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EXHIBIT 10.13
REAL ESTATE PURCHASE AND SALE AGREEMENT
Seller: MAGELLAN HEALTH SERVICES, INC., a Delaware
corporation, and its wholly owned
subsidiaries listed on Exhibit A attached
hereto
Purchaser: CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership
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TABLE OF CONTENTS
Page
1. Purchase and Sale of the Facilities.......................... 2
2. Consideration................................................ 2
3. Documents to be Provided by the Seller....................... 3
4. Access to Facilities, Records and Personnel.................. 6
5. Title........................................................ 7
6. Representations and Warranties............................... 9
7. Covenants.................................................... 16
8. Conditions................................................... 20
9. Damage, Destruction and Condemnation......................... 24
10. Closing...................................................... 24
11. Indemnifications............................................. 28
12. Remedies..................................................... 29
13. Brokers...................................................... 30
14. Changes in the Portfolio..................................... 31
15. Miscellaneous................................................ 33
Exhibits
A -- List of Subsidiaries Selling Facilities
B -- Facility Descriptions and Names of Subsidiaries Owning Each Facility
C -- Form of Master Lease Agreement
D -- Schedule of Industrial Revenue Bonds and Encumbered Facilities
E -- List of Tenants under Leases at Each Facility
F -- Insurance Information
G -- Form of Subordination Agreement
H -- Form of Assignment of Leases
I -- Form of Blanket ▇▇▇▇ of Sale
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Schedules
Schedule 1.1
Schedule 2.1 (to be attached after execution and not later than 30 days prior
to Closing)
Schedule 6.1(b)
Schedule 6.1(d)
Schedule 6.1(f)
Schedule 6.1(g)
Schedule 6.1(j)
Schedule 6.1(p)
Schedule 6.1(r)
Schedule 6.1(w)
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REAL ESTATE PURCHASE AND SALE AGREEMENT
This REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement") is made
and entered into as of January 29, 1997, by and between MAGELLAN HEALTH
SERVICES, INC., a Delaware corporation ("Magellan" or the "Seller") and
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Purchaser").
R E C I T A L S:
A. In connection with the transactions contemplated by this Agreement,
Magellan and the Purchaser have entered into (i) that certain Contribution
Agreement of even date herewith (the "OPCO CONTRIBUTION AGREEMENT") and (ii)
that certain Warrant Purchase Agreement of even date herewith (the "WARRANT
PURCHASE AGREEMENT"). Magellan and the Purchaser have also agreed that,
following the execution and pursuant to the terms of the foregoing agreements,
they will cause certain other agreements to be executed, including, without
limitation, that certain Operating Agreement of Charter Behavioral Health
Systems, LLC ("OpCo"), between Magellan and a designee of the Purchaser (the
"OPERATING AGREEMENT"), that certain Master Franchise Agreement between
Magellan and OpCo (the "MASTER FRANCHISE AGREEMENT") and certain additional
Franchise Agreements between Magellan and certain subsidiaries of OpCo (the
"SUBSIDIARY FRANCHISE AGREEMENTS, and collectively with the Master Franchise
Agreement, the "FRANCHISE AGREEMENT"), that certain Master Lease Agreement
between the Purchaser and OpCo (the "FACILITIES LEASE"), and that certain
Subordination Agreement by and among Magellan, the Purchaser and OpCo (the
"SUBORDINATION AGREEMENT") (this Agreement, the OpCo Contribution Agreement,
the Warrant Purchase Agreement, the Operating Agreement, the Franchise
Agreement, the Facilities Lease and the Subordination Agreement are referred to
collectively as the "TRANSACTION DOCUMENTS," and all of the transactions
contemplated thereby are referred to collectively as the "TRANSACTIONS").
B. The wholly owned (directly or indirectly) subsidiary corporations or
limited liability companies listed on Exhibit A attached hereto (each,
individually, a "Subco" and, collectively, the "Subcos") are the owners of the
real property and improvements thereon described on Exhibit B attached hereto
(each individually, a "FACILITY" and collectively, the "FACILITIES").
C. The Purchaser desires to acquire the Facilities, and Magellan, as
the sole shareholder of the sole shareholder of the Subcos, desires to cause
the Subcos to sell the Facilities to the Purchaser, all upon the terms and
conditions hereinafter set forth.
D. Immediately after the Purchaser acquires the Facilities, and as one
of the Transactions, the Purchaser intends to lease the Facilities to OpCo
pursuant to the Facilities Lease, the form of which is attached hereto as
Exhibit C.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the receipt
and sufficiency of which are hereby acknowledged, and in further consideration
of the mutual covenants and conditions set forth herein, the parties hereto
agree as follows:
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1 Purchase and Sale of the Facilities.
1.1 Real and Personal Property Included. Upon the terms and
conditions hereinafter set forth, Magellan agrees to cause each Subco to sell
and convey to the Purchaser the Facility listed beside such Subco's name on
Exhibit B, and the Purchaser agrees to purchase or cause to be purchased by a
permitted designee or assignee of the Purchaser from the Subcos, the
Facilities. As used herein, the term "FACILITIES" shall mean, collectively,
the following: (a) (i) those certain parcels of real property described in
Exhibit B, and any and all improvements thereon (whether now or hereafter
constructed), and all fixtures attached thereto, (ii) all right, title and
interest of Magellan and the Subcos to any mineral, oil and gas rights, water
rights, sewer rights and other utility rights allocated to said properties,
(iii) all appurtenances, and other property interests belonging or appurtenant
to said properties, and (iv) all right, title and interest of Magellan and the
Subcos in and to any streets and ways, public and private, serving said
properties (collectively, the "REAL PROPERTY"); together with (b) all
furniture, fixtures and equipment owned by Magellan or the Subcos and located
at or used in connection with the operation of the Real Property as acute care
psychiatric hospitals, site plans, surveys, plans and specifications, and floor
plans which relate to the Real Property, all right, title and interest of
Magellan and the Subcos in all transferable warranties, guaranties, bonds and
development rights related to any of the foregoing, and, subject to applicable
law and regulations, all transferable licenses, permits, authorizations,
approvals, certificates of occupancy and other consents and regulatory
approvals necessary for the current ownership, occupancy, construction (if any
is on-going) and leasing of the Real Property; and together with (c) all
furniture, fixtures and equipment and certain other assets generally described
on Schedule 1.1 attached hereto and owned by the entities listed on Schedule
1.1 (collectively, the "PERSONAL PROPERTY").
2 Consideration.
2.1 Purchase Price. The total purchase price to be paid for
the Facilities and the warrants to be issued pursuant to the Warrant Purchase
Agreement (the "WARRANTS") shall be Three Hundred Ninety-Five Million and
No/100 Dollars ($395,000,000), which shall be payable in accordance with this
Section 2. Notwithstanding the foregoing, if the Purchaser assumes at Closing
any or all of the Industrial Revenue Bonds as hereinafter described, the
purchase price set forth in the first sentence of this Section 2.1 shall be
reduced by the outstanding principal amount and any accrued and unpaid interest
and other accrued and outstanding costs and fees of such assumed Industrial
Revenue Bonds, excluding assumption fees and other costs relating to the
assumption of such assumed Industrial Revenue Bonds that the Purchaser is
required to pay pursuant to Section 10.4. The term "PURCHASE PRICE," as used
in this Agreement, shall mean the purchase price set forth in the first
sentence of this Section 2.1, as adjusted pursuant to the second sentence of
this Section 2.1. The Seller and the Purchaser agree that they shall use
commercially reasonable best efforts to agree, not later than thirty (30) days
prior to Closing, upon an allocation of the total purchase price set forth in
the first sentence of this Section 2.1 among (a) the Warrants and (b) the
Facilities, and the portion allocated to the Facilities shall be further
allocated among (i) the land comprising a part of the Real Property, (ii) the
land improvements (other than buildings) comprising a part of the Real
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Property (such as tennis courts, parking lots and swimming pools), (iii) the
buildings comprising a part of the Real Property, and (iv) the Personal
Property. Such agreed upon allocations shall be attached to this Agreement as
Schedule 2.1. The Seller shall initially propose an allocation to the
Purchaser, and the portion of the total purchase price allocated by the Seller
to the Personal Property shall be supported by an independent appraisal
obtained by the Seller and the Purchaser, the cost of which shall be shared
equally.
2.2 Allocation Among Facilities. The portion of the purchase price
allocable to the Facilities set forth in the first sentence of Section 2.1
shall generally be allocated among the Facilities on a pro rata basis based on
the relative net cash flow from operations of each Facility (excluding capital
expenditures and proceeds from borrowings and taking into account any other
factors mutually agreed upon by the parties) for the 1995 and 1996 full fiscal
years, which allocations shall be agreed upon by the parties not later than
thirty (30) days prior to Closing. The cash portion of such purchase price
allocable to any Facility encumbered by an Industrial Revenue Bond assumed by
the Purchaser shall be reduced by the outstanding principal amount and any
accrued and unpaid interest and other accrued and outstanding costs and fees of
such assumed Industrial Revenue Bond, excluding assumption fees and other costs
relating to the assumption of such assumed Industrial Revenue Bond that the
Purchaser is required to pay pursuant to Section 10.4.
2.3 Payment. At the Closing, the Purchaser shall pay or cause to be
paid to or at the direction of the Subcos, through a closing escrow established
with the Title Company (as defined in Section 8.1(b)), the Purchase Price, as
adjusted to reflect the closing adjustments and prorations provided for in this
Agreement, which adjusted balance shall be payable by bank wire transfer
pursuant to instructions given by the Seller to the Title Company not later
than two (2) business days prior to Closing.
2.4 Independent Contract Consideration. Within three (3) business
days after the execution of this Agreement by both parties hereto, the
Purchaser will deliver to Magellan the amount of One Hundred and No/100 Dollars
($100.00) (the "INDEPENDENT CONTRACT CONSIDERATION") which amount has been
bargained for and agreed to as consideration for Magellan's execution and
delivery of this Agreement. The Independent Contract Consideration is in
addition to and independent of all other consideration provided in this
Agreement, and is nonrefundable in all events.
3 Documents to be Provided by the Seller. As soon as reasonably
practicable but in any event within thirty (30) days after the date hereof
(except as otherwise provided in this Section 3 to the contrary, including
Sections 3.12 and 3.17), Magellan shall deliver to, cause to be delivered to,
or make available for review and inspection by the Purchaser at Magellan's
offices in Atlanta, Georgia, or Macon, Georgia, originals or true, complete and
accurate copies of all of the following items which affect or relate to any of
the Facilities ("SELLER'S DELIVERIES"), to the extent such items currently
exist and are in Magellan's or any of the Subco's possession or are readily
obtainable without material cost from third parties:
3.1 Tax Statements. The most recent real estate and personal
property tax bills for each of the Facilities, together with copies of all tax
assessment notices for the year
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immediately preceding the date hereof and evidence of payment of all taxes
currently due or past due.
3.2 Insurance Policies. All existing liability, property, rental
value and other insurance policies pertaining to the Facilities, and paid
receipts therefor.
3.3 Warranties. All material unexpired warranties and guaranties
covering the Personal Property and the roofs, elevators, heating and air
conditioning systems and any other components of the Real Property and a list
and description of any material third party bonds, warranties and guaranties
which will be in effect after Closing with respect to the Facilities.
3.4 Leases. All leases or occupancy agreements of any portion of the
Facilities (collectively, the "LEASES," and any such Lease with annual rent
payable thereunder in excess of $100,000 being hereinafter referred to as a
"MATERIAL LEASE"), together with copies of all occupancy inspection reports,
rental deposit agreements, lease guaranties, estoppels and subordination,
nondisturbance and attornment agreements relating to the Material Leases, and
all amendments and correspondence with respect to the Material Leases.
3.5 Rent Roll. A current "RENT ROLL" (herein so called), certified
by Magellan and containing (i) a complete list and description of the Material
Leases at each Facility, (ii) rental rate and deposits paid by each tenant
under each Material Lease, (iii) the term of each Material Lease, and (iv)
notations indicating whether, to the Seller's knowledge, the tenant under any
such Material Lease is in default.
3.6 Industrial Revenue Bonds. All documents evidencing, securing or
otherwise relating to the Industrial Revenue Bonds.
3.7 Plans, Specifications and Reports. The most recent plans,
specifications, drawings, surveys, title insurance policies or reports, and
engineering, inspection and structural reports relating to the Facilities
(including any current elevator inspections and any reports or audits with
respect to compliance of the Facilities with the Americans with Disabilities
Act (the "ADA")), and all soil reports and environmental reports and audits
relating to the Facilities prepared within the last ten (10) years, that were
prepared by or for the Seller or are in the Seller's possession or are
reasonably obtainable by the Seller from third parties who prepared such
reports, together with any plan in existence for compliance with ADA and
similar state or local laws or any Environmental Laws (as defined below).
3.8 Development Conditions. Copies of all unrecorded land use
restrictions, proffers and other conditions limiting development of any of the
Facilities, if any.
3.9 Permits. All licenses, permits, certificates of occupancy,
authorizations, consents, unrecorded easements and unrecorded rights of way,
and other approvals or instruments required in connection with any current
construction, occupancy, ownership or leasing of the Facilities (the
"PERMITS"), and all currently pending applications or requests submitted in
connection therewith.
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3.10 JCAHO Accreditation. The most recent survey reports on each of
the Facilities by the Joint Commission on the Accreditation of Healthcare
Organizations (the "JCAHO").
3.11 Personal Property Inventory. A complete, itemized and detailed
inventory of the Personal Property.
3.12 Operating Reports. Monthly (from October 1996 until the latest
available month end prior to Closing) unaudited statements of operation
relating to the operations of the Facilities prepared in the ordinary course of
business (the "OPERATING REPORTS"), which shall be delivered to the Purchaser
as soon as practical after such reports are prepared, and the Seller's 1997
budgets for each of the Facilities prepared in the ordinary course of business.
3.13 Capital Expenditures Information. A detailed list of all
material capitalized expenditures made at each of the Facilities since October
1, 1993. For purposes hereof, a material capitalized expenditure shall mean
any single capitalized expenditure in excess of $100,000.
3.14 Financial Statements. Magellan's audited financial statements
for the fiscal year ended September 30, 1996 (the "1996 FINANCIALS").
3.15 Disputes. Summaries of any and all material outstanding
litigation and material outstanding or asserted written claims by any third
party which concern or otherwise affect the Facilities or the business operated
therein received by the Seller during its ownership of the Facilities, together
with copies of any and all written notices of potential material litigation,
written notices from any governmental or quasi-governmental body alleging a
failure to comply with applicable Laws (as hereinafter defined in Section
6.1(g)), audit response letters prepared during the last five (5) years, and
any internal lists of claims or anticipated material litigation related to the
Facilities prepared by or on behalf of the Seller. For purposes of this
Section, "material" shall mean those claims and litigations involving amounts
or alleged liabilities in excess of $1,000,000.
3.16 Philadelphia Facility. All construction contracts, architects'
agreements, engineering reports, building permits, plans, specifications, and
other material agreements, information and materials relating to the
construction of the planned improvements currently underway at the Facility
located in Philadelphia, Pennsylvania (the "PHILADELPHIA FACILITY").
3.17 Other. Such other documents and materials as are reasonably
requested by the Purchaser (which documents and materials shall be delivered to
the Purchaser as soon as practical following such request), except for (i)
patient medical records, (ii) medical and professional staff records that are
either privileged or protected from discovery by a state law relating to
confidentiality of peer review activities, and (iii) all other records relating
to the provision of health care services that are made privileged, confidential
or protected from discovery under applicable state law.
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4 Access to Facilities, Records, and Personnel. The Purchaser
shall have the right, at its sole option, to undertake, at its cost and expense
except as otherwise provided in Section 10.4(a), a review and examination of
all aspects of the Facilities, including without limitation: (a) the physical
condition and state of repair of the Facilities; (b) the existence, now or at
any time in the past, of any Hazardous Substances (as defined below) at or in
the Facilities, and the extent of compliance of the Facilities with all
applicable Environmental Laws (as defined below); (c) the terms and conditions
of all Contracts, agreements, warranties, Leases and other materials relating
to the condition, occupancy, operation, management or use of the Facilities;
(d) books and records relating to the operation of the Facilities, and (e) such
other matters relating to the Facilities as the Purchaser deems appropriate.
Upon reasonable advance notice from the Purchaser, the Seller shall make all of
its books and records pertaining to the Facilities available during normal
business hours for review and/or audit by the Purchaser and its agents and
consultants, including, without limitation, correspondence and communications
with regulatory authorities, and shall promptly furnish to the Purchaser all
information pertaining to the Facilities reasonably requested by the Purchaser
or its representatives. In addition, the Purchaser and its agents and
consultants shall have the right to enter upon the Facilities to conduct such
review, inspections and tests as it deems appropriate (including taking soil
samples), provided that the Purchaser (i) shall exercise reasonable efforts to
coordinate such review, inspections and tests with Magellan and to minimize
disruption to Magellan's operations, (ii) shall repair any damage that may be
caused by such inspections and tests, (iii) shall not interfere with the
delivery of patient care, and (iv) shall not review any documents described in
the exceptions clause of Section 3.17. Notwithstanding anything in this
Agreement to the contrary, (x) the Purchaser will not do, cause or direct to be
done any subsurface testing or boring, or any testing of subsurface water, or
any coring, boring or other intrusive testing, or any other inspection of or
entry upon any of the Facilities, without giving Magellan at least two (2)
business days' prior notice thereof and an opportunity to have Magellan's
representative be present to accompany and observe all such inspections and
entries; (y) the Purchaser will not enter, or cause or direct any entry, upon
any premises which are leased to a tenant without giving Magellan at least two
(2) business days' prior notice thereof and an opportunity to have Magellan's
representative be present to accompany and observe all such inspections and
entries, and in carrying out any such entry the Purchaser will use its
commercially reasonable best efforts to minimize interference with the business
of any such tenant; and (z) the Purchaser hereby indemnifies the Seller, and
agrees to defend and hold the Seller harmless, from and against any and all
claims, losses, damages and liabilities that may be asserted against or
incurred by the Seller for or in connection with any injuries or damage to any
persons or property which directly or indirectly are caused by or result from
any entry, inspection, testing or other action done or caused or directed to be
done by the Purchaser or its representatives or contractors. The Purchaser
agrees to cause all parties entering any Facility at the Purchaser's instance
to maintain customary and appropriate insurance to cover all risks of the types
described in clause (z) above, and, upon the Seller's request, to deliver to
the Seller evidence establishing to the Seller's reasonable satisfaction that
adequate and appropriate insurance to cover risks of the types described in the
preceding clause (z) is being maintained. Notwithstanding anything in this
Agreement to the contrary, the Purchaser's obligation to repair such damage and
the Purchaser's indemnity of the Seller in this Section 4 shall survive any
termination of this Agreement. The Purchaser also shall have the right to
communicate with governmental officials and other regulatory authorities having
jurisdiction over the Facilities
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with respect to issues arising out of the ownership, use, leasing, and
condition of the Facilities, and with all architects and contractors who have
provided services for the benefit of the Facilities, provided, however, that
the Purchaser shall not have the right to communicate with governmental
officials and other regulatory authorities having jurisdiction over the
business operations at the Facilities with regard to regulatory issues arising
out of the operation of the Facilities as acute care psychiatric hospitals (or
such other business operations for which any of the Facilities is currently
used) without the prior written consent of Magellan, which consent may be
granted or withheld in Magellan's sole and absolute discretion. Magellan
agrees to provide the Purchaser with access to its regulatory legal counsel and
shall instruct such counsel to cooperate with the Purchaser in answering the
Purchaser's questions regarding compliance of the Facilities and business
operations conducted therein with applicable Laws, subject to attorney-client
privilege. Notwithstanding anything in this Agreement to the contrary, (A)
the Seller's representations and warranties made in this Agreement shall not be
limited or otherwise affected by any review or investigation of the Facilities
made by the Purchaser, and (B) nothing herein contained shall be deemed to
provide the Purchaser with the right to terminate this Agreement as a result
of any such review, inspections or tests, and the Purchaser's satisfaction with
the results of such review, inspections and tests shall not be a condition
precedent to Closing.
5 Title.
5.1 Condition of Title. Purchaser shall determine that title
to the Facilities is good and marketable of record and in fact. Title shall be
conveyed in fee simple, by the form of Warranty Deed customary in each of the
jurisdictions in which the Facilities are located, as reasonably determined by
the Title Company (as defined in Section 8) or the mutual agreement of the
parties, with limited or special warranty of title unless such form of warranty
is not customary in the relevant jurisdiction(s) or adversely affects the
insurability of title (collectively, the "DEEDS"), with customary covenants,
free and clear of any and all liens, tenancies, restrictions, easements,
options, unrecorded agreements, encroachments, or other encumbrances of any
kind whatsoever, except for the following (the "PERMITTED EXCEPTIONS"): (i)
those matters approved or deemed approved by the Purchaser pursuant to Section
5.2; (ii) liens securing the Industrial Revenue Bonds that the Purchaser
assumes at Closing, (iii) liens for ad valorem taxes and general or special
assessments not yet due and payable as of the Closing Date (as defined below),
(iv) building and zoning restrictions applicable to the Facilities, and (v)
other exceptions which in the reasonable judgment of the Purchaser do not
impair in any material respect the use or enjoyment of the Facilities as
currently operated or as proposed to be operated under the Transaction
Documents.
