Related Calculations. (a) Cash Balance and Net Working Capital Calculations. (i) Seller shall, at least five (5) Business Days prior to the Closing Date, cause to be prepared and delivered to Buyer a statement (the “Good Faith Statement”) setting forth a good faith estimate of the Closing Cash Balance (as hereinafter defined) of the Division as of the Effective Time (the “Estimated Closing Cash Balance”) and the Net Working Capital (as hereinafter defined) of the Division as of the Effective Time (the “Estimated Net Working Capital”) and the respective components and calculations of each thereof. Buyer and its representatives shall have an opportunity to review and comment upon the Good Faith Statement, which shall be subject to Buyer’s reasonable approval. As used herein, “Closing Cash Balance” shall mean an amount equal to (A) Cash less (B) Cash Due to Minority Interest Holders as of the Effective Time (it being understood that Seller shall be responsible for any checks that are outstanding as of the Effective Time that relate to the Company or the Division Entities). As used herein, “Net Working Capital” shall mean (i) the sum of (A) accounts receivable, net of reserves for doubtful accounts (but excluding any intercompany accounts receivable) and (B) other current assets, less (ii) the sum of (A) trade accounts payable (but excluding any intercompany accounts payable and unapplied cash), (B) refunds due to patients and third-party payors, principally as reflected in account 2512 (which as of September 30, 2006 reflected an accrued liability of $1.5 million), (C) accrued liabilities (but excluding any intercompany accrued liabilities and excluding the current portion of long-term Indebtedness) and (D) other current liabilities, and shall be calculated in accordance with the Accounting Principles. The “Accounting Principles” shall mean GAAP utilizing the methodologies, accounting principles and practices used in the preparation of the Audited Financial Statements (as hereinafter defined), and as adjusted to derive the 2005 Pro Forma Financial Information, consistent with the reconciliation thereof set forth in Section 3.7(d) of the Disclosure Letter. Net Working Capital shall be prepared in a manner consistent with the example thereof set forth in Schedule II hereto, which Schedule II is derived from the September 30, 2006 pro forma balance sheet of the Division attached as Schedule III hereto.
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Related Calculations. (a) Cash Balance and Balance, Net Working Capital and Closing Indebtedness Calculations.
(i) Seller shall, at least five (5) Business Days prior to the Closing Date, cause to be prepared and delivered to Buyer a statement (the “"Good Faith Statement”") setting forth a good faith estimate of (A) the Closing Cash Balance of the Division as of 11:59 p.m., Central Time, on June 30, 2007 (the "Estimated Closing Cash Balance"), (B) the Net Working Capital of the Division as hereinafter definedof 11:59 p.m., Central Time, on June 30, 2007 (the "Estimated Net Working Capital") and (C) Closing Indebtedness of the Division as of the Effective Time (the “"Estimated Closing Cash Balance”) and the Net Working Capital (as hereinafter defined) of the Division as of the Effective Time (the “Estimated Net Working Capital”) and Indebtedness"), in each case, setting [Washington DC #361873 v9] 3 forth the respective components and calculations of each thereof. Buyer and its representatives shall have an opportunity to review and comment upon the Good Faith Statement, which shall be subject to Buyer’s reasonable approval. As used herein, “"Closing Cash Balance” " shall mean an amount equal to (A) Cash less (B) Cash Due to Minority Interest Holders as of Unrestricted Cash, calculated in accordance with the Effective Time (it being understood that Seller shall be responsible for any checks that are outstanding as of the Effective Time that relate to the Company or the Division Entities)Accounting Principles. As used herein, “"Net Working Capital” " shall mean (i) the sum of (A) accounts receivable, net of reserves for doubtful accounts (but excluding any intercompany accounts receivable) and (B) other current assets of the type included in the line items set forth on Schedule II (but excluding any income Tax assets), less (ii) the sum of (A) trade accounts payable (but excluding any intercompany accounts payable and unapplied cashcash and excluding the current portion of any Intercompany Indebtedness), (B) refunds due to patients and third-party payors, principally as reflected in account 2512 (which as of September 30, 2006 reflected an accrued liability of $1.5 million)2512, (C) accrued liabilities (but excluding any intercompany accrued liabilities and excluding the current portion of long-term IndebtednessIndebtedness and excluding Distributions accrued by Division Entities and payable to Minority Interest Holders) and (D) other current liabilitiesliabilities (but excluding (i) any income Tax liabilities and (ii) any accruals for severance, transaction bonus payments or change of control payments, in each case in this clause (ii), arising out of the transactions contemplated hereby), in each case of the Company and shall be the Division Entities, calculated in accordance with the Accounting PrinciplesPrinciples (but excluding any of the foregoing items relating to Closed Facilities or Opt-Out Partnerships). The “"Accounting Principles” " shall mean GAAP utilizing the methodologies, accounting principles and practices used in the preparation of the Audited Financial Statements (as hereinafter defined)Statements, and as adjusted to derive the 2005 Pro Forma Financial Information, consistent with the reconciliation thereof set forth in Section 3.7(d) of the Disclosure Letter, and the Year-End Pro Forma Financial Statements. Net Working Capital shall be prepared in a manner consistent with the example thereof set forth in Schedule II III hereto, which Schedule II III is derived from the December 31, 2005, June 30, 2006, September 30, 2006 and December 31, 2006 pro forma balance sheet sheets of the Division. As used herein, "Closing Indebtedness" shall mean an amount equal to Indebtedness (other than Intercompany Indebtedness and Non-Consolidated Third Party Indebtedness) of the Company and the Division Entities as of the Effective Time (prior to giving account to any Indebtedness incurred in connection with the Financing or any Alternative Financing). For the avoidance of doubt, Net Working Capital and Cash Balance shall not include any cash or other assets contributed to the Division by Buyer or any Affiliate of Buyer (including by way of merger with any Division Entity) at or after the Closing.
