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SECURITIES AND 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 (Date of earliest event reported):
October 30, 1998
NEW AMERICAN HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 001-14397 62-1750169
-------- --------- ----------
(State or other jurisdiction of (Commission File (Employer
incorporation) Number) Identification Number)
109 Westpark Drive, Suite 440, Brentwood, Tennessee 37027
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(Address of principal executive offices)
(615) 221-5070
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(Registrant's telephone number, including area code)
Not applicable
-------------------------------
(Former name or former address,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
New American Healthcare Corporation (the "Registrant") reports
the following acquisition to inform its security holders:
Pursuant to an Agreement to Lease and Purchase dated October
29, 1998, by and among Lucius O. Crosby Memorial Hospital (as "Seller/Lessor"),
NAHC of Mississippi, Inc., a wholly-owned subsidiary of the Registrant (as
"Buyer") and the Registrant, the Registrant entered into a 30-year lease
agreement to operate Lucius O. Crosby Memorial Hospital a 95-bed acute care
hospital.
The purchase price was approximately $18.5 million, payable in
cash. The cash utilized in this acquisition was obtained from the Registrant's
credit facility with Toronto Dominion (Texas), Inc. The funding of the
acquisition occurred on October 30, 1998.
Prior to this transaction, no material relationship existed
between Seller and the Registrant or any of its affiliates, any director or
officer of the Registrant, or any associate of such director or officer. The
Registrant, intends to continue the acquired operations through its subsidiary.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of the business acquired. It is
impracticable at this time to provide the required financial statements of the
acquired business described in Item 2. This information will be provided within
60 days by an amendment to this report.
(b) Pro forma financial information. It is impracticable
at this time to provide the required pro forma financial information of the
acquired business described in Item 2. This information will be provided within
60 days by an amendment to this report.
(c) Exhibits. The exhibit filed as a part of this report
is listed in the Index to Exhibits immediately following the signature page.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW AMERICAN HEALTHCARE CORPORATION
By: /s/ Robert M. Martin
-------------------------
Robert M. Martin
President
Date: November 16, 1998
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Exhibit Index
Exhibit No.
2.1 Agreement to Lease and Purchase dated October 29, 1998 among Lucius O.
Crosby Memorial Hospital ("Seller") and NAHC of Mississippi, Inc.
("Buyer") and New American Healthcare Corporation ("Parent").
A copy of the exhibit list to the Agreement has been included. The
exhibits have been omitted but the Registrant shall furnish
supplementally a copy of any omitted exhibit to the Commission upon
request.
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AGREEMENT TO LEASE
AND PURCHASE
between
LUCIUS O. CROSBY MEMORIAL HOSPITAL
as Seller/Lessor
and
NAHC OF MISSISSIPPI, INC.
as Buyer
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<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I. LEASE, PURCHASE AND SALE .......................................... 1
1.1 Purchase and Sale .......................................... 1
1.2 Leased Property and Excluded Assets ........................ 3
1.3 Assumed Contracts, Leases and Liabilities .................. 4
1.4 Excluded Liabilities ....................................... 4
1.5 Additional Real Estate ..................................... 5
ARTICLE II. ACCOUNTS RECEIVABLE .............................................. 5
2.1 Seller's Accounts Receivable ............................... 5
ARTICLE III. PURCHASE PRICE AND RENT ......................................... 6
3.1 Purchase Price ............................................. 6
3.2 Prepaid Rent ............................................... 6
3.3 Taxes and Assessments; Prorations; Adjustments ............. 6
3.4 Closing Statements ......................................... 7
3.5 Allocation of Purchase Price ............................... 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER ......................... 7
4.1 Organization, Qualification and Authority .................. 8
4.2 Absence of Default ......................................... 8
4.3 Financial Statements ....................................... 9
4.4 Operations Since December 31, 1997 ......................... 9
4.5 Taxes ...................................................... 11
4.6 Employment ................................................. 11
4.7 Licenses and Permits ....................................... 11
4.8 Accreditations ............................................. 12
4.9 Medicare, Medicaid, and Other Third-Party Payors ........... 12
4.10 Peer Review ................................................ 12
4.11 Compliance with Zoning, Land Use and Other Laws ............ 12
4.12 Easements .................................................. 13
4.13 Title to Assets ............................................ 13
4.14 Leases and Contracts ....................................... 14
4.15 Environmental Matters ...................................... 15
4.16 Miscellaneous Representations Relating to Real Estate ...... 18
4.17 Conditions of Assets ....................................... 18
4.18 Capital Expenditure and Construction ....................... 19
4.19 Future Construction ........................................ 19
4.20 Litigation ................................................. 19
4.21 Seller's Employees ......................................... 19
4.22 Labor Relations ............................................ 20
4.23 Insurance .................................................. 20
4.24 Broker's or Finder's Fee ................................... 21
</TABLE>
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<TABLE>
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4.25 Medical Staff .............................................. 21
4.26 Conflicts of Interest ...................................... 21
4.27 Hill-Burton Liens .......................................... 21
4.28 Experimental Procedures .................................... 21
4.29 Intellectual Property; Computer Software ................... 21
4.30 Inventories ................................................ 21
4.31 Motor Vehicles ............................................. 22
4.32 Employee Benefit Plans ..................................... 22
4.33 Compliance with Laws ....................................... 23
4.34 No Omissions or Misstatements .............................. 23
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER ........................... 24
5.1 Organization, Qualification and Authority .................. 24
5.2 Absence of Default ......................................... 24
5.3 Organization, Qualification and Authority .................. 25
5.4 Absence of Default ......................................... 25
ARTICLE VI. COVENANTS OF PARTIES ............................................. 25
6.1 Preservation of Business and Assets ........................ 25
6.2 Absence of Material Change ................................. 26
6.3 Access to Books and Records ................................ 26
6.5 Risk of Loss ............................................... 27
6.6 Condemnation ............................................... 28
6.7 Good Faith ................................................. 28
6.8 Preserve Accuracy of Representations and Warranties ........ 29
6.9 Maintain Books and Accounting Practices .................... 29
6.10 Indebtedness; Liens ........................................ 29
6.11 Compliance with Laws and Regulatory Consents ............... 29
6.12 No Sale, Merger or Consolidation ........................... 30
6.13 Maintain Insurance Coverage ................................ 30
6.14 Medicare and Medicaid Reporting ............................ 30
6.15 Current Return Filing ...................................... 30
6.16 Performance ................................................ 31
6.17 WARN Act ................................................... 31
6.18 [Deleted] .................................................. 31
6.19 Power to Endorse Checks .................................... 31
6.20 Phase I Environmental Assessment; Additional Environmental
Inspections ................................................ 31
6.21 Foundation ................................................. 31
6.22 Covenant of Net Worth ...................................... 32
6.23 Plan of Integration ........................................ 32
6.24 Education Affiliations ..................................... 32
6.25 Replacement Facility ....................................... 32
6.26 Performance Bond ........................................... 34
6.27 Acute Care Services; Emergency Room and Obstetrical Services 34
</TABLE>
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<TABLE>
<S> <C>
6.28 Seller's Employees ......................................... 35
6.29 Parent Guaranty ............................................ 35
ARTICLE VII. TITLE AND SURVEY ................................................ 35
7.1 Title Report and Policy .................................... 35
7.2 Survey ..................................................... 35
7.3 U.C.C. Searches ............................................ 36
7.4 Defects and Cure ........................................... 36
ARTICLE VIII. CLOSING ........................................................ 36
8.1 Closing .................................................... 36
8.2 Termination ................................................ 37
ARTICLE IX. SELLER'S CONDITIONS TO CLOSE ..................................... 37
9.1 Representations and Warranties True at Closing; Compliance
with Agreement ............................................. 37
9.2 Regulatory Approvals ....................................... 38
9.3 No Action/Proceeding ....................................... 38
9.4 Compliance with Article XII ................................ 38
9.5 Approval by Counsel ........................................ 38
9.6 Order Prohibiting Transaction .............................. 38
9.7 Completion of Exhibits ..................................... 38
9.8 Right of First Refusal Agreement ........................... 38
9.9 [Deleted] .................................................. 38
9.10 Attorney General Approval .................................. 39
ARTICLE X. BUYER'S CONDITIONS TO CLOSE ....................................... 39
10.1 Representations and Warranties True at Closing; Compliance
with Agreement ............................................. 39
10.2 No Loss, Damage or Destruction ............................. 39
10.3 No Material Adverse Change ................................. 39
10.4 Regulatory Approvals ....................................... 39
10.5 No Action/Proceeding ....................................... 39
10.6 Compliance with Articles VII and XI ........................ 39
10.7 Approval by Counsel ........................................ 40
10.8 Order Prohibiting Transaction .............................. 40
10.9 [Deleted] .................................................. 40
10.10 Tail Insurance ............................................. 40
10.11 Completion of Exhibits ..................................... 40
10.12 Attorney General Approval .................................. 40
ARTICLE XI. OBLIGATIONS OF SELLER AT CLOSING ................................. 40
11.1 Documents Relating to Title ................................ 40
11.2 Possession ................................................. 41
11.3 Opinion of Seller's Counsel ................................ 41
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<TABLE>
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11.4 Good Standing and Resolutions .............................. 41
11.5 Closing Certificate ........................................ 41
11.6 Third Party Consents ....................................... 41
11.7 Taxes and Other Payments ................................... 42
11.8 Releases and Other Matters ................................. 42
11.9 Notice to Third-Party Payors ............................... 42
11.10 Additionally Requested Documents; Post Closing Assistance .. 42
ARTICLE XII. OBLIGATIONS OF BUYER AT CLOSING ............................... 42
12.1 Purchase Price and Prepaid Rent ............................ 42
12.2 Corporate Good Standing and Certified Board Resolutions .... 42
12.3 Opinion of Buyer's Counsel ................................. 42
12.4 Assumption of Liabilities .................................. 43
12.5 Closing Certificate ........................................ 43
12.6 Right of First Refusal Agreement ........................... 43
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION .................... 43
13.1 Survival ................................................... 43
13.2 Indemnification by Seller .................................. 43
13.3 Indemnification by Buyer ................................... 44
13.4 Procedure for Indemnification .............................. 45
13.5 Assignment by Buyer ........................................ 46
ARTICLE XIV. PRESERVATION OF BUSINESS AND NONCOMPETE
RESTRICTIONS ................................................ 47
14.1 Covenant Not to Compete .................................... 47
14.2 Enforceability ............................................. 47
ARTICLE XV. MISCELLANEOUS ................................................. 48
15.1 Assignment ................................................. 48
15.2 Other Expenses ............................................. 48
15.3 Notices .................................................... 48
15.4 Controlling Law ............................................ 49
15.5 Headings ................................................... 49
15.6 Benefit .................................................... 49
15.7 Partial Invalidity ......................................... 49
15.8 Waiver ..................................................... 50
15.9 Counterparts ............................................... 50
15.10 Interpretation; Knowledge .................................. 50
15.11 Entire Agreement ........................................... 50
15.12 Legal Fees and Costs ....................................... 50
15.13 Exclusivity ................................................ 50
15.14 Completion of Exhibits ..................................... 51
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Matter
- - ----------- --------------
<S> <C>
1.1(2) Equipment and Furnishings
1.2 Form of Lease
1.2(2) Excluded Assets
3.5 Purchase Price Allocation
4.1 Seller's Ownership in Other Entities
4.2 Absence of Default; Consents
4.3 Financial Statements
4.4 Operations since December 31, 1997
4.5 Tax Payment Delinquencies
4.6 Employment Matters
4.7 Licenses and Permits
4.9 Program Agreements and related matters
4.10 Peer Review Memorandum of Understanding
4.11 Exceptions to Zoning, Land Use and Other Laws
4.13(2) Permitted Exceptions
4.13(3) Transferred Assets
4.13(4) Trade names and Fictitious Names
4.13(5) Addresses for Accounts Receivable
4.14 Leases and Contracts
4.14(1) Assumed Contracts
4.15 Hazardous Materials
4.17 Condition of Assets
4.19 Future Construction
4.20 Litigation
4.21(a) Employees, Fringe Benefits and Personnel Policies
4.21(b) Terminated Employees
4.23 Insurance
4.26 Conflicts of Interest
4.29 Intellectual Property
4.32(1) Employee Benefit Plans
4.32(2) Employee Benefit Plans - Prohibited Transactions
4.32(3) Employee Benefit Plans - Noncompliance
4.32(4) Employee Benefit Plan Obligations being assumed by Buyer
9.8 Form of Right of First Refusal Agreement
11.6(3) Estoppel and attornment letters from tenants
11.9 Form of Notice to Third Party Payors
</TABLE>
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GLOSSARY
<TABLE>
<CAPTION>
Section Defined Term
- - ------- ------------
<S> <C>
13.1 Absolute Covenants
3.4 Accountants
15.13(2) Acquisition Transaction
4.15(2) Affiliates
Page 1 Agreement
1.2(1) Assets
4.14(1) Assumed Contracts
1.3 Assumed Liabilities
4.3(1) Audited Financial Statements
1.4(1) Bonds
Page 1 Buyer
13.2(1) Buyer Indemnified Parties
4.15(1) CERCLA
13.4(1) Claim
8.1 Closing
8.1 Closing Date
3.1 Closing Net Working Capital
1.4(7) Code
7.1 Commitment
6.25(2) CON
6.25(4) CON Period
1.4(7) continuation coverage
1.2(2) Cornerstone Building
7.4 Defects
6.25(2) Department
4.32(1) Employee Plan
4.32(1) ERISA
1.2(2) Excluded Assets
1.4 Excluded Liabilities
3.4 Final Closing Statement
4.3(1) Financial Statements
6.27 Force Majeure
6.21 Foundation
4.15(1) Hazardous Substances
Recital A Hospital
4.14(1) Immaterial Contracts
13.2(3) Indemnification Threshold
13.4(1) Indemnitee
13.4(1) Indemnitor
13.2(3) Individual Claim Threshold
4.29 Intellectual Property
</TABLE>
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<TABLE>
<S> <C>
1.1(1) Inventory
4.24 IRG
Page 1 Seller
1.2(1) Lease
1.2(1) Leased Property
4.14(1) Leases and Contracts
15.1 Lenders
4.7 Licenses and Permits
1.4(1) Loans
13.2(1) Loss
6.5 Material Casualty
6.22 Minimum TNW
3.1 Net Working Capital
14.1 Noncompete Area
14.1 Noncompete Period
13.4(1) Notice
Page 1 Parent
4.21 part-time employee
4.13(2) Permitted Exceptions
1.4(7) PHSA
6.27 Physician/Staffing Shortage
15.13(2) Potential Acquiror
3.4 Preliminary Closing Statement
1.1(2) Prepaid Expenses
3.2 Prepaid Rent
4.9(1) Program Agreements
4.9(1) Programs
3.1 Purchase Price
1.1 Purchased Assets
13.2 Rate
4.15(1) RCRA
1.2(1) Real Estate
1.1(6) Receivables
6.25 Replacement Facility
Page 1 Seller
7.2 Survey
6.22 Tangible Net Worth
7.4 Title Evidence
7.1 Title Policy
7.3 U.C.C. Searches
4.3(1) Unaudited Financial Statements
4.21 WARN
</TABLE>
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AGREEMENT TO LEASE AND PURCHASE
THIS AGREEMENT TO LEASE AND PURCHASE (the "AGREEMENT") is made as of
October 29, 1998, by and between LUCIUS O. CROSBY MEMORIAL HOSPITAL, a
Mississippi nonprofit corporation ("SELLER"), and NAHC OF MISSISSIPPI, INC., a
Tennessee corporation ("BUYER"), and NEW AMERICAN HEALTHCARE CORPORATION, a
Delaware corporation ("PARENT").
R E C I T A L S:
A. Seller owns and operates Lucius O. Crosby Memorial Hospital,
located on approximately 4.61 acres of land at 801 Goodyear Boulevard, Picayune,
Mississippi, and including a hospital comprised of 85 licensed acute care beds,
10 geriatric psychiatric beds and other related businesses and programs (the
"HOSPITAL"); and
B. Except for the Excluded Assets described in Section 1.2,
Seller desires to lease to Buyer certain assets and sell and transfer to Buyer
certain other assets related to the Hospital, and Buyer or its designee desires
to lease or purchase the same from Seller, subject to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants,
agreements and conditions contained in this Agreement, the undersigned agree as
follows:
ARTICLE I. LEASE, PURCHASE AND SALE
1.1 Purchase and Sale. Seller agrees to sell, transfer, assign,
convey and deliver to Buyer and Buyer shall purchase from Seller all right,
title and interest in all of the following assets of Seller (collectively, the
"PURCHASED ASSETS"):
(1) All inventory of goods and supplies useable and/or
maintained in connection with or located in the Hospital, including, but not
limited to, food, cleaning materials, disposables, consumables, office supplies,
drugs and medical supplies (collectively, the "INVENTORY");
(2) Except as set forth in Exhibit 1.1(2), all prepaid
assets useable by Buyer, as determined by Buyer in Buyer's reasonable discretion
(the "PREPAID EXPENSES");
(3) To the extent assignable by Seller, all warranties
(express or implied) and rights and claims assertable by Seller related to the
operation of the Hospital and the Assets (as defined in Section 1.2(1));
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(4) Except as set forth in Exhibit 1.1(4), all Seller's
contract and leasehold rights and interests pursuant to Leases and Contracts (as
defined in Section 4.14) constituting the Assumed Liabilities (as defined in
Section 1.3);
(5) All insurance proceeds (including applicable
deductibles, co-payments or self insured requirements) arising in connection
with damage to the Assets prior to Closing (as defined in Section 8.1), to the
extent not expended for the repair and restoration of the Assets;
(6) All Seller's patient accounts, notes and other
receivables, including those from third party payors, whether or not written
off, and to the extent a receivable is not transferable, the right to receive
from Seller the proceeds from such receivable (collectively, the "RECEIVABLES");
(7) All security or other deposits and prepayments made
by tenants of Seller pursuant to leases or subleases included in the Assumed
Liabilities;
(8) All of Seller's membership, partnership and equity
interests in the entities which ownership is more completely described in
Exhibit 4.1 to the extent that the transfer of such interests is not restricted,
or if such restrictions exist, then to the extent that Seller is able to obtain,
with reasonable effort, the necessary consents, amendments or waivers in regard
to such restrictions;
(9) All of Seller's rights of first refusal, option to
purchase equity interests or any other options, to the extent that the transfer
of such rights is not restricted, or if such restrictions exist, then to the
extent that Seller is able to obtain, with reasonable effort, the necessary
consents, amendments or waivers in regard to such rights;
(10) All of Seller's equipment, vehicles, machinery,
furnishings, furniture, trade fixtures and other items of tangible personal
property, of every kind and description, and all components thereof, used in
connection with the Hospital, including without limitation those items described
on Exhibit 1.1(10) attached hereto, and including without limitation data
processing hardware and software; and
(11) to the extent permitted by law, all permits,
approvals, certificates of need and other intangible property or any interest
therein now or hereafter owned or held by Seller in connection with the Hospital
and necessary for the operation of the Hospital, including all trade names,
trademarks, service marks and logos related to the Hospital or any part thereof,
specifically including the name "Crosby Memorial Hospital" and any derivatives
thereof and all other trade names and trademarks used in connection with the
services provided by the Hospital.