5.2 Title Objections. The Purchaser shall promptly after the
date hereof order a title commitment for and survey of each of the Facilities.
The Seller shall be obligated to pay the costs of title examinations, title
insurance and surveys, and, notwithstanding anything to the contrary in this
Agreement, such obligation shall survive any termination of this Agreement.
Within fifteen (15) business days after the Purchaser has received all of the
title commitments and surveys, the Purchaser shall notify Magellan in writing
of any matters listed in the title commitments or depicted (or not depicted) on
the surveys (including, without limitation, flood
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plains) of which the Purchaser disapproves except for the Permitted Exceptions
(the "OBJECTIONS"), provided, however, that in no event shall the Purchaser
have the right to disapprove or object to any flood plain matter with respect
to any Facility unless (i) an ordinance, law, rule or regulation applicable to
said Facility provides that such Facility may not be rebuilt following a
casualty because such Facility is located in a flood plain, or (ii) the
Purchaser reasonably determines that the uninsured cost to rebuild would be
unduly burdensome or the flood risk cannot be insured at reasonable rates. If
the Purchaser so notifies Magellan of any Objections, then, within a reasonable
period of time after such notice, the Seller shall take all action necessary to
eliminate or cure such Objections or to make arrangements, satisfactory to the
Purchaser, to have such Objections eliminated or cured prior to the Closing.
If the Seller is unable or unwilling to eliminate or cure all such Objections,
or to make satisfactory arrangements to have same eliminated or cured prior to
the Closing to the Purchaser's satisfaction, and the Purchaser does not waive
the Seller's failure to eliminate or cure such Objections as provided in
Section 8.1, then the Purchaser shall have the right, at its sole option, to
terminate this Agreement by giving written notice of such election to Magellan.
Upon the giving of any such termination notice, this Agreement shall terminate,
and all rights, obligations and liabilities of the parties hereunder shall be
released and discharged. If the Purchaser fails to object to any matter within
such fifteen (15) business day period or thereafter waives it Objections, such
matters shall be deemed approved and shall constitute Permitted Exceptions
hereunder. Without limiting the generality of the foregoing, the Seller shall
have the absolute obligation, whether or not the Purchaser objects, to cure or
remove of record or, with the Purchaser's consent, obtain affirmative coverage
over the following matters at or before the Closing: (a) all mortgages or
deeds of trust affecting the Facilities, except those securing the Industrial
Revenue Bonds that the Purchaser assumes at Closing; (b) all past due ad
valorem taxes and assessments of any kind constituting a lien against the
Facilities; (c) all mechanic's, materialmen's and similar liens; and (d) all
judgments constituting a lien against the Facilities. Notwithstanding the
foregoing to the contrary, the Purchaser shall use its commercially reasonable
bests efforts to deliver Objections to the Seller on a Facility by Facility
basis within fifteen (15) business days following the Purchaser's receipt of a
title commitment and survey for each Facility.
5.3 Option to Assume IRBs. The parties acknowledge that some of the
Facilities are encumbered by liens securing certain Industrial Revenue Bonds
(the "INDUSTRIAL REVENUE BONDS"). A schedule listing the outstanding principal
and accrued interest amounts of the Industrial Revenue Bond or Bonds associated
with each Facility is attached hereto as Exhibit D. The Purchaser shall have
the option to assume any or all of such Industrial Revenue Bonds if such
assumption is permissible under the documents governing the terms of any such
Industrial Revenue Bond proposed to be assumed and such assumption can be made
without adversely affecting the tax-exempt status of the Industrial Revenue
Bond to be assumed, provided that the Seller is completely released from all
liability thereunder and any letters of credit posted by the Seller as
additional security for repayment thereof are released and returned on behalf
of Magellan. Any Industrial Revenue Bonds that the Purchaser does not assume
at Closing shall be paid off or defeased by Magellan at Closing, the Facilities
encumbered thereby shall be conveyed free and clear of all liens securing same,
and Magellan shall be solely responsible for all prepayment penalties and other
costs associated with such repayment or defeasance. The
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Purchaser shall notify Magellan in writing by March 5, 1997, as to which
Industrial Revenue Bonds, if any, it wishes to assume. Failure by the
Purchaser to so notify Magellan by such date shall be deemed to be an election
by the Purchaser not to assume any of the Industrial Revenue Bonds.
6 Representations and Warranties.
6.1 Seller's Representations and Warranties. In order to
induce the Purchaser to execute this Agreement and the other Transaction
Documents and to proceed to Closing, Magellan hereby makes the following
representations and warranties to the Purchaser, all of which are true as of
the date hereof:
(a) Organization and Enforceability. Magellan is, and
each Subco is, a corporation or limited liability company, duly organized,
validly existing and in good standing under the laws of its state of
incorporation or formation and in any other jurisdiction where the nature of
its business or ownership of its properties would require such qualification.
Magellan and each Subco possess all requisite power and authority to own and
operate their respective properties and to carry on their respective businesses
as now conducted, to enter into and perform this Agreement and the other
Transaction Documents, and to carry out the Transactions. This Agreement and
the other Transaction Documents, and all instruments (to the extent the same
constitute agreements), documents (to the extent the same constitute
agreements) and agreements to be executed by Magellan and/or any of the Subcos
in connection herewith or therewith, are, or when delivered shall be, duly and
validly executed and delivered by Magellan and/or such Subco(s) to the
Purchaser and are, or when delivered shall be, legal, valid and binding
obligations of Magellan and/or such Subco(s), enforceable against Magellan
and/or such Subco(s) in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, conservatorship, receivership,
insolvency, moratorium or similar laws affecting creditors' rights generally or
by general principles of equity. The person or persons who have executed this
Agreement on behalf of Magellan and each Subco have full power and authority to
sign the Transaction Documents.
(b) Consents and Approvals. Except as described on
Schedule 6.1(b) attached hereto, there are no consents, approvals, or
authorizations that are material to the continued operation of the businesses
conducted at the Facilities required from any person, entity, governmental or
quasi-governmental authority, or required by law or agreement, with respect to
the Seller's execution, delivery or performance of this Agreement and the other
Transaction Documents and the consummation of the Transactions by Seller.
Notwithstanding the foregoing, it is understood and agreed that it shall be the
Purchaser's responsibility to obtain, or to obtain the transfer of, all Permits
required for the Purchaser to own, hold and lease the Facilities to OpCo, and
it shall be Magellan's responsibility to obtain, or to obtain the transfer of,
for and on behalf of OpCo, all Permits required for the continued operation by
OpCo of the businesses currently conducted at the Facilities.
(c) Title to Real Property. Except for Real Property
that will be conveyed by the Seller to the Purchaser as part of the Facilities,
neither Magellan nor any of the
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Subcos or their affiliates owns any parcel of land which is contiguous with any
of the Real Property of the Facilities.
(d) Title to Personal Property. None of the Personal
Property is held by Magellan or the Subcos under a lease or installment sale
contract, except for installment sales agreements entered into in the ordinary
course of business, and Magellan and/or the Subcos owns title to the Personal
Property reflected on the inventory to be delivered to the Purchaser pursuant
to Section 3 free and clear of any liens or claims, except for liens and claims
arising under or by virtue of the above-referenced installment sales agreements
and except as set forth on Schedule 6.1(d).
(e) Litigation; Other Proceedings. No portion of the
Real Property of any Facility has been condemned or taken in any condemnation
or similar proceeding. No action, suit, other proceeding or investigation
(including, but not limited to, condemnation actions) is pending in any court
or before any federal, state, county or municipal department, commission,
board, bureau or agency or other governmental or quasi-governmental
instrumentality or accrediting authority or before any arbitration tribunal or
panel, or to the Seller's knowledge has been threatened, that concerns or
involves (i) title, right to possession, or ownership of the Facilities, or
(ii) the Seller's ability to perform its obligations under this Agreement and
the other Transaction Documents. There are no proceedings pending, or to the
Seller's knowledge threatened, which may result in the revocation, cancellation
or suspension, or any adverse modification, of any Permit. No bankruptcy,
insolvency, reorganization or similar action involving any Facility or any
Subco or Magellan, whether voluntary or involuntary, is pending or to the
Seller's knowledge threatened, and neither any Subco nor Magellan has any
intention of filing any such action or proceeding.
(f) Violations of Agreements. None of the execution and
delivery of this Agreement and the other Transaction Documents by Magellan or
any Subco, the consummation by Magellan or any Subco of the Transactions or
compliance by Magellan or any Subco with any of the provisions hereof or
thereof will (i) conflict with or result in any breach of any provisions of the
formation documents of Magellan or such Subco; (ii) except as set forth on
Schedule 6.1(f), result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right to termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
Magellan or any Subco is a party or by which any of them or any of the
Facilities may be bound; or (iii) except as set forth on Schedule 6.1(f),
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of them or any of the Facilities; except in the case of
clauses (ii) or (iii) above, for violations, breach or defaults (A) that would
not in the aggregate have a material adverse effect on the business or
financial condition of the Seller and on the effectiveness of the Transactions
or (B) for which waivers or consents have been or will be obtained on or prior
to the Closing Date.
(g) Compliance with Laws. The Facilities and the
current ownership, use, occupancy, leasing and construction (if any) thereof
comply in all material respects with all federal, state, county or municipal
laws, ordinances, rules, orders, regulations and material
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requirements ("LAWS") of all governmental and quasi-governmental authorities
having jurisdiction over the Facilities or affecting all or any part thereof or
bearing on their ownership, use, occupancy, leasing or construction (including,
without limitation, zoning, land use, building code, fire code, Environmental
Laws (as hereinafter defined), the Occupational Safety and Health Act, and the
Americans with Disabilities Act), and in all material respects with all private
covenants and restrictions. The Seller has no knowledge of material violations
of Laws relating to the ownership, use, occupancy, leasing or construction (if
any) of the Facilities and no written notice of any such violation of any such
law, regulation or ordinance has been received by the Seller, except for
violations or alleged violations set forth on Schedule 6.1(g) attached hereto,
which are being corrected in the ordinary course of business pursuant to an
approved plan of correction. Without limiting the generality of the foregoing,
the Seller has not paid or delivered or agreed to pay or deliver, directly or
indirectly, any fee, commission or other sum of money or item of property,
however characterized, to any person or entity pursuant to a transaction
believed by the Seller to be illegal under any federal, state or local law.
(h) Permits. All Permits have been obtained from all
governmental and quasi-governmental authorities having jurisdiction over the
Facilities and the ownership thereof or from private parties for the normal
use, maintenance, and occupancy of the Facilities and to ensure unimpeded
access, ingress and egress to and from the Facilities as required to permit
normal usage thereof (including, without limitation, building or other permits,
certificates of occupancy, concessions, grants, franchises, licenses, and other
governmental authorizations and approvals). All fees payable in connection
with such items have been paid in full, and all such Permits are in full force
and effect.
(i) Accreditation and Certification. The survey reports
on each of the Facilities by the Joint Commission on the Accreditation of
Healthcare Organizations (the "JCAHO") that have been provided to the Purchaser
pursuant to Section 3 are the most recent JCAHO survey reports received by the
Seller with respect to each of the Facilities other than (i) the medical office
buildings comprising a part of some of the Facilities and (ii) the Facilities
operated as corrections facilities. The Seller has taken all actions required
by such survey reports to be taken on or before the date hereof, including, but
not limited to, the submission of written progress reports. The Seller has
received no notice of any material, adverse change in accreditation status of
any of the Facilities.
(j) Medicare and Medicaid. Except as set forth on
Schedule 6.1(j) attached hereto, each Facility participates in the Medicare and
Medicaid programs, is eligible to receive payment under Title XVIII of the
Social Security Act, as amended (the "SOCIAL SECURITY ACT"), and is a
"provider" under a provider agreement with the Medicare program. With respect
to such provider agreements, neither Magellan nor any Subco has received a
notice of termination, is in default in any material respect, or has any
knowledge that any other party to such agreements is in default thereunder.
(k) Zoning; Subdivision. The current use of each
Facility is permitted under the zoning classification applicable to the
Facility. There are no proceedings pending or to Seller's knowledge threatened
to change the existing zoning classification as to any portion of
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any Facility. No portion of any subdivided lot or tax lot comprising the Real
Property of any Facility or any part thereof is owned by any person or entity
other than the Subco that owns such Facility. To the Seller's knowledge, there
are no unrecorded land use restrictions, unrecorded proffers or other
unrecorded conditions limiting development of any of the Facilities. Except as
may be disclosed in the title commitments and surveys of each of the
Facilities, no part of any Facility has been designated as an historical
landmark by any governmental authority, or is subject to any overlay or similar
zoning or other restriction or limitation, nor, to the best of the Seller's
knowledge, is any of the foregoing under consideration by any governmental
authority.
(l) Structure; Systems. There are no material
uncorrected structural, physical, mechanical or other defects or faults in the
design or construction of the improvements included as part of any Facility,
including without limitation the roofs, parking areas, HVAC, plumbing,
electrical, life safety and other mechanical systems. All such systems are in
good operating condition and repair, normal wear and tear excepted, and require
no special maintenance, repair or replacement (except due to normal wear and
tear and obsolescence) and are in compliance in all material respects with all
applicable Laws.
(m) Material Changes. The Seller has not received
written notice from any governmental or quasi-governmental authority of any
pending or contemplated change in any regulation, code, ordinance or law, or
private restriction applicable to any of the Facilities which would result in
any material adverse effect on the condition of any of the Facilities, or would
in any material respect limit or impede the operation of any of the Facilities.
(n) Parties in Possession. No portion of any Facility
is occupied or used in any manner by any person or entity other than the
Seller, tenants under the Leases, the patients of the Facilities, the employees
of the Seller, the medical staffs of the Facilities, other health care
professionals, members of the public participating in various programs and
events at the Facilities, volunteers, independent contractors providing
services pursuant to the Contracts, and other business invitees.
(o) Status of Leases. Exhibit E attached hereto
contains a full and complete listing of all tenants under all Leases. Magellan
has delivered to the Purchaser true and complete copies of each Material Lease.
With respect to each Material Lease, neither Magellan nor any Subco has
received a notice of termination, is in default, or has any knowledge that any
other party to such Material Lease is in default thereunder. The Seller is the
owner of the entire lessor's interest in and to the Leases, and neither the
lessor's interest in the Leases nor the rents payable thereunder have been
assigned, pledged or encumbered in any manner other than under collateral
assignments that will be released in connection with the Closing. No tenant
has any right or option to purchase or otherwise acquire any Facility or any
portion thereof. Except as indicated on the Rent Roll delivered to the
Purchaser as a part of the Seller's Deliveries pursuant to Section 3, (i) no
rentals or other amounts due under the Material Leases have been paid more than
one (1) month in advance, (ii) all security and other deposits of any type
required under the Material Leases have been paid in full and are being held by
the Seller, (iii) there exists no circumstance or state of facts that
constitutes a default by the Seller or to the Seller's knowledge any tenant
under the Material Leases, or that would, with the passage of time or the
giving of
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notice, or both, constitute a default on the part of the Seller or by any
tenant under any of the Material Leases, or that entitles any tenant under the
Material Leases to defenses against the prompt, current payment and performance
of rent and/or other payments and obligations thereunder, and (iv) none of the
tenants under the Material Leases has asserted any defenses, set-offs or claims
in connection with any of the Material Leases, except in the case of clauses
(iii) or (iv) above, for violations, breaches or defaults which do not have a
material adverse effect on the Facilities. Seller has no knowledge of any
pending or threatened litigation by any tenant against the Seller with regard
to any Material Lease. There do not exist any unpaid leasing commissions due
with regard to any of the Material Leases. The Seller has performed in all
material respects all of the duties, liabilities and obligations imposed upon
Seller by the terms, provisions and conditions contained in the Material Leases
and accruing on or prior to the date hereof. The total amount of annual rent
payable under all Leases as of the date hereof is not greater than $3,000,000.
(p) Other Agreements Affecting Facilities. There are no
contracts or other material obligations (including, without limitation, options
and rights of first refusal under Leases) outstanding for the sale, exchange or
transfer of any of the Facilities or the business operated therein by the
Seller. Except as described on Schedule 6.1(p) and except for this Agreement,
the Material Leases, the management, maintenance, service, supply, commission,
parking, construction, architectural and other agreements entered into by the
Seller or any Subco with respect to the Facilities, the agreements included
among the Permitted Exceptions, and the other Transaction Documents, the Seller
has no knowledge of any contracts creating or imposing any liens, encumbrances,
material burdens, obligations or material restrictions on the use or operation
of any of the Facilities or the business conducted therein, other than (i) the
matters of title listed on the title insurance commitments for the Facilities
and (ii) security interests in the Personal Property that will be released as
of the Closing (or as to which the Purchaser agrees to take title subject).
(q) Special Assessments. There are no unpaid
assessments for public improvements against any of the Facilities, and Seller
has no knowledge of any pending or proposed assessments against any of the
Facilities. All sewer, water, gas, electric, telephone and drainage lines and
facilities required by law and for the normal operation and use of the
Facilities are fully installed, currently function, and service the Facilities
adequately for their current use, and there are no unpaid assessments, tap or
connection fees or charges for the installation of such utilities or for making
connection thereto.
(r) Taxes. To the Seller's knowledge, except as
described on Schedule 6.1(r), (i) the Seller has received no written notice of
any public plans or proposals for changes in road grade, access or other
municipal improvements which would affect any of the Facilities or result in
any assessment and that could have a material adverse effect on the Facilities
or the businesses conducted therein, and (ii) no tax proceeding is pending for
the reduction or increase of the assessed real estate tax evaluation of any of
the Facilities.
(s) FIRPTA. Neither Magellan nor any Subco is a
"foreign person," "foreign trust" or "foreign corporation" within the meaning
of the United States Foreign
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Investment and Real Property Tax Act of 1980 and the Internal Revenue Code of
1986, as subsequently amended.
(t) Environmental. As used herein, the term
"ENVIRONMENTAL LAW" means any law, statute, ordinance, rule, regulation, order
or material determination of any governmental authority or agency affecting any
of the Facilities and pertaining to health or the environment, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1982 and the Resource Conservation and Recovery Act of 1986.
Except as (i) disclosed in any of the environmental reports comprising a part
of the Seller's Deliveries or otherwise obtained by the Purchaser, or as
otherwise disclosed by Magellan to the Purchaser in writing, or (ii) would not
have a material adverse effect on the Facilities or the business of the Seller
operated thereon, to the Seller's knowledge (a) neither the Facilities nor the
Seller's operation thereof is in violation of any Environmental Law or is
subject to any pending or threatened litigation or inquiry by any governmental
authority or to any remedial action or obligations under any Environmental Law;
(b) no underground storage tanks have been or are now located at any Facility;
(c) none of the Facilities is now or ever has been used for industrial purposes
or for the storage, treatment or disposal of hazardous or toxic wastes or
materials, chemical wastes, or other toxic substances, except for the storage
and disposal of such wastes and materials in the ordinary course of the
business of the Facilities in accordance with applicable Environmental Laws,
nor has any Facility ever been listed by any federal, state or county agency or
governmental official as containing any oil, hazardous or toxic wastes or
materials, chemical wastes, or other toxic substances, and (d) no hazardous
substances or toxic wastes have been handled, packaged, generated,
manufactured, released, removed, stored, used, discharged, disposed of ,
treated, installed, transported or deposited over, beneath, in or on any
Facility or any portion thereof, from any source whatsoever, or are now located
at any Facility, in violation of applicable Environmental Laws (including,
without limitation, asbestos, radon, oil or other petroleum products, PCBs and
urea formaldehyde). Prior to Closing, Magellan agrees to notify the Purchaser
promptly of any fact of which the Seller acquires actual knowledge which would
cause this representation to become false and of any written notice that the
Seller receives regarding the matters set forth in this subsection (t).
(u) Soils; Flood Plain. There are no material defects,
faults or other problems in connection with the soils, subsoils, grading or
compaction of the Real Property, other than as set forth in any soil reports to
be delivered to the Purchaser. Except as noted on the surveys of the
Facilities, no portion of the Real Property is located inside a one hundred
(100) year flood plain, as such plain is determined by the Federal Emergency
Management Agency and published in a Flood Insurance Rate Map for the area
including the Real Property.
(v) Ownership of Subcos. Magellan holds, beneficially,
directly or indirectly, all voting and equity ownership of each Subco.
(w) No Other Owned Facilities. Except as described on
Schedule 6.1(w), no Subco owns or operates any facility other than the one(s)
being sold hereunder.
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(v) Insurance. There is currently in full force and
effect public liability, property and casualty insurance in the amounts and
issued by the companies specified in Exhibit F (the "INSURANCE"). Each of such
policies is in full force and effect, and all premiums due and payable
thereunder have been, and on the Closing Date will be, fully paid when due. No
notice of cancellation has been received or threatened with respect thereto.
No insurance company insuring either the Facilities or the Personal Property,
nor the Board of Fire Underwriters, has delivered to the Seller oral or written
notice (i) that any insurance policy now in effect would not be renewed or (ii)
that the Seller or any tenant under the Leases has failed to comply with
insurance requirements or (iii) that defects or inadequacies exist in any of
the Facilities, or in any part thereof, which could adversely affect the
insurability thereof or the cost of such insurance.
(y) Philadelphia Facility. To Magellan's knowledge, the
total costs and expenses required for completion of the construction of the
improvements currently underway to the Philadelphia Facility will not exceed
$11,000,000, and upon completion of such improvements, the Philadelphia
Facility will be ready for occupancy and suitably equipped for the operation of
a behavioral healthcare facility similar to the other Facilities.
