<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: June 25, 1999
------------------------------
PROVINCE HEALTHCARE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-23639 62-1710772
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification
Number)
105 WESTWOOD PLACE
SUITE 400
BRENTWOOD, TENNESSEE 37027
(Address of principal executive offices) (Zip Code)
(615) 370-1377
(Registrant's telephone number, including area code)
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<PAGE> 2
ITEM 5.
Province Healthcare Company (the "Company"), a Delaware corporation,
hereby amends its Report on Form 8-K, dated April 28, 1999, which reported under
Item 5, its acquisition of Glades General Hospital in Belle Glade, Florida on
April 12, 1999 (the "Acquisition"). The Company is filing this amendment for the
purpose of including the financial statements and pro forma financial
information with respect to the Acquisition.
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The audited consolidated financial statements of Glades
General Hospital for the fiscal year ended September 30, 1998,
are filed herewith.
(b) Pro Forma Financial Information.
The pro forma financial statements of the Company and its
subsidiaries, giving effect to the Acquisition as if it had
occurred on March 31, 1999, as to the balance sheet, and on
January 1, 1998, as to the income statements, are filed
herewith.
(c) Exhibits:
2.1 Asset Purchase Agreement, dated as of March 24, 1999,
among Palm Beach County Health Care District,
PHC-Belle Glade, Inc. and Province Healthcare
Company, filed herewith.
23.1 Consent of KPMG LLP.
99.1 Copy of the press release, dated April 12, 1999,
relating to the execution of a definitive agreement to acquire
Glades General Hospital, is incorporated herein by reference
to the Company's Current Report on Form 8-K, filed April 28,
1999, Commission File No. 0-23639.
99.2 Copy of the press release, dated April 15, 1999,
relating to the completion of the Glades General Hospital
acquisition, incorporated herein by reference to the Company's
Current Report on Form 8-K, filed April 28, 1999, Commission
File No. 0-23639.
<PAGE> 3
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 hereunto duly authorized.
PROVINCE HEALTHCARE COMPANY
By: /s/ Brenda B. Rector
---------------------------------
Brenda B. Rector
Vice President and Controller
Date: June 25, 1999
2
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Glades General Hospital (a division of Palm Beach County Health Care District)
Independent Auditors' Report...................................................1
Balance Sheets at September 30, 1998 and 1997..................................2
Statements of Revenue, Expenses and Fund Balance for the
Years Ended September 30, 1998 and 1997...................................3
Statement of Cash Flows for the Years Ended September 30, 1998 and 1997........4
Notes to Financial Statements..................................................6
Condensed Balance Sheet at March 31, 1999 (Unaudited).........................18
Condensed Statements of Revenue, Expenses and Fund Balance for the
Six Months Ended March 31, 1999 and 1998 (Unaudited).....................19
Condensed Statements of Cash Flows for the Six Months Ended
March 31, 1999 and 1998 (Unaudited)......................................20
Notes to Condensed Financial Statements.......................................21
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
Pro Forma Condensed Consolidated Financial Statements.........................23
Pro Forma Condensed Consolidated Balance Sheet at March 31, 1999 (Unaudited)..24
Pro Forma Condensed Consolidated Statement of Income for the Year
Ended December 31, 1998 (Unaudited)......................................25
Pro Forma Condensed Consolidated Statement of Income for the Three Months
Ended March 31, 1999 (Unaudited).........................................26
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)....27
</TABLE>
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Governing Board
Palm Beach County Health Care District:
We have audited the accompanying balance sheets of Glades General Hospital (a
division of the Palm Beach County Health Care District) as of September 30, 1998
and 1997, and the related statements of revenue, expenses and fund balance and
cash flows for the years then ended. These financial statements are the
responsibility of the Hospital's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glades General Hospital (a
division of the Palm Beach County Health Care District) as of September 30, 1998
and 1997, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
The year 2000 supplementary information in note 16 is not a required part of the
general purpose financial statements, but is supplementary information required
by the Governmental Accounting Standards Board, and we did not audit and do not
express an opinion on such information. Further, we were unable to apply to the
information certain procedures prescribed by professional standards because of
the nature of the subject matter underlying the disclosure requirements and
because sufficiently specific criteria regarding the matters to be disclosed
have not been established. In addition, we do not provide assurance that the
Hospital is or will become year 2000 compliant, that Hospital's year 2000
remediation efforts will be successful in whole or in part, or that parties with
which Hospital does business are or will become year 2000 compliant.
In accordance with Government Auditing Standards, we have also issued a report
dated November 20, 1998 on our consideration of Glades General Hospital's (a
division of the Palm Beach County Health Care District) internal control over
financial reporting and our tests of its compliance with certain provisions of
laws and regulations.
/s/ KPMG LLP
Jacksonville, Florida
November 20, 1998, except as to note 7,
which is as of December 17, 1998 and notes
15 and 16, which are as June 22, 1999.
1
<PAGE> 6
GLADES GENERAL HOSPITAL
Balance Sheets
September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,320,292 $ 766,527
Patient accounts receivable, less allowance for doubtful
accounts of approximately $3,400,000 in 1998 and
$2,400,000 in 1997 4,578,917 2,254,234
Supplies 473,082 411,106
Prepaid expenses and other current assets 304,183 21,329
----------- ----------
Total current assets 7,676,474 3,453,196
----------- ----------
Property and equipment (note 4) 10,988,343 11,049,385
Less accumulated depreciation and amortization 7,758,018 8,212,908
----------- ----------
3,230,325 2,836,477
----------- ----------
$10,906,799 $6,289,673
=========== ==========
LIABILITIES AND FUND BALANCE
Current liabilities:
Accounts payable $ 654,403 $ 632,206
Current installments under loan payable to District (note 7) 1,856,428 120,000
Accrued salaries, professional fees and other current liabilities 1,592,414 1,092,758
Current installments of obligations under capital leases (note 6) 34,751 194,483
Estimated third-party payor settlements (note 3) 827,001 538,762
----------- ----------
Total current liabilities 4,964,997 2,578,209
Loan payable to District, excluding current installments (note 7) 514,406 2,234,745
Estimated self-insurance provision (note 13) 825,000 823,368
Obligations under capital leases, excluding current
installments (note 6) 19,301 54,641
----------- ----------
Total liabilities 6,323,704 5,690,963
Fund balance 4,583,095 598,710
----------- ----------
$10,906,799 $6,289,673
=========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 7
GLADES GENERAL HOSPITAL
Statements of Revenue, Expenses and Fund Balance
Years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Net patient service revenue (note 3) $ 25,329,965 $16,265,655
Other revenue 112,977 169,840
------------ -----------
Total operating revenues 25,442,942 16,435,495
------------ -----------
Operating expenses:
Nursing services 6,944,365 2,941,959
Other professional services 6,433,052 7,014,682
General services 1,988,673 1,742,631
Fiscal and administrative services 2,776,081 2,544,343
Depreciation 681,977 806,858
Interest 127,002 161,410
Provision for bad debt 4,979,634 3,006,930
------------ -----------
Total operating expenses 23,930,784 18,218,813
------------ -----------
Income (loss) from operations 1,512,158 (1,783,318)
------------ -----------
Nonoperating gains (losses):
District funding (note 7) 1,461,681 2,204,896
Other (100,083) (17,330)
------------ -----------
Total nonoperating income 1,361,598 2,187,566
------------ -----------
Revenue and gains in excess of expenses
and losses 2,873,756 404,248
Fund balance, beginning of year 598,710 150,962
Fair value of donated equipment -- 43,500
Restricted capital subsidy from District (note 7) 1,110,629 --
------------ -----------
Fund balance, end of year $ 4,583,095 $ 598,710
============ ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 8
GLADES GENERAL HOSPITAL
Statements of Cash Flows
Years ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Net cash flow from operating activities and gains:
Income (loss) from operations $ 1,512,158 $(1,783,318)
Interest expense considered capital financing activity 127,002 161,410
Adjustments to reconcile income (loss) from operations
to cash flow provided by (used in) operating
activities and gains, net:
Depreciation 681,977 806,858
Provision for bad debt 4,979,634 3,006,930
Changes in:
Patient accounts receivable, net (7,304,317) (3,674,016)
Supplies (61,976) (1,625)
Prepaid expenses and other current assets (282,854) 7,904
Accounts payable 22,197 (308,449)
Accrued salaries, professional fees and other current
liabilities 499,656 31,298
Estimated third-party payor settlements 288,239 (43,905)
Estimated self-insurance provision 1,632 180,000
----------- ----------
Net cash provided by (used in) operating
activities and gains 463,348 (1,616,913)
----------- ----------
Cash flows from noncapital financing activities:
Decrease in deposits and other assets -- 226
Ad valorem taxes 1,461,681 2,204,896
Other -- 8,690
----------- ----------
Net cash provided by noncapital financing
activities $ 1,461,681 $2,213,812
----------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 9
GLADES GENERAL HOSPITAL
Statements of Cash Flows
Years ended September 30, 1998 and 1997
(Continued)
<TABLE>
<CAPTION>
1998 1997
----------- --------
<S> <C> <C>
Cash flows from capital and related financing activities:
Principal payments under capital lease obligations $ (195,072) $(184,957)
Interest paid on loan and capital lease obligations (110,913) (161,410)
Capital expenditures, net (1,175,908) (206,521)
Capital subsidy from District 1,110,629 --
----------- --------
Net cash used in capital and related financing
activities (371,264) (552,888)
----------- --------
Net increase in cash and cash equivalents 1,553,765 44,011
Cash and cash equivalents, beginning of year 766,527 722,516
----------- --------
Cash and cash equivalents, end of year $ 2,320,292 $766,527
=========== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 111,000 $ 44,000
=========== ========
Capital lease additions -- $ 83,558
=========== ========
Fair value of equipment donated -- $ 43,500
=========== ========
</TABLE>
5
<PAGE> 10
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
Glades General Hospital (the "Hospital") is a tax exempt
acute-care public hospital operated under the oversight of the
Palm Beach County Health Care District (the "District"). The
District was established as an independent taxing district by
special statute, Chapter 87-450 as amended by Chapters 88-460,
Laws of Florida, which was approved by the voters of Palm Beach
County on November 8, 1988. Pursuant to this action, the assets
and liabilities of the Hospital were effectively transferred to
the District.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and certificates of
deposit maturing within three months and are carried at cost,
which approximates market value.
(C) SUPPLIES
Supplies are stated at the lower of cost (first-in, first-out
method) or market.
(D) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, or if donated, at
fair value at the date of receipt. Depreciation is provided over
the estimated useful lives of the respective assets on the
straight-line basis. The estimated useful lives generally conform
to those recommended by the American Hospital Association, with
buildings and improvements ranging from 15 to 30 years and
equipment ranging from 3 to 20 years.
(E) STATEMENT OF REVENUE AND EXPENSES
For purposes of display, transactions deemed by management to be
ongoing, major, or central to the provision of health care
services are reported as operating revenues and expenses.
Peripheral or incidental transactions are reported as nonoperating
gains and losses.
6
<PAGE> 11
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(F) NET PATIENT SERVICE REVENUE
Net patient service revenue is reported at the estimated net
realizable amounts from patients, third-party payors, and others
for services rendered, including estimated retroactive adjustments
under reimbursement agreements with third-party payors.
Retroactive adjustments are accrued on an estimated basis in the
period the related services are rendered and adjusted in future
periods as final settlements are determined.
(G) INCOME TAXES
The Hospital is exempt from income taxes as a Government
organization pursuant to Internal Revenue Code Section 115.
Accordingly, no provision for income taxes has been recorded in
the accompanying financial statements.
(H) CHARITY CARE
The Hospital provides care to patients who meet certain criteria
under its charity care policy without charge or at amounts less
than its established rates. Because the Hospital does not pursue
collection of amounts determined to qualify as charity care, they
are not reported as revenue.
(I) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(J) RECLASSIFICATIONS
Certain amounts for 1997 have been reclassified to conform with
the presentation adopted for 1998.
(K) ACCOUNTING STANDARDS
Governmental Accounting Standards Board ("GASB") Statement No. 20,
"Accounting and Financial Reporting for Proprietary Funds and
Other Governmental Entities that use Proprietary-Fund Accounting
offers the option of following all Financial Accounting Standards
Board ("FASB") standards issued after November 30, 1989, unless
the latter conflict with or contradict GASB pronouncements, or not
following FASB standards issued after such date. The Hospital
elected the option not to follow FASB pronouncements issued after
November 30, 1989.
7
<PAGE> 12
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(2) CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of September 30, 1998 consist of bank
deposits with a carrying amount of $2,320,292 and a market value of
$2,320,292.
Cash and cash equivalents are required to be categorized to give an
indication of the level of credit risk assumed by the entity at year-end.
The three categories of risk as defined by the Government Accounting
Standards Board Statement No. 3 are as follows:
(A) Insured or registered, or securities held by the entity or its agent
in the entity's name.
(B) Uninsured and unregistered, with securities held by the
counterparty's trust department or agent in the entity's name; and
(C) Uninsured and unregistered, with securities held by the
counterparty, or by its trust department or agent, but not in the
entity's name.
All of the Hospital's cash and cash equivalents are categorized in
Category I.
The Hospital's bank deposits at September 30, 1998 are as follows:
<TABLE>
<CAPTION>
CARRYING BALANCE
AMOUNT PER BANK
-------------- -----------
<S> <C> <C>
Demand deposits $ 2,320,292 $ 2,570,028
============== ===========
</TABLE>
The difference between the Hospital's demand deposits' carrying amount
and the bank balance is due to outstanding checks and deposits in transit.
8
<PAGE> 13
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
In addition to insurance provided by the Federal Depository Insurance
Corporation, all demand deposits are held in banking institutions
approved by the State of Florida State Treasurer to hold public funds.
Under Florida Statutes Chapter 280, "Florida Security for Public Deposits
Act", the State Treasurer requires all qualified public depositories to
deposit with the State Treasurer, or another banking institution,
eligible collateral equal to from 30 percent to 125 percent of the
average daily balance for each month of all public deposits in excess of
any applicable deposit insurance held. The percentage of eligible
collateral (generally U.S. Government and agency securities, state or
local government debt, or corporate bonds) to public deposits is
dependent upon a depository's financial history and its compliance with
Chapter 280. In the event of a failure of a qualified public depository,
the remaining public depositories would be responsible for covering any
resulting losses.
(3) NET PATIENT SERVICE REVENUE
The Hospital has agreements with third-party payors that provide for
reimbursement at amounts different from its established rates. A summary
of the basis of reimbursement with major third-party payors follows:
MEDICARE - Inpatient acute care services rendered to Medicare program
beneficiaries are paid at prospectively determined rates per discharge.
These rates vary according to a patient classification system that is
based on clinical, diagnostic, and other factors. Certain outpatient
services are paid based on a cost reimbursement methodology. The Hospital
is reimbursed for cost reimbursable items at a tentative rate with final
settlement determined after submission of annual cost reports by the
Hospital and audits thereof by the Medicare fiscal intermediary. The
Hospital's classification of patients under the Medicare program and the
appropriateness of their admission are subject to an independent review
by a peer review organization under contract with the Hospital. The
Hospital's Medicare cost reports have been audited by the Medicare fiscal
intermediary through 1995. The Hospital has filed Medicare cost reports
through September 30, 1997, and an estimated provision for the fiscal
year ended September 30, 1998 has been included in the accompanying
financial statements.
