-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MvAI932XRAjd/Hovj+tPK1WzjUO1JbvrR3HHauTXBk1Y0yx+RKiXsr1hO0WWTTev DApQfSalmmQAa515V1CaDg== 0000898430-96-005771.txt : 19961217 0000898430-96-005771.hdr.sgml : 19961217 ACCESSION NUMBER: 0000898430-96-005771 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961130 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961216 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSITIONAL HOSPITALS CORP CENTRAL INDEX KEY: 0000022764 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 941599386 STATE OF INCORPORATION: NV FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07008 FILM NUMBER: 96681386 BUSINESS ADDRESS: STREET 1: 5110 WEST SAHARA AVE STREET 2: STE 118 CITY: LAS VEGAS STATE: NV ZIP: 89102 BUSINESS PHONE: 7022593600 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNITY PSYCHIATRIC CENTERS /NV/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSOR TO COMMUNITY PSYCHIATRIC CENTERS/CA/ DATE OF NAME CHANGE: 19600201 8-K 1 FORM 8-K UNITED STATES SECURITIES EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report: December 16, 1996 Date of earliest event reported: November 30, 1996 Transitional Hospitals Corporation - ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 1-7008 94-1599386 - ----------------------- ------------------------ ------------------ (State of incorporation) (Commission File Number) (IRS Employer Identification No.) 5110 W Sahara Avenue, Las Vegas, Nevada 89102 - ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) (702) 257-3600 - -------------------------------------------------- Registrant's telephone number, including area code Community Psychiatric Centers - -------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Disposition of Assets: On November 30, 1996, Transitional Hospitals Corporation (the "Company" or "THC") consummated the sale of its psychiatric operations in the U.S. and Puerto Rico (with certain limited exceptions set forth below) to Behavioral Healthcare Corporation ("BHC"). Prior to such sale, BHC owned 17 psychiatric hospitals. At the November 30 closing, the Company transferred title to 22 freestanding psychiatric hospitals, a joint venture interest in another psychiatric operation, an outpatient psychiatric center, two closed hospitals and vacant land located at three sites in California. Two other operating hospitals and a joint venture interest (the "Escrowed Assets") are to be transferred to BHC upon receipt of necessary regulatory approvals, and BHC is receiving the economic benefit thereof pending such transfer. The transfer of these assets has been reflected in the pro forma financial statements included in item 7 of this document. At the initial closing, the Company received $60,000,000 in cash, 2,214,400 shares of BHC Common Stock, 5,072,579 shares of BHC Series A Preferred Stock and 46,902 shares of BHC Series B Preferred Stock. In general, the Series A Preferred converts into BHC Common Stock on a share for share basis on sales and dispositions of the Series A Preferred Stock by the Company and under certain other limited circumstances. At the closing of the sale of the Escrowed Assets, the Company will receive an additional 3,538,000 to 3,785,600 shares of BHC Common Stock, an additional 578,844 shares of BHC Series A Preferred Stock and from 1,675 to 3,350 additional shares of BHC Series B Preferred Stock. In determining the amount of the consideration to be paid to the Company, the parties compared their respective EBITDAs (Earnings before interest, taxes, depreciation, and amortization) and used multiples generally accorded to publicly-traded psychiatric hospitals. Richard L. Conte, the Company's Chairman and Chief Executive Officer, will serve as Chairman of BHC's Board of Directors. Wendy L. Simpson, the Company's Chief Operating Officer and Chief Financial Officer, and Robert L. Thomas, a Company board member, will also serve on BHC's eleven member Board of Directors. Mr. Conte has been engaged as BHC's Chairman for a four year period for annual compensation of $200,000, which is payable to the Company so long as Mr. Conte is an employee of the Company. BHC has also agreed to grant Mr. Conte options to purchase BHC Common Stock in an amount equal to one-half the options granted from time to time to BHC's Chief Executive Officer. As previously reported on the Company's Form 8-K dated July 5, 1996, the Company completed the sale of Priory Hospitals Group, the Company's United Kingdom operations. As a result of such sale and BHC sale, the Company's primary business will be long-term acute care hospital services. Item 7. Financial Statement: The following unaudited pro forma financial information gives effect to the sales of the Company's psychiatric operations as described in Item 2, as if the sales occurred as of November 30, 1994 for purposes of the unaudited Pro Forma Condensed Combined Statements of Operations and as of August 31, 1996 for purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet for the sale of the U.S. and Puerto Rico psychiatric operations. The U.K. psychiatric sale is accounted for in the August 31, 1996 balance sheet as the sale was consummated in June 1996. The unaudited pro forma condensed combined financial statements are based on historical audited financial statements for the year ended November 30, 1995 and the unaudited financial statements as of and for the nine months ended August 31, 1996. Pro forma adjustments are based upon preliminary estimates, available information and certain assumptions and adjustments described in the notes to the Unaudited Pro Forma Condensed Combined Financial Statements. The unaudited pro forma financial information presented herein is not necessarily indicative of the results of operations or financial position that THC would have obtained had such events occurred at the