(12) all financial, patient, medical staff and personnel
records (including, without limitation, all accounts receivable records,
equipment records, medical/ administrative libraries, medical records, patient
billing records, documents, catalogs,
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books, records, files, operating manuals and current personnel records) with
Seller being furnished copies or originals, if needed, of any of such records as
it may reasonably request.
1.2 Leased Property and Excluded Assets.
(1) At the Closing, Buyer shall lease the following
property from Seller pursuant to the terms of a Lease Agreement to be dated as
of the Closing Date (as defined in Section 8.1) between Buyer and Seller in the
form attached hereto as Exhibit 1.2 (the "LEASE"):
(a) The Land, the Leased Improvements, the
Facilities (including the Hospital building), the Easements and Related Rights,
and the Fixtures (all as defined in Section 1.1 of the Lease and collectively
referred to herein as the "REAL ESTATE");
(b) The Plans and Studies (as defined in Section
1.1(h) of the Lease); and
(c) All other assets related to or used in
connection with the operation of the Hospital, other than the Purchased Assets
and the Excluded Assets.
The Real Estate, the Plans and Studies, and any items referred
to in Section 1.2(1)(c) above are collectively referred to herein as the "LEASED
PROPERTY." The Leased Property and the Purchased Assets are collectively
referred to herein as the "ASSETS."
(2) Seller is neither selling nor leasing to Buyer, and
Buyer is neither purchasing, leasing from Seller, nor assuming obligations with
respect to, the following (collectively, the "EXCLUDED ASSETS"):
(a) All of Seller's cost reports,
correspondence, work papers and other documents relating to accounts receivables
under the Medicare and Medicaid programs (provided, that Buyer shall have
reasonable access to such documents) and all rights to appeal any Medicare or
Medicaid determination relating to the cost reports;
(b) Seller's corporate, fiscal or tax records
that Seller is required by law to retain in its possession;
(c) Any gifts, devises, bequests or donations
made to Seller but not received by Seller prior to Closing;
(d) Any other assets of Seller not related to
the Hospital;
(e) Seller's cash and cash equivalents;
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(f) That certain building known as the
"Cornerstone Sports Complex" located at 101 Kirkwood Street, Picayune,
Mississippi, together with all assets of any kind related to the fitness center
contained therein (collectively, the "CORNERSTONE BUILDING");
(g) Any assets related to the Employee Plans (as
defined in Section 4.32); and
(h) Those items listed on Exhibit 1.2(2).
All tangible Excluded Assets shall be removed from the Assets by Seller
prior to Closing without damage or replacement to the Assets.
1.3 Assumed Contracts, Leases and Liabilities. At Closing, Buyer
will assume and agree to pay or perform, as the case may be, all of the
following (collectively, the "ASSUMED LIABILITIES"):
(1) All obligations accruing after Closing with respect
to those Leases and Contracts which are described on Exhibit 4.14.
(2) All accrued paid days off and sick days together with
all related taxes, with respect to Seller's employees who become employees of
Buyer, which time accrued prior to Closing; provided, however, that Buyer shall
assume the same only to the extent that Buyer has received a credit therefor
under Section 3.1.
(3) Current liabilities of Seller, to the extent
identified on the Final Closing Statement but only to the extent included in the
calculation of Net Working Capital.
1.4 Excluded Liabilities. Seller shall remain responsible for all
liabilities and obligations not expressly assumed by Buyer (collectively, the
"EXCLUDED LIABILITIES"), including but not limited to the following:
(1) All obligations pursuant to or related to any bonds
("BONDS") or long term debt obligations ("LOANS"), including any obligations or
liabilities with respect to any bonds heretofore defeased or otherwise attempted
to be defeased or satisfied pursuant to a refunding, restructuring or
refinancing of said bonds;
(2) All amounts payable under the Medicare and Medicaid
Programs applicable to cost reports filed for services rendered through the
Closing, including any amount payable if any gain related to this transaction is
deemed to have occurred;
(3) Obligations or liabilities to any donor with respect
to any and all gifts, devises, bequests or donations in any way related to the
Hospital or the Assets;
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(4) Liabilities, indebtedness, commitments or obligations
and responsibilities of any kind whatsoever (other than the Assumed Liabilities)
of Seller arising from operations of the Hospital (including malpractice claims
or suits and scheduled or unscheduled liabilities of any kind whatsoever)
relating to the time through Closing, or from the operations or existence of any
trust or foundation;
(5) Liabilities or obligations with respect to the
ownership or operation of the Excluded Assets and any assets owned or operated
by Seller other than the Assets;
(6) Any liabilities or obligations with respect to any
Employee Plans (as defined in Section 4.32) and any contribution, settlor or
fiduciary liability therefor, excluding obligations assumed under Section
1.3(2);
(7) All liabilities and commitments relating to the time
periods through Closing for all of the following: any and all investment tax
credit recapture; all impositions of income tax and other taxes; Hill-Burton
liabilities, violation or liabilities under environmental laws; except pursuant
to Section 1.3(2), all employee (and former employee) wages, salaries and
benefits including any and all liabilities with respect to medical benefits for
active and retired employees, and all obligations to give notice of and to
provide continuation health care coverage for employees, retirees, former
employees, and their dependents or any qualified beneficiary of such employees
or retirees in accordance with the requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, the Public Health Service Act, as
amended (the "PHSA"), or any applicable state law requiring continuing health
coverage (hereinafter referred to as "CONTINUATION COVERAGE"), including,
without limitation, all liabilities, taxes, sanctions, interest and penalties
imposed upon, incurred by or assessed against Buyer or any affiliated entity
within a controlled group relationship with Buyer (as determined under Section
414 of the Internal Revenue Code of 1986, as amended) (the "CODE"), and any of
their employees, arising by reason of or relating to any failure to provide the
continuation coverage; and
(8) Amounts owed by Seller to any third party payors,
including Medicare and Medicaid, for the periods through Closing as a result of
any settlement process used by such third party payors, including cost reports
filed or to be filed.
1.5 Additional Real Estate. Seller acknowledges and agrees that it
is its intent to lease to Buyer all real estate used in, usable with or related
to the operation of the Hospital that is owned or leased by Seller, except for
the Excluded Assets. If at any time before or after Closing, any tract or parcel
of real estate (or improvements and fixtures thereon or any easement,
appurtenances or rights related thereto), whether owned or leased, is (1)
misidentified, incorrectly described or identified as being owned or leased by a
particular entity, or (2) inadvertently not included in the Lease and such
errors are discovered subsequent to execution of this Agreement, the parties
agree that the Lease shall be amended by mutual agreement to correct such
errors.
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ARTICLE II. ACCOUNTS RECEIVABLE
2.1 Seller's Accounts Receivable. Buyer is purchasing all of
Seller's accounts receivable, including patient accounts receivable, long-term
patient accounts receivable, income guarantee advances, amounts receivable from
third party payor programs (governmental or commercial), notes, other
receivables, whether or not written off. After the Closing, Seller shall remit
to Buyer any payments received by Seller with respect to the accounts receivable
sold to Buyer. Any funds so collected will be remitted to Buyer within fifteen
(15) days following receipt of such payments.
ARTICLE III. PURCHASE PRICE AND RENT
3.1 Purchase Price. Subject to the terms and conditions hereof,
the purchase price (the "PURCHASE PRICE") will be payable by Buyer to Seller for
the Purchased Assets as provided in Section 8.1 hereof and shall be an amount
equal to the Closing Net Working Capital. The term "CLOSING NET WORKING CAPITAL"
shall mean the Net Working Capital calculated as of Closing. The term "NET
WORKING CAPITAL" shall mean the book value at Closing of the following asset
accounts less the value of the following liability accounts as those terms are
used in the Financial Statements (as defined in Section 4.3), all recorded and
valued in accordance with generally accepted accounting principles, consistently
applied: Current Assets (excluding cash, cash equivalents and any other Excluded
Assets) less Current Liabilities (excluding retirement and health plans and any
other Excluded Liabilities, but including a credit to Buyer for sick pay and
related taxes which are not accrued and reflected on the Financial Statements)
and the short term and long term portions of capital leases and notes payable to
the extent assumed. Buyer and Seller will work together to agree on the amount
of the Purchase Price by making a good faith estimate at Closing and to agree as
to the final amount within one hundred twenty (120) days after Closing as set
forth in Section 3.4 hereof. As additional consideration, Buyer shall make a
contribution to the Foundation pursuant to the terms of Section 6.21 below.
3.2 Prepaid Rent. At Closing, Buyer agrees to pay to Seller the
amount of Fifteen Million and No/100 Dollars ($15,000,000.00) as prepayment in
full of all rent due under the Lease for the entire term of the Lease (the
"PREPAID RENT").
3.3 Taxes and Assessments; Prorations; Adjustments. Seller shall
pay or credit against the Purchase Price the amount of all delinquent real
estate and personal property taxes, including penalties and interest, and all
special assessments that are a lien as of the day of Closing, both current and
reassessed. Seller shall also credit on the Purchase Price all unpaid real
estate and personal property taxes and assessments not yet due for the years
prior to the Closing and a portion of such taxes for the year of Closing
prorated through the date of Closing not already included in the calculation of
Net Working Capital. The proration of the undetermined taxes and assessments
shall be based upon a 365-day year and on the most recently available tax rate
and valuation. It is the intention of the parties in making the tax proration to
allow Buyer a credit as close in amount as possible
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to the amount which Buyer will be required to pay, giving effect to applicable
exemptions, discounts, recently voted millage, changes in valuation or other
similar matters which may have an effect on the amount of the real estate and
personal property taxes, whether or not they have been certified.
Notwithstanding the foregoing, Buyer shall not receive a credit for any taxes or
assessments which would not be payable but for the transaction contemplated by
this Agreement.
To the extent not included in the calculation of Net Working Capital,
Seller shall prorate rentals received from tenants and subtenants with respect
to leased facilities covering the period from and after Closing, none of which
may be applied by Seller to delinquent rents by credit against the Purchase
Price. Rents collected by Seller for the month in which Closing occurs shall be
prorated to the Closing. Rents collected by Buyer after Closing shall be
attributed to current rent first and then to delinquent rent in reverse
chronological order. Any deposits (including any capital occupancy fee or
occupancy deposit) from tenants or the like, which are refundable shall be a
credit towards any purchase price and the obligation to refund the same shall be
an assumed obligation of Buyer and entitle Buyer to a credit.
Utilities and payments under Assumed Contracts, as defined in Section
4.14(1), shall be prorated at Closing.
3.4 Closing Statements. The adjustments specified in Section 3.1
shall be estimated by the parties hereto in good faith at the Closing based on
the most current interim financial statements with provisional adjustments as
shall be mutually agreed at Closing and shall be called the "PRELIMINARY CLOSING
STATEMENT." No later than one hundred twenty (120) days after the Closing,
Seller shall provide to Buyer a balance sheet as of the Closing Date (the "FINAL
CLOSING STATEMENT") reflecting the items listed above determined in accordance
with generally accepted accounting principles on an accrual basis applied
consistently with prior periods. Adjustments made after the Closing based on the
Final Closing Statement shall be payable in cash, on or before the fifteenth day
following the day the Final Closing Statement is agreed upon, with interest on
any adjustments at the Rate (as defined in Section 13.2) commencing at Closing.
If Buyer disagrees with the computations of the Final Closing Statement, Buyer
shall notify Seller in writing within one hundred fifty (150) days after the
Closing. If Seller and Buyer fail to agree within thirty (30) days of such
notice by Buyer, they shall appoint Arthur Andersen, New Orleans, Louisiana (the
"ACCOUNTANTS"), to make such determination which determination shall be final
and binding on the parties hereto for the purpose of this Agreement, and Buyer
and Seller shall each pay one-half the cost of the Accountants.
3.5 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner set forth in Exhibit 3.5, to be
determined by mutual agreement of Seller and Buyer before the Closing. The
parties agree that this allocation will be used by them for all purposes
including tax, reimbursement and other purposes. Each party hereto agrees that
it will report the transaction in accordance with such allocation, including
under
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Section 1060 of the Code, and that it will not take a position inconsistent with
such allocation except with the written consent of the other party hereto.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
As inducements to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller hereby represents and warrants to
Buyer, which representations and warranties shall be true and correct on the
date hereof and on Closing, as if then restated, as follows:
4.1 Organization, Qualification and Authority. Seller is a
nonprofit corporation duly organized and validly existing under the laws of the
State of Mississippi. Seller has full power and authority to (i) own, lease and
operate its facilities and assets as presently owned, leased and operated, (ii)
carry on its business as it is now being conducted, and (iii) execute, deliver
and carry out the terms of this Agreement and all documents and agreements
necessary to give effect to the provisions of this Agreement and to consummate
the transactions contemplated on the part thereof without the consent, approval
or authorization of, or obligation to notify, any person, entity or governmental
agency (other than the notification required to be made to the Mississippi
Department of Health). Seller is qualified to conduct business in each state in
which its operations make it necessary to be so qualified. No person or entity
owns or holds, has any interest in, whether legal, equitable or beneficial, or
has the right to purchase, any equity interest, voting interest or financial
interest or other security of Seller. Except as set forth in Exhibit 4.1,
Seller, directly or indirectly, owns no capital stock, security, interest or
other right, or any option or warrant convertible into the same, of any
corporation, partnership, joint venture or other business enterprise and Seller
has no commitments to purchase any such interests. The execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith by Seller have been duly authorized by all necessary
action on the part of Seller. No other action, consent or approval on the part
of Seller or any other person or entity is necessary to authorize Seller's due
and valid execution, delivery and consummation of this Agreement and all other
agreements and documents executed in connection herewith. This Agreement and all
other agreements and documents executed in connection herewith by Seller, upon
due execution and delivery thereof, shall constitute valid and binding
obligations of Seller, enforceable in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by general principles
of equity.
4.2 Absence of Default. Upon receipt of the consents specified in
Exhibit 4.2, the execution, delivery and consummation of this Agreement and all
other agreements and documents executed in connection herewith by Seller will
not constitute a violation of, or be in conflict with, and will not, with or
without the giving of notice or the passage of time, or both, result in a breach
of, constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, indenture, obligation or liability affecting the
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Assets pursuant to, or result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any of the Assets under: (a)
any term or provision of the organizational documents of Seller; (b) any
contract, lease, purchase order, agreement, indenture, mortgage, pledge,
assignment, permit, license, approval or other commitment to which Seller is a
party or by which Seller or the Assets are bound (except for such consent
requirements with respect to the Assumed Contracts as are identified in Exhibit
4.14(1)); (c) any judgment, decree, order, regulation or rule of any court or
regulatory authority, or (d) any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority or
arbitration tribunal to which Seller and/or the Assets are subject that would
have a material adverse effect on Buyer or the Assets.
4.3 Financial Statements.
(1) Attached as Exhibit 4.3 are true and correct copies
of the audited Financial Statements of Seller for the fiscal years ended
December 31, 1995, 1996 and 1997 (the "AUDITED FINANCIAL STATEMENTS"), along
with the interim unaudited financial statements of Seller for the eight (8)
month period ending August 31, 1998 (collectively, the "UNAUDITED FINANCIAL
STATEMENTS," which together with the Audited Financial Statements and the
financial statements described in Section 4.3(2) shall be the "FINANCIAL
STATEMENTS"). The Audited Financial Statements present fairly, in all material
respects, the financial position of Seller, and the results of its operations
and its cash flows for the periods specified. The Financial Statements have been
prepared in conformity with generally accepted accounting principles (except for
the absence of footnotes and normal recurring year-end adjustments to the
Unaudited Financial Statements and any interim unaudited financial statements
provided pursuant to Section 4.3(2) below), applied consistently for the periods
involved. The Financial Statements are in accordance with the books and records
of Seller. Except as set forth in the Financial Statements, or as otherwise
specified on Exhibit 4.3, Seller has no known contingent liabilities or
obligations except where such has and with reasonable foreseeability, will have
only a nonmaterial impact on Seller and the Assets.
(2) Seller shall cause to be prepared interim unaudited
monthly financial statements for each month after the most recent delivered
Unaudited Financial Statements, which shall be delivered to Buyer within two (2)
business days after they are created (but the delivery shall be no later than
twenty (20) days after the end of the month which the Unaudited Financial
Statements relates to), and after delivery shall be deemed a part of the
Unaudited Financial Statements.