MEDICAID - Inpatient and outpatient services rendered to Medicaid program
beneficiaries are reimbursed under a cost reimbursement methodology. The
Hospital is reimbursed at a tentative rate with final settlement
determined after submission of annual cost reports by the Hospital and
audits thereof by the Medicaid fiscal intermediary. The Hospital's
Medicaid cost reports have been audited by the Medicaid fiscal
intermediary through 1997.
9
<PAGE> 14
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
HMOS AND PPOS - The Hospital is reimbursed by health maintenance and
preferred provider organizations based on the terms of the contracts with
them. Inpatient services are generally reimbursed at per diem rates, per
case rates, or at a percentage of the Hospital's established rates.
Outpatient services are generally reimbursed at a percentage of the
Hospital's established rates.
The Hospital has also entered into reimbursement agreements with certain
commercial insurance carriers and other entities, including the District.
The basis for reimbursement under these agreements include prospectively
determined rates per discharge, discounts from established charges and
per diem rates.
(4) PROPERTY AND EQUIPMENT
Property and equipment at September 30, consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land $ 184,331 $ 184,331
Land improvements 284,272 276,333
Buildings and improvements 4,228,344 4,177,685
Equipment 6,291,396 6,411,036
----------- -----------
10,988,343 11,049,385
Less accumulated depreciation and amortization 7,758,018 8,212,908
----------- -----------
$ 3,230,325 $ 2,836,477
=========== ===========
</TABLE>
During 1997, the Hospital received donated equipment with a fair value
of $43,500.
(5) CHARITY CARE
The Hospital maintains records to identify and monitor the level of
charity care it provides. These records include the amount of charges
foregone for services and supplies furnished under its charity care
policy, the estimated cost of those services and supplies, and equivalent
service statistics. Charges foregone, based on established rates, were
approximately $3,034,000 and $1,753,000 in 1998 and 1997, respectively.
10
<PAGE> 15
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(6) LEASES
The Hospital has entered into various long-term capital lease agreements
for equipment with varying expirations through 2000. The Hospital's total
obligations under capital lease agreements at September 30, 1998 was
$54,052, of which $34,751 is payable during fiscal 1999.
The Hospital leased certain other equipment under operating leases.
Rental expense for the years ended September 30, 1998 and 1997 was
$258,130 and $69,442, respectively.
(7) DISTRICT
The Hospital receives funding from the District. The District allocates
funds to support the Hospital's operations, debt service requirements and
capital expenditures from ad valorem taxes levied by the District on
taxable property in Palm Beach County in its entirety. Funding of
$1,461,681 and $2,204,896 was received from the District for operations
in 1998 and 1997, respectively, and is included in other nonoperating
income in the statements of revenue, expenses and fund balance. In
addition, during 1998 the District provided funding of $1,110,629 to the
Hospital for capital improvements which has been reflected as a
restricted contribution to Fund balance in the accompanying financial
statements. The District has allocated $4,208,798 of funding for the
Hospital in 1999 of which $4,046,789 is restricted for capital additions.
Funding for fiscal year 2000 will be based on the discretion of the
Districts' Governing Board.
The District reimburses the Hospital for care provided to indigent
patients at per diem rates and at a percentage of the Hospital's
established rates for inpatient and outpatient services, respectively.
On September 20, 1994, the District approved a resolution authorizing a
conditional loan to the Hospital of up to $2,000,000 which bears interest
at the rate of 5 percent per annum. As of September 30, 1998, the
Hospital had received $2,000,000 and had accrued interest of $370,834
which is recorded as loan payable to District on the balance sheet.
11
<PAGE> 16
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
On December 17, 1998, the Hospital's Governing Board approved a
resolution to repay the Hospital's loan with the District. The resolution
provides that the Hospital will pay $1,000,000 during December, 1998, and
will make monthly payments of $142,738 beginning January, 1999, which
will retire the debt and interest accruing thereon during December, 1999.
The accompanying financial statements have been adjusted to reflect
$1,856,428 as current installments under loan payable to the District
pursuant to the resolution.
(8) INDIGENT CARE ASSESSMENT
The Health Care Consumer Protection and Awareness Act of 1985 created a
fund to provide for the treatment of indigent patients. Hospitals in the
State of Florida are required to deposit into the fund an amount equal to
1-1/2 percent of net operating revenues for each fiscal year, with
payments due in quarterly installments. The Hospital's assessment
approximated $291,000 in 1998 and $184,000 in 1997.
(9) PENSION PLAN
The Hospital participates in the Florida Retirement System (the System),
a cost-sharing multiple employer, public employee retirement plan which
covers substantially all of the Hospital's full-time and part-time
employees who were eligible to participate in the plan prior to October
1, 1992. The System was created in 1970 by consolidating several employee
retirement systems. All eligible employees, as defined by the State, who
were hired after 1970 and those employed prior to 1970 who elect to be
enrolled are covered by the System. Benefits under the plan vest after 10
years of service. Employees who retire at or after age 62, with 10 years
of credited service, are entitled to an annual retirement benefit,
payable monthly for life. The System also provides for early retirement
at reduced benefits and death and disability benefits. These benefit
provisions and all other requirements are established by State statute.
The system is noncontributory and is administered by the State of
Florida. The Hospital is required to contribute amounts necessary to pay
benefits when due as defined by State statute. Such contribution
requirements were 16.45% and 16.77% of gross salaries during 1998 and
1997, respectively. Pension costs were approximately $299,696 on an
eligible payroll of $1,724,792 and a total payroll of $8,295,746 in 1998,
and $304,527 on an eligible payroll of $1,750,849 and a total payroll of
$6,576,051 in 1997.
A copy of the System's June 30, 1997 annual report can be obtained by
writing to the Division of Retirement, Cedars Executive Center, 2639-C
North Monroe Street, Tallahassee, FL 32399-1560 or by calling (850)
488-5706.
12
<PAGE> 17
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(10) EMPLOYEE BENEFIT PLAN
Effective October 1, 1992, the Hospital offered an employee benefit plan
created in accordance with Internal Revenue Code Section 457 to its
employees. The plan is available to all employees who are 21 years of age
or older who have completed 3 months of service and are not covered by
the System. The Hospital contributes a minimum of 6 percent of eligible
employees' gross wages, regardless of their contribution. The Hospital
matches 50% of employees' contributions up to 4% of each participant's
contributions, for a maximum possible contribution by the Hospital of 8%.
Participants' interest in amounts contributed by the Hospital vest as
follows:
YEARS OF SERVICE VESTED %
---------------- --------
0-2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
Amounts contributed by participants vest immediately. The Hospital's
contributions are invested in fixed accounts. Participants may choose to
invest their contributions in two programs which provide fixed accounts
and mutual fund-type accounts. Loans are permitted from a minimum of
$2,500 to a maximum of 50% of an employee's account balance or $50,000,
whichever is lower. The Hospital contributed approximately $356,531 on an
eligible payroll of $5,058,617 and a total payroll of $8,295,746 in 1998,
and $209,157 on an eligible payroll of $3,059,291 and a total payroll of
$6,576,051 in 1997.
13
<PAGE> 18
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(11) CONCENTRATIONS OF CREDIT RISK
The Hospital grants credit without collateral to its patients, most of
whom are local residents and are insured under third-party payor
agreements. The mix of receivables from patients and third-party payors
at September 30, 1998 and 1997, was as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Medicare 10% 12%
Medicaid 19% 11%
District 13% 3%
Other third-party payors 37% 64%
Self-pay 21% 10%
------------ ------------
100% 100%
============ ============
</TABLE>
(12) MANAGEMENT AGREEMENT
On October 24, 1994, with the approval of the District, the Hospital
entered into a management agreement whereby the management company
provided certain consulting and volume purchasing functions to the
Hospital. During 1998 and 1997, the Hospital paid the management company
approximately $204,000 and $407,000, respectively, for such services.
Effective April 18, 1997, the Hospital terminated certain provisions of
the management agreement which related to the management company
providing key personnel services.
(13) COMMITMENTS AND CONTINGENCIES
Effective December 1985, the Hospital elected to be self-insured with
respect to medical malpractice and general liability claims under the
doctrine of Sovereign Immunity which limits the Hospital's liability to
$100,000/$200,000 per occurrence. The Hospital provides self-insurance
reserves based on available data and re-evaluates the adequacy of these
reserves annually based on claims experience.
14
<PAGE> 19
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
Prior to October 1, 1994, the Hospital was a member of a workers'
compensation self-insurance risk management trust fund (the Fund) in
which members jointly and severally agree to pay the obligations of the
Fund. As a prior member of the Fund, the Hospital is subject to
assessments in the event that the total amount of premiums for a year in
which it was a member are not sufficient to satisfy claims. Assessments
amounting to $246,113 have been levied against the Hospital by the Fund
and have been reflected in the accompanying financial statements as of
September 30, 1997. No provision for the potential impact of any future
assessments by the Fund has been made by management in the accompanying
financial statements as any such impact is not readily determinable.
Effective October 1, 1994, the Hospital obtained workers compensation
coverage through a non-assessable insurance carrier.
(14) SCHEDULE OF VALUATION AND QUALIFIED ACCOUNTS
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (2) OF PERIOD
----------- ---------- -------- -------------- ---------
<S> <C> <C> <C> <C>
For the year ended September 30, 1997
Allowance for doubtful accounts $2,100,000 $3,006,930 $2,706,930 $2,400,000
For the year ended September 30, 1998
Allowance for doubtful accounts $2,400,000 4,979,634 3,979,634 $3,400,000
</TABLE>
(2) Uncollectable accounts written-off, net of recoveries
(15) REISSUANCE OF PREVIOUSLY - ISSUED REPORT ON GENERAL PURPOSE FINANCIAL
STATEMENTS
On March 29, 1999, the Governmental Accounting Standards Board issued
Technical Bulletin 99-1 (TB 99-1), Disclosures about Year 2000 Issues -
an amendment of Technical Bulletin 98-1. The amendment, among other
things, provides that required year 2000 disclosures may be presented
as required supplementary information. Retroactive application of TB
99-1 is permitted. The Hospital has elected to apply TB 99-1
retroactively for its 1998 general-purpose financial statements, and to
present the Year 2000 disclosures as required supplementary information
in note 16.
15
<PAGE> 20
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
(16) REQUIRED SUPPLEMENTARY INFORMATION YEAR 2000 - UNAUDITED
The Hospital is currently addressing year 2000 issues relating to its
computer systems and other electronic equipment. The year 2000 issue
refers to the fact that many computer programs use only the last two
digits to refer to a year. Therefore, both 1900 and 2000 would be
referred to as "00." Computer programs have to be adjusted to recognize
the difference between those two years or the programs will fail or
create errors. Also, some programs may not be able to recognize that 2000
is a leap year. Further, the year 2000 issue could affect electronic
equipment - such as environmental systems, elevators, and vehicles -
containing computer chips that have date recognition features.
During fiscal year 1998, the Hospital identified the computer systems
listed below that are mission-critical (that is, critical to conducting
operations) and that need to be year 2000 compliant.
The Hospital utilizes the following stages of work to address year 2000
issues:
- Awareness stage - Establishing a budget and project plan for
dealing with the year 2000 issue.
- Assessment stage - Identifying the systems and components for
which year 2000 compliance work is needed.
- Conversion/Replacement - Making changes to systems and equipment.
- Validation/Test stage - Validating and testing the changes that
were made during the remediation stage.
16
<PAGE> 21
GLADES GENERAL HOSPITAL
Notes to Financial Statements
September 30, 1998 and 1997
The Hospital's year 2000 remediation work for its mission-critical
systems and electronic equipment are in the following stages of work: "C"
means complete, "P" means in process, and "A" means still needs to be
addressed.
<TABLE>
<CAPTION>
CONVERSION/ VALIDATION/
AWARENESS ASSESSMENT REPLACEMENT TESTING
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Billing C P A A
Order management C C A A
Mainframe C C A A
Pharmacy C C P A
Pcs C C P P
Terminals C C C C
Interfaces C C C A
Biomedical C P P P
Engineering services C C P P
</TABLE>
The Hospital has budgeted $832,000 during 1999 for the replacement of the
Hospital's main computer system which has been determined to be not Year
2000 compliant.
Because of the unprecedented nature of the year 2000 issue, its effects
and the success of related remediation efforts will not be fully
determinable until the year 2000 and thereafter. Management cannot assure
that the Hospital is nor will be year 2000 ready, that the Hospital's
remediation efforts will be successful in whole or in part, or that
parties with whom the Hospital does business will be year 2000 ready.
However, management has placed the highest priority on identifying and
resolving all year 2000 issues. Emphasis has been placed on ensuring that
mission critical systems are year 2000 compliant. As an additional
precaution, management has established contingency plans wherever
feasible to ensure continued operation of mission critical functions.
Project plans are closely monitored and all mission critical systems are
expected to be year 2000 compliant by the summer of 1999.
17
<PAGE> 22
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,136
Accounts receivable, less allowance for
doubtful accounts of $6,000 5,008
Inventories 486
Prepaid expenses and other 123
-------
Total current assets 7,753
Property, plant and equipment, net 3,568
-------
$11,321
=======
LIABILITIES AND FUND BALANCE
Current liabilities:
Accounts payable $ 598
Accrued salaries and benefits 858
Accrued expenses 1,394
Current maturities of long-term obligations 909
Third-party settlements 738
-------
Total current liabilities 4,497
Long-term obligations, less current maturities 447
Fund balance: 6,377
-------
$11,321
=======
</TABLE>
See accompanying notes.
18
<PAGE> 23
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES
AND FUND BALANCE (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31,
---------------------
1999 1998
------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Net patient service revenue $15,703 $ 9,969
Other 623 427
------- --------
Net operating revenue 16,326 10,396
Expenses:
Salaries, wages and benefits 5,739 4,542
Purchased services 2,260 1,575
Supplies 1,718 1,157
Provision for doubtful accounts 3,483 2,190
Other operating expenses 807 570
Rentals and leases 145 114
Depreciation and amortization 342 424
Interest expense 46 65
------- --------
Total expenses 14,540 10,637
Income (loss) from operations 1,786 (241)
------- --------
Nonoperating gains:
District funding -- 731
------- --------
Total nonoperating income -- 731
------- --------
Revenue and gains in excess of expenses and losses 1,786 490
Fund balance, beginning of period 4,583 599
Restricted capital subsidy from District 8 396
------- --------
Fund balance, end of period $ 6,377 $ 1,485
======= ========
</TABLE>
See accompanying notes.
19
<PAGE> 24
GLADES GENERAL HOSPITAL
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31,
---------------------
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net cash flow from operating activities and gains:
Income (loss) from operations $ 1,786 $ (241)
Interest expense considered capital financing activity 46 65
Adjustments to reconcile net income (loss) from operations
to cash flow provided by (used in) operating activities
and gains, net:
Depreciation 342 424
Provision for bad debt 3,483 2,190
Changes in:
Patient accounts receivable, net (3,912) (2,564)
Supplies (13) 15
Prepaid expenses and other current assets 181 (103)
Accounts payable and accrued expenses 566 (522)
Accrued salaries and benefits (10) 558
Third-party settlements (89) --
------- -------
Net cash provided by (used in) operating
activities and gains 2,380 (178)
------- -------
Cash flows from noncapital financing activities:
Ad valorem taxes -- 731
------- -------
Net cash provided by noncapital
financing activities -- 731
------- -------
Cash flows from capital and related financing activities:
Payments under capital lease obligations (462) (183)
Payments on loan payable from District (1,431) --
Capital expenditures, net (680) (761)
Capital subsidy from District 8 396
------- -------
Net cash used in capital and related
financing activities (2,565) (548)
------- -------
Net increase (decrease) in cash and cash equivalents (185) 5
Cash and cash equivalents, beginning of year 2,321 767
------- -------
Cash and cash equivalents, end of period $ 2,136 $ 772
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest during the period for interest $ 8 $ 8
======= =======
</TABLE>
See accompanying notes.