beginning of the period, as assumed, or of the future results of THC. The unaudited pro forma financial statements should be read in conjunction with the audited financial statements for the year ended November 30, 1995 included in the Company's Form 10-K and the unaudited financial statements for the nine months ended August 31, 1996 included in the Company's Form 10-Q. The unaudited pro forma financial information included in this Form 8-K contains certain forward looking statements that are subject to risk and uncertainty. There can be no assurance that these future results will be achieved. Readers are cautioned that a number of factors, including those identified below, could adversely affect the Company's ability to obtain these results: (a) uncertainties in the regulatory environment due to possible future health care reform legislation, including changes in Medicare and Medicaid reimbursements programs, (b) increased payor pressures in the domestic psychiatric industry with respect to negotiated rates and other cost-containment measures that could affect the Company's equity earnings in BHC, and (c) increased competition among hospitals, managed care providers and other health care providers. Exhibits -------- 99.1. First Amendment to Asset Purchase Agreement between the Company and BHC, dated November 30, 1996. 99.2. Amendment to Agreement and Plan of Merger, between the Company and BHC, dated November 30, 1996. Transitional Hospitals Corporation (Formerly Community Psychiatric Centers) Pro Forma Condensed Combined Statement of Operations (in thousands, except per share amounts) (unaudited)
Nine months ended August 31, 1996 ------------------------------------------------------------------------ US UK Psychiatric Psychiatric Operations Operations Divested Divested Pro Forma Pro Forma Historical (A) (B) Adjustments as Adjusted ------------------------------------------------------------------------ Revenues: Net operating revenues $373,700 $(156,835) $(37,190) $(1,316)(D) $178,359 Equity in earnings of affiliate 4,250 (E) 4,250 Gain on sale of UK subsidiary 55,515 (55,515) Investment and other income 2,628 (505) 345 (C) 2,468 -------- --------- -------- ------- -------- 431,843 (157,340) (92,705) 3,279 185,077 Costs and expenses: Operating expense 292,766 (125,864) (24,390) 142,512 General & Administrative expense 25,484 (7,232) (3,007) 15,245 Bad debt expense 13,961 (8,613) (351) 4,997 Depreciation & amortization 17,182 (6,278) (1,954) 8,950 Interest expense 3,761 (117) (612) (2,225)(D) 807 Settlement costs Impairment loss Restructuring charge 2,165 (2,165) 0 -------- --------- -------- ------- -------- 355,319 (150,269) (30,314) (2,225) 172,511 -------- --------- -------- ------- -------- Net income (loss) before taxes 76,524 (7,071) (62,391) 5,504 12,566 Income taxes (credit) 27,467 (2,970) (21,852) 2,103 (F) 4,748 -------- --------- -------- ------- -------- Net income (loss) $ 49,057 $ (4,101) $(40,539) $ 3,401 $ 7,818 ======== ========= ======== ======= ======== Net income per share $ 1.11 $ 0.18 Weighted average shares outstanding 44,142 44,142 Year ended November 30, 1995 ------------------------------------------------------------------------ US UK Psychiatric Psychiatric Operations Operations Divested Divested Pro Forma Pro Forma Historical (A) (B) Adjustments as Adjusted ----------------------------------------------------------------------- Revenues: Net operating revenues $506,663 $(248,408) $(63,319) $(2,088)(D) $192,848 Equity in earnings of affiliate 5,000 (E) 5,000 Gain on sale of UK subsidiary Investment and other income 2,513 (721) 693 (C) 2,485 -------- --------- -------- ------ -------- 509,176 (249,129) (63,319) 3,605 200,333 Costs and expenses: Operating expense 384,818 (189,793) (41,597) 153,428 General & Administrative expense 39,444 (14,895) (3,338) 21,211 Bad debt expense 28,732 (25,596) (504) 2,632 Depreciation & amortization 23,344 (10,743) (3,215) 9,386 Interest expense 5,256 (156) (632) (3,360)(D) 1,108 Settlement costs 45,985 (45,985) 0 Impairment loss 46,021 (44,723) 1,298 Restructuring charge 2,110 (2,110) 0 -------- --------- -------- ------ -------- 575,710 (334,001) (49,286) (3,360) 189,063 -------- --------- -------- ------ -------- Net income (loss) before taxes (66,534) 84,872 (14,033) 6,965 11,270 Income taxes (credit) (24,902) 31,488 (4,912) 2,661 (F) 4,335 -------- --------- -------- ------ -------- Net income (loss) $(41,632) $ 53,384 $ (9,121) $ 4,304 $ 6,935 ======== ========= ======== ======= ======== Net income per share $(0.95) $0.16 Weighted average shares outstanding 43,642 43,642
See notes to unaudited pro forma condensed combined financial statements. Transitional Hospitals Corporation (Formerly Community Psychiatric Centers) Pro Forma Combined Balance Sheet (in thousands, except par value data) (Unaudited)
As of August 31, 1996 ----------------------------------------------------- US Psychiatric Hospitals Pro Forma Historical Divested (A) Adjustments Pro Forma ----------------------------------------------------- Assets: Current assets: Cash and cash equivalents $ 73,763 $ 59,637 $133,400 Accounts receivable, less allowance doubtful accounts 100,553 (43,035) 57,518 Prepaid expenses and other current assets 20,307 (4,316) 15,991 Property held for sale 24,808 (8,729) 16,079 Deferred income taxes 3,444 10,372 13,816 Refundable taxes 1,213 17,590 18,803 -------- --------- -------- -------- Total current assets 224,088 31,519 0 255,607 Property, buildings and equipment, at cost less accumulated depreciation 289,225 (139,383) 149,842 Deferred income taxes 18,956 18,956 Other assets 25,863 (1,462) 24,401 Investment in BHC 70,000 70,000 Goodwill 4,014 (3,946) 68 -------- --------- -------- -------- Total Assets $562,146 $ (43,272) 0 $518,874 ======== ========= ======== Liabilities and Stockholders' Equity: Current liabilities: Accounts payable & accrued expenses $ 41,967 $ (11,962) $ 30,005 Payable to third parties under reimbursement contracts 6,782 9,717 16,499 Income taxes payable 8,549 (95) 8,454 Current maturities on long-debt 8,670 8,670 Other accrued liabilities 525 14,683 15,208 -------- --------- -------- -------- Total current liabilities 66,493 12,343 0 78,836 Long-term debt 17,885 17,885 Deferred compensation 2,001 2,001 Deferred income taxes 17,313 (7,057) 10,256 Stockholders' Equity: Common stock, par value $1 a share, authorized 100,000 shares; issued 46,856 shares 46,856 46,856 Additional paid in capital 56,657 56,657 Retained earnings 376,119 (48,558) 327,561 Less: treasury stock at cost (21,178) (21,178) -------- --------- -------- -------- Total stockholders' equity 458,454 (48,558) 409,896 -------- --------- -------- Total Liabilities & Stockholders' Equity $562,146 $ (43,272) 0 $518,874 ======== ========= ========
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The adjustments to arrive at the Unaudited Pro Forma Combined Financial Statements are as follows: (A) To reflect the diverstiture of the Company's U.S. and Puerto Rico psychiatric operations to Behavioral HealthCare Corporation ("BHC") for $60 million in cash and $70 million in stock, representing a 44.2% common equity interest in BHC. Based on preliminary estimates, the Company expects to record a pre-tax loss of approximately $80 million on the sale of the U.S. and Puerto Rico psychiatric operations. This loss will be partially offset by the $55.5 million pre-tax gain recorded on the sale of the U.K. psychiatric operations discussed in note (B) below. THC's common equity interest in BHC net income will be recorded on the equity method of accounting. The pro forma results include estimated reductions in general and administrative expenses related to positions and other expenses which have been eliminated as a result of the sale of the psychiatric operations. The pro forma results also exclude the operating revenues and expenses related to closed psychiatric hospitals that have been sold or are being held for sale. The pro forma results include provisions for estimated current holding costs for closed hospitals that are held for sale as of November 30, 1996. These costs are estimated to be $1.8 million and $1.4 million for fiscal year ended November 30, 1995 and the nine months ended August 31, 1996, respectively. Included in other accrued liabilities are estimated reserves for severance, transaction, and other costs related to the disposition of the psychiatric operations. For purposes of the pro forma condensed combined statement of operations for the year ended November 30, 1995, settlement costs of $46.0 million, impairment losses of $44.7 million and net restructuring charges of $2.1 million have been included with the divested operations as these costs relate directly to activities of the U.S. psychiatric division. (B) To reflect the divestiture of the Company's United Kingdom operations, Priory Hospitals Group ("PHG"), after payment of taxes, severance costs, employee performance bonuses, transaction fees and PHG's debt, net proceeds were approximately $97 million, which included a $4.6 million 15% subordinated note due 2009 issued by the buyer. The pre-tax gain recorded on the sale of PHG was $55.5 million. (C) To reflect interest income on the $4.6 million note due from Foray at an annual interest rate of 15%. (D) To reflect the reduction in interest expense and the related reimbursement impact due to the June 1996 re-payment of $50 million of long-term debt which bore interest at approximately 8%. (E) To reflect THC's estimated pro forma equity earnings of BHC. Excluded from this amount for fiscal year 1995 are charges related to the adoption of FASB Statement 121, "Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of" as well as restructuring charges related to closed facilities that are being held for sale by BHC and will not be part of BHC's ongoing operations. The before tax impact of these charges was $18.7 million for BHC. Excluded from the 1995 pro forma earnings of BHC are the settlement costs related to the CPC shareholder lawsuit from 1991 which is considered to be a nonrecurring charge. Also excluded from the 1995 pro forma earnings of BHC was an extraordinary item of $2.4 million related to a debt restructuring. (F) To reflect income taxes at THC's effective tax rate of 38.2%. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Transitional Hospitals Corporation Dated: December 16, 1996 By Wendy Simpson ---------------------------------- Chief Financial Officer EX-99.1 2 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT EXHIBIT 99.1 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ------------------------------------------- THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment"), dated November 30, 1996, is by and between TRANSITIONAL HOSPITALS CORPORATION, a Nevada corporation formerly known as Community Psychiatric Centers ("THC"), COMMUNITY PSYCHIATRIC CENTERS OF CALIFORNIA, a California corporation, COMMUNITY PSYCHIATRIC CENTERS PROPERTIES INCORPORATED, a California corporation, COMMUNITY PSYCHIATRIC CENTERS OF FLORIDA, INC., a Florida corporation, FLORIDA HOSPITAL PROPERTIES, INC., a Florida corporation, COMMUNITY PSYCHIATRIC CENTERS OF IDAHO, INC., an Idaho corporation, COMMUNITY PSYCHIATRIC CENTERS OF NORTH CAROLINA, INC., a North Carolina corporation, CPC PROPERTIES OF NORTH CAROLINA, INC., a North Carolina corporation, COMMUNITY PSYCHIATRIC CENTERS OF KANSAS, INC., a Kansas corporation, CPC PROPERTIES OF KANSAS, INC., a Kansas corporation, C.P.C. OF LOUISIANA, INC., a Louisiana corporation, CPC PROPERTIES OF LOUISIANA, INC., a Louisiana corporation, COMMUNITY PSYCHIATRIC CENTERS PROPERTIES OF TEXAS, INC., a Texas corporation, COMMUNITY PSYCHIATRIC CENTERS OF