(ii) Within ninety (90) days after the end of the calendar quarter in which the Closing Date occurs, Seller shall cause to be prepared and delivered to Buyer a statement (the "Statement") setting forth (A) the Closing Cash Balance of the Division attached as of 11:59 p.m., Central Time, on June 30, 2007 (the "Actual Closing Cash Balance"), (B) the Net Working Capital of the Division as of 11:59 p.m., Central Time, on June 30, 2007 (the "Actual Net Working Capital") and (C) the Closing Indebtedness (the "Actual Closing Indebtedness") and, in each case, setting forth the components and calculations thereof. The Statement shall also set forth (i) the difference, if any, determined by subtracting the Estimated Closing Cash Balance from the Actual Closing Cash Balance (any such difference, the "Cash Adjustment Amount"), it being understood that the Cash Adjustment Amount may be either a positive or negative number, and (ii) the difference, if any, determined by subtracting the Estimated Closing Indebtedness [Washington DC #361873 v9] 4 from the Actual Closing Indebtedness (any such difference, the "Indebtedness Adjustment Amount"), it being understood that the Indebtedness Adjustment Amount may be either a positive or negative number. Subject to Sections 1.6(a)(iii)-(v), (i) Buyer shall pay to Seller the amount of any positive Cash Adjustment Amount, and any negative Indebtedness Adjustment Amount, and (ii) Seller shall pay to Buyer the amount of any negative Cash Adjustment Amount and any positive Indebtedness Adjustment Amount, in each case, as finally determined pursuant to this Section 1.6(a). Furthermore, the Statement shall set forth a calculation of the amounts paid pursuant to Sections 1.2(iii) and 1.2(iv) at the Closing and the amounts that would have been paid had the Actual Net Working Capital been used in the calculations in place of the Target Net Working Capital, and Seller shall pay to Buyer or Buyer shall pay to Seller, as appropriate, an amount that places the parties in the same position as would have obtained had the Actual Net Working Capital been so used at Closing (the “Net Working Capital Adjustment Amount”), as finally determined pursuant to this Section 1.6(a). Subject to Section 1.6(a)(iii), to the extent that netting the payments referenced in the preceding two sentences results in a net payment by Buyer to Seller, the amount of such net payment shall be referred to herein as the "Excess Amount" and, to the extent that netting the payments referenced in the preceding sentence results in a net payment by Seller to Buyer, the amount of such net payment shall be referred to herein as the "Deficiency Amount." Contemporaneously with its delivery to Buyer of the Statement, Seller shall also deliver to Buyer a copy of the work papers prepared in connection with the Statement's preparation and shall provide Buyer and its representatives reasonable access to all personnel, books and records of or related to the Division within Seller's direction or control as reasonably requested by Buyer to assist in its review of the Statement. Buyer shall provide Seller and its representatives reasonable access, during normal business hours of Buyer, to all personnel, books and records of or related to the Division within Buyer's direction or control as reasonably requested by Seller to assist it in its preparation of the Statement.