(z) Accuracy of Documents. All documents and records
delivered pursuant to Section 3 will be true, correct and complete copies of
the documents and records required to be delivered.
(aa) No Material Adverse Change. Since the date of the
1996 Financials, there has been no material adverse change in the business or
financial condition of (i) the Seller and the Subcos taken as a whole or (ii)
the Subcos taken as a whole.
6.2 Purchaser's Representations and Warranties. In order to
induce the Seller to execute this Agreement and the other Transaction Documents
and to proceed to Closing, the Purchaser hereby makes the following
representations and warranties to the Seller, all of which are true as of the
date hereof and all of which shall be true as of the Closing Date:
(a) Organization and Enforceability. The Purchaser is
duly organized, validly existing and in good standing under the laws of its
state of organization and in any other jurisdiction where the nature of its
business or ownership of its properties would require such qualification, and
is or will be by the Closing Date duly qualified to transact business in the
states in which the Facilities are situated. The Purchaser possesses all
requisite power and authority to own and operate its properties and to carry on
its business as now conducted, to enter into and perform this Agreement and the
other Transaction Documents, and to carry out the Transactions. This Agreement
and the other Transaction Documents, and all instruments (to the extent the
same constitute agreements), documents (to the extent the same constitute
agreements) and agreements to be executed by the Purchaser and/or its designees
in connection herewith or therewith, are, or when delivered shall be, duly and
validly executed and delivered by the Purchaser and/or its designees and are,
or when delivered shall be, legal, valid and binding obligations of the
Purchaser and/or such designees, enforceable against the Purchaser and/or such
designees in accordance with their respective terms, except as such enforcement
may be limited
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by bankruptcy, conservatorship, receivership, insolvency, moratorium or similar
laws affecting creditors' rights generally or by general principles of equity.
The person or persons who have executed this Agreement on behalf of the
Purchaser have full power and authority to sign the Transaction Documents.
(b) Consents and Approvals. Except for approval by the
Board of Directors of the Purchaser's general partner, there are no consents,
approvals, and authorizations required from any person, entity, governmental or
quasi-governmental authority, or required by law or agreement, with respect to
the Purchaser's execution, delivery or performance of this Agreement and the
other Transaction Documents and the consummation of the Transactions by the
Purchaser, including, without limitation, shareholder approval.
Notwithstanding the foregoing, it is understood and agreed that it shall be the
Purchaser's responsibility to obtain, or to obtain the transfer of, all Permits
required for the Purchaser to own, hold and lease the Facilities to OpCo, and
it shall be Magellan's responsibility to obtain, or to obtain the transfer of,
for and on behalf of OpCo, all Permits required for the continued operation by
OpCo of the businesses currently conducted at the Facilities.
(c) Violations of Agreements. None of the execution and
delivery of this Agreement and the other Transaction Documents by the
Purchaser, the consummation by the Purchaser of the Transactions or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provisions of the formation documents of
the Purchaser; (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right to termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Purchaser is a party or by which it may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to it; except
in the case of clauses (ii) or (iii) above, for violations, breach or defaults
(A) that would not in the aggregate have a material adverse effect on the
business or financial condition of the Purchaser and on the effectiveness of
the Transactions or (B) for which waivers or consents have been or will be
obtained prior to the Closing Date.
6.3 Best Knowledge. For purposes of this Agreement, the
phrase "to the Seller's knowledge" or "to Magellan's knowledge" means the
actual knowledge of any executive officer (as defined in Rule 3b-7 of the
Securities Exchange Act of 1934) of a Subco, or actual knowledge of any officer
of Magellan, based upon the Seller's reasonable inquiry and investigation.
6.4 Survival. The representations and warranties set forth in
this Section 6 will survive the Closing for the period of the statute of
limitations applicable to breaches of contracts in Delaware, except for the
representations and warranties relating to claims against the Seller by
Medicare and Medicaid, which shall survive until the expiration of the
applicable statutes of limitations on the "Cost Reports" filed by the Seller
prior to the Closing Date.
7 Covenants.
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7.1 Seller's Covenants. Magellan hereby covenants and agrees
as follows:
(a) Operation. From the date hereof until the Closing
Date, the Seller will (i) continue to operate the Facilities in the ordinary
course, consistent with past practice, (ii) continue to offer services at the
Facilities in accordance with past practices, except for changes in services
deemed reasonably appropriate by management based upon changes in the market,
(iii) permit no material change in presently existing policies (excluding
on-going enhancements), except as required by applicable law and except for
changes in policies deemed reasonably appropriate by management based upon
changes in the market, without, in each instance, the prior written approval of
the Purchaser, and (iv) use commercially reasonable best efforts to maintain
the Facilities in as good a condition and substantially the same state of
repair as that existing on the date hereof.
(b) Leases. The Seller will not, without the prior
written consent of the Purchaser, (i) enter into any contract that will or
could be binding upon the Purchaser or other entity taking title to any of the
Facilities and that is not terminable upon at most thirty (30) days' notice,
unless such contract will be fully performed by the Seller on or before the
Closing Date, (ii) amend, modify or supplement any existing Permit in any
material respect, (iii) enter into any new lease for any of the Facilities or
any portion thereof, other than in the ordinary course of business, and in any
event, enter into any new lease that would constitute a Material Lease, or (iv)
amend, modify, supplement or terminate any of the Leases, other than in the
ordinary course of business, and in any event, amend, modify, supplement or
terminate any of the Leases in any manner that would convert any Lease into a
Material Lease. Any consent requested by Seller pursuant to this Section
7.1(b) will be deemed approved if the Purchaser does not respond by written
notice to Magellan within ten (10) business days after Magellan's written
notice to the Purchaser requesting such consent.
(c) Litigation. Magellan shall advise the Purchaser
promptly of any litigation, arbitration, investigation or other proceeding or
administrative hearing (including condemnation) before any governmental or
quasi-governmental agency, licensing or accrediting authority, or other
authority which concerns or affects any of the Facilities or the operation
thereof in any manner and which is instituted after the date hereof and which
involves a claim or alleged liability in excess of $1,000,000.
(d) Compliance with Laws. The Seller shall comply in
all material respects with all Laws, including without limitation all
Environmental Laws, applicable to the Facilities, and the Seller shall not
install in or remove from the Facilities any storage tanks except in compliance
with all applicable Laws. Magellan shall advise the Purchaser promptly in
writing of any notice or other communication, written or oral (and as to oral
notices or communications, only those of which the officers described in
Section 6.3 have knowledge), to the Seller from any federal, state or local
governmental authority with respect to (i) any alleged material violation of
any Law, including without limitation any Environmental Law, at or affecting
any Facility, or (ii) the handling, packaging, generating, transportation,
release, use, discharge, treatment, removal, storage, or disposal of Hazardous
Substances or storage tanks which is or may be in violation of applicable Laws.
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(e) Notification of Subsequent Events. Prior to
Closing, Magellan shall notify the Purchaser of any notice received by the
Seller of any material adverse change in or to the Facilities, as well as of
any material adverse changes in the business operated therein, operations and
assets related thereto, or financial condition of the Seller.
(f) Alterations; Encumbrances; Commitments. From the
date hereof until the Closing Date, the Seller shall not take any of the
following actions without the prior written consent of the Purchaser, which may
be granted or withheld in the Purchaser's sole discretion: (i) except as
hereinafter expressly provided with respect to the Philadelphia Facility, make
or permit to be made any material alterations to or upon the Facilities; (ii)
encumber or permit encumbrance of any of the Facilities in any manner; or (iii)
make any commitments or representations to any applicable governmental
authorities, any adjoining or surrounding property owners, any utility, or any
other person or entity that would in any manner be binding upon the Purchaser
or other entity taking title to the Facilities, or upon the Facilities, other
than in the ordinary course of business.
(g) Sale of Personal Property. The Seller will not
transfer or dispose of, or permit to be sold, transferred or otherwise disposed
of, any item or group of items constituting Personal Property, except for the
use and consumption of inventory and other supplies and spare parts, and the
replacement of worn out, obsolete and defective tools, equipment and
appliances, in the ordinary course of business.
(h) Insurance; Permits. Magellan will maintain in full
force and effect (i) the Seller's existing insurance coverage with respect to
the Facilities and the business operated therein and (ii) all Permits relating
to the Facilities or any part thereof.
(i) Taxes. Magellan shall (a) subject to Magellan's
right under applicable Laws to contest such taxes and other public charges, pay
or cause to be paid, in a timely fashion, all taxes and other public charges
against the Facilities for the period through Closing, and (b) provide the
Purchaser, within ten (10) days of receipt, with copies of any notices the
Seller receives with respect to any special assessments or proposed increases
in the valuation of the Facilities.
(j) Performance Under Leases. The Seller will perform
all material obligations of landlord or lessor under the Leases, including any
condition for a tenant's or lessee's occupancy of any Facility.
(k) Cooperation. Magellan will assist and cooperate
with the Purchaser (i) prior to Closing in obtaining all Permits which are
required by applicable Laws to be obtained or transferred, or which by custom
are obtained or transferred, prior to closing, (ii) after Closing, in obtaining
all Permits which by custom are obtained or transferred after closing (which
covenant shall survive Closing), and (iii) prior to Closing with any
evaluation, inspection, audit or study of the Facilities and the books and
records relating to the operation thereof conducted or prepared by, for, or at
the request of the Purchaser.
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(l) Consents. Except for the consents and approvals
which the Purchaser is required to obtain pursuant to Section 6.2(b), Magellan
will use its commercially reasonable best efforts to file or submit in a timely
manner and diligently prosecute any and all applications or notices with
federal, state and local authorities and all other requests with any private
persons or entities for consents, approvals, authorizations and permissions
which are reasonably considered necessary or appropriate (i) for consummation
by the Seller of the Transactions and (ii) to effect the transfer of, or
prevent the termination of, any Permit, Lease, or contract with respect to the
Facilities, including, without limitation, obtaining, or obtaining the transfer
of, for and on behalf of OpCo, all permits required for the continued operation
by OpCo of the business currently conducted at the Facilities.
(m) Financial Statements. Magellan will provide, upon
request by the Purchaser, (i) to the extent required by applicable federal
securities laws, audited financial statements in such form and for the periods
necessary to permit the Purchaser to satisfy applicable federal securities law
requirements, and (ii) such other unaudited financial statements relating to
the Facilities as may be prepared by Magellan through the date of Closing. The
Purchaser shall bear the costs of preparation of such audited financial
statements to the extent that (i) the costs of preparation of such financial
statements exceed the costs of preparation of the financial statements that
Magellan is required to prepare in order to satisfy its obligations under
applicable federal securities laws or (ii) Magellan incurs additional costs, at
the Purchaser's request, attributable to the preparation of such financial
statements prior to the date on which such financial statements are required to
be filed with the Securities and Exchange Commission.
(n) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Magellan will file, and will
cooperate with the Purchaser in the filing (if required by applicable Laws) of,
any documents required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act.
(o) Magellan Stockholder Approval. On or prior to May
31, 1997, Magellan shall use commercially reasonable best efforts to obtain the
approval of its stockholders relating to the Transactions and to any changes in
its Certificate of Incorporation required in connection therewith, including
without limitation, (a) scheduling and holding a meeting of stockholders at
which such matters will be on the agenda, (b) recommending the approval of such
matters in any proxy or related materials for such meeting, subject, however,
to the fiduciary obligations of Magellan's Board of Directors to the
stockholders under Delaware Corporation Law, and (c) recommending the approval
of such matters at such meeting, subject, however, to the fiduciary obligations
of Magellan's Board of Directors to the stockholders under Delaware Corporation
Law.
(p) Satisfaction of Conditions. Magellan shall exercise
its commercially reasonable best efforts to satisfy all conditions precedent to
Closing, as set forth in Section 8, that are the Seller's responsibility to
satisfy.
(q) Completion of Philadelphia Facility. Magellan shall
continue the construction of the planned improvements currently underway at the
Philadelphia Facility and shall complete such construction in a timely manner
at Magellan's sole cost and expense, lien
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free, provided, however, that Magellan's total liability for such costs and
expenses shall not exceed $11,000,000. Notwithstanding anything set forth in
this Agreement to the contrary, this covenant shall survive Closing for the
period of the statute of limitations applicable to breaches of contracts in
Delaware.
(r) New Senior Credit Facility. Magellan shall use
commercially reasonable best efforts to close, prior to or simultaneously with
Closing hereunder, any new credit facility required to satisfy Magellan's
obligations under its existing financing arrangements and arising out of the
Transactions, or to obtain a loan commitment reasonably satisfactory to the
Purchaser for such new credit facility.
7.2 Purchaser's Covenants. The Purchaser hereby covenants and
agrees as follows:
(a) Satisfaction of Conditions. The Purchaser shall
exercise its commercially reasonable best efforts to satisfy all conditions
precedent to Closing, as set forth in Section 8, that are the Purchaser's
responsibility to satisfy.
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The Purchaser will file (if
required by applicable Laws), and will cooperate with Magellan in the filing
of, any documents required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act.
(c) The Purchaser will assist and cooperate with
Magellan (i) prior to Closing in obtaining all Permits which are required by
applicable Laws to be obtained or transferred, or which by custom are obtained
or transferred, prior to Closing, (ii) after Closing, in obtaining all Permits
which by custom are obtained or transferred after closing (which covenant shall
survive Closing).
8 Conditions.
8.1 Purchaser's Conditions Precedent to Closing. The
obligations of the Purchaser under this Agreement are subject to the
satisfaction on or before the Closing Date of all conditions contained in this
Agreement, including each of the following (any of which may be waived by the
Purchaser, in the Purchaser's sole and absolute discretion, but only in
writing):
(a) The Seller shall have performed in all material
respects all of its covenants and other obligations contained in this
Agreement, and all of the Seller's representations and warranties contained in
this Agreement shall be true in all material respects on and as of the Closing
Date.
(b) The title insurance company(ies) conducting the
title examination, which shall be selected by the Purchaser and shall be
reasonably acceptable to Magellan (collectively, the "TITLE COMPANY"), shall be
prepared to issue to the Purchaser or the Purchaser's designee(s), at standard
rates, a Title Policy (as defined in Section 10.2) with respect
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to each Facility or a marked title commitment unconditionally committing to
issue a Title Policy with respect to each Facility within a reasonable time
thereafter.
(c) From the date hereof until the Closing Date, there
shall not have occurred any material adverse change to, or deterioration of,
the physical condition of the Facilities taken as a whole, ordinary wear and
tear excepted.
(d) From the date hereof until the Closing Date, there
shall not have occurred any material adverse change in the business or
financial condition of the Seller from that disclosed in the Operating Reports
and 1996 Financials furnished by Magellan to the Purchaser as a part of the
Seller's Deliveries.
(e) The Purchaser or Magellan, as appropriate, shall
have obtained, or obtained the transfer of, all permits, licenses and approvals
necessary to allow the ownership of the Facilities by the Purchaser and the
continued lawful operation by OpCo of the business conducted therein, except
for those permits, licenses and approvals which by custom are not transferred
or obtained until after a conveyance of property, and except for such consents,
regulatory and other approvals, licenses, permits and other required
documentation the failure to obtain which would not, individually or in the
aggregate, have a material adverse effect on the operation of such business.
(f) The Facilities Lease in the form of Exhibit C
attached hereto shall have been executed by the Purchaser, as lessor, and OpCo,
as tenant.
(g) The Subordination Agreement in the form of Exhibit
G attached hereto shall have been executed by the Purchaser, Magellan and OpCo.
(h) There shall exist no material regulatory or
contractual impediment to, nor any litigation, governmental proceeding or
investigation seeking to enjoin, challenging or seeking damages in connection
with, the operation of the Facilities or the Transactions that, in Magellan's
or the Purchaser's reasonable judgment, would make it inadvisable to proceed
with the consummation of the Transactions.
(i) The Purchaser shall have received all necessary
shareholder approvals (if any) required by its governing documents.
(j) The waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act after any necessary filing by the Purchaser shall
have expired.
(k) The Purchaser shall have received opinions of
counsel to Magellan regarding Magellan's authority to enter into the
transactions, due authorization, good standing, no conflicts with or defaults
under other material agreements, and other customary opinions.
(l) The allocations referenced in Sections 2.1 and 2.2
hereof shall have been agreed upon by the parties and Schedule 2.1 shall have
been attached hereto.
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(m) Receipt of all consents, regulatory and other
approvals, licenses, permits and other documentation required by state and
federal laws and regulations or any agreements to which the Purchaser is
subject necessary to consummate the Transactions and permit the Purchaser to
own the Facilities and OpCo to conduct the businesses operated at the
Facilities, except for such consents, regulatory and other approvals, licenses,
permits and other required documentation the failure to obtain which would not,
individually or in the aggregate, have a material adverse effect on the
operation of such businesses.
(n) The "fairness" opinion obtained by the Purchaser
from ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. shall not have been withdrawn or revoked.
(o) All of the conditions of the other Transaction
Documents shall have been satisfied or waived by the party(ies) entitled to
insist upon satisfaction of same, and the closing of all of the Transactions
shall have occurred or shall occur simultaneously with the Closing hereunder.
8.2 Seller's Conditions Precedent to Closing. The obligations
of the Seller under this Agreement are subject to the satisfaction on or before
the Closing Date of the following conditions (any of which may be waived by
Magellan, in Magellan's sole and absolute discretion, but only in writing):
(a) Magellan shall have consummated a new credit
facility in the amount contemplated by Section 7.1 (r).
(b) Receipt of all consents, regulatory and other
approvals, licenses, permits and other documentation required by state and
federal laws and regulations or any agreements to which the Seller is subject
necessary to consummate the Transactions and permit the Purchaser to own the
Facilities and OpCo to conduct the businesses operated at the Facilities,
except for such consents, regulatory and other approvals, licenses, permits and
other required documentation the failure to obtain which would not,
individually or in the aggregate, have a material adverse effect on the
operation of such businesses.
(c) Magellan shall have received stockholder approval
relating to the Transactions pursuant to the proxy materials for Magellan's
1997 annual meeting.
(d) The waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act after any necessary filing by the Seller shall have
expired.
(e) Magellan shall have complied with all federal and
state laws, rules and regulations applicable to the execution and delivery of
the Franchise Agreement.
(f) Magellan shall have received opinions of counsel to
the Purchaser regarding the Purchaser's authority to enter into the
transactions, due authorization, good standing, no conflicts with or defaults
under other material agreements, and other customary opinions.
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(g) The Master Facilities Lease in the form of Exhibit C
attached hereto shall have been executed by the Purchaser, as lessor, and OpCo,
as tenant.
(h) The Subordination Agreement in the form of Exhibit G
attached hereto shall have been executed by the Purchaser, Magellan and OpCo.
(i) The Purchaser shall have performed in all material
respects all of its covenants and other material obligations contained in this
Agreement, and all of the Purchaser's representations and warranties contained
in this Agreement shall be true in all material respects on and as of the
Closing Date.
(j) The allocations referenced in Sections 2.1 and 2.2
hereof shall have been agreed upon by the parties.
(k) There shall exist no material regulatory or
contractual impediment to, nor any litigation, governmental proceeding or
investigation seeking to enjoin, challenging or seeking damages in connection
with, the operation of the Facilities or the Transactions that, in Magellan's
or the Purchaser's reasonable judgment, would make it inadvisable to proceed
with the consummation of the Transactions.
(l) The "fairness" opinion obtained by Magellan from
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. shall not have been withdrawn or revoked.
(m) All of the conditions of the other Transaction
Documents shall have been satisfied or waived by the party(ies) entitled to
insist upon satisfaction of same, and the closing of all of the Transactions
shall have occurred or shall occur simultaneously with the Closing hereunder.
8.3 Failure of Conditions. If any condition described in
Section 8.1 is not satisfied by the Closing Date, as such date may be extended
pursuant to Section 10.1, the Purchaser shall have the right to terminate this
Agreement by giving written notice of such action to Magellan. If any
condition referenced in Section 8.2 is not satisfied by the Closing Date, as
such date may be extended pursuant to Section 10.1, the Seller shall have the
right to terminate this Agreement by giving written notice of such action to
the Purchaser. Upon delivery of any such termination notice, this Agreement
shall terminate, and all rights and obligations of the parties hereunder shall
be released and discharged, except that Magellan and the Purchaser shall each
remain liable to the other for all damages suffered by the other if the
unsatisfied condition was due to a breach by one party of any of the covenants,
obligations, representations or warranties of such party in this Agreement or
any other failure by such party to use commercially reasonable best efforts to
satisfy conditions precedent to Closing that are within the control of such
party to satisfy.
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9 Damage, Destruction and Condemnation.
-------------------------------------
9.1 Damage; Destruction. In the event of any loss, damage or
destruction to any Facility prior to Closing, Magellan shall immediately notify
the Purchaser thereof and shall promptly commence and diligently prosecute to
completion the repair and restoration thereof to substantially its condition
prior to such casualty. If the damaged Facility is not fully restored prior to
Closing such that the Seller's representations and warranties in Section 7 with
respect thereto are not true at Closing, then the parties shall nevertheless
proceed to Closing hereunder without reduction of the Purchase Price, the
Seller shall assign all of its right, title and interest in and to any
remaining claims the Seller may have under the insurance policies covering the
damaged Facility(ies), as well as any remaining unused and unpaid insurance
proceeds, to OpCo at Closing, and the parties shall cause OpCo to complete such
restoration and repair work after Closing at Seller's sole cost and expense.