UTAH, INC., a Utah corporation, COMMUNITY PSYCHIATRIC CENTERS PROPERTIES OF UTAH, INC., a Utah corporation, COMMUNITY PSYCHIATRIC CENTERS OF ARKANSAS, INC., an Arkansas corporation, CPC PROPERTIES OF ARKANSAS, INC., an Arkansas corporation, COMMUNITY PSYCHIATRIC CENTERS OF MISSISSIPPI, INC., a Mississippi corporation, CPC PROPERTIES OF MISSISSIPPI, INC., a Mississippi corporation, COMMUNITY PSYCHIATRIC CENTERS OF MISSOURI, INC., a Missouri corporation, CPC PROPERTIES OF MISSOURI, INC., a Missouri corporation, OLD ORCHARD HOSPITAL, INC., an Illinois corporation, CPC PROPERTIES OF ILLINOIS, INC., an Illinois corporation, COMMUNITY PSYCHIATRIC CENTERS OF INDIANA, INC., an Indiana corporation, CPC PROPERTIES OF INDIANA, INC., an Indiana corporation, CPC MANAGED CARE HEALTH SERVICES, INC., a Delaware corporation, and COMMUNITY BEHAVIORAL HEALTH SYSTEM, INC., a Louisiana corporation (collectively with THC, the "Sellers"), and BEHAVIORAL HEALTHCARE CORPORATION, a Delaware corporation (the "Parent"), individually and on behalf of various wholly-owned subsidiaries of the Parent (collectively, the "BHC Subs"), (the BHC Subs and the Parent, collectively and individually when the context so requires, the "Purchaser"). RECITALS -------- A. Certain of the parties hereto entered into that certain Asset Purchase Agreement dated as of October 22, 1996 (the "Asset Purchase Agreement"), pursuant to which, among other things, the Purchaser will acquire THC's psychiatric hospital and residential treatment center business in the United States (other than the property and assets used by Southwind Hospital, which hospital is not being sold to Purchaser). Capitalized terms used herein without definition shall have the meanings set forth in the Asset Purchase Agreement. B. The parties have been unable to obtain as of the date hereof all approvals and licenses from the State of Washington necessary to permit the transfer of the assets relating to the Hospital (the "Fairfax Hospital") located in Kirkland, Washington (the "Fairfax Hospital Assets"). C. The parties desire to amend the Asset Purchase Agreement to provide for the consummation, effective as of November 30, 1996, of the transactions contemplated by the Asset Purchase Agreement, other than the transfer of the Fairfax Hospital Assets, and to permit the transfer of the Fairfax Hospital Assets at such time as all required approvals and licenses from the State of Washington have been obtained. D. The parties desire to make certain other modifications to the Asset Purchase Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements, the parties hereto hereby agree to amend the Asset Purchase Agreement as follows: 1. Section 1.4 of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows: "Section 1.4. Purchase Price. The total purchase price of the Assets -------------- (the "Purchase Price") shall be cash (represented by one or more cashier's checks) in the aggregate amount of $60,000,000 together with 2,504,694 shares of the common stock, par value $.01 per share, of Purchaser (the "BHC Common Stock"), 5,651,368 shares of the Series A Preferred Stock, par value $.01 per share, of Purchaser, having the terms and conditions set forth in Schedule 1.4 (the "BHC Preferred ------------ Stock"), and 46,902 shares of the Series B Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), of Purchaser, having the terms and conditions set forth in Schedule 1.4 (the "Series B ------------ Preferred Stock"). The Purchase Price shall be payable to each Seller as follows: (a) In consideration of the sale of its portion of the Assets (other than the stock of CPC of Texas), Community Psychiatric Centers of California ("CPC of Calif.") shall receive $4,963,598 in cash, 999,749 shares of BHC Common Stock, 957,941 shares of BHC Preferred Stock and 8,375 shares of Series B Preferred Stock. (b) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers Properties Incorporated ("CPC Properties") shall 2 receive $775,702 in cash, 1,385,076 shares of BHC Common Stock, 4,350,712 shares of BHC Preferred Stock and 33,501 shares of Series B Preferred Stock. (c) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Florida, Inc. shall receive $5,124,507 in cash and 3,350 shares of Series B Preferred Stock. (d) In consideration of the sale of its portion of the Assets, Florida Hospital Properties, Inc. shall receive $1,033,842 in cash. (e) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Idaho, Inc. shall receive $2,187,000 in cash. (f) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of North Carolina, Inc. shall receive $1,466,000 in cash. (g) In consideration of the sale of its portion of the Assets, CPC Properties of North Carolina, Inc. shall receive $2,528,664 in cash. (h) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Kansas, Inc. shall receive $2,209,000 in cash. (i) In consideration of the sale of its portion of the Assets, CPC Properties of Kansas, Inc. shall receive $2,566,313 in cash. (j) In consideration of the sale of their portion of the Assets, C.P.C. of Louisiana, Inc. and Community Behavioral Health System, Inc. shall receive an aggregate of $2,080,000 in cash, 6,700 shares of BHC Common Stock, 838 shares of BHC Preferred Stock and 838 shares of Series B Preferred Stock to be allocated among them as they determine. (k) In consideration of the sale of its portion of the Assets, CPC Properties of Louisiana, Inc. shall receive $3,746,918 in cash. (l) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers Properties of Texas, Inc. shall receive $3,208,407 in cash. (m) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Utah, Inc. shall receive $1,967,000 in cash. 3 (n) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers Properties of Utah, Inc. shall receive $2,809,626 in cash. (o) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Arkansas, Inc. shall