4.4 Operations Since December 31, 1997. Except as set forth on
Exhibit 4.4 since December 31, 1997, Seller has conducted its business only in
the ordinary course and there have been no:
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(1) material adverse changes in the condition, financial
or otherwise, of the Assets, the business or prospects of, or in the results of
operations of the Hospital or Seller;
(2) terminations of any contract, lease or other
agreement to which Seller is a party (other than an "Immaterial Contract" as
defined in Section 4.14) except by Seller, or damage or destruction to the
Assets whether or not covered by insurance;
(3) sales, leases, transfers or other dispositions by
Seller of any of the Assets, mortgages or pledges of or the imposition of any
liens, charges or encumbrances in excess of, in the aggregate Five Thousand and
No/100 Dollars ($5,000.00) on any of the Assets or removal of any of the Assets
from the Real Estate, other than those made in the ordinary course of business;
(4) increases in the compensation payable by Seller to
any employees, directors, managers, governors, independent contractors or
agents, or any increase in, or institution of, any bonus, insurance, pension,
profit-sharing or other employee benefit plan, remuneration or arrangements made
to, for or with such persons, other than those made in the ordinary course;
(5) changes in the composition of the medical staff of
the Hospital, other than normal turnover occurring in the ordinary course of
business;
(6) changes in the rates charged by the Hospital for its
services, other than those made in the ordinary course of business;
(7) any dividends, distributions or extraordinary
payments by Seller;
(8) capital expenditures, additions or betterments to the
Hospital in excess of, in the aggregate Twenty-Five Thousand and No/100 Dollars
($25,000.00);
(9) discharges or satisfactions of, or unscheduled
payments against, any lien, charge or encumbrance, other than current
liabilities shown on the Financial Statements or incurred since December 31,
1997, and paid consistent with past practice;
(10) Adjustments or write-offs of Receivables or
reductions in reserves for Receivables outside of the ordinary course of
business;
(11) Changes in the accounting methods or practice
employed by Seller or change in depreciation or amortization policies;
(12) Issuance or sales by Seller, or contracts or other
commitments entered into by Seller, for the issuance or sales of any ownership
interest in or securities convertible into or exchangeable for any ownership
interest in Seller;
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(13) Mergers, consolidations or similar transactions; or
solicitations therefor;
(14) State or local statutes, rules, regulations, orders
or cases adopted, promulgated or decided which, to the best knowledge of Seller,
materially adversely affect the Assets or the ability of Buyer to perform its
obligations hereunder; or
(15) Strikes, work stoppages or other labor disputes
adversely affecting the Hospital.
4.5 Taxes. All taxes, including, without limitation, income,
property, sales, use, franchise, added value, employees' income withholding and
social security taxes, license fees and taxes, deposits and fees for waste
disposal, pharmaceutical, nursing facilities, and taxes on disproportionate
share hospitals imposed by the United States, by any foreign country or by any
state, municipality, subdivision or instrumentality of the United States or any
foreign country, or by any other taxing authority, which are due or payable by
Seller and all predecessors and affiliates of Seller and all interests and
penalties thereon, whether disputed or not, have been paid in full and all tax
returns required to be filed in connection therewith have been accurately
prepared and timely filed except where such has and with reasonable
foreseeability, will have only a nonmaterial impact on Seller and the Assets.
All deposits required to be made by Seller and all predecessors and affiliates
of Seller with respect to employees' withholding taxes have been duly made.
Except as set forth in Exhibit 4.5, Seller has not been delinquent in the
payment of any tax, assessment or governmental charge or deposit and has no tax
deficiency or claim outstanding, proposed or assessed against it, and there is
no basis therefor.
4.6 Employment. Except as disclosed in Exhibit 4.6 hereto, to the
best of Seller's knowledge, no person or party (including, but not limited to,
any governmental agency) has any claim or basis for any action or proceeding,
against Seller (or any officer, director, employee, agent of Seller), arising
out of any statute, ordinance or regulation relating to wages, collective
bargaining, discrimination in employment or employment practices or occupational
safety and health standards (including, but not limited to, the Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, as amended, the
Occupational Safety and Health Act, or the Age Discrimination in Employment Act
of 1967 or the Americans With Disabilities Act of 1990). None of such claims
shall result in any liability to or obligation of Buyer, or lien or encumbrance
against the Assets except where such liability, obligation, lien or encumbrance
will have a nonmaterial impact against the Assets.
4.7 Licenses and Permits. Seller has all local, state and federal
licenses, permits, registrations, certificates, contracts, consents,
accreditations and approvals (collectively, "LICENSES AND PERMITS") necessary
for Seller to occupy, operate and conduct its business, except where the failure
to have such License or Permit could not result in a material adverse effect on
the business or prospects of Hospital or Buyer, all of which are listed on
Exhibit 4.7. There is no material default under any of such Licenses and
Permits. True and correct copies of these Licenses and Permits have previously
been provided to
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Buyer. The most recent licensure surveys and deficiency reports related to each
of these items has also been included in Exhibit 4.7. Seller is and at the
Closing Date will have duly registered eighty-five (85) acute care beds and ten
(10) geriatric psychiatric beds with the Mississippi Department of Health as a
general, acute care hospital. Except as described in Exhibit 4.7, no notices
have been received by Seller with respect to complaints lodged with any
regulatory authority or agency or with respect to threatened, pending, or
possible revocation, termination, suspension or limitation of any of the
Licenses and Permits nor are there any grounds for revocation, suspension or
limitation.
4.8 Accreditations. Seller is not accredited by the Joint
Commission on Accreditation of Healthcare Organizations.
4.9 Medicare, Medicaid, and Other Third-Party Payors.
(1) The Hospital is duly certified to participate, and
does participate in the Medicare Program and the Medicaid Programs in the State
of Mississippi (the "PROGRAMS") under valid Medicare and Medicaid contracts (the
"PROGRAM AGREEMENTS"). The Hospital is in compliance with all of the terms,
conditions and provisions of the Program Agreements, as well as state and
federal laws related thereto, except where such noncompliance in the aggregate
has and, with reasonable foreseeability will have only a nonmaterial impact on
the business or prospects of the Hospital or Buyer.
(2) No written notice of any offsets against future
reimbursement has been received by Seller nor is the Seller aware of any basis
therefor. There are no pending appeals, adjustments, challenges, audits,
litigation, notices of intent to reopen or open cost reports with respect to the
Programs except as set forth in Exhibit 4.9. To the Seller's knowledge, the
Hospital has not been subject to or threatened with loss of waiver of liability
for utilization review denials with respect to the Programs during the past
twelve (12) months, nor has it received notice of pending, threatened or
possible decertification or other loss of participation in, any of the Programs,
except as set forth in Exhibit 4.9.
(3) The Hospital currently has contractual arrangements
with Blue Cross and other third party payors. Copies of all existing Blue Cross
contracts are included in Exhibit 4.9. The Hospital is in compliance with all of
the terms, conditions and provisions of such contract(s), except where such
noncompliance in the aggregate, has and with reasonable foreseeability will have
only a nonmaterial impact on Seller and Buyer.
(4) Seller has previously furnished Buyer the Medicare
and Medicaid cost reports of Seller for the years of 1996 and 1997. The cost
reports are complete and accurate for the periods indicated. All liabilities and
contractual adjustments of the Hospital under any third party payor or
reimbursement programs have been properly reflected and adequately reserved for
in the Financial Statements.
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(5) Seller has received no written notice of any
violation of federal or state fraud and abuse or self-referral laws, nor is
Seller aware of any such violations in connection with the operation of its
business.
4.10 Peer Review. The Hospital has entered into one or more valid
memorandums of understanding with the Hospital's peer review organizations. A
copy of each memorandum of understanding is attached as Exhibit 4.10.
4.11 Compliance with Zoning, Land Use and Other Laws. Except as
disclosed in Exhibit 4.11 hereto, the Hospital has received no written notice of
any, and to the best of
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Seller's knowledge, there exists no, violation of any zoning, land use, public
health, building code or other similar laws, ordinances and regulations
applicable thereto (other than violations which in the aggregate have, and with
reasonable foreseeability, will only have a nonmaterial impact on Seller) and
there does not exist any variances, conditional use permits, waivers or
exemptions relating to the Real Estate with respect to such matters. Final,
permanent and unconditional certificates of occupancy and/or use have been duly
issued by the applicable governmental authority having jurisdiction for all
buildings located on the Real Estate.
4.12 Easements. To the best of Seller's knowledge, the Hospital has
all easements and rights necessary to continue operation of the business of the
Hospital as currently conducted.
4.13 Title to Assets.
(1) Seller is the only record, legal and beneficial owner
of and has, and at Closing will have, good, marketable and insurable fee simple
or leasehold, as the case may be, title to all the Assets, free and clear of all
mortgages, security interests, liens, leases, covenants, assessments, easements,
options, rights of refusal, restrictions, reservations, defects in the title,
encroachments, adverse claims and other encumbrances, except for the Permitted
Exceptions (as defined below).
(2) The Real Estate is described in the Lease and
includes all real estate owned or leased by Seller set forth on the Financial
Statements and used in connection with the Hospital. Seller is the sole and
exclusive record, legal and equitable owner of all right, title and interest in
and has good, indefeasible and insurable title in fee simple or leasehold, as
the case may be, to, and at Closing will be in possession of, all the Real
Estate including the buildings, structures and improvements situated thereon and
appurtenances thereto, in each case free and clear of all mortgages, liens,
leases, assessments, easements, covenants, options, rights of refusal,
restrictions, reservations, defects in title, encroachments and other
encumbrances, whether or not the same render the title to such Real Estate
uninsurable or unmarketable, except for the "PERMITTED EXCEPTIONS," as defined
below.
(3) The Seller has not sold, exchanged or transferred any
assets with a value of Fifty Thousand and No/100 Dollars ($50,000.00) or more
outside the ordinary course of business which were used by the Hospital within
the last five years, except as listed on Exhibit 4.13(3).
(4) The only names, trade names or fictitious names under
which the business of the Hospital has been operated for the last five (5) years
are listed on Exhibit 4.13(4). Seller has complied with all fictitious name
filing statutes.
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(5) Exhibit 4.13(5) lists all post office boxes and
addresses where accounts receivable sold to Buyer are to be paid and all names
under which payment is to be received. Seller hereby grants to Buyer the
irrevocable power of attorney to execute and endorse any checks or receive any
payments with respect to any accounts receivable which are sold to Buyer.
(6) For purposes of this Agreement, "Permitted
Exceptions" shall mean those liens, encumbrances, security interests,
assessments, easements, options, restrictions or other exceptions to or
limitations on title to the Assets, whether real, personal or mixed.
4.14 Leases and Contracts.
(1) Exhibit 4.14 hereto sets forth a complete and
accurate list of all contracts, agreements, service contracts, management
agreements, equipment leases, leases of space, and ground leases, leases,
subleases, options and commitments, oral or written, and all assignments or
amendments thereof, affecting or relating to any Asset or any interest therein,
to which Seller is a party or by which Seller, the Hospital or the Assets are
bound or affected (collectively, the "LEASES AND CONTRACTS"), except that
"Immaterial Contracts" may be omitted from Exhibit 4.14. "IMMATERIAL CONTRACTS"
shall mean contracts which no party thereto is a referral source (including
physician) to Seller and no party thereto is a Payor to Seller, and are
cancellable without penalty by Buyer as Seller's assignee upon no more than
thirty (30) days' written notice. Buyer shall assume the Immaterial Contracts
and those Leases and Contracts identified on Exhibit 4.14 as being assumed by
Buyer (herein, the "ASSUMED CONTRACTS"). Exhibit 4.14 also indicates whether the
assignment and assumption of such Assumed Contracts requires the consent of any
third party. Seller will provide or cause to be provided to Buyer a copy of all
written Leases and Contracts, and detailed summary of the provisions of all oral
Leases and Contracts, prior to Closing. Except for Assumed Contracts, all Leases
and Contracts and all other obligations relating to the Assets and the business
of Seller shall be retained and paid or performed by Seller.
(2) Except as noted on Exhibit 4.14, none of the Leases
and Contracts has been modified, amended, assigned or transferred, to the
knowledge of Seller, except as noted on Exhibit 4.14, and each is in full force
and effect and is valid, binding and enforceable in accordance with its
respective terms.
(3) To Seller's knowledge, no event or condition has
happened or presently exists which constitutes a default or breach or, after
notice or lapse of time or both, would constitute a default or breach by any
party under any of the Leases and Contracts, and Seller shall do no act nor omit
to do any act which would cause such a default or breach. To Seller's knowledge,
there are no counterclaims or offsets under any of the Leases and Contracts
which are part of the Assumed Liabilities.
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(4) There does not exist any security interest, lien,
encumbrance or claim of others created or suffered to exist on any interest
created under any of the Leases and Contracts other than the Permitted
Exceptions.
(5) No purchase commitment by Seller is in excess of
Seller's ordinary business requirements.
(6) Except as expressly identified on Exhibit 4.14, none
of the Leases and Contracts is a capitalized lease within the meaning of
generally accepted accounting principles.
(7) Except as specifically set forth on Exhibit 4.14, the
assignment to Buyer of the Assumed Contracts will not default, alter or
terminate any of the Assumed Contracts, and such assignment will confer all
Seller's rights thereunder to Buyer, without resulting penalty, premium or
variation.
(8) Except as set forth in Exhibit 4.14, Seller has no
outstanding obligations to make any repairs or improvements or renovations under
any leases of office space or other space included in the Leases and Contracts,
including without limitation any obligations other than normal repairs and
maintenance. There are no outstanding negotiations with any such lessees
regarding any matter relating to the leased space. Except for those tenants in
possession of the Real Estate under Leases and Contracts, there are no parties
in possession of, or claiming any possession, adverse or not, to or other
interest in, any portion of the Real Estate as lessees, tenants at sufferance,
trespassers or otherwise. No tenant is entitled to any rebate, concession or
free rent, other than as set forth in the Lease or Contract with such tenant. No
rents due under any of the Leases and Contracts have been assigned or
hypothecated to, or encumbered by, any person.
(9) The performance after Closing of obligations under
the Leases and Contracts will not violate any law, rule, regulation or judgment
applicable to the business of the Hospital or to the subject matter of or
parties to the Leases and Contracts, except where such violation will only have
a nonmaterial impact on the business or prospects of the Hospital or Buyer.
4.15 Environmental Matters.
(1) Hazardous Substances. As used in this Section, the
term "HAZARDOUS SUBSTANCES" means any hazardous or toxic substances, pollutants,
contaminants, materials or wastes, including but not limited to those
substances, pollutants, contaminants, materials, and wastes listed in the United
States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances pursuant to 40 CFR Part
302, or such substances, materials and wastes which are regulated under any
federal environmental law or any applicable local or state
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environmental law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") as
supplemented and amended or the Resource Conservation and Recovery Act, as
amended ("RCRA"), 42 U.S.C. ss.6901 et seq.; toxic substances as defined under
the Toxic Substance Control Act, 15 U.S.C. 2601 et seq; or any of the following:
hydrocarbons, petroleum and petroleum products, asbestos, polychlorinated
biphenyls, formaldehyde, radioactive substances, flammables and explosives.
(2) Compliance with Laws and Regulations.
(a) To the best of Seller's knowledge, all
operations or activities upon, or any use or occupancy of the Real Estate, or
any portion thereof, by Seller or employee of Seller, or any tenant or subtenant
of Seller of any part of the Real Estate, are and have been in all respects in
compliance with all laws, regulations or orders relating to Hazardous
Substances.
(b) To the best of Seller's knowledge, Seller
has kept the Real Estate free of any lien imposed pursuant to any laws,
regulations or orders relating to Hazardous Substances.
(c) To the best of Seller's knowledge, except
for uses and temporary storage of Hazardous Substances reasonably necessary to
the customary operation of a hospital and in compliance with all applicable
federal, state and local laws, statutes, ordinances, codes, rules, regulations,
orders, decrees, and other applicable requirements of governmental authorities,
Seller has not allowed the manufacture, use, generation, voluntary transmission,
storage or presence of any Hazardous Substances over, in or upon the Real
Estate. Seller has obtained all environmental permits necessary for the
operation of a hospital and related activities, all such permits are in good
standing and Seller is in compliance with all terms and conditions of its
environmental permits except where such noncompliance in the aggregate, has and
with reasonable foreseeability will have only a nonmaterial impact on Seller.
(d) Seller has not received any communication
(written or oral) that alleges that Seller is not or was not in compliance with
all applicable environmental laws (including CERCLA or any comparable state or
local law). None of the Real Estate, nor any part thereof, nor Seller is subject
to any pending or threatened investigation or inquiry by any governmental
authority, or any remedial or removal obligations under any applicable rules,
regulations or orders pertaining to health, safety or the environment.
(e) To the best of Seller's knowledge, Seller
has not installed or permitted to be installed or have knowledge of friable
asbestos or any substance containing asbestos or any other substance deemed
hazardous by federal or state laws or regulations respecting such material in or
on the Real Estate except as disclosed on Exhibit 4.15.
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(f) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, Seller has not at any time engaged in, permitted or
have knowledge of, nor to the best knowledge of Seller, has any tenant or
subtenant engaged in or permitted any dumping, discharge, disposal, spillage, or
leakage (whether legal or illegal, accidental or intentional) of Hazardous
Substances, at, on, in or about the Real Estate. To the best of Seller's
knowledge, no portion of the Real Estate has ever been used as a landfill,
garbage or refuse dump site, waste disposal facility, transfer station or other
type of facility for the processing, treatment or disposal of waste materials.
(g) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, no work, repairs, remedy, construction or capital
expenditures is required by any environmental or land use laws or regulations
with respect to the Real Estate in order for the continued lawful use of the
Real Estate as a hospital.