The Seller covenants to pay all such costs and expenses of completion to OpCo,
or to reimburse OpCo therefor, within five (5) business days after OpCo's
written request therefor, which covenant shall survive Closing. In addition,
the Seller shall pay OpCo after Closing any lost income from the damaged
Facility(ies) during the period from Closing through the date that business
interruption insurance proceeds under policies of insurance required to be
carried by OpCo pursuant to the Facilities Lease would have been payable had
such insurance been in effect at the time of the casualty. The Seller shall
not agree to or accept any settlement of its insurance claim(s) without
obtaining the Purchaser's prior written approval thereof.
9.2 Condemnation. If any condemnation proceedings are
instituted, or notice of intent to condemn is given, with respect to all or any
material portion of the Facilities, Magellan shall promptly notify the
Purchaser thereof, in which event the Purchaser shall have the option either
(i) to terminate this Agreement with respect to the Facility(ies) affected by
written notice to Magellan, in which event the Purchase Price shall be reduced
by the amount allocated to such Facility(ies) pursuant to Section 2.2, or (ii)
to consummate the purchase of the Facilities without reduction of the Purchase
Price, and the right to collect any condemnation award or compensation for such
condemnation shall be assigned by the Seller to the Purchaser or the
Purchaser's designee at Closing. The Seller shall not agree to or accept any
compromise or condemnation award without obtaining the Purchaser's prior
written approval thereof. For purposes of this Agreement, (i) a condemnation
shall be deemed to include any governmental action which could limit or render
inconvenient the current access to any Facility, and (ii) a "material portion"
of a Facility shall be any portion the taking of which would have a material
adverse effect on the operation of the business conducted at such Facility.
10 Closing.
--------
10.1 Closing Date. The consummation of the transactions
contemplated hereby (the "Closing") shall occur at the offices of King &
Spalding, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other
location upon which Magellan and the Purchaser agree, at 10:00 a.m. on May 31,
1997, or such earlier or later date upon which Magellan and the Purchaser agree
(the "Closing Date"); provided, however, that in the event that the Closing has
not occurred by June 30, 1997, either party shall have the right to terminate
this Agreement by
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written notice to the other. Upon delivery of such notice, this Agreement
shall terminate, and all rights and obligations of the parties hereunder shall
be released and discharged, except that Magellan and the Purchaser shall each
remain liable to the other for all damages suffered by the other if the failure
to close was due to a breach by one party of any of the covenants, obligations,
representations or warranties of such party in this Agreement or any other
failure by such party to use commercially reasonable best efforts to satisfy
conditions precedent to Closing that are within the control of such party to
satisfy.
10.2 Seller's Obligations at Closing. At the Closing, the
Seller will do, or cause to be done, the following:
(a) Documents. The Seller will, and will cause the
Subcos (as appropriate) to, execute, acknowledge (if necessary), and deliver
the following documents:
(i) the Deeds, subject only to the Permitted
Exceptions;
(ii) an Assignment of Leases in the form and
substance of Exhibit H;
(iii) a ▇▇▇▇ of Sale in the form and substance of
Exhibit I;
(iv) an updated certificate executed by the
Seller remaking and reaffirming all representations and
warranties made by the Seller to the Purchaser in
accordance with the provisions of Section 6; and
(v) an opinion of the Seller's attorney to be
dated as of the Closing Date stating (i) that Magellan and
each Subco are authorized to convey its respective
Facility(ies) in accordance with this Agreement, and (ii)
that the Deeds and other documents, instruments, and
agreements executed by the Seller in connection with
Closing have been duly authorized and executed.
(b) Title Policies. For purposes of this Section
10.2(b), a "TYPICAL OWNER'S POLICY" shall mean a standard Extended Coverage
A.L.T.A. Form B Policy of Owner's Title Insurance (10-17-70 revision with '84
amendments), or other form of owner's title insurance policy reasonably
acceptable to the Purchaser available in a state where such A.L.T.A. Form B is
not available and most closely resembling such A.L.T.A. Form B. Magellan will
cause the Title Company to issue to the Purchaser a Typical Owner's Policy with
respect to each Facility, in the amount of the Purchase Price allocated to each
such Facility in accordance with Section 2.2, and insuring that the Purchaser
has fee simple title to each Facility, subject only to the Permitted Exceptions
(a "TITLE POLICY"). In addition, each Title Policy shall contain affirmative
coverage with respect to mechanics' liens (or any reference to such liens in
the general provisions or elsewhere shall be deleted), and each Title Policy
shall include the following endorsements to coverage to the extent available
and commonly used for title insurance covering real property in the state where
the applicable Facility is located: access, survey, contiguity, zoning (ALTA
3.1), subdivision, an endorsement deleting creditor's rights exceptions to
coverage, and such other
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endorsements as may be reasonably requested by Purchaser (the "ENDORSEMENTS").
The Seller shall execute and deliver to the Title Company a customary form of
affidavit and other documents and agreements (to the extent required by the
Title Company in order for the Title Company to issue the Title Policies)
certifying (a) the absence of claims which would give rise to mechanic's and
materialmen's liens, (b) that the Seller and the tenants under the Leases are
the only parties in possession of the Facilities, and (c) that there are no
pending or outstanding suits or judgments against either the Seller or the
Facilities, except as disclosed to the Title Company and for which the Title
Company has not taken exception. The Seller shall also deliver to the Title
Company such evidence as may be required with respect to the authority of the
person executing the deeds of conveyance and other items necessary to issue
title insurance to the Purchaser or the Purchaser's designee(s). In addition,
Magellan and each Subco shall furnish to the Purchaser and the Title Company a
certificate to the effect that none of them is a foreign person, corporation,
partnership, trust or estate under Section 1445 of the Internal Revenue Code.
If Magellan or any Subco fails or refuses to provide such certificate, the
Title Company or Escrow Agent shall have the right to make such deductions from
the Seller's proceeds at Closing and to remit such amounts to the Internal
Revenue Service as are required by the Federal Foreign Investment in Real
Property Tax Act and the regulations promulgated thereunder.
(c) Original Documents. Seller will deliver at the
corporate headquarters of OpCo or the Facilities, as appropriate, to Purchaser
or OpCo, as appropriate, originals within Seller's possession of all items
enumerated in Section 3 of this Agreement.
(d) Possession. Seller will deliver possession of the
Facilities, subject to the Leases.
(e) Keys. Seller shall furnish to OpCo duplicate keys
and master keys to all locks located on the Facilities, properly tagged for
identification, as well as combinations, card keys and cards for the security
systems, if any.
(f) Costs. The Seller will pay all costs allocated to
the Seller pursuant to Section 10.4.
10.3 Purchaser's Obligations at Closing. At the Closing, the
Purchaser will do, or cause to be done, the following:
(a) Payment of Consideration. The Purchaser will pay to
Magellan the Purchase Price, as adjusted in accordance with the provisions of
this Agreement.
(b) Documents. The Purchaser will execute, acknowledge
(if necessary), and deliver an Assignment of Leases in the form and substance
of Exhibit H and an updated certificate executed by the Purchaser remaking and
reaffirming all representations and warranties made by the Purchaser to the
Seller in accordance with the provisions of Section 6.
(c) Additional Documents. The Purchaser will execute
and deliver or obtain for delivery to the Title Company any instruments
reasonably necessary to consummate
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this Agreement, including by way of example, evidence of the authority of the
party executing instruments on behalf of the Purchaser.
(d) Costs. The Purchaser will pay all costs allocated
to the Purchaser pursuant to Section 10.4.
10.4 Costs and Adjustments at Closing. If the prorations and
adjustments provided for in this Section 10.4 impose post-Closing obligations
or liabilities on OpCo, Magellan covenants to use commercially reasonable best
efforts to cause OpCo to perform such obligations and satisfy such liabilities
in a timely manner, which covenant shall survive Closing.
(a) Expenses. The Purchaser shall pay or cause to be
paid all fees of consultants, appraisers, and engineers rendering reports or
opinions to the Purchaser, and all other costs incurred by the Purchaser, in
connection with the Purchaser's due diligence investigation of the Facilities,
except that the Seller shall pay the costs and fees of environmental
consultants and engineers retained to perform Phase I environmental audits and,
if necessary or advisable in the reasonable opinion of the Purchaser, Phase II
environmental audits and prepare environmental reports on the Facilities. The
Purchaser shall also pay all costs and fees associated with the assumption of
any Industrial Revenue Bonds that Purchaser assumes at Closing, including,
without limitation, assumption fees, mortgage fees, mortgage recordation fees,
and mortgagees' title insurance costs. The Seller shall pay the cost of
preparing the Deeds and other conveyancing documents, the costs associated with
releasing any encumbrances of record, all grantor's taxes, transfer taxes,
county taxes, clerks' fees, documentary stamps, release fees, recordation taxes
associated with the Deeds and other conveyancing documents, escrow fees charged
by the Escrow Agent or Title Company, and the costs and fees for the title
examinations, title insurance (including any affirmative coverages and
endorsements required by the Purchaser), and surveys. Each party shall pay its
own attorneys' fees, including local counsel fees.
(b) Real Estate TaxeS. Real estate taxes on the Real
Property for the calendar year of the Closing will be prorated between Magellan
and OpCo as of the Closing Date. If the amount of such taxes is not known at
Closing, the proration of such real estate taxes will be based on the amount of
such taxes for the previous real estate tax fiscal period. As soon as the
actual amount of real estate taxes on the Facilities for the year of Closing is
known, the Seller and OpCo will readjust the amount of such taxes to be paid by
each party with the result that the Seller will pay for those taxes applicable
to the Real Property up to and including the date of Closing and OpCo will pay
for those taxes and assessments applicable to the Real Property after the date
of Closing. The provisions of this Section 10.4(b) will survive the Closing.
(c) Rents. All rents, additional rents and other sums
actually paid under the Leases for the month of Closing will be prorated
between Magellan and OpCo as of the Closing Date, provided that delinquent
amounts will not be considered in such calculation. All rents, percentage
rents, real estate taxes and other costs or charges paid by tenants under the
Leases after the Closing will first be applied to such charges as are then due
and then applied in
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their reverse order of accrual until applied in full. Any amounts that are to
be applied to periods prior to Closing will be delivered by OpCo to the Seller
within thirty (30) days after receipt, net of any costs incurred by OpCo in
collecting such amounts (including, without limitation, attorneys' fees). OpCo
will have no obligation to incur any cost or expense or institute any
litigation to collect delinquent rents, percentage rents, or other costs or
charges owed to the Seller, and the Seller will not exercise any right to
collect such amounts unless OpCo fails to use reasonable efforts to collect
same. In any event, the Seller will not institute suit against any tenant
under the Leases. The provisions of this Section 10.4(c) will survive the
Closing.
(d) Security Deposits. The Seller will pay to OpCo, in
cash at Closing or as a credit against the Purchase Price, the amount of any
security deposits paid pursuant to the Leases.
(e) Other Expenses. All other ordinary operating
expenses for or pertaining to the Facilities, including, but not limited to,
public utility charges, maintenance, service charges, and lease commissions,
will be prorated as of the Closing Date between the Seller and OpCo, it being
understood and agreed that revenues resulting from operation of the Facilities
prior to Closing will belong to Magellan and revenues resulting from operation
of the Facilities from and after Closing will belong to the Purchaser;
provided, however, that the Seller shall pay in full any and all special
assessments which have either been levied or are pending against the Facilities
or any part thereof as of the Closing Date, except if such assessments are due
in installments, in which event the Seller shall only be responsible for paying
such installments due prior to the Closing. OpCo shall be responsible for the
installments due after Closing. The Seller shall pay in full any and all
leasing commissions or other compensation with respect to all Leases and other
tenancies in effect as of the Closing Date, including commissions which are or
may become due on account of options, renewals or extensions.
(f) Adjustment. To the extent that errors are
discovered in, or additional information becomes available with respect to, the
prorations and allocations made at Closing, the Seller and OpCo shall make such
post-Closing adjustments as may be necessary to correct any inaccuracy;
however, all prorations (except for ad valorem taxes) will be final within
ninety (90) days after Closing. Magellan agrees to deliver to OpCo all
invoices and payments related to the Facilities received by the Seller after
Closing and relating to periods after the Closing. In addition, Magellan shall
give the Purchaser written notice of any payments received by the Seller (other
than from OpCo) after Closing relating to periods prior to the Closing in order
to facilitate OpCo's collection of and accounting for Magellan's receivables
after Closing in accordance with the OpCo Contribution Agreement.
10.5 Settlement Statement. At the Closing, the Purchaser and
the Seller shall execute and deliver duplicate originals of a settlement
statement (the "SETTLEMENT STATEMENT") showing all of the payments, adjustments
and prorations provided herein and otherwise agreed upon by them.
11 Indemnifications.
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11.1 Purchaser's Indemnity. The Purchaser hereby agrees to
indemnify the Seller against, and to hold the Seller harmless from, all claims,
demands, causes of action, losses, damages, obligations, debts, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements actually incurred) (collectively, "CLAIMS") asserted against
or incurred by the Seller in connection with or arising out of (a) the
ownership, maintenance or operation of the Facilities and attributable to
events occurring on or after the Closing, during the Purchaser's ownership of
the Facilities, and at any time after the Purchaser or any of its affiliates
(other than OpCo) takes over the operation of the Facilities following an Event
of Default under the Facilities Lease, or (b) a breach of any representation,
warranty or covenant of the Purchaser contained in this Agreement not disclosed
to or actually known by the Seller at or before Closing. The Purchaser's
obligations under this Section 11.1 shall survive the Closing until the
expiration of any applicable statute of limitations for making or bringing such
claims, demands, or causes of action. Notwithstanding anything to the contrary
contained herein, the Purchaser's indemnity obligations hereunder (i) will not
extend to Claims arising out of the negligence, willful misconduct or fraud of
the Seller, and (ii) with respect to indemnification claims under clause (b) of
this Section 11.1, (x) for a period of two (2) years following the Closing
Date, shall not arise until the aggregate Claims arising during such period and
resulting from the breach exceed $1,000,000, at which time such indemnity
obligations shall cover all Claims, and (y) after two (2) years following the
Closing Date, shall not arise until the aggregate Claims arising during such
period and resulting from the breach exceed $10,000,000, at which time such
indemnity obligations shall cover all Claims.
11.2 Seller's Indemnity. The Seller hereby agrees to
indemnify the Purchaser against, and to hold the Purchaser harmless from all
Claims asserted against or incurred by the Purchaser in connection with or
arising out of (a) the ownership, maintenance or operation of the Facilities
and attributable to events occurring prior to the Closing and during the
Seller's ownership of the Facilities, or (b) a breach of any representation,
warranty or covenant of the Seller contained in this Agreement not disclosed to
or actually known by the Purchaser at or before Closing. Notwithstanding the
foregoing, the Seller shall not indemnify the Purchaser for any debts,
liabilities or obligations of the Seller expressly assumed by the Purchaser at
Closing pursuant to this Agreement or any of the other Transaction Documents.
The Seller's obligations under this Section 11.2 shall survive the Closing
until the expiration of any applicable statute of limitations for making or
bringing such claims, demands, or causes of action. Notwithstanding anything
to the contrary contained herein, the Seller's indemnity obligations hereunder
(i) will not extend to Claims arising out of the negligence, willful misconduct
or fraud of the Purchaser, and (ii) with respect to indemnification claims
under clause (b) of this Section 11.2, (x) for a period of two (2) years
following the Closing Date, shall not arise until the aggregate Claims arising
during such period and resulting from the breach exceed $1,000,000, at which
time such indemnity obligations shall cover all Claims, and (y) after two (2)
years following the Closing Date, shall not arise until the aggregate Claims
arising during such period and resulting from the breach exceed $10,000,000, at
which time such indemnity obligations shall cover all Claims.
12 Remedies.
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12.1 Default by Seller. If the Closing fails to occur as a
result of the Seller's material breach of this Agreement, then the Purchaser
may (i) enforce specific performance of the Seller's duties and obligations
under this Agreement, or (ii) terminate this Agreement by giving written notice
thereof to the Seller prior to or at the Closing, in which event the Purchaser
shall also be entitled to seek its direct, actual damages against the Seller
for such default as well as such other relief as may be available at law or in
equity. If prior to Closing the Seller defaults in any of its obligations,
representations or warranties hereunder, whether or not such obligation,
representation or warranty survives Closing, and such default is not disclosed
to or actually known by the Purchaser at or prior to Closing, then the
Purchaser may seek recovery of all of its direct, actual damages incurred as a
result of the Seller's default (subject to any applicable limitations set forth
in Section 11.2) as well as such other relief as may be available at law or in
equity, and the Purchaser will not be deemed to have waived its right to ▇▇▇
for damages by having closed this transaction even though the accuracy of
representations and warranties was a condition precedent to the Purchaser's
obligation to close.
12.2 Default by Purchaser. If the Closing fails to occur as a
result of the Purchaser's material breach of this Agreement, then the Seller
may (i) enforce specific performance of the Purchaser's obligation to close
under this Agreement, or (ii) terminate this Agreement by giving written notice
thereof to the Purchaser prior to or at the Closing, in which event the Seller
shall also be entitled to seek its direct, actual damages against the Purchaser
for such default as well as such other relief as may be available at law or in
equity. If prior to Closing the Purchaser defaults in any of its obligations,
representations or warranties hereunder, whether or not such obligation,
representation or warranty survives Closing, and such default is not disclosed
to or actually known by the Seller at or prior to Closing, then the Seller may
seek recovery of all of its direct, actual damages incurred as a result of the
Purchaser's default (subject to any applicable limitations set forth in Section
11.2) as well as such other relief as may be available at law or in equity, and
the Seller will not be deemed to have waived its right to ▇▇▇ for damages by
having closed this transaction even though the accuracy of representations and
warranties was a condition precedent to the Seller's obligation to close.
12.3 Arbitration. Notwithstanding anything set forth herein
to the contrary, all claims and disputes between the parties arising after the
Closing hereunder shall be subject to resolution by binding arbitration in
Delaware before the American Arbitration Association and governed by the
Commercial Arbitration Rules then in effect.
12.4 Legal Fees. In the event either party to this Agreement
commences legal action of any kind or any arbitration proceeding to enforce the
terms and conditions of this Agreement, the prevailing party in such litigation
or arbitration will be entitled to collect from the other party all costs,
expenses and attorneys' fees incurred in connection with such action or
proceeding.
13 Brokers. Each party hereby represents and warrants to the other
that it has not engaged, dealt with or otherwise discussed this transaction
with any broker, agent or finder. Each party agrees to indemnify and hold the
other harmless from and against any claim arising out of a breach of the
foregoing agreement and representation and warranty.
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14 Changes in the Portfolio.
14.1 Pre-Closing.
(a) Addition of New Facilities. Except as set forth
below, in the event Magellan, any Subco, or any other subsidiary of Magellan at
any time after December 26, 1996, and prior to Closing desires to acquire any
additional behavioral healthcare in-patient facilities (the "NEW FACILITIES"),
which Magellan or such subsidiary intends to own and/or operate in a manner
substantially similar to the Facilities, the Purchaser shall have the right to
require Magellan or such subsidiary to add such New Facility to the Facilities
being acquired hereunder, in which event the Purchase Price shall be increased
by the amount actually paid or required to be paid by Magellan or such
subsidiary for such New Facility. The foregoing sentence shall not apply to
(i) the purchase by Magellan or any subsidiary of Magellan of Parkwood Hospital
in Olive Branch, Mississippi, (ii) acquisitions by Green Spring Health
Services, Inc., or (iii) acquisitions by Magellan or any subsidiary of Magellan
of facilities the primary purpose of which is to provide services pursuant to
contracts with federal, state and local governments and governmental agencies,
providing health and human services, including behavioral healthcare services,
to the mentally retarded, the developmentally disabled, the elderly, persons
under the control or supervision of criminal/juvenile justice systems and other
designated populations. If the Purchaser does not want to add the New Facility
to the Facilities being acquired hereunder, then, subject to compliance with
the provisions of other Transaction Documents, Magellan shall be entitled to
acquire such New Facility. If Magellan acquires such New Facility, then
simultaneously with Closing Magellan shall enter into a management agreement
with OpCo covering such New Facility, pursuant to which OpCo shall manage and
operate such New Facility in exchange for payment by Magellan to OpCo of OpCo's
costs plus a fair market value management fee. Magellan shall negotiate such
management fee with OpCo in good faith. If Magellan and OpCo are unable to
agree upon a fair market value management fee, then such dispute shall be
resolved by appraisal in the manner provided for determining the Fair Market
Value of the Franchise (as such terms are defined in the Franchise Agreement),
as set forth in Section 4.4 of the Franchise Agreement, except that the term
"Qualified Appraiser" used therein, for purposes of determining a fair market
value management fee pursuant to this Section 14.1(a), shall mean an appraiser
who is not in control of, controlled by or under common control with either the
Seller or OpCo and has not been an employee of the Seller or OpCo or any
Affiliate (as defined in the Franchise Agreement) of the Seller or OpCo at any
time, who is qualified to appraise the fair market value of the management fee
and has been actively engaged in the appraisal of assets, rights and
businesses, and, to the extent it is reasonably practicable to locate such an
appraiser, an appraiser who has been actively engaged in the appraisal of
management fee arrangements for healthcare operations, in the state in which
the New Facility is located and who has held his or her certificate as an
M.A.I. or its equivalent for a period of not less than five (5) years
immediately preceding his or her appointment hereunder.