receive $1,370,000 in cash. (p) In consideration of the sale of its portion of the Assets, CPC Properties of Arkansas shall receive $4,281,870 in cash. (q) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Mississippi, Inc. shall receive $1,824,000 in cash. (r) In consideration of the sale of its portion of the Assets, CPC Properties of Mississippi, Inc. shall receive $2,024,954 in cash. (s) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Missouri, Inc. shall receive $625,000 in cash. (t) In consideration of the sale of its portion of the Assets, CPC Properties of Missouri, Inc. shall receive $1,857,183 in cash. (u) In consideration of the sale of its portion of the Assets, Old Orchard Hospital, Inc. shall receive $1,380,000 in cash. (v) In consideration of the sale of its portion of the Assets, CPC Properties of Illinois, Inc. shall receive $3,670,496 in cash. (w) In consideration of the sale of its portion of the Assets, Community Psychiatric Centers of Indiana, Inc. shall receive $2,190,000 in cash. (x) In consideration of the sale of its portion of the Assets, CPC Properties of Indiana, Inc. shall receive $4,109,921 in cash. In addition, Purchaser shall issue to CPC of Calif. 113,170 shares of BHC Common Stock, 341,876 shares of BHC Preferred Stock and 838 shares of Series B Preferred Stock as consideration for the outstanding stock of CPC of Texas. 2. The conditions to the obligations of the parties to consummate the transactions contemplated by the Asset Purchase Agreement have been satisfied with respect to all Assets other than the following condition with respect to the Fairfax Hospital Assets: the Purchaser shall have received and have been issued all licenses and approvals required under the provisions of state and federal law necessary for the Purchaser to legally conduct all relevant operations of the Fairfax Hospital on the Closing Date (except for the 4 Controlled Substance Registration Certificate relating to the pharmacy located in the Fairfax Hospital) (the "Fairfax Licensing Condition"). No conditions apply to the sale of the Assets, other than the Fairfax Licensing Condition. 3. The Sellers shall transfer to Purchaser, effective as of 9:59 p.m. Nashville time on November 30, 1996, all Assets owned by them which are to be transferred to Purchaser pursuant to Asset Purchase Agreement, other than the Fairfax Hospital Assets. There shall be no adjustment to the consideration payable to the Sellers, except as follows: the portion of the Purchase Price to be paid to CPC of Calif. at the Closing (notwithstanding Section 1.4 of the Asset Purchase Agreement as amended hereby) shall be $4,963,598 in cash, 763,484 shares of BHC Common Stock, 721,676 shares of BHC Preferred Stock and 8,375 shares of Series B Preferred Stock, and the portion of the Purchase Price to be paid to CPC Properties at the Closing (notwithstanding Section 1.4 of the Asset Purchase Agreement as amended hereby) shall be $775,702 in cash, 1,331,046 shares of BHC Common Stock, 4,008,133 shares of BHC Preferred Stock and 33,501 shares of Series B Preferred Stock. Concurrently herewith, BHC Fairfax Hospital, Inc., CPC of Calif. and CPC Properties are entering into the Management Agreement in the form attached hereto as Exhibit A (the "Fairfax --------- Management Agreement"). At 11:59 p.m. Pacific time on the last day of the calendar month during which the Fairfax Licensing Condition is satisfied (the "Fairfax Effective Time"), CPC of Calif. and CPC Properties shall transfer the Fairfax Hospital Assets to Purchaser, and Purchaser shall deliver to CPC of Calif. 236,265 shares of BHC Common Stock and 236,265 shares of BHC Preferred Stock and shall deliver to CPC Properties 54,030 shares of BHC Common Stock and 342,579 shares of BHC Preferred Stock. For purposes of Section 5.5 of the Asset Purchase Agreement, the Closing shall be deemed to have occurred with respect to employees at the Fairfax Hospital (the "Fairfax Employees") as of the commencement of the Fairfax Management Agreement, and the provisions of such Section shall be deemed to apply as of such time to the Fairfax Employees notwithstanding anything to the contrary contained in the Fairfax Management Agreement. In the event the Fairfax Management Agreement is extended to a term of years pursuant to the terms thereof, Purchaser shall pay Sellers the consideration which would have been paid had the Fairfax Hospital Assets been transferred to Purchaser. 4. At or prior to the transfer of the respective Assets Sellers shall pay all indebtedness for borrowed money and capitalized lease obligations secured by any of the Assets. Notwithstanding Section 9.3 of the Asset Purchase Agreement, Sellers shall defend the title to all Assets and rights granted, bargained, sold, conveyed, assigned, transferred, set over and delivered to Purchaser against every person whomsoever lawfully claiming an interest in the Assets arising from obligations for borrowed money or capitalized lease obligations at the time of transfer and will take all actions reasonably necessary to release any liens relating to such indebtedness. 5. Clause (v) of Section 1.2 of the Asset Purchase Agreement is hereby amended to read as follows: "certain excess land located at the Spirit of St. Louis Hospital, Streamwood Hospital and Pinnacle Point Hospital described in Schedule 1.2." 5 6. Section 11.4 of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows: "Section 11.4 Effective Time. The Closing and the other -------------- transactions contemplated hereby shall be effective for accounting and all other purposes as of 9:59 p.m. Nashville time on November 30, 1996 with respect to all of the Assets other than the Fairfax Hospital Assets and shall be effective for accounting and all other purposes as of the Fairfax Effective Time with respect to the Fairfax Hospital Assets, unless otherwise agreed in writing by the Seller and the Purchaser." 