20
<PAGE> 25
GLADES GENERAL HOSPITAL
Notes to Condensed Financial Statements
March 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Glades General Hospital (the "Hospital") is a tax exempt acute-care public
hospital operated under the oversight of the Palm Beach County Health Care
District (the "District"). The District was established as an independent taxing
district by special statute, Chapter 87-450 as amended by Chapters 88-460, Laws
of Florida, which was approved by the voters of Palm Beach County on November 8,
1998. Pursuant to this action, the assets and liabilities of the Hospital were
effectively transferred to the District.
As discussed in Note 2, effective April 12, 1999, Palm Beach County Health Care
District sold the assets and business of the Hospital to Province Healthcare
Company. The condensed financial statements of the Hospital are presented in a
format which conforms to the presentation of Province Healthcare Company's
consolidated financial statements.
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Glades General
Hospital have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
March 31, 1999, are not indicative of the results that may be expected for the
year ended December 31, 1999. For further information, refer to the 1998
financial statements and footnotes thereto included herein.
DISTRICT
The Hospital receives funding from the District. The District allocates funds to
support the Hospital's operations, debt service requirements and capital
expenditures from ad valorem taxes levied by the District on taxable property in
Palm Beach County in its entirety. The District reimburses the Hospital for care
provided to indigent patients at per diem rates and at a percentage of the
Hospital's established rates for inpatient and outpatient services,
respectively.
INCOME TAXES
The Hospital is exempt from income taxes as a Government organization pursuant
to Internal Revenue Code Section 115. Accordingly, no provision for income taxes
has been recorded in the accompanying financial statements.
21
<PAGE> 26
COMMITMENTS AND CONTINGENCIES
Effective December 1985, the Hospital elected to be self-insured with respect to
medical malpractice and general liability claims under the doctrine of Sovereign
Immunity, which limits the Hospital's liability to $100,000/$200,000 per
occurrence. The Hospital provides self-insurance reserves based on available
data and re-evaluates the adequacy of these reserves annually based on claims
experience.
NOTE 2 - SUBSEQUENT EVENT
As of April 12, 1999, Province Healthcare Company acquired the assets and
business of Glades General Hospital for approximately $15,150,000, excluding
working capital. Upon signing of the sales agreement, the public hospital
operated under the oversight of the Palm Beach County Health Care District
ceased to exist.
22
<PAGE> 27
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On April 12, 1999, Province acquired Glades General Hospital
(a public hospital operated under the oversight of Palm Beach County Health
Care District) ("Glades").
The following unaudited pro forma condensed consolidated balance sheet
as of March 31, 1999 gives effect to the acquisition of Glades by Province as if
the transaction had been completed as of March 31, 1999.
The following unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1998, and the three months ended March
31, 1999, give effect to the acquisition of Glades by Province, as if such
transaction had been completed as of January 1, 1998.
The pro forma condensed consolidated financial information presented
herein does not purport to represent what the Company's results of operations or
financial position would have been had such transaction, in fact, occurred at
the beginning of the periods presented or to project the Company's results of
operations in any future period. The pro forma results of operations, which do
not take into account certain operational changes instituted by the Company upon
acquisition of its hospitals, are not necessarily indicative of the results that
may be expected from such hospitals. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of Province, included in its Annual Report on
Form 10-K for the year ended December 31, 1998, the unaudited condensed
consolidated financial statements of Province, included in its Quarterly Report
on Form 10-Q for the period ended March 31, 1999, and the financial statements
of Glades, included elsewhere in this Current Report on Form 8-K/A. Certain
reclassifications have been made in the Glades historical financial statements,
included in the pro forma financial statements, to conform to the Province
presentation.
23
<PAGE> 28
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ACQUISITION PRO FORMA
------------------------ PRO FORMA ACQUISITION
PROVINCE GLADES ADJUSTMENTS CONSOLIDATED
-------- ------- ------------ --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,656 $ 2,136 $ 13,500 (a)
(2,136)(b)
(11,479)(c) $ 14,677
Accounts receivable, net 56,930 5,008 (3,176)(b) 58,762
Inventories 7,501 486 7,987
Prepaid expenses and other 8,417 123 8,540
-------- ------- -------- --------
Total current assets 85,504 7,753 (3,291) 89,966
Property, plant and equipment, net 111,830 3,568 2,364 (c) 117,762
Other assets:
Cost is excess of net assets acquired, net 140,846 -- -- 140,846
Other 16,001 -- 8,268 (c) 24,269
-------- ------- -------- --------
$354,181 $11,321 $ 7,341 $372,843
======== ======= ======== ========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,015 $ 598 $ (598)(b) $ 8,015
Accrued salaries and benefits 10,232 858 (43)(b) 11,047
Accrued expenses 5,473 1,394 (1,394)(b)
206 (c) 5,679
Current maturities of long-term obligations 1,545 909 (909)(b)
716 (c) 2,261
-------- ------- -------- --------
Total current liabilities 25,265 3,759 (2,022) 27,002
Long-term obligations, less current maturities 138,357 447 13,500 (a)
(447)(b)
3,395 (c) 155,252
Third-party settlements 5,353 738 (738)(b) 5,353
Other liabilities 10,795 -- 30 (c) 10,825
Minority interest 787 -- 787
Common stockholders' equity (deficit):
Net assets -- 6,377 (1,183)(b)
(5,194)(c) --
Common stock 157 -- 157
Additional paid-in-capital 163,294 -- 163,294
Retained earnings (deficit) 10,173 -- 10,173
-------- ------- -------- --------
Total common stockholders' equity (deficit) 173,624 6,377 (6,377) 173,624
-------- ------- -------- --------
$354,181 $11,321 $ 7,341 $372,843
======== ======= ======== ========
</TABLE>
24
<PAGE> 29
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
PROVINCE GLADES ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Net patient service revenue $217,364 $24,342 $241,706
Management and professional services 11,885 -- 11,885
Reimbursable expenses 6,520 -- 6,520
Other 3,086 2,275 5,361
-------- ------- --------
Net operating revenue 238,855 26,617 265,472
Expenses:
Salaries, wages and benefits 94,970 10,129 105,099
Reimbursable expenses 6,520 -- 6,520
Purchased services 28,250 3,558 31,808
Supplies 24,252 2,705 26,957
Provision for doubtful accounts 17,839 4,980 22,819
Other operating expenses 19,149 1,304 20,453
Rentals and leases 5,777 258 6,035
Depreciation and amortization 13,409 682 $ 391 (a) 14,482
Interest expense 10,555 127 902 (b) 11,584
Minority interest 155 -- 155
Loss on sale of assets 45 -- 45
-------- ------- ------- --------
Total expenses 220,921 23,743 1,293 245,957
-------- ------- ------- --------
Income (loss) before income taxes 17,934 2,874 (1,293) 19,515
Income taxes (benefit) 7,927 -- 630 (c) 8,557
-------- ------- ------- --------
Net income (loss) 10,007 2,874 (1,923) 10,958
Preferred stock dividends and accretion (696) -- -- (696)
-------- ------- ------- --------
Net income (loss) to common shareholders $ 9,311 $ 2,874 $(1,923) $ 10,262
======== ======= ======= ========
Basic earnings (loss) per common share:
Net income $ 0.75 $ 0.82
Preferred stock dividends and accretion (0.05) (0.05)
-------- --------
Net income per common share $ 0.70 $ 0.77
======== ========
Diluted earnings (loss) per common share:
Net income $ 0.73 $ 0.80
Preferred stock dividends and accretion (0.05) (0.05)
-------- --------
Net income per common share $ 0.68 $ 0.75
======== ========
Weighted-average shares:
Basic 13,344 13,344
Diluted 13,672 13,672
</TABLE>
25
<PAGE> 30
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ACQUISITION
HISTORICAL GLADES PRO FORMA PRO FORMA
PROVINCE (Note d) ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Net patient service revenue $67,256 $ 8,149 $ 75,405
Management and professional services 3,450 -- 3,450
Reimbursable expenses 1,777 -- 1,777
Other 764 313 1,077
------- ------- --------
Net operating revenue 73,247 8,462 81,709
Expenses:
Salaries, wages and benefits 29,508 2,916 32,424
Reimbursable expenses 1,777 -- 1,777
Purchased services 7,236 1,148 8,384
Supplies 8,217 912 9,129
Provision for doubtful accounts 4,676 1,807 6,483
Other operating expenses 6,145 426 6,571
Rentals and leases 1,683 72 1,755
Depreciation and amortization 4,177 178 $ 90 (a) 4,445
Interest expense 2,575 16 210 (b) 2,801
Minority interest 58 -- 58
Loss on sale of assets -- -- --
------- ------- ------ --------
Total expenses 66,052 7,475 300 73,827
------- ------- ------ --------
Income (loss) before income taxes 7,195 987 (300) 7,882
Income taxes (benefit) 3,130 -- 274 (c) 3,404
------- ------- ------ --------
Net income (loss) 4,065 987 (574) 4,478
Preferred stock dividends and accretion -- -- --
------- ------- ------ --------
Net income (loss) to common shareholders $ 4,065 $ 987 $(574) $ 4,478
======= ======= ====== ========
Basic earnings (loss) per common share:
Net income $ 0.26 $ 0.29
Preferred stock dividends and accretion -- --
------- --------
Net income per common share $ 0.26 $ 0.29
======= ========
Diluted earnings (loss) per common share:
Net income $ 0.25 $ 0.28
Preferred stock dividends and accretion -- --
------- --------
Net income per common share $ 0.25 $ 0.28
======= ========
Weighted-average shares:
Basic 15,709 15,709
Diluted 16,021 16,021
</TABLE>
26
<PAGE> 31
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Reflects the borrowing by Province of $13.5 million to finance the
acquisition of Glades.
(b) Reflects the elimination of Glades assets not purchased and liabilities not
assumed by Province as follows:
Cash.................................................. $(2,136)
Accounts receivable................................... (3,176)
Accounts payable...................................... 598
Accrued salaries and benefits......................... 43
Accrued expenses...................................... 1,394
Current maturities of long-term obligations........... 909
Long-term obligations, less current maturities........ 447
Third-party settlements............................... 738
-------
Net assets............................................ $(1,183)
=======
(c) Reflects the purchase of Glades and the allocation of the purchase
price to adjust assets purchased and liabilities assumed to fair value
and to record intangibles as follows:
Unallocated purchase price............................ $ 8,268
Property, plant and equipment......................... 2,364
Accrued expenses...................................... (206)
Current maturities of long-term obligations........... (716)
Other liabilities..................................... (30)
Long-term obligations, less current maturities........ (3,395)
Net assets............................................ 5,194
------
Cash paid............................................. $11,479
=======
27
<PAGE> 32
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(a) Reflects the elimination of the historical depreciation expense of
Glades, and the inclusion of the Company's depreciation of property,
plant and equipment and amortization of unallocated purchase price,
goodwill and other intangible assets.
(b) Reflects the elimination of the historical interest expense related to
the debt of Glades not assumed in the acquisition, and the inclusion of
the Company's interest expense related to the debt used to finance the
acquisition.
(c) Reflects the inclusion of the income tax expense based on the combined
federal and state statutory rate of 40.0% applied to adjusted pre-tax
income.
(d) The unaudited pro forma condensed consolidated statement of income for
the year ended December 31, 1998 is presented using Province's fiscal
year-end. The presentation combines Province's income statement for the
year ended December 31, 1998, and Glades' income statement for the year
ended September 30, 1998, for the purposes of presenting the pro forma
information.
28
<PAGE> 1
EXHIBIT 2.1
-----------------------------------------------
ASSET PURCHASE AGREEMENT
among
PALM BEACH COUNTY
HEALTH CARE
DISTRICT
and
PHC-BELLE GLADE, INC.
and
PROVINCE HEALTHCARE COMPANY
-----------------------------------------------
<PAGE> 2
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 24,
1999, between Palm Beach County Health Care District, an independent, special
taxing district created pursuant to Chapter 87-450, Laws of Florida, as amended
("Seller"), and PHC-Belle Glade, Inc., a Florida corporation ("Buyer"), which is
a wholly-owned subsidiary of PROVINCE HEALTHCARE COMPANY, a Delaware corporation
("Province") and PROVINCE.
WITNESSETH:
-----------
This Agreement provides for the sale by Seller to Buyer (the
"Transaction") of substantially all of the assets, real and personal, tangible
and intangible, constituting Glades General Hospital, Belle Glade, Florida, a
73-bed general acute care hospital (the "Hospital").
NOW, THEREFORE, for and in consideration of the foregoing premises and
the agreements, covenants, representations and warranties hereinafter set forth
and for other good and valuable consideration, the receipt and adequacy of all
of which are acknowledged and agreed, the parties hereto agree as follows:
1. SALE OF ASSETS AND CERTAIN RELATED MATTERS.
1.1. Sale of Assets. At the Closing (as hereinafter defined), Seller
shall sell, transfer, convey, assign and deliver to the Buyer, and Buyer shall
purchase from Seller, the following assets and properties:
(a) all real property owned by Seller used in connection with the
operation of the business of the Hospital (the "Business") and which comprises
the physical plant of the Hospital (the "Premises"), as more specifically
described in Schedule 1.1(a), together with all buildings, improvements and
fixtures located thereupon and all construction in progress (collectively, the
"Real Property"), such Schedule to include a legal description for each such
parcel of Real Property owned by Seller;
(b) all tangible personal property owned by Seller and used in
connection with the Business and located on Real Property or Leased Property (as
defined herein), including, without limitation, all equipment, furniture,
fixtures, machinery, vehicles, office furnishings, instruments, leasehold
improvements, spare parts, and, to the extent assignable or transferable by
Seller, all rights in all warranties of any manufacturer or vendor with respect
thereto (collectively, the "Personal Property"), which Personal Property is
described in Schedule 1.1(b);
(c) all rights, to the extent legally assignable or transferable,
to all licenses or permits issued principally in connection with the Business,
certificates of need, certificates of exemption, franchises, accreditations and
registrations (collectively, the "Licenses"), including, without limitation, the
Licenses described in Schedule 1.1(c);
(d) all of Seller's interest, to the extent legally assignable or
transferable by it, in and to those real property and personal property leases
<PAGE> 3
relating to the Business and also described in Schedule 1.1(d) (collectively,
the "Assumed Leases");
(e) all of Seller's interest, to the extent legally assignable or
transferable by it, in and to those contracts and agreements relating to the
Business set forth in Schedule 1.1(e) (collectively, the "Assumed Contracts");
(f) all inventories of supplies, drugs, food, janitorial and
office supplies and other disposables and consumables existing on the Closing
Date (as hereinafter defined) and located at the Hospital (collectively, the
"Operating Inventory");
(g) all documents, records, operating manuals and files, and
computer software (to the extent legally assignable) owned by Seller or its
affiliates and located on the Premises, pertaining principally to or used in
connection with the Business, including, without limitation, all patient records
located at the Hospital, medical records located at the Hospital, financial
records, equipment records, construction plans and specifications, and medical
and administrative libraries located at the Hospital provided, however, Seller
shall have the right to make copies of any such records, at its own expense; and
(h) except as expressly excluded above, all other property owned
by Seller, whether tangible or intangible, located at the Hospital or used
solely in connection with the Business whether or not reflected on the balance
sheet of Seller or Hospital, including, without limitation, the name "Glades
General Hospital" and any claims, other than those presently being pursued by
Seller, against third parties by the Seller relating to the Assets (as
hereinafter defined) whether known or unknown, contingent or otherwise.