(h) Except as disclosed on Exhibit 4.15, the
Real Estate is not currently nor has it ever been listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under CERCLA, or any comparable
state list and, to the best of Seller's knowledge, no off-site location at which
Seller has disposed or arranged for the disposal of any waste is listed on the
National Priorities List or on any comparable state list.
(i) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, no petroleum hydrocarbons have migrated on or below
the surface of any portion of the Real Estate, and there are no underground
storage tanks, or related pipes on any portion of the Real Estate. There has
been no release of hydrocarbons or other Hazardous Substances from or rupture of
such tank or line, including without limitation, any release from or in
connection with the filling or emptying of such tank.
(j) To the best of Seller's knowledge, the Real
Estate is free of dangerous levels of naturally-emitted radon.
(3) Seller shall promptly notify Buyer in writing of any
order of which it is aware, receipt of any notice of violation or noncompliance
with any applicable law, rule, regulation, standard or order, any threatened or
pending action of which it is aware by any regulatory agency or their
governmental authority, or any claims made by any third party of which it is
aware relating to Hazardous Substances on, emanations on or from, releases on or
from, or threats or threats of releases on or from any of the Real Estate which
relate to the period prior to Closing; and shall promptly furnish Buyer with
copies of any correspondence, notices, or legal pleadings in connection
therewith. Buyer shall have the right, but shall not be obligated, to notify any
governmental authority of any state of facts which may come to its attention
with respect to Hazardous Substances, on, released from or emanating from any
part of the Real Estate.
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(4) Seller shall prior to Closing provide Buyer with a
copy of all Phase I environmental audits or reports, and any other engineering
reports or inspections which have been prepared by Seller or at the direction of
Seller relating to the Real Estate within the last three (3) years .
4.16 Miscellaneous Representations Relating to Real Estate.
(1) No part of the Real Estate is currently subject to
condemnation proceedings, and no condemnation or taking is threatened or known
by Seller to be contemplated. To the best of Seller's knowledge, there are no
public improvements which may result in special assessments against or otherwise
affect the Real Estate.
(2) Seller has furnished to Buyer complete copies of all
appraisals, mechanical and structural studies or reports or assessments,
engineering plans, architectural drawings, soil studies, surveys and other
documents which have been prepared by or at the direction of Seller within the
last three (3) years relating to any of the Assets.
(3) Except for those obligations set forth in Exhibit
4.14, from and after the date hereof until Closing, Seller will not perform or
permit any material grading or excavation, construction or removal of any
improvement, or make any other material change or improvement upon or about the
Real Estate without prior written consent of Buyer which may not unreasonably be
withheld.
(4) All utilities serving the Hospital are, and shall be
at Closing adequate to operate the Real Estate in the manner it is currently
operated and all utility lines, pipes, hook-ups and wires serving the Hospital
are located within the Real Estate or recorded easements for the benefit of the
Real Estate, except as set forth in the Survey (as defined in Section 7.2). Any
so-called tap fees, hook-up fees or other associated charges accrued to date
have been fully paid with respect to all potable and industrial water and all
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and systems and other similar systems serving the Hospital. There
are no encroachments upon the Real Estate or upon any dominant easement
appurtenant thereto and no encroachment of any improvements to the Real Estate
onto adjacent property, except as shown on the Survey (as defined in Section
7.2). None of the improvements to the Real Estate violate set-back, building or
side lines, nor do they encroach on any easements located on the Real Estate,
except as shown on the Survey.
(5) To the best of Seller's knowledge, no portion of the
Real Estate constitutes wetlands and no portions of the Real Estate has been or
is used as a cemetery, burial ground or other site for the internment, burial or
location of the remains of any deceased person or persons.
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4.17 Conditions of Assets. Except as otherwise specifically set
forth in this Agreement, the Assets will be conveyed or leased, as applicable,
by Seller "AS IS," WITH NO WARRANTY OF HABITABILITY, USE OR FITNESS FOR
HABITATION WITH RESPECT TO THE REAL ESTATE AND WITH NO WARRANTIES, INCLUDING THE
WARRANT OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO
ALL OF THE OTHER ASSETS, and all of which warranties (both express and implied)
Seller hereby disclaims, and further subject to normal wear and tear on the
Assets. Seller has received no written recommendation from any insurer to repair
or replace any of the Assets with which Seller has not complied. To the extent
that Buyer, as a result of its due diligence or otherwise, desires to make any
capital improvements to the Assets, Buyer shall be solely responsible for such
improvements.
4.18 Capital Expenditure and Construction. Except as set forth on
Exhibit 4.18, Seller has no unfulfilled contracts for capital construction
projects or construction in progress other than normal recurring maintenance and
repairs.
4.19 Future Construction. Except as described on Exhibit 4.19,
Seller has entered into no agreements, including oral agreements or
understandings regarding the development of future or pending construction of
facilities in connection with the Hospital.
4.20 Litigation. Except as set forth in Exhibit 4.20 hereto, Seller
has not received notice of any violation of any law, rule, regulation, ordinance
or order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality (including,
without limitation, legislation and regulations applicable to the Medicare and
Medicaid programs, environmental protection, civil rights and public health and
safety and occupational health). Except as set forth in Exhibit 4.20, there are
no lawsuits, proceedings, actions, arbitrations, governmental investigations,
claims, inquiries or proceedings pending or, to the best knowledge of Seller,
threatened, involving or related to Seller, the Hospital or the Assets, and
Seller knows of no basis therefore.
4.21 Seller's Employees. Exhibit 4.21(a) hereto sets forth: (a) a
complete list of all of Seller's employees and rates of pay,(b) the employment
dates and job titles of each such person, and (c) categorization of each such
person as a full-time or part-time employee of Seller. True and correct copies
of any and all employment contracts, fringe benefits and personnel policies have
previously been provided to Buyer. For purposes of this paragraph, "PART-TIME
EMPLOYEE" means an employee who is employed for an average of fewer than twenty
(20) hours per week or who has been employed for fewer than six (6) of the
twelve (12) months preceding the date on which notice is required pursuant to
the "Worker Adjustment and Retraining Notification Act" ("WARN"), 29 U.S.C.
ss.2102 et seq., and any similar state laws. Except as provided in Exhibit
4.21(a), Seller has no employment agreements and all such employees are employed
on an "at will" basis. Exhibit 4.21(a) lists all ex-employees of Seller
utilizing or eligible to use COBRA (health insurance). Exhibit 4.21(b) shall be
attached at Closing and shall set forth a complete list
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of all of Seller's full- and part-time employees who have been terminated within
ninety (90) days before Closing.
Seller and Buyer agree that the unemployment experience of Seller will
be transferred to Buyer if such a transfer of unemployment experience is allowed
by law and elected by Buyer. If the payroll of the Hospital is reported in an
unemployment insurance account with other payroll prior to the Closing, the
portion of the unemployment experience transferred to Buyer shall be the same
portion as the Hospital's state unemployment taxable payroll bears to the total
state unemployment taxable payroll of Seller's unemployment insurance account.
Funds which are in group accounts for the purpose of paying reimbursable
unemployment benefits will be transferred to Buyer if Buyer elects such
transfer. Obligations to reimburse the state for unemployment benefits relating
to persons who do not become employees of Buyer at Closing shall continue to be
the obligations of Seller.
Seller agrees to make available to Buyer the records of individual
wages of all employees, as well as copies of state unemployment tax returns, to
the extent necessary for Buyer to verify future unemployment tax rates and to
calculate the correct taxable payroll for the remainder of the calendar year in
which the transaction occurs.
4.22 Labor Relations. Seller is not a party to any labor contract,
collective bargaining agreement, contract, Letter of Understanding or any other
arrangement, formal or informal, with any labor union or organization which
obligates Seller to compensate its employees at prevailing rates or union scale,
nor are any of Seller's employees represented by any labor union or
organization. There is no pending, or to the best knowledge of Seller,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Seller and any
present or former employees (or a union) of Seller, and Seller knows of no basis
therefore. There is no pending, or to the knowledge of Seller, threatened suit,
action, investigation or claim between Seller and any present or former
employees (or a union) of Seller and Seller knows of no basis therefore. To the
best of Seller's knowledge, there has not been any labor union organizing
activity at the Hospital or elsewhere with respect to employees of the Hospital
within the last three (3) years.
4.23 Insurance. Seller has in effect and has continuously, for at
least the last five (5) years, maintained insurance coverage for its operations,
personnel and assets. Exhibit 4.23 sets forth a summary of the Seller's current
insurance coverage (listing type, carrier and limits). Exhibit 4.23 also
includes a list of any pending insurance claims relating to Seller. Seller is
not in default or breach with respect to any provision contained in any such
insurance policies, nor has Seller failed to give any notice or to present any
claim thereunder in due and timely fashion. Such insurance is adequate to cover
all business risks normally insured against by owners and operators of acute
care hospitals. Seller will continue to maintain all its insurance policies and
coverage amounts in full force and effect until the Closing. All of such
policies are valid, outstanding, in full force and effect with
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insurers unaffiliated with Seller, and enforceable with no premium arrearages.
Complete genuine copies of all policies and endorsements thereto have been
provided to Buyer. At no time has Seller been denied, or reduced or requested a
reduction in the scope of amount of, any insurance or indemnity bond coverage
with respect to the Assets. Except as disclosed on Exhibit 4.23, no insurance
carrier has canceled or reduced, or given notice of its intention to cancel or
reduce, any insurance coverage with respect to the Hospital, and there exist no
grounds to cancel or void any such policies or the coverage provided thereby.
4.24 Broker's or Finder's Fee. Seller has not engaged any finder,
broker or similar person other than Intensive Resource Group, LLC ("IRG") in
connection with the transactions contemplated by this Agreement. Seller is
responsible for paying all fees payable to IRG or any affiliate thereof.
4.25 Medical Staff. Seller has previously delivered to Buyer a true
and correct copy of medical staff privilege and membership application forms, a
description of medical staff privileges, all current medical staff bylaws, rules
and regulations and amendments thereto, all credentials and appeals procedures
not incorporated therein, the name of each current member of the medical staff
of the Hospital, the age of each medical staff member, the specialty, if any, of
each medical staff member, and all contracts with physicians, physician groups,
or other members of the medical staff of the Hospital. There are no pending or,
to the knowledge of Seller, any threatened appeals, challenges, disciplinary or
corrective actions, or disputes involving applicants, staff members, or health
professionals and Seller knows of no basis therefor.
4.26 Conflicts of Interest. Except as disclosed in Exhibit 4.26, no
members, director, officer, employee or agent of Seller or any Affiliates is
either a supplier of goods or services to Seller, or directly or indirectly
controls or is a shareholder, officer, director, employee or agent of any
corporation, firm, association, partnership or other business entity which is a
supplier of goods or services to Seller or a party to any contract or other
agreement with Seller.
4.27 Hill-Burton Liens. As evidenced by Exhibit 4.27, Seller has
met its total Hill-Burton uncompensated services obligation.
4.28 Experimental Procedures. Seller has not performed or permitted
the performance of any experimental or research procedures or studies involving
patients in the Hospital.
4.29 Intellectual Property; Computer Software. All trademarks,
service marks, trade names, patents, copyrights, inventions, processes and
applications therefor (whether registered or common law) currently owned or used
by Seller are listed and described in Exhibit 4.29 (collectively the
"INTELLECTUAL PROPERTY"). No proceedings have been instituted or pending or, to
the knowledge of Seller, threatened which challenge the validity of the
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ownership by Seller of such Intellectual Property, and Seller knows of no basis
therefore. Seller has not licensed anyone to use such Intellectual Property and
Seller has no knowledge of the use or the infringement of any of such
Intellectual Property by any other person. Seller owns (or possesses adequate
and enforceable licenses or other rights to use) all Intellectual Property, and
all computer software programs and similar systems used in the conduct of its
business.
4.30 Inventories. The Inventory is of a quality and quantity
presently usable in the ordinary course of business at the Hospital determined
and valued consistent with generally accepted accounting principles. The
Inventory is maintained at normal levels consistent with the past practice of
Seller. Since the date of the most recent Financial Statements, Seller has not
decreased or substituted its items of Inventory other than in the ordinary
course of business.
4.31 Motor Vehicles. All motor vehicles used in the business of
Seller, identified as owned or leased, are listed in Exhibit 1.1(2) hereto. All
such vehicles are properly licensed and registered in accordance with applicable
law.
4.32 Employee Benefit Plans.
(1) Except as set forth in Exhibit 4.32(1), Seller does
not maintain, and is not required to contribute to or otherwise participate in
an "employee benefit plan" or a "multi-employer plan" (as such terms are defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including without limitation, any pension, profit-sharing, retirement, stock
purchase or stock option plan, or any other retirement, compensation, welfare or
fringe benefit plan, program or arrangement of any kind whatsoever, whether
formal or informal, providing for benefits for, or for the welfare of, any or
all of the employees of Seller, any member of a group defined in Section 414(b),
(c), (e), (m) or (o) of the Code to which Seller belongs or has belonged, or any
predecessor of Seller, or for the welfare of the beneficiaries of such employees
(each an "EMPLOYEE PLAN"). Seller shall be liable for any withdrawal liability
with regard to such employees under the Multi-Employer Pension Plan Amendments
Act of 1980. Seller has no liability for unpaid compensation or fringe benefits,
including without limitation accrued vacation, sick leave, post retirement
medical or other benefits, severance pay, "parachutes," or vacation pay, not
disclosed on Exhibit 4.32(1).
(2) Except as set forth in Exhibit 4.32(2), no "party in
interest" (as such term is defined in Section 3(14) of ERISA) or "disqualified
person" (as such term is defined in Section 4975(e) of the Code) with respect to
any of the Employee Plans has engaged in any "prohibited transaction" (as such
term is defined in ERISA or the Code) which could subject any of the Employee
Plans, any trusts thereunder, any trustee, custodian or administrator thereof,
any person or entity holding or controlling assets of any of the Employee Plans,
any party in interest or disqualified person or any other person or entity
dealing with such Employee Plans to any tax, penalty or other cost or liability
of any kind.
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No "reportable events" (as such term is defined in Section 4043 of ERISA) have
occurred by reason of any act or omission of Seller or any other person with
respect to any of the Employee Plans.
(3) Except as set forth in Exhibit 4.32(3), Seller and
its Affiliates have fully complied with all of its and their obligations under
each of the Employee Plans and all provisions of ERISA, the Code, and any and
all other laws, rules, regulations, releases and other official pronouncements
applicable to the Employee Plans, each Employee Plan that is intended to qualify
under Section 401(a) of the Code has, at all times, so qualified and each
Employee Plan has, at all times, been administered so as to comply with all
applicable law including, but not limited to, ERISA, the Code, applicable state
laws and any regulations thereunder, except when noncompliance could not have a
material adverse effect on the business or prospects of the Hospital or Buyer.
(4) Except as specified in Section 1.3(2) relating to
accrued vacation, PTO and sick leave, and as set forth on Exhibit 4.32(4), Buyer
will not be liable and will not be responsible for any debt, obligation,
contribution, responsibility, withdrawal liability or other liability of Seller
under any Employee Plans, including, without limitation, any penalty, fee or
funding obligation related to the termination of any plan pursuant to Section
6.18. Seller will be liable under the Employee Plans for all claims due and
unpaid at or after Closing and for all claims incurred before or after the
Closing, whether or not paid or presented before Closing, and for any
liabilities arising from any failure before or after the Closing to comply with
the requirements of ERISA, the Code, applicable state laws or regulations
thereunder.
(5) Seller has provided or caused to be provided notice
of the availability of COBRA coverage for all of its present and former
employees, and their dependents entitled to such notice because of a qualifying
event occurring on or before the Closing. The only persons entitled to receive
COBRA coverage or in the future elect COBRA coverage as a result of a qualifying
event occurring on or prior to Closing are persons listed on Exhibit 4.21(a).
Upon Closing, all of Seller's employees shall cease participation in all
Employee Plans maintained by Seller, except to the extent provided herein or as
to benefits owed such employees.
4.33 Compliance with Laws. To the best of Seller's knowledge,
Seller has complied with all existing laws, rules, regulations, ordinances,
orders, judgments and decrees applicable to its businesses or the Assets in all
ways other than exceptions which in the aggregate have and will have only a
nonmaterial impact on the business and its operations and prospects. To the best
knowledge of Seller, there are no proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations or other
proceedings which could, before or after Closing, adversely affect the Hospital.
Seller has made no kickback, bribe or payment to any person or entity, directly
or indirectly, for referring, recommending or arranging business or patients
with, to or for Seller. To the best of Seller's knowledge, none of the Leases
and Contracts and no activity of Seller violates Section 1877 of the Social
Security Act or any similar provision of
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applicable state law. To the best of Seller's knowledge, none of the Leases and
Contracts and no activity of Seller violates provisions of applicable state law
relating to the corporate practice of medicine.