7. Seller shall from time to time for a period of two years after the transfer thereof, advance Purchaser an amount sufficient to pay insurance and maintenance expenses relating to the Excess Real Estate. Purchaser shall be responsible for real property taxes on the Excess Real Estate. All advances shall be made on the terms set forth on the term sheet attached hereto as Exhibit B. - --------- 8. The Parent hereby indemnifies THC (and its stockholders, employees, officers, directors, agents and representatives) from and against any liabilities, damages, costs and expenses (including reasonable attorneys' fees) incurred by THC, including liabilities, damages, costs and expenses resulting from the reduction in value of any Seller that is a subsidiary of THC, as a result of the failure by a BHC Sub to perform its obligations under the Assignment and Undertaking executed by such BHC Sub, provided that the liability of the Parent under this paragraph shall not exceed $129,858,663. The parties acknowledge that the Parent's liability under this paragraph shall be without regard to any limits contained in Sections 9.3(a) and (b) of the Asset Purchase Agreement, but otherwise shall be applied consistent with Article IX of the Asset Purchase Agreement. 9. Subsidiaries of THC which are Sellers shall retain their corporate existence until at least November 30, 2001. During such time such Sellers shall comply in all material respects with corporate formalities pertaining thereto, including but not limited to maintaining the corporate existence of such Sellers and having annual elections of directors and officers, and will file all required franchise tax returns and make all other required filings with governmental entities, except in each case where the failure to comply or file would not have a material adverse effect on the Seller in question. 10. The Parent agrees to maintain the corporate existence of Community Psychiatric Centers of Texas, Inc. until at least November 30, 1998. 11. Article XII of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows: "Sellers recognize that (i) Purchaser's entering into this Agreement is induced primarily because of the covenants and assurances made by Sellers hereunder, (ii) Sellers' covenant not to 6 compete is necessary to insure the continuation of the Hospital Business subsequent to the Closing, and (iii) irreparable harm and damage will be done to Purchaser in the event that Sellers or Sellers' affiliates compete with Purchaser within the area or areas specified in this Section. Therefore, in consideration of the premises and as an inducement for Purchaser to enter into this Agreement and consummate the transactions contemplated herein, Sellers agree that, for a period of three (3) years from and after the Closing Date, Sellers, their affiliates (other than affiliates which become affiliates as a result of the acquisition of stock or assets of CPC or one or more Sellers) (collectively, the "Regulated Persons") will not own, lease, manage or operate any psychiatric hospitals, beds or units in the United States within the 25-mile radiuses of the Hospitals or any facility operated by Purchaser on the Closing Date (the "Proscribed Area"). Notwithstanding the foregoing, the Regulated Persons may own, lease, manage and operate psychiatric beds and/or units within the Proscribed Area: (a) in any non-psychiatric hospital acquired by the Regulated Persons, provided that Purchaser has been offered a right of first refusal to manage the psychiatric services provided at such hospital on then reasonably customary terms (provided that Sellers shall not enter into any agreement to manage such psychiatric services on terms less favorable to Seller than those last offered to Purchaser), and (b) at THC New Orleans. The parties agree that no portion of the Purchase Price shall be allocated to the noncompetition covenant contained in this Article XII. 12. Purchaser shall pay all fees and costs associated with the cancellation of the SMS contract, not to exceed $600,000. 13. CPC Managed Care Health Services, Inc. shall not be a Seller, shall have no obligations under the Agreement, and the Asset Purchase Agreement be and hereby is amended to delete such corporation as a party to the Asset Purchase Agreement. 14. Included among the Assets shall be the net economic interest (after all taxes, expenses, liabilities and obligations) of CPC Properties in connection with that certain Renewed and Restated Partnership Agreement dated as of October 4, 1995 with David A. Justice and Eve Bloomberg Justice relating to the so-called "Tomato Patch" parcel and that certain Partnership Agreement dated as of October 4, 1995 with such parties relating to the so-called "Camino Station" parcel. CPC Properties and the Parent agree to discuss in good faith the transfer of CPC Properties' aforesaid partnership interests to the Parent. To the extent CPC Properties receives any revenues from such partnerships CPC shall promptly pay such revenue, after deducting all applicable taxes, costs and expenses, to Purchaser. 7 15. Except as amended hereby, the Asset Purchase Agreement shall remain in full force and effect. 