(b) Substitution of Facilities. Magellan shall have the
right at any time not later than thirty (30) days prior to Closing to
substitute a Comparable Facility (as hereinafter defined) for any Facility it
designates (a "DESIGNATED FACILITY"), provided that such substitution will
satisfy the Purchaser's requirements related to taxation as a real estate
investment trust. The
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Purchaser may demand, at Magellan's expense, a reasonably acceptable opinion of
counsel or private letter ruling from the Internal Revenue Service indicating
that the substitution will have no material adverse tax consequences to the
Purchaser. As used herein, the term "COMPARABLE FACILITY" shall mean a
facility reasonably acceptable to the Purchaser, operated as the same type of
business as the Facilities, with an expected future profitability substantially
equivalent to or greater than that of the Designated Facility both immediately
prior to such substitution and as reasonably projected over the term of the
Facilities Lease, taking into account any relevant factors. Magellan shall pay
all costs and expenses incurred in connection with any substitution of
facilities, including reasonable attorneys' fees and expenses. After the
substitution, a Comparable Facility shall be treated as if it were a Facility
under this Agreement.
(c) Closed Facilities. If the Seller elects to close
and cease its business operations in one or more Facilities prior to Closing,
such closed Facility(ies) shall nevertheless be included in the Facilities to
be acquired hereunder, without adjustment in the Purchase Price, and at Closing
shall be included among the Collective Leased Properties (as defined in the
Facilities Lease) covered by the Facilities Lease, without adjustment to the
Rent (as defined in the Facilities Lease) payable thereunder.
14.2 Post-Closing. In the event Magellan, any Subco, or any
other subsidiary of Magellan other than Green Spring at any time or from time
to time from and after Closing desires to acquire any New Facilities, which
Magellan or such subsidiary intends to own and/or operate in a manner
substantially similar to the Facilities, the Purchaser shall have a right of
first refusal to acquire such New Facility upon the terms and conditions
hereinafter set forth. The Purchaser shall have thirty (30) days after receipt
from Magellan of a copy of an executed letter of intent with a seller of any
such New Facility to notify Magellan of its election to exercise such right of
first refusal. The Purchaser's failure so to notify Magellan shall be deemed
to be a waiver of the Purchaser's right to exercise its right of first refusal
with respect to the New Facility that was the subject of Magellan's notice;
however, the Purchaser's failure so to notify Magellan shall not be deemed to
be a waiver of any of the Purchaser's rights or remedies under the
noncompetition or other provisions of the Transaction Documents or a waiver of
its rights with respect to any future New Facility. If the Purchaser elects
not to exercise such right of first refusal, Magellan may close and consummate
such transaction on substantially the terms as set forth in the letter of
intent, subject to compliance with the applicable provisions of the other
Transaction Documents. If Magellan acquires any such New Facility, then
simultaneously with closing of such acquisition Magellan shall enter into a
management agreement with OpCo covering such New Facility, pursuant to which
OpCo shall manage and operate such New Facility in exchange for payment by
Magellan to OpCo of OpCo's costs plus a fair market value management fee.
Magellan shall negotiate such management fee with OpCo in good faith. If
Magellan and OpCo are unable to agree upon a fair market value management fee,
then such dispute shall be resolved by appraisal in the manner provided for
determining the Fair Market Value of the Franchise (as such terms are defined
in the Franchise Agreement), as set forth in Section 4.4 of the Franchise
Agreement, except that the term "Qualified Appraiser" used therein, for
purposes of determining a fair market value management fee pursuant to this
Section 14.2, shall have the meaning given such term in Section 14.1(a) hereof.
If the Purchaser exercises its right of first refusal, the Purchaser shall be
obligated to acquire the New Facility on the terms set
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forth in the letter of intent; provided, however, that the Purchaser's exercise
of such right shall be conditioned upon (1) the Purchaser's and OpCo's
execution at or as of the closing of the acquisition of such New Facility of an
amendment to the Master Facilities Lease adding such New Facility to the leased
premises thereunder and adjusting the rent payable thereunder appropriately
(with the rent payable for such New Facility to be determined on the same basis
as the rent payable for the Facilities during the initial Lease Year, as
defined in the Facilities Lease, escalating on the same basis as the rent
payable for the Facilities), and (2) Magellan's and OpCo's execution at or as
of the closing of the acquisition of such New Facility of (A) an amendment to
the Master Franchise Agreement adding such New Facility to the facilities
covered thereby and adjusting the franchise fee payable thereunder
appropriately (with the franchise fee payable for such New Facility to be
determined on the same basis as the franchise fee payable for the Facilities
during the first and second Contract Years (as defined in the Franchise
Agreement), escalating on the same basis as the franchise fee payable for the
Facilities), and (B) a Subsidiary Franchise Agreement covering such New
Facility, upon substantially the same terms and conditions as the Subsidiary
Franchise Agreement covering each of the other Facilities. Notwithstanding
anything set forth in this Agreement to the contrary, the provisions of this
Section 14.2 shall survive Closing for a period equal to the term of the
Facilities Lease, including all extensions and renewals thereof.
15 Miscellaneous.
15.1 Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors by operation of law and permitted
assigns; provided that neither party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the prior written
consent of the other party hereto, which consent may be granted or withheld in
such party's sole and absolute discretion. Notwithstanding the foregoing, the
Purchaser may assign its rights and obligations hereunder to a wholly owned
subsidiary of the Purchaser or the Purchaser's general partner, provided that
in no event shall the Purchaser be released from liability for performance of
all of its obligations hereunder.
15.2 Notices. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and (a) sent by certified mail,
postage prepaid, return receipt requested, (b) given by established overnight
commercial courier for delivery on the next business day with delivery charges
prepaid or duly charged, (c) personally hand-delivered or (d) sent by facsimile
transmission with confirmation of receipt received, to the applicable address
or facsimile number set forth below:
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As to the Purchaser: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
Crescent Real Estate Equities, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Senior Vice President, Law
Crescent Real Estate Equities, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Shaw, Pittman, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
As to Magellan: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Executive Vice President,
Administrative Services and General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices which are mailed shall be deemed effective upon receipt. Notices which
are hand-delivered shall be deemed effective upon tender to a natural person at
the address shown. Notices which are delivered by overnight courier shall be
deemed given on the next business day after delivery to such courier. Notices
which are delivered by facsimile transmission shall be deemed received upon
electronic confirmation of delivery.
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15.3 Further Assurances. The Seller and the Purchaser agree
to execute, acknowledge and deliver any further agreements, documents,
certificates or instruments that are reasonably necessary or desirable to carry
out the transactions contemplated by this Agreement.
15.4 Amendments; Waiver. No amendment or waiver of any
provision of this Agreement shall be effective unless in writing and signed by
the party or parties against whom enforcement is sought. No failure or delay
by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
15.5 Governing Law; No Rule of Construction. This Agreement
and all transactions hereunder shall be governed by the laws of the State of
Delaware, without regard to the application of choice of law principles. The
rule that an Agreement should be construed against the party drafting it shall
not apply to this Agreement because all parties have played a significant role
in negotiating and drafting this Agreement.
15.6 Captions. The captions used in connection with the
Articles, Sections and Subsections of this Agreement are for convenience only
and will not be deemed to expand or limit the meaning of the language of this
Agreement.
15.7 Exhibits. All exhibits, attachments, annexed instruments
and addenda referred to herein will be considered a part hereof for all
purposes with the same force and effect as if copied verbatim herein.
15.8 Entire Agreement. This Agreement, including all Exhibits
and Schedules hereto, together with all of the other Transaction Documents and
their respective exhibits and schedules, supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof, all of which are null, void and of no further force or
effect.
15.9 Time of Essence. Time is of the essence of each and
every provision of this Agreement. However, if the final date of any period
which is set out in any provision of this Agreement falls on a Saturday, Sunday
or legal holiday under the laws of the United States, the State of Texas or the
State of Georgia then, and in such event, such period shall be extended to the
next day that is not a Saturday, Sunday or legal holiday.
15.10 Severability. If any term, covenant or condition of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.
15.11 Risk of Loss. All risk of loss to the Facilities
occurring prior to the Closing will be on the Seller.
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15.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original document, and all of
which together shall constitute one and the same instrument. Signatures may be
transmitted by facsimile and will be accepted and considered effective as long
as such signatures are followed up with signature pages with original signature
within two (2) business days thereafter.
15.13 WAIVER OF JURY TRIAL; SERVICE OF PROCESS. EACH PARTY
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER PARTY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES HEREUNDER.
EACH PARTY HEREBY CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO
ANY SUCH ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM AT THE ADDRESS SET FORTH FOR
SUCH PARTY IN SECTION 15.2 HEREOF; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL
BE CONSTRUED AS REQUIRING SUCH SERVICE AT SUCH ADDRESS.
15.14 Non-Solicitation. During the Exclusive Period (as
hereinafter defined), Magellan shall not, and shall not permit any of its
representatives, to offer, negotiate, consummate or solicit (including
furnishing any information concerning Magellan's business, properties or other
assets) any offer or proposal for a sale and lease-back of any or all of the
Facilities, a sale and/or lease of any or all of the Contributed Assets,
Purchased Assets, Working Capital Assets or Excluded Assets (to the extent such
Excluded Assets are necessary to provide the services to be provided under the
Franchise Agreement) except, in the case of the Contributed Assets, Purchased
Assets, Working Capital Assets or Excluded Assets (to the extent such Excluded
Assets are necessary to provide the services to be provided under the Franchise
Agreement), in the ordinary course of business or as otherwise permitted under
the OpCo Contribution Agreement, or any other transaction covering any or all
of the Facilities, Magellan's acute care psychiatric hospitals, Contributed
Assets, Purchased Assets, Working Capital Assets or Excluded Assets (to the
extent such Excluded Assets are necessary to provide the services to be
provided under the Franchise Agreement) that is proposed to be accomplished in
a manner similar to that for the Transactions, unless Magellan shall have
received an unsolicited written offer relating to such transaction, from a
reputable buyer, which offer, in the written opinion of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Inc., Magellan's financial advisors, appears to be on terms financially
superior to those offered by the Transactions and which, in the written opinion
of legal counsel to Magellan reasonably acceptable to the Purchaser (which
would include King & Spalding, current legal counsel to Magellan), Magellan's
Board of Directors is legally obligated to consider by principles of fiduciary
duty to stockholders under Delaware Corporation Law. Magellan shall promptly
notify the Purchaser in the event it receives any unsolicited offers or
proposals. In addition, Magellan agrees to notify all other parties who have
expressed an interest in acquiring all of any of the Facilities and/or
Operational Assets that Magellan has entered into exclusive negotiations with
one party (without identifying the Purchaser) and that such other parties'
offers have therefore been rejected, except for any proposals or other
expressions of interest which the Board of Directors of Magellan is required to
consider by principles of fiduciary duty to stockholders under Delaware
Corporation Law. For purposes of this Agreement, the "EXCLUSIVE
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PERIOD" began on December 26, 1996, and shall continue in effect until the
earlier of Closing or termination of this Agreement and the other Transaction
Documents.
15.15 Confidentiality; Public Announcement. The parties shall
maintain in strict confidence all discussions regarding the Transactions, as
well as the fact that such discussions have taken and are taking place;
provided, however, that each party may disclose such information to its
attorneys, consultants, affiliates, directors, officers, employees and
representatives, governmental authorities, lenders and any other parties
assisting a party to the Transaction Documents in conducting its due diligence
investigations. The provisions of this Section will not be applicable to
disclosures of information required by applicable law, rule or regulation and
will not survive the Closing. Neither of the parties hereto shall issue any
press release or make any public announcement of or relating to the
Transactions without the prior consent of the other party, except where a
public announcement is required by law. Where such announcement is required by
law, in the reasonable opinion of counsel to Magellan or the Purchaser, the
other party shall be given opportunity to review and comment upon the proposed
announcement. It is the intent of the parties to publicly announce the
Transactions upon execution of this Agreement and the other Transaction
Documents.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the dates set forth beneath their respective signatures below.
PURCHASER:
----------
ATTEST: CRESCENT REAL ESTATE EQUITIES LIMITED
-------
PARTNERSHIP
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation
By: By:
------------------ --------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President and
-----------------------
Chief Executive Officer
Title:
----------------------
SELLER:
-------
MAGELLAN HEALTH SERVICES, INC.
By: By:
------------------------- ------------------------------------------
Name: Name:
----------------------- ----------------------------------------
Title: Title:
---------------------- ---------------------------------------
[EXHIBITS OMITTED]
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FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this
"Amendment") is made as of the 28th day of February, 1997, by and between
MAGELLAN HEALTH SERVICES, INC., a Delaware corporation ("Magellan" or the
"Seller"), and CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Purchaser").
R E C I T A L S:
A. The parties entered into that certain Real Estate Purchase and
Sale Agreement dated as of January 29, 1997 (the "AGREEMENT") and that certain
Contribution Agreement dated as of January 29, 1997 (the "CONTRIBUTION
AGREEMENT"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Agreement.
B. The parties desire to enter into this Amendment to evidence
their agreement to certain changes to the Agreement, as hereinafter set forth,
and to declare the Contribution Agreement null and void ab initio and of no
force and effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereby agree as follows:
1. Contribution Agreement. The parties hereby declare the
Contribution Agreement to be null and void ab initio and of no force and
effect, as though it had never been entered into by them.
2. Recitals in Agreement. Recital A of the Agreement is amended
and restated in its entirety as follows:
In connection with the transactions contemplated by this
Agreement, Magellan and the Purchaser have entered into that
certain Warrant Purchase Agreement of even date herewith (the
"WARRANT PURCHASE AGREEMENT"). Magellan and the Purchaser
have also agreed that, following the execution of the Warrant
Purchase Agreement and this Agreement and pursuant to the
terms hereof, they will cause certain other agreements to be
executed, including, without limitation, (i) that certain
Operating Agreement of Charter Behavioral Health Systems, LLC
("OPCO"), between Magellan and a designee of the Purchaser to
be formed as a Delaware limited partnership or corporation
("NEW CRESCENT") (the "OPERATING AGREEMENT"), (ii) that
certain Contribution Agreement among Magellan, OpCo
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43
and New Crescent (the "OPCO CONTRIBUTION AGREEMENT"), (iii)
that certain Master Franchise Agreement between Magellan and
OpCo (the "MASTER FRANCHISE AGREEMENT") and certain additional
Franchise Agreements between Magellan and certain subsidiaries
of OpCo (the "SUBSIDIARY FRANCHISE AGREEMENTS, and
collectively with the Master Franchise Agreement, the
"FRANCHISE AGREEMENT"), (iv) that certain Master Lease
Agreement between the Purchaser and OpCo (the "FACILITIES
LEASE"), (v) that certain Subordination Agreement by and among
Magellan, the Purchaser and OpCo (the "SUBORDINATION
AGREEMENT"), (vi) that certain Warrant Purchase Agreement (the
"WARRANT AGREEMENT") between Magellan and New Crescent or
Crescent Corp. (as such term is defined in the OpCo
Contribution Agreement) and (vii) subject to certain
conditions set forth in the OpCo Contribution Agreement, that
certain Bridge Loan and Security Agreement and Promissory Note
between Magellan and OpCo (the "BRIDGE LOAN AGREEMENT") (the
Agreement, this Amendment, the Warrant Purchase Agreement, the
Operating Agreement, the OpCo Contribution Agreement, the
Franchise Agreement, the Facilities Lease, the Subordination
Agreement, the Warrant Agreement and the Bridge Loan Agreement
are referred to collectively as the "TRANSACTION DOCUMENTS,"
and all of the transactions contemplated hereby and thereby
are referred to collectively as the "TRANSACTIONS").
3. Seller's Representations and Warranties.
a. Section 6.1(b) of the Agreement is amended to add
the following new first sentence:
The execution and delivery of this Agreement and
the other Transaction Documents by Magellan and the
Magellan Subsidiaries (as defined in the OpCo
Contribution Agreement) and the performance by
Magellan and the Magellan Subsidiaries of all
obligations under this Agreement and the other
Transaction Documents, including, without
limitation, the sale and delivery of the
Contributed Assets, the Purchased Assets and the
Working Capital Assets (as each such term is
defined in the OpCo Contribution Agreement) as
contemplated under the OpCo Contribution Agreement,
have been duly authorized by all necessary
corporate action on the part of Magellan and the
Magellan Subsidiaries.
b. The following new Section 6.1(bb) is added to the
Agreement:
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44
(bb) Magellan hereby makes the following representations and
warranties to the Purchaser with respect to the operation of
the businesses conducted at the Hospitals (as defined in the
OpCo Contribution Agreement), all of which are true as of the
date hereof:
i. Insurance. A complete and accurate schedule
of all insurance policies (including a
statement of policy limits and deductibles)
held by Magellan and the Magellan
Subsidiaries relating to the Hospitals or the
businesses conducted therein now in force,
including, without limitation, malpractice,
public liability, property damage and workers
compensation or other coverage, has been made
available to the Purchaser. All insurance
policies remain in full force and effect
except where such failure to remain in full
force and effect will not have a material
adverse effect on a Hospital or on the
business of the Hospitals taken as a whole.
ii. Litigation. Except as set forth in Schedule
5.1(f) to the OpCo Contribution Agreement,
there are no lawsuits, proceedings, actions,
arbitrations, claims or governmental
investigations, inquiries or proceedings
pending or, to the knowledge of Magellan,
threatened, against Magellan or any Magellan
Subsidiary seeking damages for an amount in
excess of $1 million, and there is no action,
suit or proceeding by any person or agency
pending or, to the knowledge of Magellan,
threatened which questions the legality or
validity of the transactions contemplated by
the OpCo Contribution Agreement.
iii. Licenses, Accreditation and Third-Party
Payors. Magellan and the Magellan
Subsidiaries hold all licenses, permits,
registrations, approvals, certificates,
contracts, consents, accreditations,
approvals and
3
45
franchises ("OPERATING LICENSES") necessary to
own or lease the Contributed Assets and to
conduct and operate the Hospitals in the
manner presently operated and for
participation in the Medicare and Medicaid
reimbursement programs, including, without
limitation, all licenses, certificates of need
and permits required by the state in which
they operate and by all other appropriate
health care facility licensing agencies,
federal, state, county or local governmental
authorities and regulatory agencies, except
where the failure to hold such Operating
Licenses would not have a material adverse
effect on a Hospital or on the business of the
Hospitals taken as a whole.
iv. The Business. Upon transfer to OpCo of the
Contributed Assets, the Purchased Assets and
the Working Capital Assets as contemplated in
the OpCo Contribution Agreement, and
consummation of the transactions contemplated
by the other Transactional Documents, (i)
OpCo will have or, through the Franchise
Agreement, will have access to all tangible
and intangible assets and all personnel
reasonably necessary to conduct a business
that is substantially the same as and that
operates in accordance with the same
standards of operation as the business of the
Hospitals prior to the Closing, and (ii) OpCo
will have the means to provide the services
specified in Section 7.9 of the OpCo
Contribution Agreement.
v. Contracts. Schedule 5.1(i) to the OpCo
Contribution Agreement contains a listing of
all contracts or series of related contracts
which are material to the business of the
Hospitals, taken as a whole ("MATERIAL
CONTRACTS"), including all amendments,
modifications and side letters thereto,
currently in existence. With respect to each
Material Contract, neither Magellan nor any
Magellan Subsidiary has received a notice of
termination, has sent a notice of
termination, is in default, or has any
knowledge that any other party to such
Material Contracts is in default thereunder.
vi. No Other Owned Hospitals. Except as described
on Schedule 5.1(j), no Magellan Subsidiary
owns or operates any Hospital other than the
Hospitals operated using the assets
4
46
which are being contributed or sold pursuant
to this Agreement and the OpCo Contribution
Agreement.
vii. Financial Statements. All books and records
relating to operating income and expenses of
the Hospitals made available to the Purchaser
by Magellan were and shall be those
maintained by Magellan in regard to the
Hospitals in the normal course of business.
The audited Financial Statements as of and
for the year ended September 30, 1996 (the
"1996 FINANCIAL STATEMENTS") furnished by
Magellan to the Purchaser as a part of the
Seller's Deliveries have been prepared from
the books and records of Magellan in the
ordinary course of business and present
fairly in all material respects the results
of operations of Magellan for the periods
then ended and the financial condition of
Magellan as of the date of the 1996 Financial
Statements.
viii. No Material Adverse Change. Since the date
of Magellan's 1996 Financial Statements,
there has been no material adverse change in
the business or results of operations of
Magellan and the Magellan Subsidiaries taken
as a whole or the business of the Hospitals
taken as a whole.
ix. SEC Reports. The periodic reports filed by
Magellan with the Securities and Exchange
Commission with respect to Magellan's
immediately preceding fiscal year and any
interim periods in its current fiscal year
did not as of their respective dates contain
any untrue statements of a material fact or
omit to state any material fact required to
be stated therein or necessary to make the
statements therein, in the light of the
circumstances under which they were made, not
misleading.
x. Compliance With Laws. Magellan has delivered
to the Purchaser a draft dated January 24,
1997 ("PROXY STATEMENT") of its proxy
statement to shareholders for its Annual
Meeting of Shareholders at which, among other
matters, shareholders of Magellan will
consider and vote on the transactions which
are the subject of the Transaction Documents.