The foregoing, which (except for the Excluded Assets, as defined in
Section 1.2) are hereafter referred to collectively as the Assets.
1.2 Excluded Assets. The following items which are related to the
Business are not intended by the parties to be a part of the sale and purchase
contemplated hereunder and are excluded from the Assets (collectively, the
"Excluded Assets"): (i) all notes and accounts receivable of the Business
existing on the Closing Date, whether recorded or unrecorded or assigned for
collection, including without limitation, all Medicare, Medicaid and CHAMPUS
receivables net of related payables relating to the settlement of cost reports
of Seller ("Cost Report Receivables"), including depreciation "recapture" (gain
or loss) whether recorded as a current or long term asset; (ii) all supplies,
drugs, food and other disposables and consumables disposed of in the ordinary
course of business prior to the Closing; (iii) prepaid expenses as disclosed on
Schedule 1.2(iii); and (iv) any other assets set forth on Schedule 1.2(iv).
1.3 Assets Free and Clear; Assignment and Undertaking.
(a) Notwithstanding any other provision hereof to the
contrary, the Assets shall be sold free and clear of all liabilities, liens and
encumbrances, except for the liens, liabilities and encumbrances described in
Schedule 1.3(a) (collectively, the "Assumed Liabilities") and the Permitted
Encumbrances (as hereinafter defined). Buyer shall expressly agree to assume all
of the Assumed Liabilities
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pursuant to the Assignment and Undertaking Agreement (the "Assignment and
Undertaking Agreement") in the form attached hereto as Exhibit 1.3(a). Except as
provided in the Assignment and Undertaking Agreement, Buyer is not assuming and
shall not be deemed to have assumed any other liability or obligation of Seller
or any of its affiliates, fixed or contingent, disclosed or undisclosed, or
otherwise. Buyer agrees to promptly pay, perform and discharge in due course in
accordance with their terms all Assumed Liabilities and to provide evidence of
such performance to Seller on a timely basis.
(b) To effect the assumptions and assignments of the Assumed
Leases and Assumed Contracts contemplated hereby, Buyer and Seller shall execute
the Assignment and Undertaking Agreement. Except for the Assumed Contracts,
Assumed Leases and indebtedness of Seller expressly assumed by Buyer in the
Assignment and Undertaking Agreement, accordingly, Buyer is not undertaking and
shall not be deemed to be responsible for any other of Seller's leases,
agreements or contracts or for any indebtedness incurred or arising with respect
to any period on or prior to the Closing Date in connection with the Assets or
their operation, whether fixed or contingent, disclosed or undisclosed, or
otherwise, not listed on Schedules 1.1(d) or 1.1(e). Specifically, Buyer is not
assuming and shall not be deemed to have assumed and Seller explicitly agrees to
retain and satisfy when due and payable all obligations relating to that certain
Management Services Agreement between Quorum Health Resources, Inc. and the
Seller dated April 9, 1997 and that certain loan between the Hospital and
Seller, authorized and described in that certain resolution 94-007 of Seller,
dated September 20, 1994.
(c) With respect to any indebtedness secured by a lien on the
Assets which is not expressly assumed by Buyer in the Assignment and Undertaking
Agreement, the Seller shall discharge such indebtedness and cause any such lien
to be released prior to or at the Closing.
1.4 Purchase Price. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties of Seller set forth herein and
as consideration for the purchase and sale of the Assets, Buyer agrees to tender
to Seller the amount of Fifteen Million One Hundred Fifty Thousand and No/100
Dollars ($15,150,000.00) (the "Purchase Price"). The Purchase Price shall be
payable as follows: (a) $100,000 to be paid to Seller as a cash deposit upon
execution of this Agreement, such deposit and all accrued interest thereon, if
any (the "Deposit") shall be subject to forfeiture to Seller in the event Buyer
terminates this Agreement for any reason except as provided in 11.1(b) or (d)
hereof, (b) $10,050,000 in cash at Closing (the "Base Purchase Price"), and (c)
a promissory note for $5,000,000 (the "Promissory Note"), representing
additional purchase price (the "Additional Purchase Price"). Buyer shall pay
Seller $1,000,000 of the Additional Purchase Price a year for each of the first
through fifth anniversaries of Closing. The Promissory Note shall be guaranteed
by Province, such guarantee (the "Guarantee") to be an unconditional guarantee
of payment in a form acceptable to the parties and shall not provide for
interest to be paid on the principal amount thereof. Seller is under no
obligation to invest the Deposit and any interest or income thereon shall belong
solely to Seller. In addition, Buyer agrees at Closing, to place in an escrow
account with an escrow agent agreeable to each party and pursuant to an Escrow
Agreement, the form of which is attached hereto as Exhibit 1.4, funds in an
amount deemed reasonably sufficient to purchase a performance
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bond (the "Performance Bond") at such time as the Buyer is obligated to commence
construction of the Replacement Hospital pursuant to the terms hereof.
Additionally, Buyer shall deliver to Seller at Closing, funds equal to
the cost of Seller's new management information system, such cost as evidenced
by the original vendor receipts for such system.
1.5 Proration. Seller and Buyer shall prorate as of the Closing Date
any amounts which become due and payable after the Closing Date with respect to
the Assumed Contracts, and all utilities servicing any of the Assets, including
without limitation water, sewer, telephone, electricity, gas service, and
insurance contracts, if any, and to the extent to be assumed, if assumable.
Seller shall be responsible for paying any such amounts owed for the period
prior to and on Closing Date, and Buyer shall be responsible for paying any such
amounts owed after the Closing Date.
1.6 Transition Services and Patients. To compensate Seller for services
rendered and medicine, drugs and supplies provided by Seller before the Closing
Date (the "Seller Transition Services") to patients admitted to the Hospital on
or before the Closing Date but discharged on or after the Closing Date (such
patients being referred to herein as the "Transition Patients"), the parties
shall determine in good faith an appropriate per diem rate per patient to
reimburse Seller for Seller's Transition Services. Buyer shall pay all amounts
owed to Seller pursuant to this Section 1.6, as soon as practicable but in no
event later than forty-five (45) days after the Closing Date.
2. CLOSING.
2.1 Closing. The consummation of the sale and purchase of the Assets
contemplated by and described in this Agreement (the "Closing") shall take place
in Boca Raton, Florida, at the offices of Sachs, Sax & Klein, P.A. or other
agreed upon location, at 10:00 A.M. local time on the last day of the month in
which all of the approvals required pursuant to Section 5.8 hereof have been
obtained, or at such other time as the parties hereto may mutually designate in
writing (the "Closing Date"), but in no event later than March 31, 1999, or such
other date as may be agreed to in writing by the parties.
2.2 Action of Seller at Closing. At the Closing, Seller shall deliver
to Buyer the following:
(a) a special warranty deed or deeds in recordable form executed
by a duly authorized officer of Seller, conveying to Buyer fee title to the Real
Property, subject to Permitted Encumbrances (as defined in Section 5.5 hereof);
(b) the Assignment and Undertaking Agreement executed by a duly
authorized officer of Seller assigning to Buyer all the Assumed Leases and
Assumed Contracts;
(c) a bill of sale and assignment executed by a duly authorized
officer of Seller conveying and assigning to Buyer good and marketable title to
all of the other tangible and intangible Assets, free and clear of all
liabilities, claims,
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liens, security interests and other encumbrances other than the Assumed
Liabilities and the Permitted Exceptions (the "Bill of Sale");
(d) the Non-Competition Agreement in a form mutually agreed upon
by the parties and attached hereto as Exhibit 2.2(d) (the "Non-Competition
Agreement") executed by a duly authorized officer of Seller;
(e) copies of resolutions duly adopted by Seller authorizing and
approving Seller's performance of the transactions contemplated hereby and the
execution and delivery of the documents described herein, certified as true and
of full force as of Closing by appropriate officers of Seller;
(f) certificates dated as of the Closing Date of the appropriate
officers of Seller certifying as of Closing all of the material representations
and warranties by or on behalf of Seller contained in this Agreement are true
and correct and all material covenants and agreements of Seller to be performed
prior to or as of the Closing pursuant to this Agreement have been performed by
Seller or waived by Buyer;
(g) certificates of incumbency, dated as of the Closing Date, for
the officers of Seller making certifications for Closing, or executing this
Agreement, deeds, the Assignment and Undertaking Agreement, Bill of Sale, or any
other document, agreement or certificate contemplated by the terms hereof to be
executed and delivered by Seller;
(h) subject to Section 1.2 hereof and except as otherwise
described on Schedule 2.2(h), all of Seller's Assumed Contracts, Assumed Leases,
commitments, books, records and other data relating to the Assets, provided that
Seller shall have the right to make copies thereof, at its sole expense,
following the Closing;
(i) the Information Systems Transition Agreement substantially in
the form attached hereto as Exhibit 2.2(i) (the "Information Systems Transition
Agreement") executed by a duly authorized officer of Seller;
(j) such other documents as may be reasonably requested by Buyer
to effectuate the terms of this Agreement; and
(k) the Escrow Agreement substantially in the form as attached
hereto as Exhibit 1.4 executed by a duly authorized officer of Seller.
Simultaneously with the delivery of the foregoing items, Seller will
take all such steps as may reasonably be required to put Buyer in actual
possession and operating control of the Assets, provided that Seller shall have
the right to make copies thereof, at its sole expense, following the Closing.
2.3 Action of Buyer at Closing. At the Closing, Buyer and Province
shall deliver to Seller the following:
(a) payment of the Base Purchase Price as determined in accordance
with Section 1.4(b) hereof in cash, certified or cashier's check or wire
transfer in immediately available funds;
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(b) the Assignment and Undertaking Agreement executed by a duly
authorized officer of Buyer providing for the assumption from Seller of the
Assumed Liabilities, if any, the Assumed Leases and the Assumed Contracts;
(c) the Promissory Note in the amount of $5,000,000, evidencing
the Additional Purchase Price;
(d) copies of corporate resolutions duly adopted by Buyer and
Province authorizing and approving Buyer's and Province's performance of the
transactions contemplated hereby and the execution and delivery of the documents
described herein, certified as true and of full force as of Closing by
appropriate officers of Buyer or Province;
(e) certificates dated as of the Closing Date of an officer of
each of the Buyer and Province certifying that as of Closing all of the material
representations and warranties by or on behalf of the Buyer and Province
contained in this Agreement are true and correct and the material covenants and
agreements of Buyer and Province to be performed prior to or as of Closing
pursuant to this Agreement have been performed by Buyer or Province or waived by
Seller;
(f) certificates of incumbency, dated as of the Closing Date, for
the officers of Buyer and Province making certifications for Closing or
executing this Agreement, the Assignment and Undertaking Agreement or any other
documents, agreements or certificates contemplated by the terms hereof to be
executed and delivered by Buyer or Province;
(g) certificates of good standing of Buyer from the State of
Florida and of Province from the state of Delaware, each dated the most recent
practical date prior to Closing;
(h) the Guarantee executed by Province in the form to be attached
as Exhibit 2.3(h) hereto (the "Guarantee");
(i) the Capital Commitments Agreement executed by Buyer and
Province in the form to be attached as Exhibit 2.3(i) hereto (the "Capital
Commitments Agreement");
(j) the Performance Covenant as defined in Section 8.6;
(k) the Information Systems Transition Agreement executed by a
duly authorized officer of Buyer;
(l) such other documents as may be reasonably requested by Seller
to effectuate the terms of this Agreement; and
(m) the Escrow Agreement substantially in the form as attached
hereto as Exhibit 1.4 executed by a duly authorized officer of the Buyer.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER.
As of the date hereof, Seller represents and warrants to Buyer and
Province that:
3.1 Capacity. Seller is an independent special taxing district created
pursuant to Chapter 87-450, Laws of Florida, as amended, validly existing and in
good standing under the laws of the State of Florida with all requisite power
and authority to own, operate and lease its properties with respect to the
Business and to carry on the Business as now being conducted.
3.2 Powers; Absence of Conflicts With Other Agreements, etc.
(a) The execution, delivery and performance by Seller of this
Agreement and the other agreements and transactions contemplated hereby:
(i) are within Seller's powers, are not in
contravention of the terms of any resolution or act or governing
instrument or any amendments thereto and have been duly authorized by
Seller, as and to the extent required; and
(ii) except as set forth on Schedule 3.2, on the
Closing Date, to Seller's knowledge, (A) will not result in any breach
of any indenture, agreement, lease or instrument to which Seller is a
party or by which Seller is bound, (B) will not constitute a violation
of any judgment, decree, or order of any court of competent
jurisdiction applicable to Seller, (C) will not violate any law, rule
or regulation of any governmental authority applicable to the Seller or
any of the Assets, and (D) will not require any consent, approval or
authorization of, or notice to, or declaration, filing or registration
with, any governmental or regulatory authority.
(b) This Agreement has been duly and validly executed and
delivered by Seller and, as of the Closing, the other agreements and instruments
contemplated hereby will have been duly and validly executed and delivered by
Seller. This Agreement constitutes, and upon their execution and delivery, the
other agreements and instruments contemplated hereby will constitute, the valid,
legal and binding obligations of Seller enforceable against it in accordance
with their terms.
3.3 Financial Statements. Schedule 3.3(a) hereto consists of true,
correct and complete copies of the Hospital's audited financial statements for
the years ended September 30, 1996, 1997, and 1998, and the unaudited financial
statements of the Hospital for each of the months thereafter, as available
(collectively, the "Hospital Financial Statements"). The Hospital Financial
Statement's have been prepared from and are in accordance with the books and
records of the Hospital and Seller; are true, complete and accurate in all
material respects and fairly present the financial position of the Hospital as
of the dates and for the periods indicated, in each case in accordance with GAAP
except for the monthly statements for 1998 and except as otherwise described in
Schedule 3.3(b) and consistently applied during such periods. Any Hospital
financial statements prepared as of a date after September 30, 1998 and
delivered to Buyer pursuant to this Agreement after the
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date hereof shall be subject to and prepared in accordance with the preceding
representation and the standards set forth therein.
3.4 Licenses. Seller has to its knowledge, all licenses and permits
relating to its ownership of the Assets and operation of the Business as are
necessary and required for Seller's ownership and operation of the Business.
Schedule 3.4 hereto contains a complete description of all material licenses,
permits, franchises, certificates of need, certificate of need applications, and
PRO memos, if any, and their respective dates of termination or renewal, owned
or held by Seller relating to the ownership, development or operation of the
Assets or the Business, together with any formal and specific notices or
directives received from the agency responsible for such Schedule 3.4 item, for
which noncompliance with such notice or directive would likely cause the
revocation, suspension or material diminution in term for such item, all of
which are in good standing.