8 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. ENTITIES CONSTITUTING THE "SELLER" TRANSITIONAL HOSPITALS CORPORATION COMMUNITY PSYCHIATRIC CENTERS OF CALIFORNIA COMMUNITY PSYCHIATRIC CENTERS PROPERTIES INCORPORATED COMMUNITY PSYCHIATRIC CENTERS OF FLORIDA, INC. FLORIDA HOSPITAL PROPERTIES, INC. COMMUNITY PSYCHIATRIC CENTERS OF IDAHO, INC. COMMUNITY PSYCHIATRIC CENTERS OF NORTH CAROLINA, INC. CPC PROPERTIES OF NORTH CAROLINA, INC. COMMUNITY PSYCHIATRIC CENTERS OF KANSAS, INC. CPC PROPERTIES OF KANSAS, INC. C.P.C OF LOUISIANA, INC. CPC PROPERTIES OF LOUISIANA, INC. COMMUNITY PSYCHIATRIC CENTERS PROPERTIES OF TEXAS, INC. COMMUNITY PSYCHIATRIC CENTERS OF UTAH, INC. COMMUNITY PSYCHIATRIC CENTERS PROPERTIES OF UTAH, INC. COMMUNITY PSYCHIATRIC CENTERS OF ARKANSAS, INC. CPC PROPERTIES OF ARKANSAS, INC. COMMUNITY PSYCHIATRIC CENTERS OF MISSISSIPPI, INC. CPC PROPERTIES OF MISSISSIPPI, INC. COMMUNITY PSYCHIATRIC CENTERS OF MISSOURI, INC. CPC PROPERTIES OF MISSOURI, INC. OLD ORCHARD HOSPITAL, INC. CPC PROPERTIES OF ILLINOIS, INC. COMMUNITY PSYCHIATRIC CENTERS OF INDIANA, INC. CPC PROPERTIES OF INDIANA, INC. CPC MANAGED CARE HEALTH SERVICES, INC. COMMUNITY BEHAVIORAL HEALTH SYSTEM, INC. By: /s/ Julia Kopta ____________________________________________________ Title:_________________________________________________ 9 PARENT BEHAVIORAL HEALTHCARE CORPORATION By: /s/ Michael Davis ____________________________________________________ Title: CFO _________________________________________________ 10 EX-99.2 3 AMENDMENT TO AGREEMENT AND PLAN OF MERGER EXHIBIT 99.2 AMENDMENT TO AGREEMENT AND PLAN OF MERGER ----------------------------------------- This AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment"), dated as of November 30, 1996, is by and among TRANSITIONAL HOSPITALS CORPORATION, a Nevada corporation formerly known as COMMUNITY PSYCHIATRIC CENTERS ("THC"), COMMUNITY PSYCHIATRIC CENTERS OF PUERTO RICO, INC., a Nevada corporation (the "Hospital Company"), CPC-PHP, INC., a Nevada corporation (the "Partially Owned Company"), and BEHAVIORAL HEALTHCARE CORPORATION, a Delaware corporation (the "Parent"), with respect to the following facts: a. The parties hereto entered into that certain Agreement and Plan of Merger, dated as of October 22, 1996 (the "Merger Agreement"), pursuant to which the Companies (as that term is defined in the Merger Agreement) are to be merged into two newly formed Tennessee corporations wholly-owned by the Parent. Capitalized terms used herein within definition shall have the meanings set forth in the Merger Agreement. b. The parties hereto wish to modify the Hospital Company Merger Consideration and the Partially Owned Merger Consideration as provided below. c. The Partially Owned Company is in the process of negotiating the purchase of a 52% interest (the "Interest") in Integrated Health Care Systems Corp., a Puerto Rico corporation ("IHS"), for a purchase price (including the post-closing repayment of certain loans and obligations) of approximately $575,000. No assurance can be given as to whether the Interest will be purchased by the Partially Owned Company. d. The Partially Owned Merger Consideration (as set forth below) has been determined on the assumption that the Interest has been acquired by the Partially Owned Company on or prior to the Closing. e. In the event that the Interest has not been acquired by the Partially Owned Company on or prior to the Closing, the parties wish to make certain modifications in the Merger Agreement with respect thereto as hereinafter set forth. f. The parties wish to make certain additional modifications in the Merger Agreement as set forth below. NOW THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements, the parties hereto hereby agree to amend the Merger Agreement as follows: 1. Section 1.1 of the Merger Agreement is hereby revised to provide that the Hospital Company Merger Consideration shall consist of an aggregate of 3,248,405 shares of BHC Common Stock and an aggregate of 1,675 shares of Series B Preferred Stock (rather than 3,439,934 shares of Common Stock and 1,774 shares of Series B Preferred Stock). 2. Section 1.2 of the Merger Agreement is hereby revised to provide that the Partially Owned Merger Consideration shall consist of an aggregate of 246,900 shares of BHC Common Stock and 1,675 shares of Series B Preferred Stock rather than 261,458 shares of BHC Common Stock and 1,774 shares of BHC Preferred Stock. 3. In the event that the Interest has not been acquired by the Partially Owned Company on or prior to the Closing, then no shares of BHC Common Stock or BHC Preferred Stock shall be issued at the Closing in connection with the Partially Owned Merger. 4. At such time as the Partially Owned Company acquires the Interest, the 246,900 shares of BHC Common Stock and 1,675 shares of BHC Preferred Stock comprising the Partially Owned Merger Consideration shall be issued to the shareholder of CPC-PHP, Inc., provided that THC has paid to the Partially Owned Company the purchase price for the Interest (and is obligated to make or fund the other payments to be made by the Partially Owned Company referred to in Exhibit A hereto). --------- 5. THC (as opposed to the Partially Owned Company) shall have the right to vary the terms of the purchase of the Interest from those set forth in Exhibit A, provided that THC is not obligated to pay more than $575,000 --------- pursuant to paragraph 4 above, and the Partially Owned Company shall take such actions as THC may reasonably request to effectuate the purchase of the Interest on terms satisfactory to THC, provided in each case that the Partially Owned Company is not responsible (after any indemnification or payments by THC) for significant liabilities or obligations in excess of those set forth in Exhibit A. - --------- 6. In the event the Interest is not purchased by the Partially Owned Company on or before six months after the date hereof, and provided that after the Closing the Partially Owned Company complies with its obligations set forth in paragraph 5 above, THC will be obligated to pay the Parent $82,910. 