4.34 No Omissions or Misstatements. To the best of Seller's
knowledge, none of the information included in this Agreement and Exhibits or
other documents furnished or to be furnished by Seller or any of its
representatives pursuant to the terms of this Agreement contains any untrue
statement of a material fact or is misleading in any material respect or omits
to state any material fact necessary in order to make any of the statements
herein or therein not misleading. Copies of all documents referred to in any
Exhibit hereto have been delivered or made available to Buyer and constitute
true, correct and complete copies thereof and include all amendments, exhibits,
schedules, appendices, supplements or modifications thereto or waivers
thereunder. The representations and warranties of Seller set forth in this
Agreement or in any document delivered pursuant hereto shall not be affected or
deemed waived by reason of the fact that the Buyer knew or should have known
that any such representation or warranty is, or might be, inaccurate in any
respect.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer and Parent, jointly and
severally, represent and warrant to Seller, which representations and warranties
shall be true and correct on the date hereof, and on Closing, as if then
restated by it, and which shall survive Closing, as follows:
5.1 Organization, Qualification and Authority. Buyer is a
corporation duly organized, and validly existing under the laws of the State of
Tennessee and is duly qualified as a foreign corporation in the State of
Mississippi. Buyer has the full corporate power and authority to enter into and
perform its obligations under this Agreement without the consent, approval or
authorization of, or obligation to notify, any person, entity or governmental
agency. Buyer has the corporate power and authority to execute, deliver and
carry out the terms of this Agreement and all documents and agreements necessary
to give effect to the provisions of this Agreement and to consummate the
transactions contemplated on the part of Buyer hereby. The execution, delivery
and consummation of this Agreement and all other agreements and documents
executed in connection herewith by Buyer has been duly authorized by all
necessary action on the part of Buyer. No other action on the part of Buyer or
any other person or entity is necessary to authorize the execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith. This Agreement and all other agreements and documents
executed in connection herewith by Buyer, upon due execution and delivery
thereof shall constitute valid binding obligations of Buyer, enforceable in
accordance with their respective terms.
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5.2 Absence of Default. The execution, delivery and consummation
of this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
with or without the giving of notice or the passage of time, or both, result in
a breach of, constitute a default under, or create (or cause the acceleration of
the maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets under: (a) any term or provision of the
Charter or Bylaws of Buyer; (b) any contract, lease, agreement, indenture,
mortgage, pledge, assignment, permit, license, approval or other commitment to
which Buyer is a party or by which Buyer is bound; (c) any judgment, decree,
order, regulation or rule of any court or regulatory authority, or (d) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Buyer is
subject.
5.3 Organization, Qualification and Authority. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Parent has the full corporate power and authority to
own, lease and operate its properties and assets as presently owned, leased and
operated and to carry on its business as it is now being conducted, and is in
good standing in each jurisdiction in which it does business and has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement without the consent, approval or authorization
of, or obligation to notify, any person, entity or governmental agency. Parent
has the corporate power and authority to execute, deliver and carry out the
terms of this Agreement and all documents and agreements necessary to give
effect to the provisions of this Agreement and to consummate the transactions
contemplated on the part of Parent hereby. The execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith by Parent has been duly authorized by all necessary
action on the part of Parent. No other action on the part of Parent or any other
person or entity is necessary to authorize the execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith. This Agreement and all other agreements and documents
executed in connection herewith by Parent, upon due execution and delivery
thereof shall constitute valid binding obligations of Parent, enforceable in
accordance with their respective terms.
5.4 Absence of Default. The execution, delivery and consummation
of this Agreement and all other agreements and documents executed in connection
herewith by Parent will not constitute a violation of, be in conflict with, or,
with or without the giving of notice or the passage of time, or both, result in
a breach of, constitute a default under, or create (or cause the acceleration of
the maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets under: (a) any term or provision of the
Certificate of Incorporation or Bylaws of Parent; (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval or
other commitment to which Parent is a party or by which Parent is bound; (c) any
judgment, decree, order, regulation or rule of any
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court or regulatory authority, or (d) any law, statute, rule, regulation, order,
writ, injunction, judgment or decree of any court or governmental authority or
arbitration tribunal to which Parent subject.
ARTICLE VI. COVENANTS OF PARTIES
6.1 Preservation of Business and Assets. From the date hereof
until the Closing, Seller shall use its best efforts and shall do or cause to be
done all such acts and things as may be necessary to preserve, protect and
maintain intact the Assets and the business and operation of the Hospital as a
going concern consistent with prior practice and not other than in the ordinary
course of business, and to preserve, protect and maintain for Buyer the goodwill
of the Hospital's medical staff, suppliers, employees, clientele, patients,
tenants and others having business relations with Seller. Seller shall use its
best efforts to retain its employees in their current positions up to Closing
and shall use its best efforts to obtain all documents called for by this
Agreement. From and after the date of this Agreement until Closing, Seller will
maintain and keep the Assets in a sanitary, well-maintained condition and in
good order and repair, ordinary wear and tear excepted. Buyer and Seller shall
use their best efforts to facilitate the consummation of the transactions
contemplated by this Agreement. From and after the date of this Agreement until
Closing, Seller shall make no distribution or extraordinary payment to any
Affiliate or any third party or pay any intercompany payable and, other than in
the ordinary course of business. Seller will not sell, discard, dispose of or
move any of the Assets. None of the Leases and Contracts shall be amended
between the date hereof and Closing without the prior written consent of Buyer.
6.2 Absence of Material Change. From the date hereof until the
Closing, Seller shall not make any material change in the business and operation
of the Hospital and shall not enter into any other significant contract or
commitment or any other transaction with respect thereto without the prior
written consent of Buyer, which shall not be unreasonably withheld.
6.3 Access to Books and Records.
(1) From the date hereof until the Closing, Seller shall give to
Buyer and to Buyer's counsel, accountants, and other representatives, full
access during normal business hours to all of Seller's offices, properties,
books, contracts, commitments, records and affairs relating to the Assets so
that Buyer may inspect and audit them and shall furnish to Buyer a copy of all
documents and information concerning the properties and affairs of the Assets as
Buyer may reasonably request. If any such books, records and materials are in
the custody of third parties, Seller shall direct such third parties to promptly
provide them to Buyer. Copies of documents furnished to Buyer by Seller will be
returned by Buyer upon request if the transaction is not consummated. Seller
shall provide Buyer promptly with interim financial statements of Seller in
accordance with Section 4.3, and any other management reports as and when they
are available. Additionally, from the date
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hereof until Closing, Seller grants Buyer full access to Seller's personnel and
computers as is reasonably necessary to assist Buyer in the transition to be
prepared for the ownership change.
(2) Buyer shall permit Seller's representatives
(including, without limitation, their counsel and auditors), during normal
business hours and upon appropriate advance notice, to (i) have reasonable
access to, and examine and make copies of all books and records of the Hospital,
including all medical records and medical charts of any patient admitted to the
Hospital, which are transferred to Buyer hereunder and (ii) have reasonable
access to the Hospital's employees, relating to transactions or events occurring
prior to the Closing, to the maximum extent permitted by law as long as such
requests do not unreasonably interfere with the operation of the Hospital. For a
period of three (3) years after the Closing, Buyer agrees that, prior to the
destruction or disposition of any such books or records, Buyer shall provide not
less than forty-five (45) days', nor more than ninety (90) days' prior written
notice to Seller of such proposed destruction or disposal. If Seller desires to
obtain any of such documents, it may do so by notifying Buyer in writing at any
time prior to the date scheduled for such destruction or disposal. In such
event, Buyer shall not destroy such documents and the parties shall then
promptly arrange for the delivery of such documents to Seller, its successors or
assigns. All out-of-pocket costs associated with the delivery of the requested
documents shall be paid by Seller.
(3) Following the Closing, Seller shall permit Buyer and
its representatives (including, without limitation, their counsel and auditors),
during normal business hours, to have reasonable access to, and examine and make
copies of, all books and records of Seller and its Affiliates relating to the
Hospital, which books and records, are retained by Seller and which relate to
transactions or events contemplated by this Agreement occurring prior to the
Closing, to the maximum extent permitted by law. For a period of three (3) years
after the Closing, Seller agrees that, prior to the destruction or disposition
of any such books or records, Seller shall provide not less than forty-five (45)
days', nor more than ninety (90) days' prior written notice to Buyer of such
proposed destruction or disposal. If Buyer desires to obtain any such documents,
it may do so by notifying Seller in writing at any time prior to the date
scheduled for such destruction or disposal. In such event, Seller shall not
destroy such documents and the parties shall then promptly arrange for the
delivery of such documents to Buyer, its successors or assigns. All
out-of-pocket costs associated with the delivery of the requested documents
shall be paid by Buyer.
(4) After Closing, Seller shall make its books and
records available to Buyer and Buyer's auditors at reasonable times and in a
manner so as to not unduly interfere with Seller's operations, and otherwise
cooperate with Buyer in order to permit Buyer to conduct an audit of Seller's
financial statements for any period prior to Closing. Such audit, if any, shall
be at Buyer's expense. Seller agrees to cooperate, at Buyer's expense, with
Buyer in Buyer's preparation of financial statements relating to such periods
and Buyer's filing in a timely manner registration statements, private placement
memoranda and periodic reports, if any, pursuant to applicable federal and state
securities laws. Seller
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intends to leave Seller's books and records (other than those books and records
which are Excluded Assets under Section 1.2(e) including but not limited to
corporate records), prior period tax returns and open cost reports with Buyer
after the Closing.
6.4 Consents. Seller shall use its best efforts, without
unreasonable expense to Seller, to obtain all consents required in form and
substance reasonably acceptable to Buyer for the assignment of the Assumed
Contracts.
6.5 Risk of Loss. In the event there is any damage to or loss of
any of the Assets (whether by fire, theft, vandalism or other cause or
casualty), between the date hereof and the Closing, the Purchase Price shall be
reduced by the amount necessary to repair the damage, which reduction shall be
offset by any amounts paid by Seller's insurance company and assigned to Buyer;
provided, however, in the event of a Material Casualty (as defined herein), (A)
Buyer, at its sole option, may elect either (i) to terminate this Agreement in
its entirety, or (ii) to terminate this Agreement but only with respect to the
damaged property with a reduction in the Purchase Price determined as follows,
(B) In the event Buyer has made the election permitted by provision (A)(ii)
above, prior to Closing but after the amount of the reduction in Purchase Price
is determined, either party may terminate this Agreement. For purposes of this
Section "MATERIAL CASUALTY" shall mean a casualty: (i) causing damage in the
amount of $1,000,000 or more, or (ii) resulting in an annualized anticipated
decrease in the Asset's EBDITA (earnings before depreciation, interest, taxes
and amortization) of $1,000,000 or more, each as reasonably determined by Buyer.
The reduction in Purchase Price shall be determined, based on the value on the
date of this Agreement of the Assets damaged or lost, the value of which shall
be determined by an MAI appraiser to be mutually selected and paid equally by
Seller and Buyer. If Seller and Buyer are unable to mutually select an
appraiser, then one (1) MAI appraiser shall be selected and paid by Buyer and
one (1) MAI appraiser shall be selected and paid by Seller. If a party does not
select an appraiser as provided in the preceding sentence within ten (10) days
after the other party has given notice of the name of its appraiser, such party
shall lose its right to appoint an appraiser. If the two (2) appraisers are
selected by the parties as provided above, they shall meet promptly to determine
the reduction in Purchase Price. If they are unable to agree within fifteen (15)
days after the second appraiser has been selected, they shall jointly select a
third MAI appraiser. The reduction in Purchase Price shall be set by agreement
of any two (2) of the three (3) appraisers. If the two (2) appraisers are unable
to agree on a third appraiser within thirty (30) days after the second appraiser
has been selected, either party, by giving written notice to the other, may
apply to the American Arbitration Association for the purpose of determining the
reduction in Purchase Price. Seller and Buyer shall each bear one-half (1/2) of
the cost of selecting the third appraiser and of paying the third appraiser's
fee. The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party. If any two (2) appraisers are
unable to determine the reduction in Purchase Price within fifteen (15) days
after the third appraiser has been selected, then the three (3) appraisals shall
be added together and their total divided by three (3); the resulting quotient
shall be the reduction in Purchase Price. In determining the reduction
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in Purchase Price, each appraiser shall take into consideration, understand, and
correctly employ those recognized techniques that are necessary to produce a
credible appraisal.
6.6 Condemnation. From the date hereof until the Closing, in the
event that any portion of the Assets becomes subject to or is threatened with
any condemnation or eminent domain proceedings which in Buyer's reasonable
opinion materially adversely affects the businesses or operations or prospects
of any of the Assets, then Buyer, at its sole option, may elect either (i) to
terminate this Agreement in its entirety or (ii) to terminate this Agreement
with respect only to that part which is condemned or threatened to be condemned
with a reduction in the Purchase Price determined as provided in Section 6.5.
6.7 Good Faith. All parties shall act in good faith and use their
reasonable best efforts to satisfy all conditions to their respective
obligations to close. In addition, Seller and its affiliates shall act in good
faith to provide reasonable assistance to Buyer, upon request and at Buyer's
expense, and shall not directly or indirectly interfere with Buyer, in the
performance of Buyer's obligations hereunder, including those obligations of
Buyer hereunder to be performed after the Closing Date.
6.8 Preserve Accuracy of Representations and Warranties. Seller
shall use it best efforts to refrain from taking any action which would render
any representations and warranties contained in Article IV hereof inaccurate as
of Closing. Seller will use its best efforts to promptly notify Buyer of any
lawsuit, claim, audit, investigation, administrative action or other proceeding
asserted or commenced against Seller or its directors or officers that may
involve or relate in any way to Seller, the Assets or the business and
operations of Seller or the Assets. Seller shall use its best efforts to
promptly notify Buyer of any facts or circumstances which come to its attention
and which cause, or through the passage of time may cause, any of Seller's
representations and warranties to be untrue or misleading at any time from the
date hereof to Closing.
6.9 Maintain Books and Accounting Practices. From the date hereof
until the Closing, Seller shall maintain its books of account in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles consistently applied and on a basis consistent with prior years and
shall make no change in its accounting methods or practices or the accounting
methods or practices.
6.10 Indebtedness; Liens. Other than in the ordinary course of
business as reflected in the Financial Statements, from the date hereof until
the Closing, Seller shall not create, incur, assume, guarantee or otherwise
become liable or obligated with respect to any indebtedness for borrowed money,
nor make any loan or advance to, or any investment in, any person or entity, nor
create any lien, security interest, mortgage, right or other encumbrance in any
of the Assets in an amount in excess of Twenty-Five Thousand Dollars ($25,000),
without Buyer's prior written approval which will not be unreasonably withheld.
Until Closing, Seller shall make all payments required with respect to its
long-term debt, including, without limitation, any bonds, loans or other
obligations as
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described in Section 1.4(1) and fully and timely comply with and satisfy all its
obligations with respect thereto. Seller shall take all action necessary to
fully defease any such bonds and retire any such loans or other obligations and
cause all collateral and obligations and security against the Assets to be fully
released to Buyer's satisfaction as contemplated hereunder, and Buyer will
cooperate with Seller in this regard.
6.11 Compliance with Laws and Regulatory Consents. From the date
hereof until the Closing, (a) Seller shall use its best efforts to comply with
all applicable statutes, laws, ordinances and regulations; (b) Seller shall use
its best efforts to keep, hold and maintain all certificates, certificates of
need, certificates of exemption, accreditations, participations, licenses, and
other permits necessary for the business and operation of the Assets; (c) Seller
shall use its best efforts to obtain all consents, approvals, exemptions and
authorizations of third parties, whether governmental or private, necessary to
consummate the transactions contemplated by this Agreement; (d) Seller shall use
its best efforts to make and cause to be made all filings and give and cause to
be given all notices which may be necessary or desirable on its part under all
applicable laws and under its contracts, agreements and commitments in order to
consummate the transactions contemplated by this Agreement; and (e) Seller shall
use reasonable efforts to consummate the transactions contemplated by this
Agreement and the agreements and documents to be executed in connection with
this Agreement as soon as is practicable.
6.12 No Sale, Merger or Consolidation. From the date hereof until
the Closing, Seller shall not sell all or substantially all of its assets, merge
or consolidate with any other entity; Seller shall not solicit any inquiries,
proposals or offers relating to such transactions; and Seller shall promptly
notify Buyer orally, and confirm in writing, of all relevant details relating to
inquiries, proposals or offers which it may receive relating to any of the
matters referred to in this Section.
6.13 Maintain Insurance Coverage. From the date hereof until the
Closing, Seller shall maintain and cause to be maintained in full force and
effect, without change of coverage or insurance carrier unless approved of in
writing by Buyer (which approval shall not be unreasonably withheld), the
existing insurance on the Assets and the operations of the Hospital and shall
provide, upon request by Buyer, evidence satisfactory to Buyer that such
insurance continues to be in effect and that all premiums due have been paid.
Prior to Closing, Seller will obtain "tail" insurance coverage for a
malpractice and general liability insurance policy with limits no less than
$1,000,000.00 per occurrence and $3,000,000.00 in the aggregate. Buyer and its
affiliates shall be named under such coverages as additional insureds.
6.14 Medicare and Medicaid Reporting. From the date hereof until
the Closing, Seller shall timely file or cause to be filed all cost reports
required to be filed with respect to the purchase of services by third party
payors, including, but not limited to, Medicare, Medicaid, and Blue Cross prior
to Closing. Seller has paid or will pay all liabilities for
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contracted adjustments, discounts, refunds and other offsets in connection with
the filing of such reports and claims up to Closing; provided, however, that if
any adverse adjustments or offsets regarding operations on or after Closing are
the result of the willful acts or omissions, or gross negligence, of Seller
and/or its employees, representatives or agents, Seller shall be responsible for
such adjustments and offsets. Seller shall be entitled to receive any refund or
other benefit which may result from the filing of said reports and claims for
operations up to Closing, and Buyer shall likewise be so entitled on and after
Closing. Buyer will prepare and file the terminating cost reports for the
Hospital. Seller shall assist Buyer in any way needed to complete the cost
report in a timely manner. Seller shall have the right to review and approve
said report prior to the filing thereof.
6.15 Current Return Filing. Seller shall be responsible for the
preparation and filing of the federal, state and local income tax returns for
all the tax periods of Seller ending on or before the Closing. Seller shall be
responsible for returns for organizations exempt from income tax for Seller and
related parties for all periods ending on or before the Closing.
6.16 Performance. Seller and Buyer shall take appropriate steps to
satisfy their respective obligations, and the conditions to Closing, including
without limitation, the obtaining of necessary contracts and application for
necessary licenses and permits.