3.5 Certain Contracts. Schedule 3.5(a) lists all written contracts to
which the Seller is a party involving obligations of the Seller principally with
respect to the Business for payment, performance of services or delivery of
goods in excess of Ten Thousand and No/100 Dollars ($10,000.00) or having terms
in excess of one (1) year ("Scheduled Contracts"). Seller has delivered to Buyer
true and correct copies of all Scheduled Contracts. Schedule 3.5(b) lists all
contracts for payment, performance of services or delivery of goods, regardless
of amount, whether written or oral, with any referral source, including all
physicians and healthcare providers. To the best of Seller's knowledge, all
Assumed Contracts are valid and binding obligations of Seller, are in full force
and effect, and are enforceable against Seller in accordance with their terms;
no event has occurred including, but not limited to, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby which (whether with or without notice, lapse of time or
both) would constitute a default thereunder except as otherwise disclosed on
Schedules 3.5(a) or (b). Seller has not received any written notice that the
other parties to the Assumed Contracts are (i) in default under such Assumed
Contracts or (ii) consider Seller to be in default thereunder except as
otherwise disclosed on Schedules 3.5(a) or (b). Except as expressly noted in
Schedules 3.5(a) and (b), to the best knowledge of Seller, no party to any of
the Assumed Contracts intends to terminate or materially adversely modify its
agreement(s) with respect thereto, or materially adversely change the volume of
business done thereunder. Notwithstanding the foregoing, except for purchase
orders for inventory or supplies entered in the ordinary course of business,
Schedule 1.1(e) shall not be amended to include any of the Scheduled Contracts,
unless Buyer agrees in writing to assume any such contract. Moreover, Buyer
explicitly agrees to assume only those contracts so listed and shall have no
obligation for any contract not so listed.
3.6 Certain Leases. Schedule 3.6 lists all leases to which the Seller
is a party in respect of the Business involving annual obligations on the part
of the Seller for the payment of rent in excess of Ten Thousand and No/100
Dollars ($10,000.00) or having lease terms in excess of one (1) year ("Scheduled
Leases"). Seller has delivered to Buyer true and correct copies of all Scheduled
Leases. To the best of Seller's knowledge, all of the Assumed Leases are valid
and binding obligations of Seller, are in full force and effect, and are
enforceable against Seller in accordance with their terms; no event has occurred
including, but not limited to, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby which
(whether with or without notice,
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lapse of time or both) would constitute a default thereunder, except as
otherwise disclosed on Schedule 3.6. Seller has not received any written notice
that the other parties to the Assumed Leases are (i) in default under such
Assumed Leases or (ii) consider Seller to be in default thereunder, except as
otherwise disclosed on Schedule 3.6. Other than as specified therein, no
property leased under any Assumed Lease is subject to any lien, encumbrance,
easement, right of way, building or use restriction, exception, variance,
reservation or limitation as might in any material respect interfere with or
impair the present and continued use thereof in the usual and normal conduct of
the Business.
3.7 Title to Properties, Personal Property and Related Matters.
(a) The Seller will hold good, valid and marketable title to
all of the Assets constituting Real Property free and clear of all title
defects, liens, pledges, claims, charges, rights of first refusal, security
interests or other encumbrances and are not, in the case of the Real Property or
to the knowledge of Seller the real property leased by Seller principally
related to the Hospital (the "Leased Real Property"), subject to any rights of
way, building or use restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever, except with respect to all such Permitted
Encumbrances defined in Section 5.5. Schedule 1.1(a) includes a true and
accurate legal description of the Real Property, and street addresses for the
Leased Real Property as reflected on the Hospital Financial Statements. In
respect to their physical condition and defects, the Real Property and
structures owned or leased by the Seller and used in connection with the
Business are being purchased by Buyer "AS IS, WHERE IS, AND WITH ALL FAULTS."
Notwithstanding the foregoing, however, except as disclosed on Schedule 3.7(a)
hereto, Seller has no knowledge of any material defect, structural or other, in
any of the Assets, including, without limitation, the real property and
implements used in the operation of the Business. Seller has not received any
written notice of any violation of any building, zoning or other law, ordinance
or regulation in respect of such property or structures or their use by the
Seller that would adversely affect Buyer's ability to operate the Hospital in
the same manner as Seller currently operates the Hospital. No portion of the
Assets is subject to a condemnation or similar proceeding.
(b) On the Closing Date, the Seller will hold good, valuable
and marketable title to all the Personal Property. Schedules 1.1(b) and 1.1(d)
include true and accurate descriptions of Personal Property owned or leased by
Seller and used solely in connection with the Business and reflected on the
Hospital Financial Statements. In respect to their physical condition and
defects, all machinery and equipment used in the operation of the Business are
being purchased by Buyer "AS IS, WHERE IS AND WITH ALL FAULTS." Notwithstanding
the foregoing, however, except as disclosed on Schedule 3.7(b) hereto, Seller
does not know of any material defect, structural or other, in any of the
Personal Property which comprise the Assets, including the machinery and
equipment used in the operation of the Business. Personal Property is subject to
no liens or encumbrances except the security interests of record set forth on
Schedule 3.7(b), which Schedule is a copy of a Uniform Commercial Code ("UCC")
search duly obtained by Seller in the last thirty (30) days and which search
shows security interests of record relating to such Assets in the State of
Florida. Seller agrees to remove all security interests reflected on such UCC
search, if any, prior to or at the Closing (except those
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approved by Buyer in writing) and to remove any other security interests filed
with respect to such Assets between the date of such UCC search and the Closing
Date.
(c) Schedule 3.7(c) describes all construction work, if any,
which Seller has contracted for and which is presently in progress in respect of
the Hospital and also contains a good faith estimate, as of the date of this
Agreement, of the cost to complete each such project. To Seller's knowledge, the
construction work performed to date on the Premises and that which is presently
in progress is free from material defects.
3.8 Employee Benefit Plans.
(a) Set forth on Schedule 3.8(a) is a list (all of which are
collectively referred to as the "Employee Plans") of all material "employee
benefit plans" as defined by Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder (collectively, "ERISA"), all material specified fringe benefit plans
as defined in Section 6039D of the Code, and all other material bonus, incentive
compensation, deferred compensation, profit sharing, savings, severance,
supplemental unemployment, layoff, salary continuation, retirement, pension,
health, life insurance, disability, group insurance, vacation, holiday, sick
leave, fringe benefit or welfare plan, or any other similar plan, agreement,
policy or understanding (whether written or oral, qualified or nonqualified),
and any trust, escrow or other agreement related thereto, which (i) is
maintained or contributed to by the Seller, with respect to employees of Seller
providing services at the Hospital, or (ii) with respect to which the Seller has
any obligations to any current or former Hospital officer, Hospital employee,
Hospital service provider, or the dependents of any thereof, or (iii) which
could result in the imposition of liability to the Seller, due to its operation
of the Hospital, including without limitation plans and arrangements that have
been terminated. The Seller has made available to Province copies of the
documents comprising each Employee Plan and any related trust agreements,
annuity contracts or any other funding instruments ("Funding Arrangements"),
which copies are substantially true, accurate and complete.
(b) Each Employee Plan has been operated in compliance with
applicable law, including, but not limited to, Section 401(a) of the Code as
applicable, applicable state and local law, and in accordance with its terms.
(c) To the best knowledge of Seller, all required reports and
descriptions of the Employee Plans have been timely filed with the Internal
Revenue Service, the United States Labor Department (the "DOL"), and the Pension
Benefit Guaranty Corporation (the "PBGC") and, as appropriate, provided to
participants in the Employee Plans.
(d) All Employee Plans maintained by the Seller are
governmental plans as defined in Section 414(d) of the Code, ERISA 3(32), and
ERISA 4021(b)(2).
(e) Except as disclosed on Schedule 3.8(e), there are no
pending claims, lawsuits or actions relating to any Employee Plan (other than
ordinary course claims for benefits) and, to the best knowledge of the Seller,
none are threatened.
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(f) Any Employee Plan that provides for severance payments to
employees after termination of employment is in writing and has been operated in
compliance with applicable law.
(g) Except as set forth on Schedule 3.8(g) hereto, the Seller
does not now maintain nor has it ever purchased any annuity for any employee of
the Hospital intended, purporting, or which could be construed to be a Code
Section 403(b) annuity.
(h) To the best knowledge of Seller, no contributions to any
deferred compensation plan or arrangement of the Seller, pertaining to Hospital
employees, (other than annuities set forth on Schedule 3.8(h) or plans qualified
under Section 401(a) of the Code) have exceeded the limits of Section 457 of the
Code. All such deferred compensation plans or arrangements are intended to
qualify under Section 457 of the Code and have been operated in compliance with
Section 457 of the Code and the terms of the plan or arrangement.
3.9 Litigation or Proceedings. Schedule 3.9 contains a list of each
lawsuit or legal proceeding to which Seller is a party and which arose
principally out of or in connection with the Business or, to Seller's knowledge,
which has been threatened in writing against Seller or any officer or director
of Seller in connection with the Business. Since January 1, 1998, Seller to its
knowledge, has not been subject to any formal or informal (of which Seller has
received notice in writing) investigations or proceedings of the Division of
Health (as hereinafter defined), the United States General Accounting Office,
the Health Care Financing Administration or other similar governmental agencies
(except for any investigations being conducted in the ordinary course of
business and applicable to all Florida hospitals) with respect to the Hospital.
Except as disclosed on Schedule 3.9, there are no written claims, actions,
proceedings or investigations of which Seller has received written notice
pending or, to the best knowledge of the Seller, threatened challenging the
validity or propriety of the transactions contemplated by this Agreement. Except
as set forth on Schedule 3.9, the Seller is not now, and has not been within the
last three (3) years, a party to any injunction, order, or decree restricting
the method of the conduct of the Business or the marketing of any of its
services; since January 1, 1994, to the best of Seller's knowledge, no
governmental agency has investigated or requested in writing (other than on a
routine basis) information with respect to such methods of business or marketing
of services; Seller has not received any written claim that Seller currently
violates any federal, state, or local law, ordinance, rule or regulation, which
could have a material adverse effect on the Business and, to the best of
Seller's knowledge, no such written claim is or has been threatened; and there
have been no developments materially adverse to the Seller with respect to any
pending or, to Seller's knowledge, threatened written claim, action or
proceeding of an administrative or judicial nature, including but not limited to
those referred to in Schedule 3.9, and including without limitation any such
pending or threatened written claim, action or proceeding arising from or
relating to (i) the assertion by any governmental authority of any retroactive
adjustment of the sums which the Seller was entitled to receive in connection
with the Business pursuant to government or third party reimbursement programs
such as (but not limited to) Medicare and Medicaid, except as in the ordinary
course of business, or (ii) any written allegation by any governmental authority
of fraud or abuse by any current or former officers or employees of Seller in
connection with the making of any
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application for reimbursement on behalf of or in connection with the Business
pursuant to the government or third party reimbursement programs referred to in
the preceding clause (i).
3.10 Insurance. Schedule 3.10 summarizes the professional and general
liability insurance policies covering the Business and the property insurance
policies covering the Assets, which Schedule 3.10 reflects, the policies'
numbers, terms, identity of insurers, amounts and coverage.
3.11 Post-Balance Sheet Results. Except as set forth on Schedule 3.11,
since October 1, 1998 with respect to the Assets there has not been:
(a) any material damage, destruction or loss (whether or not
covered by insurance) affecting the Assets, taken as a whole;
(b) any sale, lease, transfer or disposition by Seller of the
Assets except sales, leases, transfers or dispositions of non-material portions
of the Assets with replacements thereof in the ordinary course of Seller's
business; or
(c) any change or the occurrence of any fact or condition which
may be reasonably expected to have a material adverse effect on the Business or
the value of the Assets, other than such changes, facts and conditions, if any,
affecting the general economy or the healthcare industry generally.
3.12 Seller's Employees. Schedule 3.12(a) contains a list of all of
Seller's employees as of October 1, 1998 who perform services on the Premises,
their current salary or wage rates, department and a job title or other summary
of the responsibilities of such employees. Since October 1, 1998, there has not
been any increase in the compensation payable or to become payable by Seller to
any of the Hospital's officers, employees or agents, or any bonus payment or
arrangement made to or with any such person, except as described in Schedule
3.12(a).
Except as set forth on Schedule 3.12(a), Seller has not entered into
any written or verbal agreements with its employees providing services on the
Premises which have a specified employment term. Schedule 3.12(a) includes a
list of all employees of Seller (other than "part-time employees") who performed
services on the Premises who have been "terminated" or "laid-off" since June 1,
1998 (as such quoted terms are defined in the Worker Adjustment and Retraining
Notification Act). Schedule 3.12(b) lists any employees of Seller who
principally perform work on behalf of Hospital somewhere other than the
Premises.
3.13 Labor Matters. The Seller has no collective bargaining agreements
with any labor union and there are no current negotiations with a labor union
with respect to any employees employed at the Hospital. To its knowledge, Seller
is in compliance in all material respects with all applicable laws respecting
employment and employment practices, including but not limited to the Fair Labor
Standards Act, terms and conditions of employment and wages and hours, and is
not engaged in any unfair labor practice as it relates to such employees. There
is no unfair labor practice complaint against the Business pending before the
National Labor Relations Board. There is no labor strike, dispute, slowdown or
stoppage actually pending or, to Seller's knowledge threatened against or
affecting the Business. To Seller's knowledge, no grievance which might have an
adverse effect on the
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Business or any such arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claim therefor exists. The Seller has
not experienced any employee strikes with respect to the Hospital since the date
the Seller acquired the Hospital. Seller will advise Buyer of any such labor
dispute which shall arise before the Closing.
3.14 Certain Representations With Respect to the Business.
(a) The Hospital is duly accredited as a general hospital by
the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO") and
a copy of their most recent reports, lists of deficiencies, if any, and
Certificates of Accreditation relating to the Hospital are included in Schedule
3.14(a).
(b) The Hospital is qualified for participation in the
Medicare program. Complete and accurate copies of Seller's existing Medicare
contracts for the Hospital have been furnished to Buyer. To Seller's knowledge,
the Hospital is presently in compliance with all of the terms, conditions and
provisions of such contracts.
(c) The Hospital is qualified for participation in the
Medicaid programs. Complete and accurate copies of Seller's existing Medicaid
contracts for the Hospital have been furnished to Buyer. To Seller's knowledge,
the Hospital is presently in compliance with all of the terms, conditions and
provisions of such contracts.
(d) The Hospital participates in the CHAMPUS program. To
Seller's knowledge, the Hospital is presently in compliance in all material
respects with all of the terms and conditions of such participation.
(e) Except as provided on Schedule 3.14(e), Seller has
previously provided to Buyer copies of the fire marshal reports in Seller's
possession or available to Seller with respect to the Hospital after January 14,
1999. Except as provided on Schedule 3.14(e), to the Seller's knowledge, the
Hospital is not in violation in any material respect of any fire code.
(f) Seller has previously provided to Buyer copies of the
Bylaws of the Medical Staff of the Hospital. Except as disclosed on Schedule
3.14(f), no proceedings are pending or, to the best of Seller's knowledge,
threatened seeking to remove or limit the privileges of any member of the
medical staff of the Hospital.
(g) Complete and accurate copies of all appraisals, if any,
obtained by Seller since October 1, 1998, relating to any of the Assets have
been furnished to Buyer.
(h) The Hospital is licensed by the Agency for Health Care
Administration, Division of Health Quality Assurance, Bureau of Health Facility
Compliance ("Division of Health") to operate seventy-three (73) acute care beds
in its existing facilities located in Palm Beach County, Florida. Schedule
3.14(h) contains copies of all such licenses. Except as set forth in Schedule
3.14(h) the Hospital is presently in compliance in all material respects with
all the terms, conditions and provisions of such licenses. To the best of
Seller's knowledge, except
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as set forth on Schedule 3.14(h), the facilities, equipment, staffing and
operations of the Hospital satisfy the applicable licensing requirements of the
State of Florida.