7. Section 5.5 of the Merger Agreement is hereby amended to read as follows: Purchaser shall treat the Hospital Company Merger as a tax-free reorganization within the meaning of Section 368 of the Code. 8. The conditions to the obligations of the parties to consummate the transactions contemplated by the Merger Agreement have been satisfied other than the following: the 2 Purchaser shall have received and been issued all licenses and approvals required under the provisions of state and federal law necessary for the Purchaser to own and operate and legally conduct all relevant operations of the Hospitals being conducted by the Companies on the Closing Date (except for the Controlled Substance Certificates relating to the pharmacies in the Hospitals). All conditions (other than the aforesaid licensing condition) no longer apply to the Merger Agreement. 9. Concurrently herewith, the parties hereto are entering into the Management Agreement in the form attached hereto as Exhibit B (the "Puerto --------- Rico Management Agreement"). For purposes of Section 5.1 of the Merger Agreement, the Closing shall be deemed to have occurred with respect to employees working at the Hospitals (the "Employees") as of the commencement of the Puerto Rico Management Agreement, and the provisions of such Section shall be deemed to apply as of such time notwithstanding anything to the contrary contained in the Puerto Rico Management Agreement. 10. Article XII of the Merger Agreement is hereby amended to read as follows: "COMPETITION AND NEW PROJECTS. ----------------------------- Section 12.1 Noncompetition. Sellers recognize that (i) -------------- Purchaser's entering into this Agreement is induced primarily because of the covenants and assurances made by Sellers hereunder, (ii) Sellers' covenant not to compete is necessary to insure the continuation of the Hospital Businesses subsequent to the Closing, and (iii) irreparable harm and damage will be done to Purchaser in the event that Sellers, or Sellers' affiliates, compete with Purchaser within the area or areas specified in this Section. Therefore, in consideration of the premises and as an inducement for Purchaser to enter into this Agreement and consummate the transactions contemplated herein, Sellers agree that, for a period of three (3) years from and after the Closing Date, Sellers, their affiliates (other than affiliates which become affiliates as a result of the acquisition of stock or assets of THC or one or more Sellers) (collectively, the "Regulated Persons") will not own, lease, manage or operate any psychiatric hospitals, beds or units in the United States within the 25-mile radiuses of the Hospitals or any facility operated by Purchaser on the Closing Date (the "Proscribed Area"). Notwithstanding the foregoing, the Regulated Persons may own, lease, manage and operate beds and/or units within the Proscribed Area: (a) in any non-psychiatric hospital acquired by the Regulated Persons, 3 provided that Purchaser has been offered a right of first refusal to manage the psychiatric services provided at such hospital on then reasonably customary terms (provided that THC shall not enter into any agreement to manage such psychiatric services on terms less favorable to THC than those last offered to Purchaser), and (b) at THC New Orleans. The parties agree that no portion of the Hospital Company Merger Consideration or the Partially Owned Company Merger Consideration shall be allocated the non-competition covenant contained in this Section 12.1 Section 12.2 New Projects. In the event Sellers desire ------------ to pursue an opportunity to provide new mental health services in Puerto Rico, Sellers shall first present such opportunity to the Board of Directors of the Parent. If the Board of Directors of the Parent determines not to pursue such opportunity, Sellers may pursue such opportunity unless the Board of Directors has reasonably concluded that the pursuit of such opportunity by Sellers would be detrimental to the business of any psychiatric hospital or facility owned, leased, managed or operated by Purchaser in Puerto Rico. 11. In the event the Parent plans to dispose directly or indirectly of a significant amount of its Puerto Rico operations (whether through a sale or issuance of stock, sale of a subsidiary, merger, sale of assets or otherwise), then before such disposition is made THC shall have the right for a 30 day period to negotiate with the Parent with respect to a possible purchase by THC of such operations. In the event THC and the Parent are unable to agree upon the terms thereof, then the Parent shall have the right to dispose of such operations to a third party for a 360 day period on terms which are more favorable to the Parent than those last proposed by THC. In the event of any dispute as to whether the terms to be accepted directly or indirectly by the Parent are more favorable, the dispute shall be submitted to binding arbitration. 12. Richard Conte shall have the right (subject to the review and oversight of the Parent's Board of Directors) to direct the Parent's business operations in Puerto Rico to the extent set forth in that certain Services Agreement between the Parent and Mr. Conte dated as of even date herewith. 4 13. The parties hereto agree to negotiate in good faith an agreement, which shall be mutually satisfactory to both THC and the Parent, pursuant to which BHC San Juan Capestrano Hospital, Inc. will become the exclusive provider of hospital psychiatric services to subscribers of plans serviced by Caribbean Behavioral Health Systems, Inc. 14. Except as modified as set forth above, the Merger Agreement shall remain in full force and effect. 5 IN WITNESS WHEREOF, the parties hereto have fully executed this Amendment as of the day and year first above written. ENTITIES CONSTITUTING THE "SELLERS" TRANSITIONAL HOSPITALS CORPORATION COMMUNITY PSYCHIATRIC CENTERS OF PUERTO RICO, INC. CPC-PHP, INC. By /s/ Wendy Simpson _______________________________ Title____________________________ "PARENT" BEHAVIORAL HEALTHCARE CORPORATION By /s/ Michael Davis _______________________________ Title CFO ____________________________ 6 -----END PRIVACY-ENHANCED MESSAGE-----