Except as described in the Proxy Statement,
or in documents filed with the Securities and
Exchange Commission pursuant to applicable
law, Magellan is not aware of any material
risk that Magellan is, in the conduct of the
Business (as defined in the OpCo Contribution
5
47
Agreement) prior to the Closing, or that OpCo
will be, in the conduct of the Business after
the Closing, in violation of any applicable
federal law specifically designed to regulate
the healthcare industry, which violation will
have a material adverse effect on Magellan or
OpCo.
4. Representations and Warranties of the Purchaser.
a. Section 6.2(b) of the Agreement is amended to add the
following new first sentence:
The execution and delivery of this Agreement and the
other Transaction Documents by the Purchaser and the
consummation of the transactions contemplated hereby
and thereby have been duly authorized by all
necessary action on the part of the Purchaser,
including its general partner.
b. The following new Section 6.2(d) is added to the
Agreement:
d. SEC Reports. The periodic reports filed by Crescent
Real Estate Equities Company ("CEI") with the
Securities and Exchange Commission with respect to
CEI's immediately preceding fiscal year and any
interim periods in its current fiscal year did not as
of their respective dates contain any untrue
statements of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading.
5. Survival. Section 8.4 of the Agreement is amended to add, as the
new last sentence thereof, the following:
Notwithstanding the foregoing, the representations
and warranties set forth in (i) the first sentence of
Section 6.1(b), (ii) Section 6.1(bb), (iii) the first
sentence of Section 6.2(b), and (iv) Section 6.2(d)
(all as set forth in this Amendment) shall not
survive the Closing except to the extent set forth in
the same or similar form in the OpCo Contribution
Agreement.
6. Seller's Covenants.
a. Section 7.1(k) of the Agreement is amended to add the
following as the new last two sentences:
Magellan and the Purchaser shall cooperate in all
reasonable respects in OpCo's application to obtain
necessary licenses, permits and
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48
governmental approvals. In connection with each such
application on the part of OpCo, Magellan will
promptly furnish OpCo with such information and data
as is reasonably necessary to obtain such license,
permit or approval.
b. The following new Sections 7.1(s) through 7.1(aa) are
added to the Agreement:
s. Magellan's Pre-Closing Covenants.
i. Preservation of Business. Magellan covenants
and agrees, and will cause each Magellan
Subsidiary to covenant and agree, that from
the date of this Agreement to the Closing
Date, except as otherwise specifically agreed
to in writing by the Purchaser, Magellan will
(i) preserve the business organization of the
Hospitals intact, and (ii) preserve for OpCo
the goodwill of suppliers, customers and
others with whom business relationships
exist.
ii. Access to Information and Personnel.
Magellan agrees that the Purchaser shall have
the right to speak to any Magellan personnel
and make such further review as it deems
necessary or advisable, provided that the
Purchaser shall exercise reasonable efforts
to coordinate such review with Magellan and
to minimize disruption to Magellan's
operations. Notwithstanding the foregoing,
nothing herein contained shall be deemed to
provide the Purchaser with the right to
terminate this Agreement or any Transaction
Document as a result of any such review, and
the results of such review shall not be a
condition to the Closing of the Transaction
Documents.
iii. Consents. Magellan shall use its
commercially reasonable best efforts to
obtain consent to the assignment of all of
the contracts assigned under Section 2.1 of
the OpCo Contribution Agreement.
iv. No Change in Assets. Except in the ordinary
course of business consistent with past
practice, Magellan will not and will cause
the Magellan Subsidiaries not to, in any
manner which would result in a material
adverse change in the Contributed Assets,
Purchased Assets or Working Capital Assets
(i) sell or transfer, (ii) create, incur or
assume any
7
49
indebtedness secured by, (iii) grant, create,
incur or suffer to exist any liens, charges
or encumbrances, which did not exist on the
date of this Agreement, on, (iv) incur any
liability or obligation (absolute, accrued or
contingent), with respect to, or (v)
write-down the value on the books and records
of Magellan or a Magellan Subsidiary.
v. No Change in Constitutive Documents. No
change shall be made in the Certificate or
Articles of Incorporation or bylaws of
Magellan or any of the Magellan Subsidiaries
which would result in any representation of
Magellan becoming untrue or in preventing
Magellan from full performance of this
Agreement and the other Transaction
Documents.
vi. Payment and Performance of Obligations.
Unless being disputed in good faith, Magellan
will not fail to pay and perform in its
ordinary course and consistent with past
practice any and all liabilities and
obligations in respect of any of the
Contributed Assets as the same mature and
become owing, or cause or permit any default
or penalty to exist or occur under any of its
contracts or commitments.
vii. No Amendment. Magellan will not amend, alter
or terminate any agreement to which it is a
party and which is to be assumed by OpCo
pursuant to this Agreement other than
renewals or amendments in the ordinary and
regular course of the Hospitals' business.
viii. Changes in Material Contracts. Magellan will
not, and Magellan will not permit a Magellan
Subsidiary to, without the prior written
consent of the Purchaser, (i) other than
Material Contracts entered into in the
ordinary course of business, enter into any
Material Contract that will or could be
binding upon OpCo or other entity operating
the Hospitals and that is not terminable upon
at most 30 days' notice, unless such contract
will be fully performed by Magellan or a
Magellan Subsidiary on or before the Closing,
or (ii) amend, modify, supplement or
terminate any Material Contract other than in
the ordinary course of business. Any consent
requested by Magellan pursuant to this
subparagraph (viii) will be deemed approved
if the Purchaser does not respond by written
notice to Magellan within ten Business Days
after written notice from Magellan.
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50
t. Bridge Financing. On the Closing Date, either (i)
Magellan shall provide OpCo with bridge financing for
a one-year term in the amount of up to $55 million as
requested by OpCo to fund its working capital needs,
including funding OpCo's acquisition of existing
supplies, inventory, prepaid expenses, and other
Working Capital Assets (the form of the Bridge Loan
Agreement is attached as Exhibit D and D-1 to the
OpCo Contribution Agreement) or (ii) OpCo shall have
obtained working capital financing of at least $55
million pursuant to a loan facility with a syndicate
of financial institutions.
u. Financial Statements. Magellan shall provide to the
Purchaser unaudited financial statements relating to
Magellan and the business of the Hospitals as may be
prepared by Magellan through the Closing Date.
v. Insurance Reserves. Magellan will cause Plymouth
Insurance Company Ltd. ("PLYMOUTH") to maintain
reserves in amounts that are reasonably actuarially
adequate to cover risks insured by Plymouth
associated with the operation of the business of the
Hospitals.
w. Trade Accounts. Except for amounts disputed in good
faith, Magellan will cause to be paid all trade
accounts and costs and expenses of operation and
maintenance of the Facilities incurred or
attributable to the period prior to the Closing, and
Magellan agrees to indemnify and hold the Purchaser
harmless from such costs and expenses.
x. Services Agreements. Prior to closing, Magellan, in
its capacity as a joint venturer, will or will cause
any Magellan Subsidiary which is a joint venturer in
any Joint Venture that owns or operates a domestic
Hospital, which Joint Ventures are set forth on
Schedule 7.9 to the OpCo Contribution Agreement and
defined in the Franchise Agreement as "Existing Joint
Ventures" (a "JOINT VENTURE"), to enter into a
services agreement with OpCo for each such Hospital
owned or operated by a Joint Venture, pursuant to
which OpCo will perform, to the extent agreed by
joint venture partners, all of Magellan's obligations
under the Joint Venture agreement in exchange for the
payment to OpCo by Magellan of all distributions and
fees paid to Magellan by or on behalf of the Joint
Venture. Magellan will use its commercially
reasonable best efforts to obtain the consent of
Magellan's joint venture partners to the performance,
by OpCo, of Magellan's obligations under the Joint
Venture Agreements. Each service agreement, as
referred to in this Section 7.1(x), shall be approved
by the Purchaser, which approval shall not be
unreasonably withheld. The services agreement(s)
shall continue in effect until termination of the
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Facilities Lease.
y. Third Party Consents; Further Assurances. Each of
Magellan and the Purchaser shall give (or shall cause
their respective subsidiaries to give) any notices to
third parties, and use, and cause their respective
subsidiaries to use, all commercially reasonable best
efforts to obtain any third party consents necessary,
proper or advisable for it to effect the consummation
of the transactions contemplated by the OpCo
Contribution Agreement.
z. Employee Solicitation. Magellan will not directly or
indirectly induce or attempt to influence any key
employee of the Purchaser to leave such employee's
position except as mutually agreed by the Purchaser
and Magellan. Prior to Closing, Magellan and the
Purchaser will mutually agree as to which employees
will be employed by OpCo, based on the contemplated
functions of OpCo, and which will be employed by
Magellan, based on the contemplated services to be
supplied by Magellan under the Franchise Agreement.
aa. Assets. Magellan agrees and covenants that, between
the date hereof and the Closing Date, there will be
no material change in the type of Working Capital
Assets or type or amount of Contributed Assets or
Purchased Assets.
7. Limitation on Survival of Covenants. Notwithstanding
anything to the contrary contained herein, Section 7.1(v) shall not survive the
Closing except to the extent set forth in the same or similar form in the OpCo
Contribution Agreement.
8. Purchaser's Conditions Precedent to Closing. Section 8.1 of
the Agreement is amended to add the following new subsections:
p. Purchaser shall have caused the formation of New
Crescent as an entity substantially conforming to the
description in Schedule 8.1(p) to the Agreement and
the distribution to the public of shares of New
Crescent (unless New Crescent is the operating
partnership, in which case the distribution of shares
will be from Crescent Corp.).
q. The OpCo Contribution Agreement in the form attached
hereto as Exhibit A, updated to reflect any change in
the name or form of organization of New Crescent
(and/or Crescent Corp.), shall have been executed by
New Crescent, Magellan and OpCo.
r. The Operating Agreement in the form attached to the
OpCo Contribution Agreement as Exhibit C, updated to
reflect any change in the name or form
10
52
of organization of New Crescent, the names of the
Directors and the source of the initial bank
financing referred to therein, and with all missing
information completed prior to execution thereof,
shall have been executed by New Crescent and
Magellan.
s. Unless working capital financing has been obtained
from a financial institution as provided in Section
7.1(t) of the Agreement, the Bridge Loan Agreement in
the form of Exhibit D and D-1 to the OpCo
Contribution Agreement shall have been executed by
Magellan and OpCo.
9. Seller's Conditions Precedent to Closing. Section 8.2 of
the Agreement is amended to add the following new subsections:
n. Purchaser shall have caused the formation of New
Crescent as an entity substantially conforming to the
description in Schedule 8.1(p) to the Agreement and
the distribution to the public of shares of New
Crescent (unless New Crescent is the operating
partnership, in which case the distribution of shares
will be from Crescent Corp.).
o. The OpCo Contribution Agreement in the form attached
hereto as Exhibit A, updated to reflect any change in
the name or form of organization of New Crescent
(and/or Crescent Corp.), shall have been executed by
New Crescent, Magellan and OpCo.
p. The Operating Agreement in the form attached to the
OpCo Contribution Agreement as Exhibit C, updated to
reflect any change in the name or form of
organization of New Crescent, the names of the
Directors and the source of the initial bank
financing referred to therein, and with all missing
information completed prior to execution thereof,
shall have been executed by New Crescent and
Magellan.
q. The Franchise Agreement in the form of Exhibit B and
B-1 to the OpCo Contribution Agreement (except that
(i) the "Territory" for each Franchise Owner, as such
term is defined in the Franchise Agreement, shall be
specified prior to execution thereof in accordance
with the criteria set forth on Schedule 6.1(b) to the
OpCo Contribution Agreement and as reasonably
determined by Magellan with input from the
individuals who have been designated to be the
President and the Chairman of the Governing Board of
OpCo, (ii) the identities and fees payable by each
Franchise Owner shall be specified prior to execution
thereof and (iii) all other missing information shall
be completed prior to execution thereof and
reflecting any change in the amount of the Franchise
Fee thereunder as mutually agreed by the parties)
shall have been executed by Magellan and, as
applicable, OpCo or
11
53
the appropriate subsidiary of OpCo.
r. The Warrant Agreement in the form of Exhibit E to the
OpCo Contribution Agreement (updated to reflect any
change in the name or form of organization of
Crescent Corp. and with the number of shares issuable
under the Warrant completed and the exercise price
completed, reflecting the same premium as used to
calculate the exercise price for the warrants under
the Warrant Purchase Agreement, and based upon a
valuation of Crescent Corp. conducted by a mutually
agreed upon independent appraiser) shall have been
executed by Magellan and Crescent Corp.
10. The following new Section is added to Article 8 of the
Agreement:
8.4 Ownership Limitation on Purchaser. Both parties recognize that if
the principal partner of the Purchaser, CEI, which is a real estate investment
trust under sections 856 to 859 of the Internal Revenue Code of 1986, as
amended (the "CODE") (a "REIT"), were considered to own, directly or by
operation of certain attribution rules, a specified interest in OpCo and/or
entities owned by OpCo which are the Tenant under the Facilities Lease, the
rents to be received by the Purchaser would not constitute "rents from real
property" under section 856(d) of the Code for purposes of determining CEI's
compliance with certain requirements of being a REIT. Both parties agree that,
notwithstanding anything to the contrary in this Agreement or any of the other
Transaction Documents, neither the Purchaser, nor any other entity the assets
of which would be attributed to CEI for federal income tax purposes in any
period during which such entity owned such assets, has the right, option, or
obligation, directly or indirectly, (i) to enter into the OpCo Contribution
Agreement or (ii) otherwise to own any entities constituting such Tenant, and
any attempt to do so will be null and void ab initio. Both parties agree that
the failure of the Purchaser to cause the formation and distribution of an
entity substantially conforming to the description in Schedule 8.1(p) of the
Agreement shall not be considered (i) a breach entitling Seller to enforce
specific performance under Section 12.2(i) of the Agreement or (ii) a breach or
a failure to use commercially reasonable best efforts entitling Seller to
recover damages under the last sentence of Section 8.3 or under Section
12.2(ii) of the Agreement, but only if such failure by the Purchaser occurs in
reliance upon an opinion of Shaw, Pittman, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ to the Purchaser
that, if the Purchaser were to form and distribute an entity substantially
conforming to the description in Schedule 8.1(p) of the Agreement, the rents to
be received by the Purchaser would likely not constitute "rents from real
property" or if such formation and distribution would likely expose the
Purchaser to a tax exceeding $10 million under section 857(b)(5) of the
Internal Revenue Code of 1986, as amended.
11. Continuation of Agreement. The Agreement shall continue in
full force and effect as modified hereby. In the event of any conflicts or
inconsistencies between this Amendment (including all exhibits and Schedules
attached hereto) and the Agreement, the provisions of this Amendment shall
control.
12
54
12. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatories thereto and hereto were upon the same instrument. Signatures
may be transmitted by facsimile and will be accepted and considered effective
as long as such signatures are followed up with signature pages with original
signatures within two (2) business days thereafter.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the parties hereto effective as of the date first above written.
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation,
its sole general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: Chief Financial Officer
------------------------------
MAGELLAN HEALTH SERVICES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Executive Vice President/ CFO
---------------------------------------
13
55
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of OpCo Contribution Agreement
Schedule 8.1(p) Structure of New Crescent
14
56
EXHIBIT A
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT, dated as of _________, 1997 (the
"AGREEMENT"), is entered into by and among Magellan Health Services, Inc., a
Delaware corporation ("MAGELLAN"), Crescent [OPPORTUNITY LIMITED PARTNERSHIP],
a [DELAWARE] limited partnership or [CRESCENT CORP.] ("CRESCENT"), and Charter
Behavioral Health Systems, LLC, formed under the laws of the State of Delaware
("OPCO").
WHEREAS, Magellan and Crescent Real Estate Equities Limited Partnership,
a Delaware limited partnership ("CREELP"), have entered into a Real Estate
Purchase and Sale Agreement dated January 29, 1997, as amended by the First
Amendment to Real Estate Purchase and Sale Agreement dated as of February 28,
1997 ("REAL ESTATE PURCHASE AND SALE AGREEMENT"), pursuant to which Magellan
has agreed to cause certain of its subsidiaries listed on Exhibit A to the Real
Estate Purchase and Sale Agreement to sell to CREELP, and CREELP has agreed to
purchase from those subsidiaries, certain of the real property, related
improvements, furniture, equipment and fixtures owned by those subsidiaries
(the "FACILITIES") and used in the operation of Magellan's acute care
psychiatric hospitals;
WHEREAS, Magellan and Crescent desire to operate and maintain OpCo to
(i) operate the Facilities and certain leased facilities (together, the
"HOSPITALS"); and (ii) engage in the business of hospital-based behavioral
healthcare using OpCo as the operating entity;
WHEREAS, it is a condition to the consummation of the Real Estate
Purchase and Sale Agreement and the other Transaction Documents (as defined in
the Real Estate Purchase and Sale Agreement) that Magellan cause its
subsidiaries listed on Exhibit A to this Agreement (each a "MAGELLAN
SUBSIDIARY" and together the "MAGELLAN SUBSIDIARIES") to contribute certain
assets to OpCo, and that Crescent contribute certain assets to OpCo, in
exchange for all of the interests in OpCo (the "CONTRIBUTION");
WHEREAS, upon closing of the transactions contemplated by this Agreement
and the Real Estate Purchase and Sale Agreement, (i) OpCo and Magellan will
enter into that certain Franchise Agreement, attached as Exhibit B to this
Agreement (the "FRANCHISE AGREEMENT") and will cause each OpCo Subsidiary (as
hereafter defined) to enter into that certain Franchise Agreement attached as
Exhibit B-1 (the "SUBSIDIARY FRANCHISE AGREEMENT" and, collectively with the
Master Franchise Agreement, the "FRANCHISE AGREEMENT"), (ii) Magellan and
Crescent will enter into that certain Operating Agreement of OpCo attached as
Exhibit C to this Agreement (the "OPCO LLC AGREEMENT"), and (iii) unless
financing is provided by a financial
57
institution, OpCo and Magellan will enter into that certain Bridge Loan and
Security Agreement and Promissory Note attached as Exhibits D and D-1 to this
Agreement (the "BRIDGE LOAN AGREEMENT");
WHEREAS, in connection therewith, Crescent [OPPORTUNITY CORP.,] a
[DELAWARE] corporation ("CRESCENT CORP.") and Magellan also will enter into
that certain Warrant Purchase Agreement, attached as Exhibit E to this
Agreement (the "WARRANT AGREEMENT");
A G R E E M E N T:
In consideration of the mutual covenants contained in this Agreement the
parties agree as follows:
SECTION 1.
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
"BUSINESS" shall mean the business of the operation of an acute care
psychiatric hospital, part of an acute care general hospital operating an acute
care psychiatric unit, a behavioral healthcare residential treatment center, a
part of a facility operating a behavioral healthcare residential treatment
center, or other similar facility providing 24-hour behavioral healthcare, and
the delivery of behavioral healthcare from such facility and other affiliated
facilities; such behavioral healthcare to include inpatient hospitalization,
partial hospitalization programs, outpatient therapy, intensive outpatient
therapy, ambulatory detoxification, behavioral modification programs and
related services.
"CONTRIBUTION DATE" shall mean the moment in time immediately prior to
the Closing Date.
1.2 OTHER DEFINED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings given them in the Real Estate
Purchase and Sale Agreement.
SECTION 2.
CONTRIBUTION
2.1 CONTRIBUTION OF ASSETS RELATING TO THE HOSPITALS BY MAGELLAN.
On the Contribution Date, on the terms and subject to the conditions set forth
in this Agreement, and in consideration for a 50% interest in OpCo, Magellan
will cause the relevant Magellan Subsidiary
-2-
58
to (either directly or through Magellan) contribute or assign to OpCo or a
relevant, wholly owned subsidiary of OpCo (an "OPCO SUBSIDIARY") all of such
Magellan Subsidiary's right, title and interest in the following assets (the
"CONTRIBUTED ASSETS") related to the Hospitals:
(a) All patient medical records;
(b) All licenses and permits used in the operation of the
Hospitals, to the extent that such licenses and permits are transferable;
(c) All of the leasehold interests held by any Magellan Subsidiary
as lessee, in real or personal property including, but not limited to:
(i) the leasehold interests in those Hospitals set forth
on Schedule 2.1(c)(i) and
(ii) the leasehold interests in the medical office
buildings set forth on Schedule 2.1(c)(ii);
(d) All of the furniture, fixtures equipment and leasehold
improvements owned by Magellan or a Magellan Subsidiary and located at a
Hospital set forth on Schedule 2.1(c)(i) or a medical office building set forth
on Schedule 2.1(c)(ii);
(e) All contracts with physicians and other healthcare
professionals;
(f) All operating, service, maintenance and loaned employee
contracts;
(g) All payor contracts including but not limited to contracts
with employers, health maintenance organizations, preferred provider
organizations, managed care companies, and insurance companies but excluding
all national and regional contracts with vendors and payors, the benefits of
which will be provided to OpCo by Magellan pursuant to the Franchise Agreement;
(h) The employment contract between Magellan and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇;
(i) The stock of Charter Medical Executive Corporation ("CMEC");
and
(j) Employment files and records.