(i) Seller has previously provided to Buyer copies of all
licensure survey reports of the Hospital by the Division of Health since January
1, 1996.
(j) The Hospital has entered into memoranda of understanding with
the appropriate peer review organization, and copies of such memoranda of
understanding are included on Schedule 3.14(j).
3.15 Reimbursement Matters. Complete and accurate copies of all
Medicare cost reports and related forms filed during the past three (3) years by
the Seller for the Business have been furnished to Buyer. To the best of
Seller's knowledge, the amounts set up as provisions for the Medicaid or
Medicare adjustments and adjustments by any other third party payors on the
Hospital Financial Statements are sufficient to pay any amounts for which the
Seller may be liable. To the best of Seller's knowledge, Seller has not received
any written notices that Medicare or Medicaid have any claims against it which
may reasonably be expected to result in consolidated net offsets against future
reimbursement in excess of that provided for in the Hospital Financial
Statements. To the best of Seller's knowledge, neither the Seller nor any of its
employees have committed a violation of the Medicare and Medicaid fraud and
abuse provisions of the federal Social Security Act with respect to the
Business.
3.16 Hill-Burton Funds. To the best of Seller's knowledge, except as
set forth on Schedule 3.16, Seller has not received any funding under The
Hospital Survey and Construction Act, 42 U.S.C. Section 291(i) ("Hill-Burton
Act") in connection with the Hospital.
3.17 Taxes. Seller has filed all tax returns (or extensions thereto)
required by law to be filed and has paid all taxes, assessments and other
governmental charges shown thereon as due and payable, other than those
presently payable without penalty or interest or those being contested in good
faith by appropriate procedures. There are no liens with respect to taxes
(except for liens with respect to real property taxes not yet due) upon any of
the Assets. Except as set forth on Schedule 3.17, Seller has not conducted the
Business or engaged in any transaction which would cause the Seller or Buyer to
incur any sales or use taxes as a result of the transaction.
3.18 Environmental. Except as specifically disclosed in the Phase I
environmental report of Vertically Integrated Technologies, Inc. (VERITECH
Environmental Services), dated January 29, 1999 (the "Environmental Report") and
as set forth in Schedule 10.3 hereto:
(a) To the best of Seller's knowledge, Seller is currently in
compliance with all Environmental Laws (as defined below) with respect to the
Hospital, which compliance includes, but is not limited to, the possession by
Seller of all permits and other governmental authorization required under
applicable Environmental Laws to operate the Business as currently operated;
(b) To the best of Seller's knowledge, Seller has not stored,
disposed of or arranged for disposal of any Hazardous Substances (as defined
below) on any
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of the Real Property or Leased Real Property, except in compliance with
applicable Environmental Laws;
(c) Seller has not received any written notice of a claim,
whether from a governmental authority, employee of Seller or adversely affected
party, that alleges that Seller is not in compliance with Environmental Laws,
and, to the best of Seller's knowledge, there are no circumstances that may
prevent and interfere with such compliance in the future. There is no
Environmental Claim (as defined below) pending or, to the best knowledge of
Seller, threatened in writing against Seller with respect to the Real Property
or the Business.
(d) To the best of Seller's knowledge, during the period
Seller has owned the Hospital, there have been no actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Hazardous
Substances, which have not been cured or eliminated and that could form the
basis of any Environmental Claim against Seller, and Seller does not know of any
such actions, activities, circumstances, conditions, events or incidents prior
to Seller's ownership of the Hospital.
(e) Without in any way limiting the generality of the
foregoing, all underground storage tanks, and the capacity and contents of such
tanks, located on the Real Property are identified, to Seller's knowledge, in
the Environmental Report.
(f) Seller agrees to be responsible for the Environmental
Remediation of the Discovered Environmental Claims, as set forth on Schedule
10.3.
The following terms shall have the following meanings:
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (in writing) by any governmental authority or aggrieved
person alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Substances at any location which is or has been
owned, leased or operated by Seller or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means the federal, state (including specifically,
but not by way of limitation, the State of Florida), and local environmental, or
health laws, regulations, ordinances, rules and policies and common law in
effect on the date hereof and the Closing Date relating to the use, refinement,
handling, treatment, removal, storage, production, manufacture, transportation
or disposal, emissions, discharges, releases or threatened releases of Hazardous
Substances, or otherwise relating to protection of the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), as the same may be amended or modified to the date hereof
and the Closing Date, including, without limitation, the statutes listed below:
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Federal Resources Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901, et seq.
Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq.
Federal Clean Air Act, 42 U.S.C. Section 7401, et seq.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977,
33 U.S.C. Section 1251, et seq.
Federal Insecticide, Fungicide, and Rodenticide Act, Federal Pesticide
Act of 1978, 7 U.S.C. Section 136, et seq.
Federal Hazardous Materials Transportation Act, 48 U.S.C. Section 1801,
et seq.
Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.
"Hazardous Substances" means any toxic or hazardous waste, pollutants
or substances, including, without limitations, asbestos, PCBs, petroleum,
petroleum products and byproducts, substances defined or listed as "hazardous
substance", "toxic substance", "pollutant", "contaminant", "toxic pollutant", or
similarly identified substance or mixture, in or pursuant to any Environmental
Law.
3.19 Assets. The Assets comprise substantially all of the property and
assets used in the conduct and operation of the Business as of the date of this
Agreement, including without limitation, those assets reflected on Seller's
balance sheet dated as of September 30, 1998, and all assets acquired by Seller
for use in connection with the Business between September 30, 1998 and the
Closing Date. Buyer and Seller acknowledge that certain assets not purchased
hereunder set forth on Schedule 3.19, are used by Seller for the Business and
for purposes other than the operation of the Hospital. The parties will work
cooperatively to give Buyer use of and access to those assets retained by Seller
necessary for Buyer's operation of the Hospital.
3.20 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or specifically reserved against (which reserves are believed adequate
in amount) in the Hospital Financial Statements or any financial statements
prepared in respect of the Business thereafter, the Seller did not have, at the
date of such financial statements, any material liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise and whether due
or to become due) directly or indirectly arising from or in connection with the
Business required to be reflected thereon or included therein, except for any
liabilities which were incurred in the ordinary course of business consistent
with past practice or have been discharged or paid in full prior to the date
hereof.
3.21 No Misleading Statements. No representation or warranty by the
Seller contained in this Agreement, and no statement contained in any Schedule
(including any supplement or amendment thereto) and the documents to be
delivered at the Closing by or on behalf of Seller to Buyer or any of its
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representatives in connection with the transactions contemplated hereby (the
Schedules, including any supplement or amendment thereto, and such other
documents are herein referred to, collectively, as the "Additional Documents")
shall be untrue in any material respect. Copies of all documents described on
any Schedule hereto shall be true, correct and complete in all material respects
and all descriptions of such documents shall be true and complete in all
material respects.
3.22 No Other Representations and Warranties by Seller, Acceptance of
Assets. Buyer acknowledges that except as otherwise specifically provided for in
this Agreement, Seller has not made any warranties or representations concerning
the Assets or any portion thereof. BUYER ACKNOWLEDGES AND AGREES THAT THE
ASSETS, INCLUDING THE REAL PROPERTY, IMPROVEMENTS AND PERSONAL PROPERTY, ARE
BEING TRANSFERRED "AS IS, WHERE IS, AND WITH ALL FAULTS" AND SELLER HAS NOT
MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS,
WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, OF, AS TO,
CONCERNING OR WITH RESPECT TO THE ASSETS, EXCEPT AS SPECIFICALLY SET FORTH IN
THIS AGREEMENT. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE ASSETS, BUYER IS RELYING ON ITS OWN INVESTIGATION OF
THE ASSETS AND THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED HEREIN.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PROVINCE.
As of the date hereof Buyer and Province, jointly and severally,
represent and warrant to Seller the following:
4.1 Buyer Capacity.
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida with all requisite
corporate power and authority to own, operate and lease its properties. Province
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with all requisite corporate power and authority
to own, operate and lease its properties.
(b) Schedule 4.1 contains complete and correct copies of (i)
the Articles of Incorporation and all amendments thereto to the date hereof and
the Bylaws as presently in effect of Buyer and (ii) the Certificate of
Incorporation and all amendments thereto to the date hereof and the Bylaws as
presently in effect of Province.
4.2 Corporate Authorization/Contract Binding. The execution, delivery
and performance by Buyer of this Agreement and the other agreements and
transactions contemplated hereby are within Buyer's corporate powers, are not in
contravention of the terms of Buyer's Articles of Incorporation, Bylaws or any
amendments thereto and have been duly authorized and approved by the board of
directors and shareholder of Buyer. The execution, delivery and performance by
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Province of this Agreement and the other agreements to which it is a party and
the transactions contemplated hereby are within Province's corporate powers, are
not in contravention of the terms of Province's Certificate of Incorporation,
Bylaws or any amendments thereto and have been duly authorized and approved by
the board of directors of Province. No provisions exist in any document or
instrument to which Buyer or Province is a party or by which Buyer or Province
is bound which would be violated by the execution of, or the performance by
Buyer or Province of, or the consummation by Buyer or Province of the
transactions contemplated by, this Agreement. This Agreement has been duly and
validly executed and delivered by Buyer and Province, and as of the Closing, the
other agreements and instruments contemplated hereby will have been duly and
validly executed and delivered by the Buyer and Province. This Agreement
constitutes, and upon execution, their execution and delivery of the other
agreements and instruments contemplated hereby will constitute the valid, legal
and binding obligation of Buyer and Province, enforceable against each of them
in accordance with its terms.
4.3 No Conflict with Laws. The execution, delivery and performance by
Buyer and Province of this Agreement and the other agreements contemplated
hereby will not violate any law, rule or regulation of any governmental
authority applicable to Buyer or Province.
4.4 Financial Capacity to Perform. Buyer and Province have the
financial capacity necessary to fulfill their obligations hereunder and under
any other documents executed in connection with the transaction, including but
not limited to payment of the Purchase Price, building the Replacement Hospital
and fulfilling the covenants set forth in 9.2 through 9.7 hereof.
5. COVENANTS OF SELLER AND BUYER PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date:
5.1 Information. Seller shall afford to the officers and authorized
representatives of Buyer reasonable access to the Hospital and to Seller's books
and records relating to the Hospital, and will furnish to Buyer such additional
financial data and other information relating to the Hospital and the Business
at such times and in such manner as Buyer may from time to time reasonably
request of the Hospital's Chief Executive Officer or his designees.
Notwithstanding anything herein to the contrary, Seller shall not be required to
disclose any information regarding medical or employee records the
confidentiality of which is legally protected or to provide access to the
Hospital and related assets in a manner which would interfere with the delivery
of patient care. Seller agrees to cooperate reasonably with Buyer, and at no
cost to Buyer, in Buyer's efforts (i) to make any required filings and to obtain
any governmental approvals necessary in order to consummate the transactions
contemplated hereby, (ii) to respond to any governmental investigation of such
transactions, and (iii) to defend any legal or administrative proceedings
challenging such transactions. Seller will, upon reasonable request, cooperate
with Buyer, Buyer's representatives and counsel in the preparation of any
document or other material which may be required by any governmental agency as a
predicate to or result of the transactions herein contemplated. Subject to
Buyer's disclosure obligations under federal securities laws, including any
obligations of Province, and subject to disclosure obligations of Seller under
any applicable "sunshine" laws or other applicable laws, any release to
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the public of information with respect to the sale by Seller and purchase by
Buyer and of the Assets will be made only in the form and manner approved by the
parties and their respective representatives.
5.2 Operations. With respect to the ownership and operation of the
Assets, Seller will:
(a) carry on the Business in substantially the same manner as
Seller has heretofore and not make any material change in personnel or
operations, and not make any change in finance or accounting policies;
(b) maintain the Assets in substantially as good working order and
condition as at present, ordinary wear and tear excepted;
(c) perform Seller's obligations under agreements relating to or
affecting the Assets;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use reasonable efforts to maintain and preserve Seller's
business organization intact with respect to the Hospital, retain Seller's
present employees and maintain Seller's relationship with suppliers, physicians,
patients and others having business relations with the Hospital;
(f) within a reasonable time prior to Closing, permit Buyer to
make offers conditioned on the consummation of this transaction to any of
Seller's personnel who work at the Hospital for employment by Buyer subsequent
to the Closing, which personnel shall be allowed to accept or reject such offers
without penalty;
(g) as of Closing, terminate the participation of the employees of
Seller or its affiliates at the Hospital in Seller's or any affiliates' employee
health or welfare benefit plans, if any; provided, however, Seller shall cause
such termination to be effected in compliance with the terms and conditions of
all such plans and with applicable law; and
(h) not effect, grant or pay any increase in compensation to any
employee, officer or director of Hospital other than annual raises and bonuses
to employees and officers consistent with those effected, granted or paid in
prior years.
5.3 Certain Changes. Seller will not, with respect to the Business,
without the prior written consent of Buyer:
(a) sell or agree to sell any of the Assets except for the
depletion of inventories sold or equipment disposed of in the ordinary course of
the business of the Hospital;
(b) engage in any transaction out of the ordinary course of
business, including any sale, transfer, lease, encumbrance or granting of a
security interest in any portion of the Assets (except as provided in Section
5.3(a) above); or
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(c) adopt any new employee benefit plan or make any material
change in or to any Benefit Plan other than any such change that is required by
law or that, in the opinion of Seller's counsel, is necessary or advisable to
maintain the tax qualified status of any such Benefit Plan.
Seller agrees to consult with Buyer with respect to entering into, renewing or
terminating any contract or lease relating to the Business. Seller may enter
into, renew or terminate any such contract or lease without the prior written
consent of Buyer, provided that Buyer shall not be required to assume any such
contract or lease or the liabilities associated therewith unless Buyer shall
consent in writing to such entering into, renewal or termination.
5.4 Casualty. If any material part of the Hospital is damaged so as to
be rendered unusable or destroyed prior to Closing, Buyer may elect to terminate
this Agreement and all obligations of the parties hereunder. In the event the
Assets are destroyed or damaged, but such destruction or damage does not entitle
the Buyer or Buyer does not elect to terminate this Agreement, then Seller shall
be entitled to all insurance proceeds paid or payable in respect of such damage
or destruction and the Purchase Price payable by Buyer at the Closing shall be
reduced by an amount equal to the net book value of such damaged or destroyed
Assets, as reflected upon the most recent regularly prepared Hospital Financial
Statements.
