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On April 18, 1983, petitioner's board of directors passed a
resolution authorizing the sale of the hospital as negotiated by
Mr. O'Donnell and Mr. Rosenkranz. The purchase and sale
agreement was executed on April 25, 1983. The property to be
exchanged included "all of the * * * [petitioner's] properties,
assets, and business as a going concern", but not petitioner's
license to conduct or maintain a hospital or those assets
considered as restricted funds; i.e., the research, education,
and children's psychiatric development funds. In addition, the
buyer agreed to lease to petitioner 1,000 square feet of space
and allow petitioner access to the premises of the hospital for
conducting its research, educational, and charitable functions.
At this time, petitioner had not made the renovations necessary
for the additional 31 beds approved by the certificate of need.
The agreed purchase price was an amount equal to: (1)
$4,500,000, plus (2) the amounts of (a) the liabilities shown on
the March 31, 1983, balance sheet then outstanding and (b) those
outstanding liabilities incurred in the normal course of business
between the date of the March 31, 1983, balance sheet and the
closing date, plus (3) to the extent required, the amount to be
contributed to petitioner's pension plans of the excess of the
plans' actuarial present value of accrued benefits over the
assets of the plans. The agreement provided that the liabilities
assumed included petitioner's liability for the Florida Patient's
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