2.2 EXCLUDED ASSETS. Magellan and Crescent expressly understand
and agree that neither Magellan nor any Magellan Subsidiary is conveying or
contributing to OpCo or any OpCo Subsidiary pursuant to Section 2.1 any of the
following assets, rights or properties or any assets which are not used in the
conduct of the business of the Hospitals (the "EXCLUDED ASSETS"):
(a) Supplies and inventory relating to the Hospitals;
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(b) Notes receivable relating to the Hospitals;
(c) Prepaid assets relating to the Hospitals;
(d) Prepaid expenses relating to the Hospitals;
(e) Lease deposits paid by either Magellan or any Magellan
Subsidiary as tenant in any lease relating to the Hospitals;
(f) Utility deposits relating to the Hospitals;
(g) Cash held in escrow accounts relating to the Hospitals;
(h) The capital stock of any subsidiary of Magellan (other than
CMEC) or Magellan's interest in any joint venture including but not limited to
the joint ventures set forth on Schedule 2.2(h);
(i) Corporate seals, minute books, stock ledgers or other books
and records pertaining to the organization, issuance of stock and
capitalization of the Magellan Subsidiaries;
(j) All rights, properties, and assets used by Magellan primarily
in a business other than the Business and not reasonably necessary for the
operation of the Business;
(k) All rights, properties, and assets that shall have been
transferred or disposed of by Magellan or any of its subsidiaries prior to the
date of this Agreement or prior to Closing in the ordinary course of business;
(l) Trademarks, trade names (including the "Charter" name),
corporate names and logos owned by Magellan and any of its subsidiaries;
(m) All real estate, furniture, fixtures and equipment to be
transferred to Crescent under the Real Estate Purchase and Sale Agreement;
(n) Any deferred tax asset of a Magellan Subsidiary at the Closing
Date;
(o) The Cocoon System (as defined in the Franchise Agreement)
including but not limited to all treatment protocols, written or unwritten, and
future improvements and modifications, whether made by Magellan, a Magellan
Subsidiary, OpCo or an OpCo Franchisee as defined in the Franchise Agreement;
(p) Policy and procedure manuals, written or unwritten, and future
improvements and modifications to such manuals, whether made by Magellan, a
Magellan Subsidiary, OpCo or an OpCo Subsidiary;
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(q) All cash, cash equivalents, short-term investments, marketable
securities, and accounts receivable of Magellan and each Magellan Subsidiary;
(r) Patient related software systems;
(s) TRIMS system;
(t) Purchasing/ordering systems;
(u) Accounting systems;
(v) Call center system;
(w) Intellectual property rights;
(x) Tax refunds, cost report adjustments and settlements relating
to periods prior to the Closing Date and liabilities or assets related to
depreciation recapture relating to periods prior to the Closing Date;
(y) Disproportionate Share Payments; and
(z) Assets (including business records) required in order to
provide the services to be provided by Magellan pursuant to the Franchise
Agreement.
2.3 ASSUMED OBLIGATIONS. Magellan and Crescent expressly
understand and agree that all of the debts, obligations, duties and
liabilities, liquidated or unliquidated, contingent or fixed, relating to or
arising out of the operation of the Hospitals and the business of OpCo after
the Closing (as well as those in subsections (c) and (d) below) but excluding
each and every liability and obligation for which Magellan has agreed to
indemnify OpCo pursuant to Section 8 of this Agreement (the "ASSUMED
OBLIGATIONS") shall be assumed by OpCo as of the Contribution Date regardless
of whether such liabilities are accrued on the books of Magellan or a Magellan
Subsidiary, (or OpCo shall otherwise be responsible for such debts,
liabilities, duties and liabilities), including, without limitation, the
following:
(a) All such liabilities and obligations relating to the
Contributed Assets;
(b) All such liabilities and obligations relating to the Purchased
Assets (as hereafter defined);
(c) All liabilities and obligations relating to paid days off and
accrued vacation arising prior to the Contribution Date;
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(d) All liabilities and obligations relating to sick days arising
prior to the Contribution Date;
(e) All such liabilities and obligations (excluding any payment
obligations) arising from the Consent Decrees and Settlements listed on
Schedule 6.1(p) to the Real Estate Purchase and Sale Agreement;
(f) All such liabilities and obligations arising from OpCo's
participation in the contracts excluded from Section 2.1(f); and
(g) All such liabilities and obligations related to software
sublicensed to OpCo pursuant to the Franchise Agreement which are licensed from
third parties.
2.4 EXCLUDED LIABILITIES. Any and all liabilities of Magellan or
a Magellan Subsidiary arising prior to the Closing, except as set forth in
Section 2.3(c) and (d) (the "EXCLUDED LIABILITIES"), shall not be assumed by
OpCo and shall remain the liabilities and obligations of Magellan or the
relevant Magellan Subsidiary except to the extent covered by insurance, subject
to Section 8.1. Without limiting the effect of the foregoing, the term
"Excluded Liabilities" includes the following liabilities which arose or were
incurred prior to the Closing:
(a) Any liability or obligation in respect of any federal, state,
local, foreign or other tax, levy, assessment or other governmental charge,
including, without limitation, income, business, occupation, franchise,
property, payroll, personal property, sales, transfer, employment, occupancy,
franchise or withholding taxes, and any premium, including, without limitation,
interest, penalties and additions in connection therewith;
(b) Any liability (to the extent not covered by insurance) arising
from any injury to or death of any person or damage to or destruction of any
property, whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory, arising from the
ownership or operation of the Hospitals or the services performed by Magellan
or any of its subsidiaries prior to the Closing;
(c) The charges and taxes which Magellan has agreed to pay
pursuant to Section 9.1 of this Agreement;
(d) Adjustments or refunds of payments required by Medicare,
Medicaid or any other payor as a result of payments prior to the Contribution
Date; and
(e) Fines or penalties assessed and arising out of activities
occurring prior to the Contribution Date.
2.5 CONTRIBUTION OF CASH BY CRESCENT. On the Contribution Date,
on the terms and subject to the conditions set forth in this Agreement and in
consideration for a 50% interest in
- ▇ -
▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ shall contribute to OpCo cash in the amount of $5.0 million (the
"CRESCENT CONTRIBUTION"), which is equal to the purchase price of the Purchased
Assets (as defined below).
SECTION 3.
PURCHASE OF CERTAIN ASSETS BY OPCO
3.1 ASSET PURCHASE. On the Closing Date, OpCo shall purchase from
Charter Medical Information Systems ("CMIS") the assets of CMIS listed on the
computer printout (the "PURCHASED ASSETS") delivered by Magellan to Crescent on
the date hereof, which computer printout is separately bound.
3.2 PURCHASE OF WORKING CAPITAL. On the Closing Date, OpCo shall
purchase (with payment to be made within two business days of purchase) from
the Magellan Subsidiaries the following assets (the "WORKING CAPITAL ASSETS")
relating to or used in the Hospitals and as the same exist on the Closing Date:
(a) Supplies and inventory relating to the Hospitals;
(b) Notes receivable relating to the Hospitals;
(c) Prepaid assets relating to the Hospitals;
(d) Prepaid expenses relating to the Hospitals;
(e) Lease deposits paid by either Magellan or any Magellan
Subsidiary as tenant in any lease relating to the Hospitals; and
(f) Utility deposits relating to the Hospitals.
3.3 PURCHASE PRICE. The aggregate purchase price for the
Purchased Assets is $5.0 million, and for the Working Capital Assets is $8.0
million (in the aggregate, the "PURCHASE PRICE"). On the Closing Date, OpCo
shall pay to Magellan or its designated subsidiary cash equal to $5.0 million,
with payment for the Working Capital Assets to be made within two business days
of the Closing Date from the proceeds of the financing contemplated by Section
7.4.
3.4 POST-CLOSING ADJUSTMENT. Within sixty (60) days after the
Closing Date, Magellan shall deliver to OpCo a statement (the "STATEMENT")
setting forth the net book value of the Working Capital Assets as of the
Closing Date, together with appropriate supporting information. The net book
value of the Working Capital Assets shall be calculated from the books and
records of Magellan, in accordance with past practice. OpCo shall have thirty
(30) days to deliver to Magellan any objections ("OBJECTIONS") it has to the
Statement. If OpCo does
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not submit any such Objections, the Statement shall become final. If OpCo does
deliver any Objections, Magellan and OpCo shall negotiate in good faith to
resolve the Objections as promptly as practical. In the event Magellan and
OpCo are unable to resolve the Objections within thirty (30) days after such
Objections are delivered to Magellan, the matter shall be referred to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP for final resolution of the Objections, which resolution shall be
binding upon the parties. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall resolve the Objections as
promptly as practical, but in any event within forty-five (45) days. If at
any time the Objections to the Statement are resolved in any manner set forth
above, the Statement shall become final (the "FINAL STATEMENT"). If the Final
Statement shows that the amount of Working Capital Assets as of the Closing
Date are less than $8.0 million (the difference, the "SHORTFALL"), Magellan
shall promptly pay OpCo the amount of the Shortfall. If the Final Statement
shows that the Working Capital Assets as of the Closing Date are greater than
$8.0 million (the "SURPLUS"), OpCo shall promptly pay Magellan the amount of
the Surplus.
SECTION 4.
CONSIDERATION AND CLOSING
4.1 AMOUNT AND FORM OF CONSIDERATION. On the Closing Date (i) in
consideration of Magellan's transfer and contribution of the Contributed Assets
to OpCo, OpCo shall deliver to Magellan fifty percent (50%) of the issued and
outstanding capital equity interests in OpCo (the "MAGELLAN INTEREST"), and
(ii) in consideration of Crescent's transfer and contribution of the Crescent
Contribution to OpCo, OpCo shall deliver to Crescent fifty percent (50%) of the
issued and outstanding capital equity interests in OpCo (the "CRESCENT
INTEREST").
4.2 THE CLOSING.
(a) The Contribution shall occur on the date, at the time and
place, and subject to the conditions set forth in the Real Estate Purchase and
Sale Agreement and herein.
(b) On the Closing Date, Magellan, Crescent, OpCo and each OpCo
Subsidiary (as applicable) shall execute and deliver the following documents:
(i) the OpCo LLC Agreement;
(ii) the Franchise Agreement;
(iii) subject to Section 7.1(t) of the Real Estate Purchase
and Sale Agreement, the Bridge Loan Agreement;
(iv) the Warrant Agreement;
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(v) subject to obtaining any required consent, assignments
of the contracts and leases included in the Contributed Assets, the
Purchased Assets and the Working Capital Assets; and
(vi) such other instruments and documents, in form
and substance reasonably acceptable to Magellan and Crescent, as may
be necessary to effect the closing of the transactions contemplated by
this Agreement or to evidence the Contribution.
(c) On the Closing Date, Magellan shall execute and deliver to
OpCo the following:
(i) Assignments, bills of sale or other documents
or instruments of transfer to transfer to OpCo all tangible and
intangible personal property included in the Contributed Assets, the
Purchased Assets and the Working Capital Assets (which documents shall
include a general warranty to title of such assets except for those
assets which are leased, purchased on an installment basis or
encumbered by an Assumed Obligation);
(ii) Such instruments of assumption and other instruments
or documents as may be necessary to effect OpCo's assumption of the
Assumed Obligations; and
(iii) Such other instruments or documents as may be necessary
to effect the closing of the transactions contemplated by this
Agreement.
(d) At the closing, Crescent shall deliver by wire transfer, to
an account number designated by OpCo, the Crescent Contribution in immediately
available funds.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF MAGELLAN. Magellan
represents and warrants to OpCo, as of the date hereof as follows:
(a) ORGANIZATION AND POWER. Magellan and the Magellan
Subsidiaries are corporations or limited liability companies duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation or formation, with power and authority to conduct the
businesses in which they are engaged, to lease and own the properties leased or
owned by them and to enter into and perform their obligations under this
Agreement. Each of Magellan and the Magellan Subsidiaries is qualified to do
business and is in good standing as a foreign corporation or limited liability
company in each jurisdiction where each of them is required to be so qualified,
except where the failure to so qualify would not have a material adverse effect
on a Hospital or on the business of the Hospitals taken as a whole.
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(b) AUTHORIZATION. The execution and delivery of this Agreement
by Magellan and the Magellan Subsidiaries, the performance by Magellan and the
Magellan Subsidiaries of all obligations under this Agreement and the sale and
delivery of the Contributed Assets, the Purchased Assets and the Working
Capital Assets have been duly authorized by all necessary corporate action on
the part of Magellan and the Magellan Subsidiaries. This Agreement has been
duly executed and delivered by Magellan and the Magellan Subsidiaries and
constitutes the legal, valid and binding obligation of each of them,
enforceable against each of Magellan and the Magellan Subsidiaries in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditor's
rights generally.
(c) NO VIOLATION. The execution and delivery of this Agreement by
Magellan and the Magellan Subsidiaries, and the consummation by Magellan and
the Magellan Subsidiaries of the transactions contemplated in this Agreement
will not conflict with or result in the breach or violation of any of the terms
or conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default under, (i) the Certificate or Articles of Incorporation
or Bylaws of Magellan or any Magellan Subsidiary, (ii) except as set forth on
Schedule 5.1(c), any material instrument, contract or other agreement to which
Magellan or any Magellan Subsidiary is a party or by which Magellan or any
Magellan Subsidiary is bound, (iii) any material provision of law, statute,
rule or regulation of any court or governmental authority to which Magellan or
any Magellan Subsidiary is subject (assuming applicable approvals and consents
in Schedule 5.1(d) are obtained), or (iv) except as set forth on Schedule
5.1(c), any judgment, decree, franchise, order, license or permit applicable to
Magellan or any Magellan Subsidiary, except where such conflict, breach,
violation or default would not have a material adverse effect on a Hospital or
on the business of the Hospitals taken as a whole.
(d) CONSENTS. Except as set forth in Schedule 5.1(d), no material
consent, approval, license or authorization of any third party, governmental
agency, commission, board or public authority is required in connection with
the execution, delivery and performance of this Agreement by Magellan or any
Magellan subsidiary.
(e) INSURANCE. A complete and accurate schedule of all insurance
policies (including a statement of policy limits and deductibles) held by
Magellan and the Magellan Subsidiaries relating to the Hospitals or the
Business now in force, including, without limitation, malpractice, public
liability, property damage and workers compensation or other coverage, has been
made available to Crescent. All insurance policies remain in full force and
effect except where such failure to remain in full force and effect will not
have a material adverse effect on a Hospital or on the business of the
Hospitals taken as a whole.
(f) LITIGATION. Except as set forth in Schedule 5.1(f), there are
no lawsuits, proceedings, actions, arbitrations, claims or governmental
investigations, inquiries or proceedings pending or, to the knowledge of
Magellan, threatened, against Magellan or any Magellan Subsidiary seeking
damages for an amount in excess of $1 million, and there is no action, suit or
proceeding by any person or agency pending or, to the knowledge of Magellan,
threatened which questions the legality or validity of the transactions
contemplated hereby.
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(g) LICENSES, ACCREDITATION AND THIRD-PARTY PAYORS. Magellan and
the Magellan Subsidiaries hold all licenses, permits, registrations, approvals,
certificates, contracts, consents, accreditations, approvals and franchises
("LICENSES AND PERMITS") necessary to own or lease the Contributed Assets and
to conduct and operate the Hospitals in the manner presently operated and for
participation in the Medicare and Medicaid reimbursement programs, including,
without limitation, all licenses, certificates of need and permits required by
the state in which they operate and by all other appropriate health care
facility licensing agencies, federal, state, county or local governmental
authorities and regulatory agencies, except where the failure to hold such
Licenses and Permits would not have a material adverse effect on a Hospital or
on the business of the Hospitals taken as a whole.
(h) THE BUSINESS. Upon transfer to OpCo of the Contributed
Assets, the Purchased Assets and the Working Capital Assets, and consummation
of the transactions contemplated by the other Transactional Documents, (i) OpCo
will have or, through the Franchise Agreement, will have access to all tangible
and intangible assets and all personnel reasonably necessary to conduct a
business that is substantially the same as and that operates in accordance with
the same standards of operation as the business of the Hospitals prior to the
Closing, and (ii) OpCo will have the means to provide the services specified in
Section 7.9.
(i) CONTRACTS. Schedule 5.1(i) contains a listing of all
contracts or series of related contracts which are material to the business of
the Hospitals, taken as a whole ("MATERIAL CONTRACTS"), including all
amendments, modifications and side letters thereto, currently in existence.
With respect to each Material Contract, neither Magellan nor any Magellan
Subsidiary has received a notice of termination, has sent a notice of
termination, is in default, or has any knowledge that any other party to such
Material Contracts is in default thereunder.
(j) NO OTHER OWNED HOSPITALS. Except as described on Schedule
5.1(j), no Magellan Subsidiary owns or operates any Hospital other than the
Hospitals operated using the assets which are being contributed or sold
pursuant to this Agreement.
(k) FINANCIAL STATEMENTS. All books and records relating to
operating income and expenses of the Hospitals made available to CREELP or
Crescent by Magellan were and shall be those maintained by Magellan in regard
to the Hospitals in the normal course of business. The audited Financial
Statements as of and for the year ended September 30, 1996 (the "1996 FINANCIAL
STATEMENTS") furnished by Magellan to CREELP as a part of Magellan's Deliveries
(as defined in the Real Estate Purchase and Sale Agreement) have been prepared
from the books and records of Magellan in the ordinary course of business and
present fairly in all material respects the results of operations of Magellan
for the periods then ended and the financial condition of Magellan as of the
date of the 1996 Financial Statements.
(l) NO MATERIAL ADVERSE CHANGE. Since the date of Magellan's 1996
Financial Statements, there has been no material adverse change in the business
or results of operations of
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Magellan and the Magellan Subsidiaries taken as a whole or the business of the
Hospitals taken as a whole.
(m) SEC REPORTS. The periodic reports filed by Magellan with the
Securities and Exchange Commission with respect to Magellan's immediately
preceding fiscal year and any interim periods in its current fiscal year did
not as of their respective dates contain any untrue statements of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(n) COMPLIANCE WITH LAWS. Magellan has delivered to Crescent or
CREELP a draft dated __________, 1997 ("Proxy Statement") of its proxy
statement to shareholders for its Annual Meeting of Shareholders at which,
among other matters, shareholders of Magellan will consider and vote on the
transactions which are the subject of the Transaction Documents. Except as
described in the Proxy Statement, or in documents filed with the Securities and
Exchange Commission pursuant to applicable law, Magellan is not aware of any
material risk that Magellan is, in the conduct of the Business prior to the
closing of the transactions contemplated by the Transaction Documents or that
OpCo will be, in the conduct of the Business after the closing of the
transactions contemplated by the Transaction Documents, in violation of any
applicable federal law specifically designed to regulate the healthcare
industry, which violation will have a material adverse effect on Magellan or
OpCo.
5.2 REPRESENTATIONS AND WARRANTIES OF CRESCENT. Crescent hereby
represents and warrants to OpCo as follows:
(a) AUTHORIZATIONS, ETC. The execution and delivery of this
Agreement by Crescent and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Crescent, including its General Partner. This Agreement has been duly executed
and delivered by Crescent and constitutes the valid and binding obligation of
Crescent, enforceable against Crescent in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws of affecting creditor's rights generally.
(b) NO VIOLATION. Neither the execution and delivery of this
Agreement, nor the consummation by Crescent of the transactions contemplated
hereby will conflict with or result in the breach or violation of any of the
terms or conditions of, or constitute (or with notice or lapse of time or both
would constitute) a default under, (i) organizational documents, including the
Partnership Agreement of Crescent, (ii) any material instrument, contract or
other agreement to which Crescent is a party or by which Crescent is bound,
(iii) any material provision of law, statute, rule or regulation of any court
or governmental authority to which Crescent is subject, including any provision
relating to the status of Crescent Real Estate Equities Company ("CEI") as a
real estate investment trust, or (iv) any judgment, decree, franchise, order,
license or permit applicable to Crescent, except where such conflict, breach,
violation or default would not have a material adverse effect on Crescent.
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(c) CONSENTS. Except as set forth in Schedule 5.2(c), no material
consent, approval, license or authorization of any third party, governmental
agency, commission, board or public authority is required in connection with
the execution, delivery and performance of this Agreement by Crescent.
(d) SEC REPORTS. The periodic reports filed by CEI with the
Securities and Exchange Commission with respect to CEI's immediately preceding
fiscal year and any interim periods in its current fiscal year did not as of
their respective dates contain any untrue statements of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 6.