5.5 Title Matters/Survey.
(a) With respect to each parcel of Real Property, excluding
the Leased Real Property, the Seller will order a current title commitment and
deliver such to Buyer within twenty (20) days of the date of execution hereof
and arrange to purchase at Closing from a title insurance company reasonably
acceptable to Buyer (Fidelity Title Insurance Company of New York being deemed
acceptable) an ALTA Owner's Policy (10-17-92 Form) with Florida Modifications,
in the aggregate amount of the Purchase Price reasonably allocated by Buyer and
Seller to the Real Property, in which the title insurer shall have agreed to
insure in Buyer good and marketable fee simple title to the Real Property
subject only to the Permitted Encumbrances (as hereinafter defined), and the
title insurer shall, in all cases, have removed the preprinted exceptions. As
used herein, "Permitted Encumbrances" means, (A) ad valorem taxes if not yet
delinquent; (B) easements and other encumbrances for public utilities or to
provide service to the facility therein; (C) laws limiting or regulating the use
or enjoyment of the Real Property or the character, size, use or location of any
improvement now or hereafter erected thereon; (D) other items; (E) matters shown
on Schedule 5.5; and (F) other matters consented to in writing by Buyer at or
prior to the Closing; provided items (A) through (D) do not materially impair
the use of any or all of the Real Property and Leased Property for its present
purpose or result in title no longer being good and marketable. The cost of the
title reports and title policies shall be borne by Seller. Buyer shall have a
period of ten (10) days after Buyer's receipt of the Title Commitment to review
the Title Commitment and to provide to Seller, in writing, any objections to any
matters set forth in the Title Commitment which affect title to the Property,
render title to the Real Property unmarketable and uninsurable or which
materially adversely affect the use of the Real Property for Business, such
matters being referred to in this Agreement as "title defects." Questions with
respect to marketability of title shall be judged and resolved in accordance
with applicable Title Standards adopted from time to time by authority of The
Florida
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Bar and in accordance with applicable statutory and case law of the State of
Florida. Any matters reflected in the Title Commitment which are not timely and
properly objected to by Buyer shall constitute a "Permitted Encumbrance." In the
event Buyer timely objects to any title defects, Seller shall have sixty (60)
days from receipt of such written notice from Buyer in which Seller may attempt
to remove or cure the title defects identified by Buyer in such written notice
and which are reasonably capable of being cured, failing which Buyer shall have
the option of either accepting title as it then is without reduction of the
Purchase Price or terminating this Agreement pursuant to Section 11.1 hereof.
(b) At least ten (10) days prior to the date of Closing,
Seller shall have delivered to Buyer an as-built survey (the "Survey") of the
Real Property. The Survey shall be in such form as may reasonably be required to
remove the general survey exception and the cost of such survey shall be borne
by Buyer. The Survey shall, at a minimum, be on a standard ATLA form and shall
(i) be currently dated (which may include a current re-certification of a
previously prepared survey plat); (ii) show the location on the Real Property of
all improvements, fences, evidences of abandoned fences, lakes, ponds, creeks,
streams, rivers, easements, roads, and right-of-way; (iii) identify all
easements and rights-of-way by reference to the recording information applicable
to the documents creating such easements or rights-of-way; (iv) show any
encroachments onto the Real Property from adjacent property, any encroachments
from the Real Property onto adjacent property, and any encroachments into any
easement or restricted area within the property, and any encroachments into any
easement or restricted area within the Real Property; (v) locate all existing
improvements (such as buildings, power lines, fences, and the like); (vi) locate
all dedicated public streets or other roadways providing access to the Real
Property, including all curb cuts and all alleys; (vii) locate all set-back
lines and similar restrictions covering the Real Property or any part thereof
and any violations of such restrictions; and (viii) show thereon a legal
description of the boundaries of the Real Property by metes and bounds or other
appropriate legal description. The Survey shall otherwise be in accordance with
minimum technical standards for surveys of comparable property as set forth in
all applicable laws, regulations, or statements of professional surveying
standards. The Survey shall contain the surveyor's certification to Seller,
Buyer, the title agent and the title company that (A) the Survey was made on the
ground; (B) there are no visible or recorded easements, discrepancies,
conflicts, encroachments, or overlapping of improvements except as shown on the
Survey; (C) the Survey correctly shows all visible or recorded easements or
rights-of-way of which the Surveyor has been advised, including, without
limitation, those matters affecting location of all building, structures, and
other improvements situated on the Real Property; (D) the Survey conforms to all
applicable minimum guidelines for surveys of comparable property set forth in
applicable laws, regulations, or professional ALTA standards; (E) to the
surveyor's knowledge, all streets abutting the Real Property and all means of
ingress to and egress from the Real Property have been completed, dedicated, and
accepted for public maintenance by city, town or other appropriate political
subdivision in which the Real Property is located; (F) except as shown thereon,
the Real Property is not located within the 100-year flood plan or other flood
hazard area; (G) the Survey is a true, correct, and accurate representation of
the Real Property; and (H) such other matters as may be required by the title
company to allow it to issue to the title policy. Buyer shall have a period of
ten (10) days after Buyer's receipt of the Survey to review the Survey and to
provide to Seller, in writing, any objections to any matters set forth on the
Survey which affect title to the Property and render title to the Real
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Property unmarketable and uninsurable or which materially adversely affect the
use of the Real Property Business, such matters being referred to in this
Agreement as "title defects." Any such title defect shown by the Survey shall be
resolved in the same manner as if the title defect were a title defect in the
Title Commitment as set forth above.
5.6 Best Efforts to Close. Buyer and Seller shall use their reasonable
best efforts to proceed toward the Closing and to cause the conditions to
Closing to be met as soon as practicable and consistent with other terms
contained herein. Buyer and Seller shall notify the other party as soon as
practicable of any event or matter which comes to such party's attention which
may reasonably be expected to prevent the conditions to such party's obligations
being met.
5.7 Terminating Cost Report. Seller shall furnish to Buyer a copy of
Seller's terminating cost report filed timely on behalf of the Hospital in
respect of the Medicare and Medicaid programs, or any successor governmental
program, reflecting consummation of the transactions contemplated hereby.
5.8 Consents. Buyer and Seller will use their respective reasonable
best efforts to obtain all permits, approvals, authorizations and consents of
all third parties necessary in the reasonable opinion of Buyer, desirable for
the purpose of (i) consummating the transactions contemplated hereby, or (ii)
enabling the Buyer to continue to operate the Business in the ordinary course
after the Closing.
5.9 Insurance Ratings. The Seller shall take all action reasonably
requested by Buyer to enable Buyer to succeed to the Workmen's Compensation and
Unemployment Insurance ratings, insurance policies, deposits and other interests
of the Seller with respect to the operation of the Hospital and other ratings
for insurance or other purposes established by the Seller. Buyer shall not be
obligated to succeed to any such rating, insurance policy, deposit or other
interest, except as it may elect to do so.
5.10 Notice; Efforts to Remedy. Seller shall promptly give written
notice to the other parties hereto upon becoming aware of the impending
occurrence of any event which would cause or constitute a material breach of any
of the representations, warranties or covenants of such party contained or
referred to in this Agreement or cause an adverse change in the Assets or the
operations of the Business and shall use its reasonable best efforts to prevent
or promptly remedy the same.
5.11 Interim Operating Reporting. During the period from the date of
this Agreement to the Closing, Seller shall cause its officers to confer on a
frequent and regular basis with one or more representatives of Buyer to report
operational matters in respect of the Hospital and the Business and to report
the general status of on-going operations. Seller shall notify the Buyer in
writing of any material adverse change in the financial position or earnings of
the Hospital or the Business after the date hereof and prior to the Closing and
any unexpected emergency or other unanticipated change in the Business and of
any governmental complaints, investigations or adjudicatory proceedings (or
communications indicating that the same may be contemplated) or of any other
such matter and shall keep Buyer fully informed of such events and permit its
representatives to participate in all discussions relating thereto.
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6. INDEMNIFICATION.
6.1 Indemnity by Buyer and Province. From and after Closing, Buyer and
Province (collectively, the "Buyer Indemnifying Parties"), jointly and
severally, shall indemnify, defend and hold harmless Seller and its officers,
directors, employees, affiliates and agents (collectively, "Buyer Indemnified
Parties") from and against any and all liabilities, losses, damages, demands,
claims, suits, actions, judgments, causes of action, assessments, costs and
expenses, including, without limitation, interest, penalties, attorneys' fees
(at all levels of trial and appeal), any and all expenses incurred in
investigating, preparing and defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred or suffered by any of them, directly or
indirectly, as a result or arising out of the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants or
agreements made by Buyer or Province in this Agreement or the
other agreements contemplated hereby;
(ii) any liability of Buyer including, without
limitation, professional malpractice or general liability
claims, arising out of the Business after the Closing which is
imposed on Seller and any liability imposed on Seller to the
extent such liability has been expressly assumed by Buyer
pursuant to this Agreement or the Assignment and Undertaking
Agreement;
(iii) any misrepresentation in any certificate or
other document furnished or to be furnished by or on behalf of
Buyer or Province under this Agreement; and
(iv) any violation of or liability under
Environmental Laws arising after Closing solely as a result of
a condition not in existence at Closing, or an aggravation (by
action or omission) of an existing condition by Buyer, its
employees, agents, invitees or independent contractors;
provided, however, the indemnification provided for in this
subsection (iv) with respect to the aggravation of an existing
condition, shall be limited to the extent of the results of
such aggravation.
To be entitled to such indemnification, the Buyer Indemnified Party shall give
Buyer Indemnifying Parties prompt written notice of any breach or of the
assertion by a third party of any claim with respect to which the Buyer
Indemnified Party may bring a claim for indemnification hereunder or any event
which could reasonably be expected to lead to a breach or assertion of a claim
for indemnification hereunder, and in all events must have supplied such notice
to Buyer Indemnifying Parties within the period for the defense of such claims
by Buyer. Buyer Indemnifying Parties shall have the right, at their own expense,
to contest, defend and litigate any such third party claim and such Buyer
Indemnified Party shall cooperate in good faith with Buyer Indemnifying Parties
to permit Buyer Indemnifying Parties to do so. Should such Buyer Indemnified
Party settle or compromise any claim or matter for which an indemnity would be
payable by a Buyer Indemnifying Party hereunder without the prior written
consent of such Buyer Indemnifying Party, Buyer Indemnifying Parties
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shall be relieved of any liability hereunder to such Buyer Indemnified Party
with respect to such claim or matter.
In addition to the foregoing, if any third party payor deducts any
amount from payments due such a Buyer Indemnified Party in respect of claims
against or amounts owed by any Buyer Indemnifying Parties, they will promptly
reimburse such Buyer Indemnified Party for the amounts so deducted with five (5)
days after written demand therefor by such Buyer Indemnified Party. Each Buyer
Indemnified Party agrees to give prompt written notice to the Buyer Indemnifying
Parties of the assertion of any claim, formal or informal, by any third party
payor for which, if deducted by such third party payor, such Buyer Indemnified
Party would be entitled to reimbursement by the Buyer Indemnifying Parties
hereunder and will cooperate in good faith, at no out-of-pocket cost to such
Buyer Indemnified Party, with the Buyer Indemnifying Parties to permit the Buyer
Indemnifying Parties to mitigate the amount of any such claim by any such third
party payor. Moreover, if Buyer pays Seller any funds pursuant hereto and Seller
subsequently receives an adjustment, or if Buyer or Seller is successful in
contesting such payment with a third party, Seller shall repay Buyer an amount
equal to such adjustment or contested amount, to the extent Buyer has not
previously received the contested amount.
The indemnity provided herein and Seller's right to seek specific
performance of Buyer's obligations hereunder are intended to be Seller's sole
remedies for breach by Province or Buyer of any representation or warranty
contained herein; provided, however, if such indemnification is declared
unenforceable under Florida law, nothing herein shall limit Seller's right to
seek additional remedies for such breaches. The foregoing shall not limit any of
Seller's remedies set forth in any instrument or document delivered pursuant to
this Agreement, including but not limited to the Promissory Note and Capital
Commitment Agreement.
6.2 Indemnity by Seller. To the extent permitted by applicable law,
from and after the Closing, Seller shall indemnify, defend and hold harmless
Buyer and Province and their respective officers, directors, employees,
shareholders, agents and affiliates (collectively, the "Seller Indemnified
Parties") from and against any and all Damages asserted against, resulting to,
imposed upon, or incurred or suffered by any of them, directly or indirectly, as
a result or arising out of the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants or
agreements made by Seller in this Agreement or the other
agreements contemplated hereby;
(ii) any liability of Seller, including without
limitation professional malpractice or general liability
claims, arising out of the operation of the Business prior to
the Closing which is imposed on Buyer or Province, except to
the extent such liability has been expressly assumed by Buyer
pursuant to this Agreement or the Assignment and Undertaking
Agreement;
(iii) any violation of or liability under
Environmental Laws that is related to Seller's or, to the
extent heretofore assumed by Seller, any previous owner's or
operator's management, use, control, ownership or operation of
the Hospital, the Assets or the Business
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specifically, including but not limited to, any leakage,
drainage, or releases on-site from activities of Seller or any
third-party releases or any off-site releases of Hazardous
Substances on the Real Property which occurred prior to the
Closing;
(iv) any liability, fines or obligations resulting
from Medicaid overpayments prior to the Closing which is
imposed on Hospital or Buyer;
(v) any liability, obligations or expenses incurred
by Buyer as a result of Seller's failure to satisfy the
requirements set forth in the ACHA Survey dated January 14,
1999;
(vi) any claim or liability incurred by Buyer arising
from the design, implementation, operation, maintenance, or
termination of any Employee Plan, including, but not limited
to, any failure to comply with any applicable law, failure to
comply with the terms of any Employee Plan, or any acts or
omissions of the Seller prior to Closing related to any
Employee Plan; and
(vii) any misrepresentation in any certificate or
other document furnished or to be furnished by or on behalf of
Seller under this Agreement.
Except for liabilities resulting from 6.2(iii), (iv) and (v) which
shall, to the extent possible, be satisfied from the Off-Set Right, without
satisfaction of the notice requirements hereunder, to be entitled to such
indemnification, a Seller Indemnified Party shall give Seller prompt written
notice of any breach or the assertion by a third party of any claim with respect
to which a Seller Indemnified Party may bring a claim for indemnification
hereunder or any event which could reasonably be expected to lead to a breach or
assertion of a claim for indemnification hereunder, and in all events must have
supplied such notice to Seller within the applicable period for defense of such
claims by Seller. Seller shall have the right, at its own expense, and at its
option, to contest, defend or litigate any such third party claim and such
Seller Indemnified Party shall cooperate in good faith with Seller to permit
Seller to do so. Should such Seller Indemnified Party settle or compromise any
claim or matter for which an indemnity may be payable by Seller hereunder
without the prior written consent of Seller, Seller shall be relieved of any
liability hereunder with respect to such claim or matter. Any indemnity in
respect of the representations and warranties provided for in Section 3.7 shall
be net of any recovery received, or which Buyer subsequently receives, under the
title insurance policy provided by Seller hereunder arising out of or in respect
of the matter which is the subject of the indemnity claim. Buyer shall
diligently seek by appropriate procedures any recovery to which it is entitled
under the aforesaid title insurance policy and, if Buyer has previously received
from Seller a payment for an indemnity claim hereunder in respect thereof, Buyer
shall promptly pay over to Seller all such recoveries received under such title
insurance policy up to the amount of the payment made by Seller. If any recovery
under such title insurance policy is paid over to Seller or netted against the
indemnity obligations of Seller legally owing hereunder and such recovery is
subsequently required to be returned to such title insurance company by reason
of any reservation of rights required in connection with the receipt thereof by
Buyer, Seller
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shall promptly pay to Buyer cash in the amount of such recovery so credited
against its indemnity obligations hereunder or otherwise received by Seller in
cash; provided, however nothing herein shall be deemed to limit Seller's rights,
including any subrogation rights, to redress from any third party relating to
such indemnified matters.
