to UHS (the "Stock Pledge") and that certain Interim Operating
Agreement of even date herewith among UHS and the Undersigned (the "Interim
Operating Agreement).
All payments of principal and interest shall be made in
immediately available funds, in lawful money of the United States of America at
such place as the Holder may direct.
The unpaid balance of principal, together with accrued but
unpaid interest and all other sums, due under this Note shall, at the option of
the Holder, without any prior notice, presentment or demand, become
immediately due and payable in full if either: (i) payment of principal or
interest under this Note is not paid when due, whether by declaration,
acceleration or otherwise; (ii) on or before May 20, 1996, the Undersigned
fails to deliver to UHS evidence, satisfactory to UHS in its reasonable
discretion, that the Facilities Assets and Management Contracts are free and
clear of all Liens under that certain Amended and Restated Credit Agreement
dated November 21, 1994, as amended by an amendment dated March 29, 1996, with
NationsBank of Tennessee, N.A., National Westminster Bank USA, and Signet
Bank/Virginia as Lenders and NationsBank of Virginia, N.A. and NationsBank of
Tennessee, N.A. as agents for the Lenders (the "Credit Facility"); (iii) on or
before May 8, 1996, the Undersigned fails to deliver to UHS evidence,
satisfactory to UHS, of payment in full of all amounts due and owing under and
with respect to the Credit Facility; (iv) without the Holder's consent, the
Undersigned and any of their respective subsidiaries or affiliates, taken as a
whole, incur, after the date hereof, Debt (as defined below) that exceeds $20.0
Million in the aggregate; (v) Sellers breach their covenants under Sections
4.1, 4.2 or 4.3 of the Purchase Agreement, which covenants shall survive any
termination of the Purchase Agreement, the Stock Pledge or the Interim
Operating Agreement; or (vi) the Undersigned default under that certain $36.5
Million Term Note of even date herewith issued by the Undersigned to UHS (items
(i), (ii), (iii), (iv), (v) and (vi) being a "default" under this Note).
For purposes of this Note, "Debt" means: (i) indebtedness or
liability for borrowed money, or for the deferred purchase price of property or
services, whether such indebtedness or liability is matured or unmatured,
liquidated or unliquidated, direct or contingent, and joint or several; (ii)
amounts payable with respect to the lease of property that is required by
generally accepted accounting principles to be reflected as a liability on the
face of the lessee's balance sheet; (iii)
2.
3
obligations under letters of credit; (iv) all guaranties, endorsements (other
than for collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to supply
funds for investment in any person or entities or otherwise to assure a
creditor against loss; (v) obligations secured by any lien on property owned by
such person or entity, whether or not the obligations have been assumed; (vi)
all liabilities in respect of unfunded vested benefits under any Qualified
Plan; and (vii) the present value of amounts payable under any operating leases
entered into after the date hereof.
No delay by Holder, its successors or assigns in exercising
any power or right hereunder, and no partial exercise of such power or right,
shall operate in any way as a waiver of any subsequent exercise thereof.
Holder, it successors or assigns shall not be liable for or prejudiced by
failure to collect or lack of diligence in bringing suit on this Note. This
Note shall be governed and construed under the laws of the Commonwealth of
Pennsylvania.
The Undersigned waives demand, presentment, protest, notice of
dishonor, and notice of default and acceleration in connection with the
delivery, acceptance, performance, default or enforcement of this Note. If
this Note is not paid promptly in accordance with its terms and is placed in
the hands of an attorney for collection, the Undersigned agrees to pay, in
addition to the unpaid balance hereof, all reasonable costs and expenses of
collection, including, without limitation, reasonable attorney's and
paralegal's fees.
This Note shall bind Undersigned and the successors and
assigns of Undersigned and the benefits hereof shall inure to the benefit of
Holder, its successors and assigns. All references herein to "Undersigned"
shall be deemed to apply to each of the Undersigned, jointly and severally, and
to each of their respective successors and assigns, and all references herein
to "Holder" shall be deemed to apply to Holder and its successors and assigns.
UNDERSIGNED DOES HEREBY EMPOWER THE PROTHONOTARY OR ANY
ATTORNEY OF ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA TO
APPEAR FOR UNDERSIGNED AND, WITH OR WITHOUT ONE OR MORE COMPLAINTS FILED,
CONFESS JUDGMENT OR JUDGMENTS AGAINST UNDERSIGNED IN ANY COURT OF RECORD WITHIN
THE COMMONWEALTH OF PENNSYLVANIA AT ANY TIME AFTER DEFAULT ON THIS NOTE IN
FAVOR OF HOLDER, ITS SUCCESSORS AND ASSIGNS, FOR THE UNPAID PRINCIPAL BALANCE
OF THIS NOTE AND ALL INTEREST ACCRUED HEREON, TOGETHER WITH COSTS OF SUIT AND
REASONABLE ATTORNEYS' FEES FOR COLLECTION OF SUCH SUMS, AND UNDERSIGNED HEREBY
FOREVER WAIVES AND RELEASES
3.
4
ANY AND ALL ERRORS IN SAID PROCEEDINGS AND WAIVES STAY OF EXECUTION AND STAY,
CONTINUANCE OR ADJOURNMENT OF SALE ON EXECUTION. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST THE UNDERSIGNED SHALL NOT BE EXHAUSTED BY
ONE OR MORE EXERCISES THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS
OFTEN AS HOLDER OR ITS SUCCESSORS AND ASSIGNS SHALL DEEM NECESSARY OR
DESIRABLE.
Executed by a duly authorized officer of each of the
Undersigned on the day and year first above written.
FIRST HOSPITAL CORPORATION
Name: /s/ Ronald I. Dozoretz
-----------------------
Title: President
----------------------
HORSHAM CLINIC, INC. d/b/a
HORSHAM CLINIC
Name: /s/ Ronald I. Dozoretz
-----------------------
Title: President
----------------------
CENTER VALLEY MANAGEMENT, INC. d/b/a
THE MEADOWS PSYCHIATRIC CENTER
By: /s/ Ronald I. Dozoretz
-----------------------
Title: President
--------------------
CLARION FHC, INC. d/b/a CLARION
PSYCHIATRIC CENTER
By: /s/ Ronald I. Dozoretz
-----------------------
Title: President
--------------------
4.
5
WESTCARE, INC. d/b/a ROXBURY
By: /s/ Ronald I. Dozoretz
--------------------------
Title: President
-----------------------
FHC MANAGEMENT SERVICES, INC.
By: /s/ Ronald I. Dozoretz
--------------------------
Title: President
-----------------------
HEALTH SERVICES MANAGEMENT,
INC.
By: /s/ Ronald I. Dozoretz
--------------------------
Title: President
----------------------
FIRST HOSPITAL CORPORATION OF
FLORIDA
By: /s/ Ronald I. Dozoretz
--------------------------
Title: President
-----------------------
5.
5
1,000
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
762
0
116,400
0
18,330
156,358
668,037
256,822
767,942
140,233
230,401
278
0
0
315,548
767,942
0
271,616
0
196,835
24,188
21,767
4,648
24,178
8,677
15,501
0
0
0
15,501
.54
.54
The EPS-Primary and EPS-Fully Diluted reflect the impact of a 2 for 1 stock
split in the form of a 100% stock dividend which is payable on May 17, 1996 to
shareholders of record as of May 6, 1996.