(iii) After receipt of the Statement, Buyer shall have sixty (60) days to review the Statement together with the work papers used in its preparation. The Statement shall become final and binding upon the parties on the sixty-first day following receipt thereof by Buyer unless Buyer gives written notice of its disagreement (a "Notice of Disagreement") to Seller prior to such date. Any Notice of Disagreement shall (A) specify in reasonable detail the nature and amount of any disagreement so asserted, and (B) include Buyer's calculation of the Actual Closing Cash Balance, Actual Net Working Capital and/or Actual Closing Indebtedness (whichever is being disputed). The Statement shall become final and binding upon the parties on the date the parties hereto resolve in writing any differences they have with respect to any matter relating to Actual Net Working Capital, the Actual Closing Cash Balance and/or Actual Closing Indebtedness, to the extent properly included in the Notice of Disagreement, in accordance with this Section 1.6(a). During the thirty (30) days immediately following the receipt by Seller of a Notice of Disagreement, the respective Chief Financial Officers of Seller and Buyer shall negotiate in good faith to resolve any disputed items timely included in a Notice of Disagreement. During such period, Seller shall have full access to the working papers of Buyer prepared in connection with Buyer's preparation of the Notice of Disagreement. Any resolution of disputed items included in the Notice of [Washington DC #361873 v9] 5 Disagreement that is agreed upon in writing by Buyer and Seller shall be final, binding and conclusive as to Seller, Buyer and their respective Affiliates. At the end of such thirty (30) day period, at the request of Seller or Buyer, any and all matters which remain in dispute, and which were properly included in the Notice of Disagreement, shall be submitted to a mutually acceptable, nationally recognized independent accounting firm (the "Accounting Firm") selected by Seller and Buyer, with no material relationship to Seller or Buyer or any of their respective Affiliates, for a binding resolution of such disputed items. If Buyer and Seller are not able to agree upon an Accounting Firm, the appointment of an Accounting Firm will be finally selected by mutual agreement of an independent accounting firm selected by Seller and an independent accounting firm selected by Buyer; provided that, neither of the independent accounting firms selected by Buyer or Seller shall serve as the Accounting Firm. The fees and expenses of the Accounting Firm shall be borne by Buyer and Seller in proportion to the amount by which their respective determinations of the Actual Closing Cash Balance, Actual Net Working Capital and/or Actual Closing Indebtedness (whichever is being disputed) differed from the amount determined by the Accounting Firm, which proportionate allocations shall also be determined by the Accounting Firm at the time the determination of the Accounting Firm is rendered on the Statement and the Cash Adjustment Amount, Net Working Capital Adjustment Amount and/or Indebtedness Adjustment Amount, as applicable.
(iv) The Accounting Firm shall determine and report in writing to Seller and Buyer as to its determination of all disputed matters submitted to the Accounting Firm and the effect of such determinations on the Statement within thirty (30) Business Days after such submission, and such determinations shall be final, binding and conclusive as to Seller, Buyer and their respective Affiliates. In resolving any disputed item, the Accounting Firm, acting in its capacity as an expert and not as an arbitrator: (A) shall limit its review to matters specifically set forth in such Notice of Disagreement delivered pursuant to Section 1.6(a)(iii) as a disputed item (other than those items thereafter resolved by mutual written agreement of Seller and Buyer); (B) shall further limit its review to whether the calculation of any such disputed item is mathematically accurate and has been prepared in accordance with the Accounting Principles and the methodologies set forth on Schedule III attached hereto; and (C) shall not assign a value to any item greater than the greatest value for such item claimed by any party or less than the smallest value for such item claimed by any other party in the Statement or the Notice of Disagreement delivered pursuant to Section 1.6(a)(iii). Each of Seller and Buyer shall have the right, within five (5) Business Days of submission of any disputed item to the Accounting Firm, to meet with representatives of the Accounting Firm and present its position as to the resolution of such disputed item. In addition, Seller and Buyer shall each furnish to the Accounting Firm such work papers and other documents and information relating to the disputed items, as the Accounting Firm may reasonably request.
(v) At such time as the Statement becomes final, binding and conclusive upon Seller, Buyer and their respective Affiliates in accordance with this Section 1.6(a), the Statement shall become the "Conclusive Statement". If the Conclusive Statement contains a Deficiency Amount, then Seller shall pay to Buyer an [Washington DC #361873 v9] 6 amount in cash equal to such Deficiency Amount. If the Conclusive Statement contains an Excess Amount, then Buyer shall pay to Seller an amount in cash equal to such Excess Amount. Any payment to be made pursuant to this Section 1.6(a) shall be made on the third Business Day following the date on which the Statement becomes the Conclusive Statement pursuant to this Section 1.6(a). Any payment required to be made by Seller or Buyer pursuant to this Section 1.6(a) shall bear interest from the Closing Date through the date of payment at the Interest Rate (as of the date on which the Statement becomes the Conclusive Statement) and shall be payable by wire transfer of immediately available funds to an account or accounts designated by the party entitled to receive such funds prior to the date when such payment is due.
(b) The Initial Purchase Price, as increased by any Excess Amount or decreased by any Deficiency Amount, as the case may be, shall be subject to additional adjustment, if any, pursuant to Section 1.2 of the Disclosure Letter, and, as so adjusted, shall be referred to herein as the "Purchase Price."
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