6.17 WARN Act. Prior to Closing, Seller will not temporarily or
permanently close or shut down any "single site of employment" or any "facility"
or any "operating unit" or any "workplace," department or service within a
single site of employment, as such terms are used in WARN and any similar state
law. Seller represents that there have been no such closures or shutdowns within
the period of at least ninety (90) days before Closing. Seller will not, for any
reason, permanently or temporarily reduce the number of its full-time employees
by five hundred (500) or one-third (1/3), whichever is less, and in any case not
more than forty-nine (49), during the ninety (90) days prior to Closing.
6.18 [Deleted]
6.19 Power to Endorse Checks. As specified in Section 4.13(5),
Buyer has been granted the power to execute and endorse for payment all payments
on Receivables sold to Buyer.
6.20 Phase I Environmental Assessment; Additional Environmental
Inspections. Seller shall permit Buyer prior to Closing to conduct a Phase I
Environmental Assessment on any of the Real Estate, the results of which shall
be satisfactory to Buyer. Buyer shall bear the cost of such Phase I
Environmental Assessment. If Buyer becomes aware of the presence of any
Hazardous Substances on the Real Estate, including hydrocarbons, Buyer shall
have the right to make whatever additional borings or inspections reasonably
necessary to determine the condition of the Real Estate. Such additional borings
or inspections shall be at Buyer's expense. The results of such additional
borings or inspections shall be reasonably satisfactory to Buyer. Buyer shall
provide a copy of any
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reports, inspections or assessments within ten (10) days of receipt by Buyer and
not less than ten (10) days prior to Closing.
6.21 Foundation. It is anticipated that Seller may elect to
transfer certain of its assets, including all or a portion of the Purchase
Price, to a charitable foundation or similar tax exempt organization (herein,
the "FOUNDATION"). The formation of the Foundation may be done at Closing or
some time thereafter. Upon the later of (i) the Closing and (ii) the transfer of
all or a portion of Seller's assets to Foundation, Buyer shall contribute Five
Hundred Thousand and No/100 Dollars ($500,000.00) to Foundation provided that
Foundation and Seller comply with the terms of this Section 6.21 and Section
6.22 below. Seller shall cause Foundation to execute and deliver a signature
page or addendum to this Agreement in form reasonably satisfactory to Buyer
whereby such Foundation agrees to be bound by this Agreement for the following
purposes: (i) to assume joint and several liability for the indemnification
obligations of Seller set forth in Article XIII; and (ii) to agree to be bound
by Article XIV. Prior to any such transfer of the Purchase Price, and Buyer's
contribution to the Foundation referred to above, Foundation shall (i) deliver
an opinion of counsel in form and substance satisfactory to Buyer to the effect
of the due organization of such Foundation, and the valid, binding nature of
execution of the agreements required by this Section and their enforceability in
accordance with their terms, and such other matters as Buyer shall reasonably
determine are needed, (ii) deliver certified resolutions authorizing execution
of the foregoing, and (iii) execute and deliver such other instruments and
agreements, and take such other action as Buyer may reasonably request.
6.22 Covenant of Net Worth. Seller and Foundation covenant that for
a period of eighteen (18) months following the Closing, Tangible Net Worth, as
defined below, shall not drop below One Million Five Hundred Thousand and No/100
Dollars ($1,500,000.00) (the "MINIMUM TNW"). "TANGIBLE NET WORTH" as used in
this Section, shall mean the aggregate of the following accounts (or their
equivalents) of Seller and Foundation (provided that Foundation has complied
with Section 6.21) determined in accordance with generally accepted accounting
principles, consistently applied, as the same shall be in effect from time to
time: total assets less all of the following: intangible assets, including
without limitation, deferred loan costs and startup costs, any assets whose use
is limited, current liabilities, long-term liabilities, contingencies and
commitments. Seller and Foundation will furnish, upon request of Buyer, such
evidence of compliance with this Section 6.22 as Buyer may from time to time
reasonably request. Notwithstanding the above, in the event that the claims
listed on Exhibit 6.22 are settled (and any settlement amounts paid) or resolved
in a final non-appealable judgment, then the Minimum TNW shall be reduced to
Five Hundred Thousand Dollars ($500,000.00).
6.23 Plan of Integration. After Closing, Buyer will develop a plan
for the syndication, integration or other appropriate business combination
between the Hospital and local physicians and use its reasonable best efforts to
implement such plan.
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6.24 Education Affiliations. Buyer will develop a plan to develop
and/or strengthen ties with area schools, junior colleges and universities to
aid in the development and advancement of health careers and use its best
efforts in the implementation of said plan. A major component of said plan shall
be to establish a relationship with one or more graduate medical education
programs and provide a residency program and flexible internships in the field
of family practice and internal medicine at the Hospital and/or local private
practices.
6.25 Replacement Facility. Buyer and Seller agree that following
the Closing, Buyer shall seek approval to construct, and shall then construct, a
new hospital facility (the "REPLACEMENT FACILITY") to replace Seller's current
hospital facility, in accordance with the terms of this Section 6.25:
(1) The Replacement Facility will meet the following
specifications, subject to any modifications required in order to comply with
any regulatory requirements:
(a) The campus of the Replacement Facility shall
be located within the city limits of Picayune or within three (3) miles of said
city limits. Buyer estimates that the campus for the Replacement Facility will
be approximately fifteen (15) acres;
(b) The Replacement Facility will contain a
minimum of 75 total beds, each a private room of approximately 225 square feet
per room;
(c) The Replacement Facility will be equipped to
provide substantially all of the medical services currently offered at the
Hospital;
(d) The plans and specifications prepared by
Buyer with respect to the Replacement Facility shall include an estimated cost
to construct and equip the Replacement Facility (including land costs) of at
least Eighteen Million and No/100 Dollars ($18,000,000.00).
(2) Within one hundred eighty (180) days of the Closing,
Buyer shall apply to the Mississippi State Department of Health (the
"DEPARTMENT") for a certificate of need ("CON") to build the Replacement
Facility. If Buyer does not file the CON application for the Replacement
Facility within one hundred eighty (180) days of Closing, Buyer shall pay to
Seller One Thousand and No/100 Dollars ($1,000.00) per day for each day after
said one hundred eighty (180) day period that the CON application is not filed.
In the event that the CON for construction of the Replacement Facility is not
granted to Buyer within one (1) year after the Closing, and the failure to
obtain said CON is due to Buyer's failure to expeditiously respond to the
Department's requests for information, then Buyer shall pay to Seller an
additional penalty of One Thousand and No/100 Dollars ($1,000.00) per day for
each day that Buyer's response to the Department has been delinquent. Within
ninety (90) days of receipt of CON approval, Buyer shall purchase a performance
bond or other
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mutually acceptable instrument securing Buyer's obligation to construct the
Replacement Facility.
(3) Buyer shall complete construction of the Replacement
Facility within thirty (30) months of receipt of CON approval. If the
Replacement Facility is not receiving patients at or prior to the end of said
thirty (30) month period, then Buyer shall pay to Seller One Thousand and No/100
Dollars ($1,000.00) per day until the Replacement Facility is receiving
patients. In the event the Replacement Facility is not receiving patients within
forty-eight (48) months of receipt of CON approval, Seller shall have the option
to require Buyer to purchase the Leased Property for a purchase price of Fifteen
Million and No/100 Dollars ($15,000,000.00), less any sums previously paid by
Buyer under Sections 6.25(2) and (3). If Seller exercises its right under this
Section 6.25(3), Seller shall provide notice to Buyer within ninety (90) days
after the fourth anniversary of the date of Buyer's CON approval of Seller's
intent to sell the Leased Property to Buyer. The closing of the sale of the
Leased Property shall take place within ninety (90) days after delivery of
Seller's notice referred to above. At such closing, Seller shall execute and
deliver to Buyer such general warranty deeds, bills of sale and other transfer
documents as Buyer may reasonably require, in order to convey to Buyer all
right, title and interest in and to the Leased Property to Buyer free and clear
of all liens, encumbrances, attachments, claims or restrictions other than the
Permitted Encumbrances, liens incurred by Buyer, and other liens that Buyer
agrees to assume. The Lease shall terminate simultaneously with the closing of
the sale of the Leased Property to Buyer pursuant to this Section 6.25(3).
(4) If for any reason Buyer does not receive CON approval
for the Replacement Facility within three (3) years after the Closing (the "CON
PERIOD"), Seller shall have the right, but not the obligation, to terminate the
Lease and sell to Buyer the Leased Assets for a purchase price of Fifteen
Million and No/100 Dollars ($15,000,000.00). The Lease shall terminate
simultaneously with the closing of the transfer of the Leased Assets to Buyer,
and at such closing Seller shall convey to Buyer all right, title and interest
in and to the Leased Property (other than the Cornerstone Building) free and
clear of all liens, encumbrances, mortgages, restrictions, covenants, security
interests and pledges other than the Permitted Encumbrances and such others as
Buyer may elect to assume. Notwithstanding the above, the CON Period shall be
extended for a period of time equal to any period of time during which the
Department is enjoined or otherwise prohibited or restricted from granting the
CON due to any legal or administrative process commenced by a third party to
object to the issuance of the CON.
(5) The Replacement Facility shall include a chapel and
reasonable office space which shall be made available at no cost to a
nondenominational chaplain who shall be chosen and compensated by Foundation.
(6) Seller shall use its best efforts (including the best
efforts of Seller's board of directors) at Buyer's expense, to support the
efforts of Buyer in obtaining the CON.
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6.26 Performance Bond. Upon receiving CON approval, Buyer shall
purchase a performance bond, letter of credit or other instrument reasonably
acceptable to Buyer, securing Buyer's obligation to construct the Replacement
Facility. The terms of said bond, letter of credit or other instrument shall be
subject to the approval of Seller. If enforcement of any such bond, letter of
credit or other instrument results in any payments to Seller, such payments
shall be credited against any amounts owed by Buyer to Seller under Section
6.25(2), (3) or (4).
6.27 Acute Care Services; Emergency Room and Obstetrical Services.
Buyer covenants and agrees that for the first five (5) years of the Term, Buyer
shall continue to provide substantially the same acute care services provided at
the Hospital immediately prior to the Commencement Date. Without limiting the
foregoing, Buyer shall provide obstetrical and emergency services. There shall
be no breach of this Section 6.27 if such alleged breach results from any of the
following: Force Majeure (as defined herein), a Physician/Staffing Shortage (as
defined herein). "FORCE MAJEURE" means strikes, picket lines, walk-outs, boycott
efforts, fires, floods, freezes, accidents, war (whether or not declared),
revolution, riots, insurrections, acts of God, acts of government (including
without limitation any agency or department of the United States of America or
the State of Mississippi or a municipality thereof), acts of the public enemy,
scarcity or rationing of gasoline or other fuel or vital products or personnel,
inability to obtain materials or labor, or other causes which are reasonably
beyond the control of Buyer. "PHYSICIAN/STAFFING SHORTAGE" means the inability
of Buyer to obtain duly qualified physicians and/or staff personnel to perform
the services described in this Section and such inability is reasonably beyond
the control of Buyer
6.28 Seller's Employees. Buyer shall offer employment to all
employees of Seller who are employed by Seller on the Closing Date and provide
such medical and other benefits substantially similar to those provided by
Seller. For employees who accept Buyer's offer of employment, Buyer shall
recognize the employee's length of service with Seller for eligibility and
vesting under Buyer's employee benefit programs, including vacation and pension.
Additionally, Buyer agrees to continue healthcare coverage for former employees
and their beneficiaries who are covered by or have COBRA continuation rights as
listed on Exhibit 4.21(a) (the "COBRA Employees") for a period of one (1) month
from the Closing Date. Seller shall obtain at Seller's cost alternative
insurance coverage providing such employees with COBRA continuation coverage
beginning on or before the expiration of said one (1) month period or take such
other action to terminate Buyer's continuation coverage obligation pursuant to
this Section 6.28; provided that such action does not result in any obligation
or liability on the part of Buyer or Parent. Seller shall indemnify Buyer for
all costs and expenses incurred by Buyer in excess of each COBRA Employee's
contributions as a result of Buyer's one (1) month provision of said COBRA
coverage; provided that Seller's maximum indemnification obligation with respect
to the COBRA coverage provided for above shall not exceed Twenty-Five Thousand
and No/100 Dollars ($25,000.00) in the aggregate for all COBRA Employees. Seller
currently has no knowledge of any anticipated claims with respect to the COBRA
Employees reasonably expected to exceed $10,000.00.
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6.29 Parent Guaranty. Parent hereby unconditionally and absolutely
guarantees the prompt performance and observation of Buyer for each and every
obligation, covenant and agreement of Buyer arising out of, connected with, or
related to, the Lease, this Agreement, or any ancillary documents thereto and
any extension, renewal and/or modification thereof. The obligation of Parent
under this Section 6.28 is a continuing guaranty and shall remain in effect, and
the obligations of Parent shall not be affected, modified or impaired upon the
happening from time to time of any of the following events, whether or not with
notice or consent of Parent;
(1) The compromise, settlement, release, change,
modification, amendment (except to the extent of such compromise, settlement
release, change, modification or amendment) or any or all of the obligations,
duties, covenants, or agreement or any part under the Lease, the Agreement or
any ancillary documents thereto; or
(2) The extension of the time for performance of payment
of money pursuant to the Agreement, or of the time for performance of any other
obligations, covenants or agreement under or arising out of the Lease, the
Agreement or any ancillary documents thereto or the extension or the renewal
thereof.
ARTICLE VII. TITLE AND SURVEY
7.1 Title Report and Policy. Buyer may obtain, at Buyer's expense,
a current ALTA preliminary title commitment issued by a title company selected
by Buyer setting forth the condition of title to each tract of Real Estate (the
"COMMITMENT"), which Commitment shall commit for the issuance of a title
insurance policy (the "TITLE POLICY") as to each tract of Real Estate. The
Commitment and Title Policy shall show that the Real Estate is owned in fee
simple by Seller, free from all liens, restrictions, encumbrances, easements and
clouds on title whatsoever, except the Permitted Exceptions. Seller and Buyer
shall execute such certificates and affidavits as may be reasonably required in
connection with the issuance of the Title Policy and any endorsements requested
by Buyer or Buyer's lender.
7.2 Survey. Buyer may obtain, at Buyer's expense, an as-built
survey of the Real Estate (the "SURVEY") accompanied by a certificate of a
registered surveyor licensed in the State of Mississippi, certified as directed
by Buyer, sufficient to cause the title company to delete the standard printed
survey exception and to issue the Title Policy free from any survey objections
or exceptions whatsoever other than as shown on the Survey.
7.3 U.C.C. Searches. U.C.C. Financing Statement searches, local
and central, including fixtures, and federal and state tax lien and judgment
searches, with respect to Seller, its affiliates and predecessors, including all
"DBA's", trade names and fictitious names of Seller (including, but not limited
to, all names set forth in Exhibit 4.13(4)), from each of the jurisdictions in
which such entity does business or has done business within the preceding five
(5) years (the "U.C.C. SEARCHES"), shall be obtained, at Seller's cost, and
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delivered to Buyer at least ten (10) days prior to Closing. The results shall be
updated to Closing to reflect Closing and the release of all financing statement
liens other than the Permitted Exceptions.
7.4 Defects and Cure. The Commitment and Title Policy and the
Survey and U.C.C. Searches described in this Article are collectively referred
to as "TITLE EVIDENCE." Buyer shall notify Seller as soon as reasonably
possible, but not later than fifteen (15) days following Buyer's receipt of the
later of the Commitment or Survey, of any liens, claims, encroachments,
exceptions or defects disclosed in the Title Evidence which do not constitute
Permitted Exceptions (collectively, "DEFECTS"). Any such Defects revealed in the
Title Evidence which are not objected to by Buyer in writing upon delivery of
the Title Evidence shall constitute Permitted Exceptions. Seller, at its sole
cost and expense, may elect to not cure the objection and shall give written
notice to Buyer within ten (10) days of its receipt of Buyer's objections of its
decision whereupon Buyer may waive such objection and close or may terminate
this Agreement, which election shall be made within ten (10) days of receipt of
notice from Seller. If Seller fails to timely give such notice, Seller shall be
deemed to have elected not to cure the objection, whereupon Buyer may waive such
objection and close or may terminate this Agreement, which election by Buyer
shall be made within thirty (30) days following notice of objection to Seller.
Upon termination of this Agreement under the terms of this Section 7.4, no party
to this Agreement shall have any further claims under this Agreement against any
other party.
ARTICLE VIII. CLOSING
8.1 Closing. If all of the conditions to Closing set forth in
Articles IX and X hereof are satisfied, the closing of the transaction
contemplated herein (the "CLOSING") shall occur on October 30, 1998, at the
offices of Harwell Howard Hyne Gabbert & Manner, P.C., Nashville, Tennessee, or
at such other time (whether earlier or later) or place as the parties may
mutually agree. If all of the conditions to Closing set forth in Articles IX and
X hereof are not satisfied by October 30, 1998, the closing shall occur on the
last business day of any month following the date upon which all of the
conditions to Closing set forth in Articles IX and X hereof are satisfied or at
such other time as the parties may mutually agree. Upon transfer of the assets
and payment of the Purchase Price, the Closing shall be deemed to be effective
and the transfer of the Assets shall be deemed to have occurred as of 12:01 a.m.
local time on November 1, 1998 (the "CLOSING DATE") (or such later first of the
month if execution of all necessary and contemplated documents occurs after
November 1, 1998.) On the day of the effectiveness of Closing, Seller shall
receive good funds in the amount of the Purchase Price and the Prepaid Rent.