CONDITIONS TO CLOSING
6.1 PRE-CLOSING CONDITIONS. The consummation of the transactions
contemplated by this Agreement by each party is subject to satisfaction of the
following conditions, as applicable:
(a) Satisfaction of all of the conditions to closing set forth in
the Real Estate Purchase and Sale Agreement;
(b) Execution of the Franchise Agreement in the form of Exhibit B
and B-1 hereto (except that (i) the "Territory" for each Franchise Owner (as
defined in the Franchise Agreement) shall be specified prior to execution
thereof in accordance with the criteria set forth on Schedule 6.1(b) and as
reasonably determined by Magellan with input from the individuals who have been
designated to be the President and the Chairman of the Governing Board of OpCo,
(ii) the identities and fees payable by each Franchise Owner shall be specified
prior to execution thereof and (iii) all other missing information shall be
completed prior to execution thereof and reflecting any change in the amount of
the Franchise Fee thereunder as mutually agreed by the parties);
(c) Execution of the OpCo L.L.C. Agreement in the form of Exhibit
C hereto, updated to reflect any change in the name or form of organization of
Crescent, the names of the Directors and the source of the initial bank
financing referred to therein and with all missing information completed prior
to execution thereof;
(d) Unless working capital financing has been obtained from a
financial institution as provided in Section 7.1(t) of the Real Estate Purchase
and Sale Agreement, execution of the Bridge Loan Agreement in the form of
Exhibit D and D-1;
(e) Execution of the Warrant Agreement in the form of Exhibit E
hereto (updated to reflect any change in the name or form of organization of
Crescent Corp. and with the number of
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shares issuable under the Warrant completed and the exercise price completed,
reflecting the same premium as used to calculate the exercise price for the
warrants under the Magellan Warrant Agreement, and based upon a valuation of
Crescent Corp. conducted by a mutually agreed upon independent appraiser); and
(f) The truth and accuracy in all material respects of the
representations and warranties made herein and compliance in all material
respects with all covenants and the delivery by each party of an officer's
certificate so stating.
6.2 FAILURE OF CONDITIONS. If any condition described in
subsections (a) - (f) of Section 6.1 is not satisfied by the Closing Date,
Crescent shall have the right to terminate this Agreement by giving written
notice of such action to Magellan and Magellan shall have the right to
terminate by giving written notice to Crescent. Upon delivery of any such
termination notice, this Agreement shall terminate, and all rights and
obligations of the parties hereunder shall be released and discharged, except
that Magellan, on the one hand, and Crescent, on the other hand, shall each
remain liable to the other for all damages suffered by the other if the
unsatisfied condition was due to a breach by one party of any of the covenants,
obligations, representations or warranties of such party in this Agreement or
any other failure by such party to use its commercially reasonable best efforts
to satisfy conditions precedent to Closing that are within the control of such
party to satisfy.
SECTION 7.
COVENANTS AND AGREEMENTS
Magellan covenants and agrees, and will cause each Magellan Subsidiary
to covenant and agree, and, as applicable, Crescent and OpCo covenant and agree
as follows:
7.1 UNLISTED ASSETS. To the extent that, subsequent to Closing,
an asset or right that is used in the conduct of the business of the Hospitals
prior to Closing and that was not listed as a Contributed Asset, Purchased
Asset, Working Capital Asset or an Excluded Asset is discovered to exist,
either such asset or right shall be conveyed to OpCo without charge or OpCo
shall receive the benefits of ownership of such asset through the Franchise
Agreement at no additional charge (except to the extent that the asset results
in an increase in franchise fees due to the gross revenue component of the
franchise fees);
7.2 ASSIGNMENT OR TRANSFER OF CONTRIBUTED ASSETS. To the extent
that any of the Contributed Assets cannot be assigned or otherwise transferred
to OpCo, Magellan will use its commercially reasonable best efforts to create
an alternative structure that will provide OpCo with substantially the same
rights, and produce substantially the same economic effect, as that which would
have been provided or produced if the Contributed Assets had been transferred
or assigned.
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7.3 PARTIES' COMMERCIALLY REASONABLE BEST EFFORTS. Magellan and
Crescent agree to use their commercially reasonable best efforts to cause all
their covenants and agreements and all conditions precedent to the consummation
of the Transactions contemplated by this Agreement to be performed, satisfied
and fulfilled.
7.4 INSURANCE RESERVES. Magellan will cause Plymouth Insurance
Company Ltd. ("PLYMOUTH") to maintain reserves in amounts that are reasonably
actuarially adequate to cover risks insured by Plymouth associated with the
operation of the business of the Hospitals.
7.5 ACCOUNTS RECEIVABLE. OpCo shall pay to Magellan all amounts
actually received by OpCo in payment of receivables relating to the business of
the Hospitals, which receivables were existing as of (or accrued prior to) the
Closing Date, in exchange for a fee payable to OpCo by Magellan equal to 5% of
receivables collected by OpCo and received by OpCo or Magellan. The
receivables will be collected in accordance with the procedures (including the
level of effort to be expended) established by Charter Behavioral Health
Systems, Inc. prior to the Closing Date and disclosed to OpCo in writing on or
before the Closing Date. Any receivables remaining uncollected 120 days or
more after the Closing Date will be turned over to Magellan at its request and
OpCo shall have no further obligations as to such receivables but will continue
collection efforts for all receivables not so delivered to Magellan.
7.6 BROKERS. Each party represents and warrants to the other that
it has not engaged, dealt with or otherwise discussed this Agreement or the
Transactions with any broker, agent or finder.
7.7 SPECIFIC PERFORMANCE. The parties acknowledge and agree that
their respective rights and obligations that will arise out of this Agreement
are unique and irreplaceable, and that the failure of either party to perform
its obligations under this Agreement or any of the Transaction Documents would
result in damage to the other party that could not be adequately compensated by
a monetary award. Subject to Section 8.4 of the Real Estate Purchase and Sale
Agreement but notwithstanding anything else to the contrary, the parties
therefore agree that if either party fails to perform its obligations hereunder
or with respect to any of the Transaction Documents, the other party may, in
addition to all other remedies, seek an order of specific performance from a
court of appropriate jurisdiction.
7.8 THIRD PARTY CONSENTS; FURTHER ASSURANCES.
(a) If any party shall fail to obtain any third party consent
necessary, proper or advisable to effect the consummation of the Contribution,
the purchase of the Purchased Assets or the purchase of the Working Capital
Assets, such party shall use all commercially reasonable best efforts, and
shall take any such actions reasonably requested by the other parties hereto,
to minimize any adverse effect upon OpCo's business resulting, or that could
reasonably be expected to result after the date hereof, from the failure to
obtain such consent.
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(b) In addition to the actions, contracts and other agreements and
documents and other papers specifically required to be taken or delivered
pursuant to this Agreement, each of the parties hereto shall execute such
contracts and other agreements and documents and take such further actions as
may be reasonably required or desirable to carry out the provisions of this
Agreement.
7.9 SERVICES AGREEMENTS. Prior to closing, Magellan, in its
capacity as a joint venturer, will or will cause any Magellan Subsidiary which
is a joint venturer in any Joint Venture that owns or operates a domestic
Hospital, which Joint Ventures are set forth on Schedule 7.9 and defined in the
Franchise Agreement as "Existing Joint Ventures" (a "JOINT VENTURE"), to enter
into a services agreement with OpCo for each such Hospital owned or operated by
a Joint Venture, pursuant to which OpCo will perform, to the extent agreed by
joint venture partners, all of Magellan's obligations under the Joint Venture
agreement in exchange for the payment to OpCo by Magellan of all distributions
and fees paid to Magellan by or on behalf of the Joint Venture. Magellan will
use its commercially reasonable best efforts to obtain the consent of
Magellan's joint venture partners to the performance, by OpCo, of Magellan's
obligations under the Joint Venture Agreements. Each service agreement, as
referred to in this Section 7.9, shall be approved by Crescent, which approval
shall not be unreasonably withheld. The services agreement(s) shall continue
in effect until termination of the Facilities Lease.
7.10 EMPLOYEE BENEFITS. The parties agree to establish employee
benefit plans for the employees of OpCo providing for overall benefits in an
amount similar to the benefits provided by the employee benefit plans in effect
on the date hereof at Magellan and the Magellan Subsidiaries.
7.11 TITLE TO PROPERTY. Magellan and the Magellan Subsidiaries
shall convey at the Closing pursuant to the form of ▇▇▇▇ of sale attached as
Exhibit I to the Real Estate Purchase and Sale Agreement, (i) good and
marketable title to the Contributed Assets, the Purchased Assets and the
Working Capital Assets (to OpCo or such OpCo Subsidiary as OpCo directs) owned
by Magellan or a Magellan Subsidiary, subject to no liens, encumbrances or
material claims whatsoever, except for the Assumed Obligations and except for
any liens, encumbrances and claims related to the purchase of property on an
installment basis in the ordinary course of business, and (ii) all of their
rights and interest in the Contributed Assets, the Purchased Assets, and the
Working Capital Assets leased by Magellan or a Magellan Subsidiary.
7.12 RIGHT TO INSPECT. Magellan shall grant OpCo the right to
inspect any and all business records retained by Magellan pursuant to Section
2.2(z) during reasonable business hours and upon reasonable prior notice. OpCo
shall grant Magellan access to any business records transferred to OpCo during
reasonable business hours and upon reasonable prior notice.
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SECTION 8.
INDEMNIFICATION
8.1 INDEMNIFICATION OBLIGATIONS OF MAGELLAN. Magellan shall
indemnify and hold harmless OpCo and its subsidiaries and affiliates, each of
their respective officers, directors, partners, employees, agents and
representatives and each of the permitted successors and assigns of any of the
foregoing (collectively, the "OPCO INDEMNIFIED PARTIES") from, against and in
respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines and other judgments (at equity or at law) and
damages (including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) (collectively,
"CLAIMS AND DAMAGES") arising out of or relating to (i) any breach of any
representation, warranty, covenant, agreement or undertaking made by Magellan
in this Agreement or in any certificate, agreement, exhibit or schedule
delivered pursuant to this Agreement, or (ii) the ownership, lease or operation
of the Hospitals and attributable to events arising prior to the Closing
(including claims made after Closing related to events occurring prior to
Closing) other than Assumed Liabilities or liabilities to the extent they are
covered by existing insurance, provided, however, that if the insurer does not
pay insured amounts under the terms of the policies, Magellan shall indemnify
the OpCo Indemnified Parties for such debts, liabilities and obligations. The
Claims and Damages of the OpCo Indemnified Parties described in this Section
8.1 as to which the OpCo Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "OPCO LOSSES." Notwithstanding
anything to the contrary contained herein, Magellan's indemnity obligations
hereunder will not extend to claims arising out of willful misconduct or fraud
of OpCo.
8.2 INDEMNIFICATION OBLIGATIONS OF OPCO. OpCo shall indemnify
and hold harmless Magellan and its subsidiaries and affiliates and each of
their respective officers, directors, partners, employees, agents and
representatives and each of the permitted successors and assigns of any of the
foregoing (collectively, the "MAGELLAN INDEMNIFIED PARTIES") from, against and
in respect of any and all Claims and Damages arising out of or relating to any
debts, liabilities and obligations relating to (i) the ownership, lease or
operation of the Hospitals and attributable to events which arise after the
Closing or (ii) the Assumed Obligations. The Claims and Damages of the
Magellan Indemnified Parties described in this Section 8.2 as to which the
Magellan Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as "MAGELLAN LOSSES." Notwithstanding anything to the
contrary contained herein, OpCo's indemnity obligations hereunder will not
extend to claims arising out of willful misconduct or fraud of Magellan.
8.3 INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by an OpCo Indemnified Party or a
Magellan Indemnified Party (each an "INDEMNIFIED PARTY") of notice by a third
party of any complaint or the commencement of any action or proceeding with
respect to which indemnification is being sought hereunder, such Indemnified
Party shall notify OpCo, if the Indemnified Party is a
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Magellan Indemnified Party, or Magellan, if the Indemnified Party is a OpCo
Indemnified Party (the "INDEMNIFYING PARTY"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from liability for such claim arising otherwise than under this Agreement and
such failure to so notify the Indemnifying Party shall relieve the Indemnifying
Party from liability which the Indemnifying Party may have under this Agreement
with respect to such claim if, but only if, and only to the extent that, such
failure to notify the Indemnifying Party results in the forfeiture by the
Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party shall
have the right, upon written notice to the Indemnified Party, to assume the
defense of such action or proceeding, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of the
reasonable fees and disbursements of such counsel. In the event, however, that
the Indemnifying Party declines or fails to assume the defense of the action or
proceeding or to employ counsel reasonably satisfactory to the Indemnified
Party, in either case in a timely manner, then such Indemnified Party may
employ counsel to represent or defend it in any such action or proceeding and
the Indemnifying Party shall pay the reasonable fees and disbursements of such
counsel as incurred; provided, however, that the Indemnifying Party shall not
be required to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any jurisdiction in any single action or proceeding. In
any action or proceeding with respect to which indemnification is being sought
hereunder, the Indemnified Party or the Indemnifying Party, whichever is not
assuming the defense of such action, shall have the right to participate in
such litigation and to retain its own counsel at such party's own expense.
The Indemnifying Party or the Indemnified Party, as the case may be, shall at
all times use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status of the
defense of any action, the defense of which it is maintaining and to cooperate
in good faith with the Indemnifying Party or the Indemnified Party, as the case
may be, with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless such settlement, compromise or consent includes an unconditional
release of the Indemnifying Party from all liability arising out of such claim.
An Indemnifying Party may not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry of
any judgment with respect to which indemnification is being sought hereunder
unless such settlement, compromise or consent includes an unconditional release
of the Indemnified Party from all liability arising out of such claim and does
not contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of
the Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice shall
specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate
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Indemnifying Party shall establish the merits and amount of such claim (by
mutual agreement, litigation, arbitration or otherwise) and, within five
business days of the final determination of the merits and amount of such
claim, the Indemnifying Party shall deliver to the Indemnified Party
immediately available funds in an amount equal to such claim as determined
hereunder.
(d) LIABILITY LIMITS. To the extent any claim for OpCo Losses
against Magellan is based upon the alleged inaccuracy of any representation or
warranty contained in Article 5 of this Agreement, then, for a period beginning
on the Closing Date and ending two years later, Magellan shall only be liable
for such OpCo Losses solely to the extent that any such OpCo Losses exceed in
the aggregate in any one year, one million dollars ($1,000,000.00). Beginning
two years after the Closing Date, Magellan shall be liable for such OpCo Losses
solely to the extent that any such OpCo Losses exceed in the aggregate during
such period, ten million dollars ($10,000,000.00); provided, however, that to
the extent a claim for OpCo Losses is not based on the inaccuracy of a
representation or warranty contained in Article 4 of this Agreement, then such
claim shall not be subject to the limitations above, nor shall the amount of
any such OpCo Losses be included with other OpCo Losses in determining whether
such basket amounts have been reached.
(e) CLAIM PERIODS. Indemnification obligations under this Article
7 for pre-closing and post-closing debts, liabilities or obligations and for a
breach of representations, warranties or covenants shall survive until
expiration of the applicable statute of limitations.
SECTION 9.
MISCELLANEOUS
9.1 FEES AND EXPENSES; TRANSFER COSTS. Fees and expenses incident
to the negotiation, preparation and execution of this Agreement and the
performance of the Contribution (including attorneys', accountants', financial
advisors' and other advisors' fees and disbursements) shall be borne by the
party incurring the expense. Magellan shall pay all sales, transfer and other
recording charges and conveyance taxes in connection with the transfer of the
Contributed Assets, the Purchased Assets and the Working Capital Assets to OpCo
and in connection with the transfer of any licenses or permits to OpCo.
9.2 NOTICES. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and (a) sent by certified mail,
postage prepaid, return receipt requested, (b) given by established overnight
commercial courier for delivery on the next business day with delivery charges
prepaid or duly charged, (c) personally hand-delivered or (d) sent by
facsimile
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transmission with confirmation of receipt received, to the applicable address
or facsimile number set forth below:
(i) if to Crescent:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
President and Chief Operating Officer
Crescent
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Senior Vice President, Law
Crescent
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Shaw, Pittman, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Magellan:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Executive Vice President,
Administrative Services and General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile:(▇▇▇) ▇▇▇-▇▇▇▇
Notices which are mailed shall be deemed effective upon receipt. Notices which
are hand-delivered shall be deemed effective upon tender to a natural person at
the address shown. Notices which are delivered by overnight courier shall be
deemed given on the next business day after delivery to such courier. Notices
which are delivered by facsimile transmission shall be deemed received upon
electronic confirmation of delivery.
9.3 ENTIRE AGREEMENT. This Agreement and the Transaction
Documents (together with the exhibits and schedules hereto and thereto)
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof, all of which are
null, void and of no force or effect.
9.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions of this Agreement may be waived, only by a written instrument signed
by the parties hereto or, in the case of a waiver, by the party waiving
compliance.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, without regard to the application of choice of law
principles. The rule that an Agreement should be construed against the party
drafting it shall not apply to this Agreement because all parties have played a
significant role in negotiating and drafting this Agreement.
9.6 SEVERABILITY. If any term, covenant or condition of this
Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision, and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained in this Agreement.
9.7 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.8 NO ASSIGNMENT. This Agreement may not be assigned without the
prior written consent of the other party, except that Crescent shall assign all
of its rights and obligations hereunder to New Crescent.
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9.9 ARBITRATION.
(a) Following Closing, any controversy, claim or question of
interpretation arising out of or relating to this Agreement or the breach
thereof shall be finally settled by arbitration in Delaware, under the
then-effective Commercial Arbitration Rules of the American Arbitration
Association as modified by this Agreement, and judgment on the award rendered
by the arbitrators may be entered in any court having jurisdiction. The award
rendered by the arbitrators shall be final and binding on the parties and not
subject to further appeal. Such arbitration can be initiated by written notice
by either party (the "CLAIMANT") to the other party, which notice shall
identify the Claimant's selected arbitrator. The party receiving such notice
(the "RESPONDENT") shall identify its arbitrator within ten (10) business days
following its receipt of such notice. The arbitrator selected by the Claimant
and the arbitrator selected by the Respondent shall, within ten (10) business
days of their appointment, select a third neutral arbitrator. In the event
that they are unable to do so, either party may request the American
Arbitration Association to appoint the third neutral arbitrator. The
arbitrators shall have the authority to award any remedy or relief that a court
in Delaware could order or grant, including, without limitation, specific
performance of any obligation created under this Agreement, the issuance of
injunctive or other provisional relief, or the imposition of sanctions for
abuse or frustration of the arbitration process. The arbitration award will be
in writing and specify the factual and legal basis for the award.
(b) The arbitrators shall instruct the non-prevailing party to pay
all costs of the proceedings, including the fees and expenses of the
arbitrators and the reasonable attorneys' fees and expenses of the prevailing
party. If the arbitrators determine that there is not a prevailing party, each
party shall be instructed to bear its own costs and to pay one-half of the fees
and expenses of the arbitrators.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
9.11 EXHIBITS AND SCHEDULES. The exhibits and schedules delivered
or to be delivered pursuant to this Agreement are a part of this Agreement as
if set forth in full within the Agreement.
9.12 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CRESCENT
By:
-----------------------------------
Name:
Title:
MAGELLAN HEALTH SERVICES, INC.
By:
-----------------------------------
Name:
Title:
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SCHEDULE 8.1(P)
STRUCTURE OF NEW CRESCENT
Name: Crescent Opportunity Corp., or such other
name as Crescent Real Estate Equities Limited Partnership
("OPERATING PARTNERSHIP") shall approve ("NEW CRESCENT
CORP.").
Structure: Following the consummation of certain entity formation and
spin-off transactions, New Crescent Corp. shall be a
publicly held corporation, and may be the corporate parent
of a group of affiliated entities substantially similar to
the direct and indirect subsidiary of Crescent Real Estate
Equities Company ("CEI"). Without limiting the generality of
the foregoing, New Crescent Corp. may, directly or through a
wholly owned subsidiary, own a substantial (initially 99%)
limited partnership interest in an umbrella operating
partnership ("NEW CRESCENT OPERATING PARTNERSHIP") whose
sole general partner would be a second wholly owned
subsidiary ("NEW GENERAL PARTNER").
Management: New Crescent Corp.'s and New General Partner's senior
management to be same as CEI as follows:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Chairman
▇▇▇▇ ▇. ▇▇▇▇ Vice Chairman
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ CEO
Rainwater, ▇▇▇▇ and ▇▇▇▇▇▇▇ will also serve as directors of
New Crescent Corp. with three-year staggered terms.
Business: Long-term, strategic partnering with New Crescent Corp. and,
if applicable, New Crescent Operating Partnership provides
significant competitive advantage to CEI and Operating
Partnership to exploit large transactions with non-REIT
components. Shortly after the spin-off of New Crescent
Corp., New Crescent Corp. or New Crescent Operating
Partnership shall acquire (i) OpCo interest; (ii) tenant's
interest in six hotel and resort properties owned by
Operating Partnership, as well as tenant's interest in
subsequently acquired resort properties; and (iii) other
assets. The Operating Partnership will guarantee the
obligations of New Crescent Corp. or New Crescent Operating
Partnership (whichever entity holds the member interest in
OpCo) to (i) contribute $2.5 million in cash at closing and
(ii) make member loans up to the amount of $17.5 million.
80
Capitalization: Capital structure and incentive compensation plans and
arrangements of New Crescent Corp. and, if applicable, New
Crescent Operating Partnership to be on an equivalent basis
with that of CEI and Operating Partnership (taken
together), subject to possible dilution for the acquisition
of the Hotel tenant assets described above, depending on
whether the hotel and resort tenants are acquired by
purchase or contribution.
Strategic As part of spin-off transaction, New Crescent Corp. or New
Partnering: Crescent Operating Partnership will enter into a long-term
(at least 15 years) investment opportunity and
non-competition agreement with Operating Partnership
providing for the following:
(i) a first right for Operating Partnership to participate
in the real estate component of all investment opportunity
generated by New Crescent Corp. or New Crescent Operating
Partnership.
(ii) a first right for New Crescent Corp. or New Crescent
Operating Partnership to lease resort and other properties
from Operating Partnership and provide management relating
thereto, and to participate in the operating/non-real
estate component of transactions developed by Operating
Partnership.