8.2 Termination. Notwithstanding anything in this Agreement to the
contrary, this Agreement and the obligations of the parties hereunder may be
terminated on or prior to Closing as follows:
(1) By Seller (i) in the event the transactions
contemplated by this Agreement have been prohibited or enjoined by reason of any
final judgment, decree or
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order entered or issued by a court of competent jurisdiction in litigation or
proceedings involving either Buyer or Seller or (ii) in the event Buyer breaches
or violates any material provision of this Agreement or fails to perform any
material covenant or agreement to be performed by Buyer under the terms of this
Agreement, and Seller has provided written notice thereof to Buyer giving
reasonable specificity and Buyer has not cured same within a reasonable period
of time and such breach is not waived by Seller in writing.
(2) By Buyer (i) in the event the transactions
contemplated by this Agreement have been prohibited or enjoined by reason of any
final judgment, decree or order entered or issued by a court of competent
jurisdiction in litigation or proceedings involving either Buyer or Seller; (ii)
pursuant to Section 6.5 or 6.6; or (iii) in the event Seller breaches or
violates any material provision of this Agreement or fails to perform any
material covenant or agreement to be performed by Seller under the terms of this
Agreement and Buyer has provided written notice thereof to Seller giving
reasonable specificity and Seller has not cured same within a reasonable period
of time and such breach is not waived by Buyer in writing.
(3) By Buyer or Seller if the Closing hereunder shall not
have taken place by the earlier to occur of (i) the last day of the first full
month following the receipt of any necessary approval from the Mississippi
Attorney General regarding the transaction contemplated hereby, or (ii) March
31, 1999, or, by such later date as shall be agreed upon by an appropriate
amendment to this Agreement if the parties agree in writing to an extension,
provided that a party shall not have the right to terminate under this Section
8.2(3) if the conditions precedent to such party's obligation to close have been
fully satisfied and such party has failed or refused to close after being
requested in writing to close by the other party.
ARTICLE IX. SELLER'S CONDITIONS TO CLOSE
The obligations of Seller under this Agreement are subject to the
satisfaction on or prior to Closing, of the following conditions (which may be
waived specifically in writing by Seller in whole or in part):
9.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits hereto) or in any certificate or document
delivered to Seller pursuant hereto, shall be deemed to have been made again at
the Closing and shall then be true in all respects; and Buyer shall have
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at Closing.
9.2 Regulatory Approvals. Buyer shall have obtained (at its own
cost) all consents, licenses, permits, approvals, provider contracts,
determinations or certificates from the appropriate governmental agencies,
required for Buyer to acquire and operate the Assets as contemplated hereunder.
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9.3 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body shall have taken any other action or made any
request of Seller or Buyer as a result of which Seller reasonably and in good
faith deems that to proceed with the transactions hereunder may constitute a
violation of law.
9.4 Compliance with Article XII. Buyer shall have made to Seller
the deliveries required by Article XII hereof.
9.5 Approval by Counsel. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before the Closing
by counsel for Seller, which approval will not be unreasonably withheld.
9.6 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency, and
no preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, or, in either case, to exercise rights of ownership
pursuant thereto. There shall have been no federal or state statute, rule or
regulations enacted or promulgated after the date of this Agreement that would
reasonably, directly or indirectly, result in any of the consequences referred
to in this Section.
9.7 Completion of Exhibits. All Exhibits to this Agreement will be
completed to the mutual satisfaction of the parties.
9.8 Right of First Refusal Agreement. Buyer shall execute the
Right of First Refusal Agreement in the form attached hereto as Exhibit 9.8.
9.9 [Deleted]
9.10 Attorney General Approval. Seller shall have obtained any
necessary approvals with respect to the transactions contemplated herein from
the Mississippi Attorney General.
ARTICLE X. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer in whole or in part):
10.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Seller and Affiliates
contained in this
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Agreement (including the Exhibits hereto) or in any certificate or document
delivered to Buyer pursuant hereto, shall be deemed to have been made again at
the Closing and shall then be true in all respects; and Seller shall have
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at Closing.
10.2 No Loss, Damage or Destruction. In the event there is any
damage to or loss of any of the Assets (whether by fire, theft, vandalism or
other cause or casualty), the terms of Sections 6.5 and 6.6 hereof shall have
been complied with to the satisfaction of Buyer.
10.3 No Material Adverse Change. There shall have been no material
adverse change or change known to have a future material adverse affect in the
financial condition of Seller or the Hospital. There shall not be any material
claims, litigation or governmental proceedings pending or threatened against
Seller which would adversely affect the Assets or the consummation of the
transactions contemplated hereby at Closing.
10.4 Regulatory Approvals. Buyer shall have obtained or have
reasonable assurance that it will obtain (at its own cost) (a) certification for
participation in the Medicaid Programs of the State of Mississippi, (b)
certification from the appropriate agency of the federal government for
participation in the federal Medicare Program, and (c) all other consents,
licenses, permits, approvals, material provider contracts, determinations or
certificates of need necessary in the judgment of Buyer; provided that Buyer has
promptly made application for such certifications, consents, licenses, etc.
10.5 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body shall have taken any other action or made any
request of Seller or Buyer as a result of which Buyer reasonably and in good
faith deems that to proceed with the transactions hereunder may constitute a
violation of law.
10.6 Compliance with Articles VII and XI. Seller shall have made to
Buyer the deliveries required by Articles VII and XI hereof within the time
periods required thereunder.
10.7 Approval by Counsel. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before the Closing
by counsel for Buyer, which approval will not be unreasonably withheld.
10.8 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency, and
no preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, or, in either case, to exercise rights
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of ownership pursuant thereto. There shall have been no federal or state
statute, rule or regulations enacted or promulgated after the date of this
Agreement that would reasonably result, directly or indirectly, in any of the
consequences referred to in this Section.
10.9 [Deleted]
10.10 Tail Insurance. Buyer shall deliver evidence of its tail
insurance coverage required by Section 6.13 hereof.
10.11 Completion of Exhibits. All Exhibits to this Agreement will be
completed to the mutual satisfaction of the parties.
10.12 Attorney General Approval. Seller shall have obtained any
necessary approvals with respect to the transactions contemplated herein from
the Mississippi Attorney General.
ARTICLE XI. OBLIGATIONS OF SELLER AT CLOSING
At Closing, Seller shall deliver or cause to be delivered to Buyer or
Buyer's designee, at Seller's expense, the following in a form and substance
reasonably satisfactory to Buyer or Buyer's designee:
11.1 Documents Relating to Title. Seller shall execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Buyer or Buyer's designee:
(1) The Lease.
(2) Bills of sale and assignments, in form satisfactory
to Buyer, warranting and conveying to Buyer good title to all Purchased Assets
free and clear of all liens, mortgages, pledges, encumbrances, security
interests, covenants, equities, options, rights of first refusal, restrictions,
special tax or governmental assessments, defects in title and other burdens,
except for Permitted Exceptions.
(3) Certificates of title to all vehicles which
constitute Purchased Assets endorsed by Seller (or its affiliates, as is
appropriate) together with completed originals of any forms required by the
State of Mississippi to transfer the same, free and clear of liens.
(4) An assignment to Buyer of all Leases and Contracts
constituting the Assumed Contracts.
(5) U.C.C. Financing Statement searches as specified in
Section 7.3 hereof, together with evidence satisfactory to Buyer of the right to
full release at Closing of all liens noted thereon except for the Permitted
Exceptions.
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11.2 Possession. Seller shall deliver to Buyer full possession and
control of the Assets, free and clear of all liens, mortgages, pledges, security
interests, restrictions, encumbrances, mortgages, easements, liabilities, and
burdens of any kind whatsoever, including, without limitation, limitations on
use and rights of reclamation by donees, except for the Permitted Exceptions and
Seller's fee simple interest in the Leased Property.
11.3 Opinion of Seller's Counsel. Seller shall deliver to Buyer and
its lender the favorable opinion of counsel for Seller, dated as of Closing, in
form and substance reasonably acceptable to Buyer and its lender.
11.4 Good Standing and Resolutions. Seller shall deliver to Buyer a
Certificate of Good Standing from the Secretary of State of the State of
Mississippi, and from each jurisdiction in which Seller is qualified to do
business, certified copies of its charter and bylaws and any other governing
documents and a certified copy of the resolutions of its Board of Directors and
Board of Trustees authorizing the execution, delivery and consummation of this
Agreement and the execution, delivery and consummation of all other agreements
and documents executed in connection herewith by them, including the Lease and
all bills of sale and other instruments required hereunder, sufficient in form
and content to meet the requirements of the law of the State of Mississippi
relevant to such transactions and certified by officers of Seller to be validly
adopted and in full force and effect and unamended as of Closing.
11.5 Closing Certificate. Seller shall deliver to Buyer a
certificate of an officer of Seller, dated as of Closing, certifying that (a)
each covenant and obligation of Seller has been complied with by such parties in
all material respects, and (b) each representation and warranty of Seller is
true and correct on the Closing as if made on and as of the Closing.
11.6 Third Party Consents. Seller shall deliver to Buyer any
consents, estoppels, approvals, releases, filings and authorizations of third
parties which are necessary in the reasonable opinion of Buyer (in form
reasonably acceptable to Buyer) for the execution, delivery and consummation of
this Agreement, and the transactions contemplated hereunder, including without
limitation, those necessary for the assignment of the Leases and Contracts
included in the Assumed Liabilities.
11.7 Taxes and Other Payments. Seller shall deliver to Buyer
receipt or other evidence from the appropriate governmental agency showing that
all liability for sale and use taxes due from Seller have been paid through the
most recent reporting date, in form reasonably acceptable to Buyer.
11.8 Releases and Other Matters. Seller shall deliver to Buyer such
releases of Defects Buyer has objected to pursuant to Section 7.4 and which
Seller has agreed to cure.
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11.9 Notice to Third-Party Payors. Seller shall deliver executed
notices, of the sale of the Hospital, to be furnished to all third-party payors
including the Programs, in the form of Exhibit 11.9 hereto.
11.10 Additionally Requested Documents; Post Closing Assistance. At
the reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Seller shall cooperate with Buyer to put Buyer in actual possession
and operating control of the Assets, execute and deliver such further
instruments of sale, conveyance, transfer and assignment, as Buyer may
reasonably request in order to effectively sell, convey, transfer and assign the
Assets to Buyer, to execute and deliver such further instruments and to take
such other actions as Buyer may reasonably request to release Buyer from all
obligation and liability with regard to any obligation or liability retained by
Seller and to execute and deliver such further instruments and to cooperate with
Buyer as Buyer may reasonably request or to enable Buyer to obtain all necessary
health care or regulatory certifications, approvals, consents and licenses,
accreditations or permits. In addition, in the event that after Closing Buyer
elects to sell any ownership interest to local physicians, Members shall provide
such assistance to Buyer as Buyer may reasonably request.
ARTICLE XII. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
12.1 Purchase Price and Prepaid Rent. Buyer shall deliver to Seller
in immediately available funds, the aggregate amount of the Purchase Price and
the Prepaid Rent as specified in this Agreement.
12.2 Corporate Good Standing and Certified Board Resolutions. Buyer
shall deliver to Seller a certificate of good standing from the Secretary of
State of its state of organization dated the most recent practical date prior to
Closing and a certified copy of the resolutions of the Board of Directors of
Buyer approving this Agreement and consummation of the transactions hereunder
contemplated.
12.3 Opinion of Buyer's Counsel. Buyer shall deliver to Seller a
favorable opinion of counsel for Buyer, dated as of Closing, in form and
substance reasonably acceptable to Seller.
12.4 Assumption of Liabilities. Buyer shall assume and covenant to
fully perform and comply with all of the Assumed Liabilities by instruments
reasonably acceptable to Seller and Seller's counsel.
12.5 Closing Certificate. Buyer shall deliver to Seller a
certificate of an officer of Buyer, dated as of Closing, certifying that (a)
each covenant and condition precedent of Buyer has been complied with by Buyer
in all material respects and (b) each representation
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and warranty of Buyer is true and correct on the Closing as if made on and as of
the Closing.
12.6 Right of First Refusal Agreement. The Buyer shall deliver to
Seller the executed Right of First Refusal Agreement in the form attached hereto
as Exhibit 9.8.
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
13.1 Survival. The covenants, obligations, representations and
warranties of Buyer and Seller contained in this Agreement, or in any
certificate or document delivered pursuant to this Agreement, shall be deemed to
be material and to have been relied upon by the parties hereto notwithstanding
any investigation prior to the Closing and shall survive the date of Closing for
a period of one (1) year after Closing, and shall not be merged into any deeds
or other documents delivered in connection with the Closing; provided that
claims relating to the following matters (collectively, the "ABSOLUTE
COVENANTS") shall survive until sixty (60) days after the applicable statute of
limitations relating to the underlying claim: Assumed Liabilities, Excluded
Liabilities, title to Assets, lack of corporate authority, ERISA and employee
benefit matters, taxes, claims by third parties whether founded on negligence,
malpractice or statutory or regulatory violations, any failure of Seller to
transfer all of the Assets to Buyer, and claims for breach of the covenants of
Sections 6.3, 6.6, 6.17, 6.20, 6.21, and 6.24 and Article XIV and
representations set forth in Sections 4.1, 4.5, 4.6 and 4.15 and Article V.
13.2 Indemnification by Seller.
(1) Subject to the provisions of Section 13.4, Seller
promptly shall indemnify, defend and hold harmless (and upon demand shall
reimburse) Buyer and the directors, officers, shareholders, employees and agents
of Buyer (and with respect to the COBRA coverage, Buyer and all affiliated
corporations within a controlled group relationship with Buyer (as determined
under Section 414 of the Internal Revenue Code), and their employees) (the
"BUYER INDEMNIFIED PARTIES") against any and all claims, actions, demands,
suits, proceedings, assessments, judgments, losses, costs, and expenses
(including reasonable cost of investigation, court costs, legal fees and
expenses incident to any of the foregoing or incurred in attempting to avoid the
same or oppose the imposition thereof or in enforcing this indemnity) and other
damages (individually and collectively a "LOSS") resulting from (i) any breach
by Seller of any of its covenants, obligations, representations or warranties or
breach or untruth of any covenant, obligation, representation, warranty, fact or
conclusion contained in this Agreement or any certificate or document of Seller
delivered pursuant to this Agreement (or which would not have been suffered or
incurred if such representation, warranty, fact or conclusion were true or had
not been breached or such covenant or obligation had been fully performed), (ii)
arising out of the ownership, licensing, operation, action, inaction or conduct
of Seller, Hospital, or any of the Assets or any of Seller's employees, agents
or independent contractors, relating to all periods of time prior to Closing,
except the Assumed Liabilities, (iii) the Excluded Liabilities, and (iv) in
respect of any other liabilities of Seller not expressly assumed by
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Buyer hereunder. Any indemnification payment pursuant to the foregoing shall
include interest at a floating rate equal to two points over the prime rate of
the Wall Street Journal from time to time (the "RATE") from the date the loss,
costs, expenses or damages were incurred until the date of payment; provided,
however, the Rate shall not be payable with respect to attorneys' fees incurred
until such date as the underlying claim is determined to be payable.
(2) Indemnification Maximum. The maximum aggregate
liability of Seller for indemnification under this Agreement with respect to
claims made or arising under this Section 13.2 shall be equal to the Purchase
Price and Prepaid Rent.
(3) Indemnification Threshold. Buyer agrees not to seek
recourse against, and shall not recover from Seller under this Section 13.2 on
account of any Loss arising out of a breach of Seller's representations and
warranties in Article 4 hereof, which individually is less than Ten Thousand and
No/100 Dollars ($10,000.00) (the "INDIVIDUAL CLAIM THRESHOLD"). In addition,
Buyer agrees not to seek recourse against and shall not recover from Seller
under this Section 13.2 on account of any Loss arising out of a breach of
Seller's representations and warranties in Article 4 hereof unless and until the
aggregate amount thereof with respect to Losses in excess of the Individual
Claim Threshold. exceeds Two Hundred Fifty Thousand Dollars ($250,000) (the
"INDEMNIFICATION THRESHOLD"); provided that once the Indemnification Threshold
has been reached, Buyer shall be entitled to recovery of all amounts with
respect to claims that exceed the Individual Claim Threshold, including the
first Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).
Notwithstanding the foregoing: the Indemnification Threshold shall not be
applicable if the indemnification claim relates to an Excluded Liability, any
claim against Buyer by a third party, or is a Purchase Price adjustment pursuant
to Section 3.4, or any re-proration of real estate taxes pursuant to Section
3.3.
13.3 Indemnification by Buyer. Buyer shall promptly indemnify,
defend, and hold harmless (and upon demand shall reimburse) Seller, and the
officers, employees and agents of Seller against any Loss resulting from (i) any
breach by Buyer of any of its covenants, obligations, representations or
warranties or breach or untruth of any covenant, obligation, representation,
warranty, fact or conclusion contained in this Agreement or any certificate or
document of Buyer delivered pursuant to this Agreement (or which would not have
been suffered or incurred if such representation, warranty, fact or conclusion
were true or had not been breached or such covenant or obligation had been fully
performed), (ii) any claim which is brought or asserted by any third party(ies)
against Seller for failure to pay or perform any of the Assumed Liabilities, and
(iii) any claim arising out of the ownership of the Assets or the conduct of the
business of the Hospital after Closing, except for failure to obtain consents
for the assignment of the contracts and except those directly or indirectly
resulting from a breach by the Seller of any representations or covenants of
this Agreement. Any indemnification payment pursuant to the foregoing shall
include interest at the Rate from the date of the loss, costs, expenses or
damages were incurred until the date of payment; provided, however, the Rate
shall not be payable with respect
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to attorneys' fees incurred until such date as the underlying claim is
determined to be payable.
13.4 Procedure for Indemnification.
(1) Notice. Within thirty (30) days after receipt of
written or actual notice of any action or claim (the "CLAIM") as to which it
asserts a right to indemnification, the party seeking indemnification hereunder
(the "INDEMNITEE") shall give written notice thereof (the "NOTICE") to the
person from whom indemnification is sought (the "INDEMNITOR"), provided that the
failure of the Indemnitee to give the Indemnitor notice within the specified
number of days shall not relieve the Indemnitor of any of its obligations
hereunder, but may create a cause of action for breach for damages directly
attributable to such delay. Indemnitor shall be liable to Indemnitee with
respect to Losses only so long as Indemnitee gives Indemnitor written notice
thereof prior to the expiration of the survival periods set forth in Section
13.1.
(2) Third Party Claims.
(a) If any claim for indemnification by
Indemnitee arises out of a Claim by a person other than Indemnitee, the
Indemnitor shall be entitled to assume the defense thereof, by written notice to
the Indemnitee within fifteen (15) days after receipt of the Notice. Indemnitor
shall thereupon undertake to take all steps or proceedings to defeat or
compromise any such Claim, including retaining counsel reasonably satisfactory
to the Indemnitee. Except as otherwise provided herein, all costs, fees and
expenses with respect to any such Claim shall be borne by Indemnitor. If the
Indemnitor assumes the defense of a Claim, it shall not settle such Claim unless
such settlement includes as an unconditional term thereof a release by the
claimant of the Indemnitee, reasonably satisfactory to the Indemnitee and except
that Indemnitor shall not, without the prior written consent of Indemnitee,
directly or indirectly require Indemnitee to take or refrain from taking any
action, or make any public statement, or consent to any settlement, which it
reasonably considers to be against its interest. Indemnitee shall have the right
to participate at its own expense, in such proceedings, but control of such
proceedings shall remain exclusively with Indemnitor.
(b) If the Indemnitor shall fail to notify the
Indemnitee of its desire to assume the defense of any such claim or action
within the prescribed period of time, then the Indemnitee may assume such
defense in such manner as it may deem appropriate, and the Indemnitor shall be
bound by any determinations made or any settlements thereof effected by the
Indemnitee. The Indemnitor shall be permitted, at its own expense, to join in
such defense and to employ its own counsel but control of such proceedings shall
remain exclusively with Indemnitee.
(c) Indemnitor and Indemnitee agree to make
available to each other, their counsel and other representatives, all
information and documents reasonably available to them reasonably requested by
the other which relate to any such claim or
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action, and to render to each other such reasonable assistance as may be
reasonably requested in order to insure the proper and adequate defense of such
claim or action, but any costs or expenses related thereto shall be borne by
Indemnitor; and provided that any failure (after written notice with specificity
and an opportunity to cure) shall not relieve the Indemnitor of any of its
obligations hereunder but may create a cause of action for breach for damages
directly attributable to such failure.
(3) Other Claims. In the event of any Claim other than
those provided for in subsection (2) hereof, Indemnitee shall be entitled to
indemnification hereunder as provided herein.
(4) Payment of Claims. Amounts payable by the Indemnitor
to the Indemnitee under this Section 13.5 shall be payable by the Indemnitor (or
the escrow agent under the Escrow Agreement) as incurred by the Indemnitee. In
the event Indemnitor (or the escrow agent under the Escrow Agreement) fails to
pay, timely and fully, any such amounts, Indemnitee may pay such Claim. In such
event, the Indemnitee may recover from the Indemnitor, in an addition to the
amount so paid but subject to the Cap, (i) interest on the amount claimed at the
Rate, and (ii) reasonable attorneys' fees in connection with the enforcement of
payment under this Section 13.5.
(5) No Set-Off. The Indemnitee's right to indemnification
under this Section 13.5 shall not be subject to set-off for any claim by the
Indemnitor against the Indemnitee.
(6) Claims by a Straddle Patient. Any claim by a patient
relating to professional negligence or similar matters involving a patient of
the Hospital served both prior to Closing and subsequent to Closing will be the
responsibility of either Buyer or Seller in accordance with the following
guidelines: (i) if it is a claim in which clearly the incident giving rise to
liability arose prior to Closing, Seller shall respond to the loss and defense
expenses; (ii) if it is a claim in which clearly the incident giving rise to
liability arose subsequent to Closing, Buyer shall respond to the loss and
defense expenses; and (iii) in the event that the incident giving rise to
liability as to time is not clear, Seller and Buyer will jointly defend the case
and each will fully cooperate with the other in such defense. Once the case is
closed, if Buyer and Seller cannot agree to the allocation of both indemnity and
expenses, then the matter shall be submitted to binding arbitration in
accordance with the rules and procedures of the American Arbitration
Association.
13.5 Assignment by Buyer. No consent by Seller shall be required
for any assignment or reassignment of the rights of Buyer under this Article
XIII.
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
14.1 Covenant Not to Compete. Seller hereby covenants and agrees
with Buyer that during the "NONCOMPETE PERIOD" within the "NONCOMPETE AREA" it
shall not, directly
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or indirectly, (a) acquire, lease, manage, consult for, finance or own any part
of (as member, shareholder or partner) any health care facility which provides
any services similar to the services provided by the Hospital or what are
normally provided by a hospital, including but not limited to skilled nursing,
obstetrics, psychiatric, alcohol/chemical dependency, rural health, primary
care, urgent care, ambulatory surgery, diagnostics, psychiatric counseling or
any other health related services or (b) solicit for employment or employ any
person who at Closing became an employee of Buyer, or (c) disrupt or attempt to
disrupt any past, present or reasonably foreseeable future relationship,
contractual or otherwise between Buyer, on the one hand, and any physician,
physician group, or other health care provider with whom Buyer contracts with in
connection with the Hospital, on the other hand. The "NONCOMPETE PERIOD" shall
commence at the Closing and terminate on the fifth (5th) anniversary thereof.
The "NONCOMPETE AREA" shall mean Pearl River County, Mississippi.
Notwithstanding the foregoing, the following shall not be deemed breaches of
this Section 14.1: (i) Seller's or Foundation's development and operation of the
community care clinics meeting healthcare needs of patients who have no coverage
or payment source and cannot and do not pay for such services; (ii) Seller's or
Foundation's right to exercise its right of first refusal provided in Section
9.8 of this Agreement; (iii) Seller's continued operation of a fitness center at
the Cornerstone Building, provided that Seller shall not offer physical therapy,
occupational or industrial therapy services or any outpatient therapy services;
and (iv) ownership of less than five percent (5%) of the stock of a publicly
held company.
14.2 Enforceability. In the event of a breach of Section 14.1
hereof, Seller recognizes that monetary damages shall be inadequate to
compensate Buyer and Buyer shall be entitled, without the posting of a bond or
similar security, to an injunction restraining such breach, with the costs
(including attorneys' fees) of securing such injunction to be borne by Seller.
Nothing contained herein shall be construed as prohibiting Buyer from pursuing
any other remedy available to it for such breach or threatened breach.
All parties hereto hereby acknowledge the necessity of protection
against the competition of Seller and that the nature and scope of such
protection has been carefully considered by the parties. The period provided and
the area covered are expressly represented and agreed to be fair, reasonable and
necessary. The consideration provided for herein is deemed to be sufficient and
adequate to compensate for agreeing to the restrictions contained in Section
14.1 hereof. If, however, any court determines that the forgoing restrictions
are not reasonable, such restrictions shall be modified, rewritten or
interpreted to include as much of their nature and scope as will render them
enforceable.
ARTICLE XV. MISCELLANEOUS
15.1 Assignment. No assignment shall relieve the assignor of any
liability or obligation hereunder. Seller may not assign any rights or delegate
any obligations under this Agreement without the prior written consent of Buyer,
and any prohibited assignment or delegation will be null and void. Buyer may not
assign all or any part of its rights, title or interest under this Agreement
without the prior written consent of Seller, which consent
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Seller may withhold in Seller's sole discretion. Buyer, without having to first
obtain the consent of Seller, may (x) collaterally assign this Agreement to
Buyer's primary lending group (the "LENDERS") and said Lenders may further
assign this Agreement in the event of a foreclosure on Buyer's interest in this
Agreement or a transfer in lieu thereof; provided that (i) Lenders shall consult
with Seller prior to assigning Buyer's interest to try to identify an operator
of the Facility that is mutually acceptable to Lenders and Seller, (ii) any such
assignee shall be bound by the terms of this Agreement, including without
limitation Article VI; and (iii) if Lenders receive more than one (1) bona fide
offer and two (2) or more such offers are substantially equivalent (as
determined by Lenders) then Lenders shall notify Seller of the offers and
identity of the offerees and Lenders shall use their best efforts to assign
Buyer's rights under the Agreement to the offeree of Seller's choice on terms no
less favorable to Lenders than those set forth in the offer.
15.2 Other Expenses. Except as otherwise provided in this
Agreement, Seller shall pay all of its own expenses in connection with the
negotiation, execution, and implementation of the transactions contemplated by
this Agreement and Buyer shall pay all of its own expenses in connection with
the negotiation, execution, and implementation of the transactions contemplated
by this Agreement. State and local sales and use taxes incurred in connection
with the transactions contemplated under this Agreement shall be borne and
timely paid by Seller. Buyer will pay the cost of all appraisals and shall pay
all transfer taxes. Buyer will pay the cost of the Phase I Environmental
Assessment set out in Section 6.20 and the costs of any additional environmental
reports, borings or inspections as set out in Section 6.20. The costs of the
independent expert engaged by the Mississippi Attorney General in connection
with the approval described in Sections 9.10 and 10.12 shall be paid as follows:
the first $5,000.00 shall be paid by Seller, the second $5,000.000 shall be paid
by Buyer, and any amounts above $10,000.00 shall be divided equally between
Buyer and Seller.
15.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five (5) days
after mailing with postage prepaid. Any such notice shall be sent as follows:
To Seller:
Lucius O. Crosby Memorial Hospital
101 Kirkwood Street
Picayune, Mississippi 39466
Attention: Chairman
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with a copy to:
Richard G. Cowart, Esq.
Baker, Donelson, Bearman & Caldwell
700 North State Street, Suite 500
Jackson, Mississippi 39202
To Buyer:
NAHC of Mississippi, Inc.
109 Westpark Drive, Suite 440
Brentwood, Tennessee 37024
Attn: Robert M. Martin, President & CEO
with a copy to:
Michael R. Hill, Esq.
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
315 Deaderick Street
Nashville, Tennessee 37238
15.4 Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of
Mississippi. Any action or claim relating to or arising out of this Agreement or
the transactions contemplated herein may be brought in any appropriate state or
federal court in the State of Mississippi and each of the parties hereto
irrevocably consents to personal jurisdiction in any such court.
15.5 Headings. Any table of contents and paragraph headings in this
Agreement are for convenience of reference only and shall not be considered or
referred to in resolving questions of interpretation.
15.6 Benefit. Subject to Section 15.1 hereof, this Agreement shall
be binding upon and shall inure to the exclusive benefit of the respective
heirs, legal representatives, successors and assigns of the parties hereto and
Buyer shall require any of its successors to assume Buyer's obligations under
this Agreement. This Agreement is not intended to, nor shall it, create any
rights in any other party.
15.7 Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
15.8 Waiver. Neither the failure nor any delay on the part of any
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall any
single or partial exercise of any right, power
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or remedy preclude any further or other exercise thereof, or the exercise of any
other right, power or remedy.
15.9 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
15.10 Interpretation; Knowledge. All pronouns and any variation
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the person or entity, or the context, may require.
Further, it is acknowledged by the parties that this Agreement including
exhibits has undergone several drafts with the negotiated suggestions of both;
and, therefore, no presumptions shall arise favoring either party by virtue of
the authorship of any of its provisions or the changes made through revisions.
Whenever in this Agreement the term "to the knowledge of Seller" or the like is
used, Seller shall be deemed to have the knowledge of Seller's officers and
directors and Seller shall be under a duty of due inquiry, which shall include
inquiry by Seller of its key employees, as well as key employees of the current
manager of the Hospital.
15.11 Entire Agreement. This Agreement, including the Exhibits
hereto, constitutes the entire agreement between the parties hereto with regard
to the matters contained herein and it is understood and agreed that all
previous undertakings, negotiations and agreements between the parties are
merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer and Seller. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the party against which it is sought to be
enforced.
15.12 Legal Fees and Costs. In the event any party hereto elects to
incur legal expenses to enforce or interpret any provision of this Agreement,
the prevailing party will be entitled to recover such legal expenses, including,
without limitation, attorneys' fees, costs and necessary disbursements, in
addition to any other relief to which such party shall be entitled.
15.13 Exclusivity.
(1) Buyer contemplates the expenditure of substantial
sums of time and money in connection with legal, accounting, financial, and due
diligence work to be performed in conjunction with the transactions contemplated
under this Agreement. For purposes of inducing Buyer to proceed with the
transactions, Seller shall not, directly or indirectly, without Buyer's prior
written consent, initiate or hold discussions with any person or entity (other
than Buyer) concerning a purchase, affiliation, or lease of all or a material
part of the Assets, directly or indirectly, whether by sale of equity, merger,
consolidation, sale or lease of material assets, affiliation, joint venture, or
other material transaction for the period of time from the date hereof until the
date specified in the first sentence of Section 8.2(3) (or such later period of
time as the parties mutually agree pursuant to
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Section 8.2(3)). Seller will promptly notify Buyer by telephone and thereafter
confirm in writing via fax, if any such discussions or negotiations are sought
to be initiated with, or any such proposal or possible proposal is received
directly or indirectly, by Seller. In the event Seller receives an unsolicited
offer related to a type of transaction described in this paragraph, Seller shall
promptly inform the person making such unsolicited offer of the existence of its
obligations under this Section 15.13 but shall not disclose the contents of this
Section or this Agreement, and Seller shall reject such offer and promptly
notify Buyer thereof.
(2) Seller may, directly or indirectly, furnish
information and access, in response to unsolicited requests therefor, to any
corporation, partnership, person or other entity or group (each a "POTENTIAL
ACQUIROR") pursuant to appropriate confidentiality agreements, and may
participate in discussions and negotiate with such Potential Acquiror concerning
a purchase, affiliation or lease of all or a material part of the Assets,
directly or indirectly, whether by sale of capital stock, merger, consolidation,
sale or lease of material assets, affiliation, joint venture or other material
transaction (an "ACQUISITION TRANSACTION") only if: (i) the Potential Acquiror
has, in circumstances not involving any prior breach by Seller of the foregoing
provisions, made an offer to purchase, (ii) Seller's Board of Trustees is
advised in writing by its financial advisor that such Potential Acquiror has the
financial wherewithal to consummate such an offer, (iii) Seller's Board of
Trustees is advised in writing by its legal counsel that failure to negotiate an
Acquisition Transaction with the Potential Acquiror would breach fiduciary
duties owed by the Board of Trustees, and (iv) copies of the written opinions of
Seller's financial advisor and legal counsel are promptly provided by Buyer. In
the event the Seller shall take any action pursuant to the foregoing sentence,
it shall promptly inform Buyer as to that fact and shall furnish to Buyer the
specifics thereof. Seller may not enter into a definitive agreement for an
Acquisition Transaction with a Potential Acquiror with which it is permitted to
negotiate pursuant to this Section 15.13(b) unless at least ten (10) business
days prior to Seller's execution thereof, Seller shall have furnished Buyer with
a description of all of the material terms thereof and a copy of the document or
documents to be executed in connection with the Acquisition Transaction, and an
opportunity for Buyer to enter into an agreement on terms equal to the
Acquisition Transaction. In the event that Seller completes an Acquisition
Transaction, then at the closing of such Acquisition Transaction, Seller shall
pay to Buyer a fee of One Million and No/100 Dollars ($1,000,000.00). This fee
is intended as reasonable compensation to Buyer for Buyer's efforts in the
competitive bid process conducted by Seller, the negotiation of the letter of
intent, the completion of the due diligence process and the negotiation of this
Agreement, as well as compensation for opportunities foregone by Buyer in order
to pursue this transaction. Said fee is an integral part of the transactions
contemplated by this Agreement and Buyer would not enter into this Agreement
without said fee.
15.14 Completion of Exhibits. Certain of the Exhibits have not been
prepared in their final form at the time of execution of this Agreement. Input
by Seller and Buyer is necessary to finalize the Exhibits and each party agrees
to use its reasonable best efforts to finalize them. Submission of Exhibits
shall be in writing delivered via overnight courier
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to the other party's counsel. Either party may supplement the Exhibits by like
written delivery. The submitted Exhibits shall be deemed accepted and thereby
become an Exhibit to this Agreement unless: (i) such proposed Exhibit would,
individually or in aggregate with the effect of items disclosed in other
Exhibits which were first submitted after signing of this Agreement, constitute
a material adverse effect on the receiving party in the receiving party's sole
discretion, and (ii) within five (5) business days after receipt of such
proposed Exhibit, such receiving party provides written notice to opposing
counsel reasonably detailing the objection thereof and changes in such proposed
Exhibit which would make the same acceptable. Should the parties not be able to
resolve written objections within ten (10) business days thereafter, then either
party may withdraw from this Agreement and terminate it without any obligation
or liability of any sort and this Agreement shall be treated as never having
been executed or delivered. Acceptance of Exhibits shall not mean that the
underlying information (e.g. understanding claim, likelihood of successful
defense and adequacy of insurance coverage) is acceptable.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SELLER":
LUCIUS O. CROSBY MEMORIAL HOSPITAL
By: /s/ Sidney L. Whitley
---------------------------------------
Title: Chairperson
------------------------------------
"BUYER":
NAHC OF MISSISSIPPI, INC.
By: /s/ Robert M. Martin
---------------------------------------
Title: President
------------------------------------
"PARENT":
NEW AMERICAN HEALTHCARE
CORPORATION
By: /s/ Robert M. Martin
---------------------------------------
Title: President
------------------------------------
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