In addition to the foregoing, if any third party payor deducts any amount from
payments due a Seller Indemnified Party in respect of claims against or amounts
owed by Seller, Seller will promptly reimburse such Seller Indemnified Party for
the amounts so deducted within five (5) days after written demand therefor by
such Seller Indemnified Party. Each Seller Indemnified Party agrees to give
prompt written notice to Seller of the assertion of any claim, formal or
informal, by any third party payor for which, if deducted by such third party
payor, such Seller Indemnified Party would be entitled to reimbursement by
Seller hereunder and will cooperate in good faith, at no out-of-pocket cost to
such Seller Indemnified Party, with Seller to permit Seller to mitigate the
amount of any such claim by any such third party payor. Moreover, if Seller pays
Buyer any funds pursuant hereto and Buyer subsequently receives an adjustment,
or if Buyer or Seller is successful in contesting such payment with a third
party, Buyer shall repay Seller an amount equal to such adjustment or contested
amount, to the extent Seller has not previously received the contested amount.
The indemnity provided herein, in conjunction with Buyer's rights under
Section 10.5, and Buyer's right to seek specific performance of Seller's
obligations hereunder, are intended to be Buyer's sole remedies for breach by
Seller of any representation or warranty contained herein; provided, however, if
such indemnification is declared unenforceable under Florida law, nothing herein
shall limit Seller's right to seek additional remedies for such breaches.
6.3 Survival Claims Period. No claim for indemnification may be
asserted hereunder unless the party seeking indemnification gives the other
party or parties notice of such claim before the end of the applicable Survival
Period (as hereinafter defined); provided that where notice of such claim has
been timely given, such claim shall survive the expiration of the Survival
Period.
6.4 Amount Precedent to Any Indemnification Claim. No Seller
Indemnified Party nor Buyer Indemnified Party shall make any claim for
indemnification with respect to any matter unless the aggregate amount of all
claims being made by such Party (together with all such claims previously made
by such Party) exceeds $30,000.
Notwithstanding the foregoing, any Claims having their bases in the
following shall not be subject to the thresholds established by this section:
(i) breach of the representations and warranties contained in Sections 3.7(a),
3.15, 3.16 and 3.17, (ii) breach of the representations and warranties
concerning licenses and permits contained in Section 3.14, (iii) fraud or
intentional misrepresentation, (iv) litigation or potential litigation listed on
Schedule 3.9, (v) breach by Buyer of its obligation to pay the Purchase Price
hereunder, (vi) breach by Buyer or Seller of their respective obligations to pay
any adjustments to the Purchase Price or prorations as required pursuant to this
Agreement or (vii) any Claim made pursuant to Section 6.1(ii).
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer hereunder are subject to the satisfaction, on
or prior to the Closing Date, of the following conditions unless waived in
writing by Buyer:
7.1 Representations/Warranties. The representations and warranties of
Seller contained in this Agreement shall be true and correct, in all material
respects, when made and on and as of the Closing Date, as though such
representations and warranties had been made on and as of such Closing Date; and
the covenants and conditions of this Agreement to be complied with or performed
by Seller on or before the Closing Date pursuant to the terms hereof shall have
been duly complied with and performed, in all material respects.
7.2 Opinion of Seller's Counsel. Buyer shall have received an opinion
from Sachs, Sax & Klein, P.A., counsel to Seller, dated as of the Closing Date
substantially in the form attached hereto as Exhibit 7.2.
7.3 Pre-Closing Confirmations. Buyer or Province shall have obtained
documentation or other evidence confirming the following:
(a) confirmation and effective transfer or reissuance of the
appropriate licensure of the Hospital if and to the extent required by the State
of Florida for continued operation after Closing; and
(b) confirmation of Medicare and Medicaid certification of the
Hospital if and to the extent required for its continued operation after
Closing.
7.4 Action/Proceeding. No action, proceeding, investigation or
administrative hearing before a court or any other governmental agency or body
shall have been instituted or threatened against Seller or Buyer which seeks
injunctive relief in anticipation of the sale of the Assets and may reasonably
be expected to prohibit the sale of the Assets to Buyer or seeks damages in a
material amount by reason of the consummation of such sale.
7.5 Consents; Licenses. All notices to, and consents, authorizations,
approvals and waivers from, third parties required for Seller to consummate the
transactions contemplated hereby or required in connection with Seller's
assignment and Buyer's assumption of any Assumed Contract or Assumed Lease shall
have been made and obtained, and to the other transactions contemplated hereby.
Buyer shall have reason to believe that the Florida Division of Health shall
issue to Buyer promptly after the Closing a license to operate the Hospital and
all presently authorized supplemental and special services shall be so
authorized for Buyer on and after Closing.
7.6 Proceedings and Documents Satisfactory. Buyer shall have received
such certificates, opinions and other documents as it or its counsel may
reasonably require in order to consummate the transactions contemplated hereby,
all of which shall be in form and substance reasonably satisfactory to it and
its counsel. All proceedings in connection with the purchase of the Assets set
forth herein and all certificates and documents delivered to Buyer pursuant to
this Agreement shall be reasonably satisfactory in form and substance to Buyer
and its counsel acting reasonably and in good faith.
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7.7 Warranty Deed; Title Insurance Policy and Survey. Buyer shall have
been furnished with a special warranty deed or deeds to the Real Property in its
name conveying good and marketable fee simple title to such Real Property to
Buyer subject only to Permitted Encumbrances. Seller shall have furnished Buyer
with an owner's title insurance commitment in conformity with the provisions of
Section 5.5 (and shall as promptly as practicable after Closing furnish the
title insurance policy conforming to such binder as down dated to and revised as
of the Closing Date). Seller shall have furnished Buyer with the Survey in
conformity with the provisions of Section 5.5.
7.8 Delivery of Certain Documents. At the Closing, the Seller shall
have delivered to Buyer all documents, agreements and instruments contemplated
by Section 2.2.
7.9 Environmental Survey. Buyer shall have determined, in its sole
discretion, that any potential environmental liabilities relating to the Assets
or the Business are acceptable to Buyer. In addition, Seller shall have taken
steps, reasonably satisfactory to Buyer, to remedy the environmental problems
related to a certain underground storage tank (the "UST") located on the Real
Property, including, without limitation, removing the UST in compliance with all
Environmental Laws and to Buyer's satisfaction in its sole discretion.
Notwithstanding the foregoing, once Buyer has elected to close pursuant to this
Agreement, unless Seller is obligated to remedy a Discovered Environmental Claim
as set forth on Schedule 10.3, Buyer shall have accepted such Discovered
Environmental Claim and shall have no right or claim against Seller pursuant to
Section 6.2 or under any other provision of this Agreement; provided, however,
such limitation applies solely to the environmental consequences of Discovered
Environmental Claims known by the parties at the time of execution of this
Agreement.
7.10 Adverse Changes. There shall not have occurred after September 30,
1998 any change in or effect on the Business that is, or with reasonable
certainty might be, materially adverse to its business, prospects, operations,
properties, assets, liabilities or condition (financial or otherwise) of the
Hospital.
7.11 Non-Competition Agreement. Seller shall have duly executed and
delivered the Non-Competition Agreement.
7.12 Satisfactory Due Diligence; Delivery of Schedules. Buyer shall
have completed, and in its sole discretion be satisfied with the results of, its
due diligence review of the operations and financial condition of the Seller.
The Seller shall have delivered to Buyer the Schedules called for by this
Agreement, and such Schedules shall be satisfactory to the Buyer in its sole
discretion.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller hereunder are subject to the satisfaction, on
or prior to the Closing Date, of the following conditions unless waived in
writing by Seller:
8.1 Representations/Warranties. The representations and warranties of
Buyer contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties had
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been made on and as of such Closing Date; the covenants and conditions of this
Agreement to be complied with or performed by Buyer on or before the Closing
Date pursuant to the terms hereof shall have been duly complied with and
performed in all material respects.
8.2 Opinion of Buyer's Counsel. Seller shall have received from Waller
Lansden Dortch & Davis, A Professional Limited Liability Company, counsel to
Buyer and Province, an opinion dated as of the Closing Date substantially in the
form attached hereto as Exhibit 8.2.
8.3 Action; Proceeding. No action, proceeding, investigation or
administrative hearing before a court or any other governmental agency or body
shall have been instituted or threatened against Buyer or Seller which seeks
injunctive relief in anticipation of the sale of the Assets and may reasonably
be expected to prohibit the sale of the Assets to Buyer or seeks damages in a
material amount by reason of the consummation of such sale.
8.4 Proceedings and Documents Satisfactory. Seller shall have received
such certificates, opinions and other documents as it or its counsel may
reasonably require in order to consummate the transactions contemplated hereby,
all of which shall be in form and substance reasonably satisfactory to it and
its counsel. All proceedings in connection with the purchase of the Assets set
forth herein and all certificates and documents delivered to Seller pursuant to
this Agreement shall be reasonably satisfactory in form and substance to Seller
and its counsel acting reasonably and in good faith.
8.5 Delivery of Certain Documents. At the Closing, the Buyer shall have
delivered to Seller all documents, agreements and instruments contemplated by
Section 2.3.
8.6 Recorded Performance Covenant. At the Closing, Buyer shall grant a
covenant in favor of Seller (the "Performance Covenant") to be recorded among
the public records of Palm Beach County, Florida, which shall run with and
burden the Real Property, and which shall evidence Buyer's obligations pursuant
to Sections 9.2 through 9.8 hereunder, including but not limited to, the
construction of the Replacement Hospital.
9. PARTICULAR COVENANTS OF BUYER.
9.1 Employees.
(a) Provided that Seller shall have delivered to Buyer a list
of Seller's employees at the Hospital and their respective salaries, benefits
and job descriptions as soon as practicable but no less than ten (10) days prior
to the Closing Date, Buyer shall offer employment to all employees of Seller
employed at the Hospital except as otherwise set forth on Schedule 9.1 hereto.
Such offers shall be for positions and at compensation comparable to that
enjoyed by such employees immediately prior to closing. However, nothing herein
shall be deemed to affect or limit in any way normal management prerogatives of
Buyer with respect to employees or to create or grant to any such employees
third party beneficiary rights or claims or causes of action of any kind or
nature. Notwithstanding the foregoing, Buyer does not commit to and does not
guarantee the continued employment of any
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individual for any period following the Closing. Such employees who accept such
offers will be credited with their seniority with Seller and such seniority will
be applied to Buyer's employee benefit programs to the extent legally
permissible.
(b) With respect to each of the Seller's employees (including
the beneficiaries) terminated prior to or coincidental with the Closing of this
Agreement, Seller shall assume the obligation for providing COBRA and/or PHSA
notices and continuation coverage to the full extent required by COBRA and/or
PHSA under its group health, dental, or other medical plans. Further, Seller
agrees to indemnify and hold Buyer and its group health plans harmless in the
event (i) Buyer or its group health plans shall be liable for any continuation
coverage under COBRA and/or PHSA, and/or (ii) Buyer or its group health plans
shall be liable for any claim, benefit or liability with respect to COBRA and/or
PHSA continuation coverage relating to such employees or their beneficiaries.
9.2 Working Capital. Buyer and/or Province shall provide sufficient
working capital to meet the operating requirements of the Hospital, as set forth
more fully in the Capital Commitments Agreement.
9.3 Replacement Hospital. Subject to required regulatory approvals,
Buyer and/or Province shall construct a replacement hospital (the "Replacement
Hospital") pursuant to plans, specifications and a budget mutually agreeable to
Buyer and Seller in accordance with the terms and conditions set forth on
Schedule 9.3 hereto.
9.4 Physician Recruitment. Buyer and/or Province shall use their best
efforts to develop a physician recruitment program in conjunction with the
medical staff, as set forth more fully in the Capital Commitments Agreement.
9.5 New Clinic. Buyer and/or Province shall, subject to regulatory
approvals, use their best efforts to establish an outpatient clinic to serve the
needs of Pahokee, Florida, as set forth more fully in the Capital Commitments
Agreement.
9.6 Continuation of Services. Buyer and/or Province shall continue all
existing clinic services of the Hospital which are supported by the physicians
and patients. Buyer and/or Province shall continue Seller's existing indigent
care policy, in the same manner, on the same basis and continue to participate
as a provider under Seller's "Coordinated Care" and "Healthy Palm Beaches"
programs. This commitment will include the provision of at least one (1) nurse
for the public schools health program for the "western" communities in Palm
Beach County, as set forth more fully in the Capital Commitments Agreement.
9.7 Capital Investment. Buyer and/or Province agree to spend a
sufficient amount of capital necessary to fulfill their obligations under
Sections 9.2, 9.4, 9.5 and 9.6 hereof; provided, however, in no event shall such
expenditure be less than $5 million or greater than $6.5 million prior to the
third anniversary of Closing, as set forth more fully in the Capital Commitments
Agreement.
9.8 Repurchase Option. If Buyer or Province closes the Hospital prior
to construction of the Replacement Hospital, Seller shall have the option to
repurchase the Assets, as they exist at the time of such repurchase, for $1.00.
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9.9 Restriction on Sale. Buyer and or Province shall not enter into an
agreement with a third party to sell all or any material part of the Business
(whether by means of a sale of stock or merger of an entity owning all or a
material part of the assets comprising the Business, a sale or lease of all or a
material part of the assets comprising the Business or other similar transaction
which would result in the Business no longer being controlled by Buyer) unless
such third party has the financial capacity to fulfill Buyer's obligations
hereunder as reasonably determined by Seller and agrees in writing to perform
such obligations pursuant to the terms and conditions set forth herein.
9.10 Off-Set of Indigent Care Funds. Buyer agrees in the event Buyer
fails to make any payments of the Additional Purchase Price under the Promissory
Note (the "Missed Payment"), Seller shall, after prior notice to Buyer, have the
right to deduct the amount of such Missed Payment from any amounts due Buyer
from Seller; provided, however, this provision shall not limit Seller's right to
seek additional remedies to the extent necessary to receive the total Additional
Purchase Price.
10. PARTICULAR COVENANTS OF SELLER.
10.1 Payment Rate. Seller hereby agrees that for such time as Seller or
its successors or assigns operates a health plan or similar organization that
administers Medicaid funds, Seller shall negotiate a special Medicaid payment
rate with Buyer that reflects the actual costs of hospital patient care in rural
areas, including rural areas located within the jurisdiction of the Palm Beach
County Health Care District. Seller agrees that such rate will not be less than
80% of the amount Seller receives to provide hospital care, provided such amount
shall not be less than $1,200 per patient day.
10.2 ACHA Survey. Seller agrees to expend such sums as necessary to
satisfy the deficiencies noted in the ACHA Survey dated January 14, 1999,
including but not limited to the ventilation and fire door issues (the "ACHA
Survey").
10.3 Environmental Remediation Removal. Seller agrees to satisfy the
environmental claims, penalties or liabilities, to Buyer's satisfaction,
including those related to the existence and removal of the UST and all other
conditions set forth on Schedule 10.3 (each a "Discovered Environmental Claim")
in the manner set forth on such Schedule 10.3 and to reimburse Buyer for any
fines or penalties levied on Buyer, Province or Hospital by any governmental
agency as a result of the Discovered Environmental Claims (the "Environmental
Remediation").
10.4 Medicaid Repayment. Seller agrees to satisfy all Medicaid claims,
arising out of Seller's operation of the Business prior to the Closing Date,
including all alleged overpayments to Seller (the "Medicaid Payment Issue.")
10.5 Off-Set of Promissory Note. Seller hereby agrees in the event
Seller fails to satisfy any of its obligations pursuant to Sections 10.2, 10.3,
or 10.4 hereunder or in the event the indemnification provided by Seller under
Section 6.2 hereunder is determined unenforceable pursuant to the Laws of the
State of Florida, or Seller fails to fulfill its obligations pursuant to Section
6.2 (collectively, "Failed Indemnification"), Buyer shall, after prior notice to
Seller, have the right to
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deduct the amount of obligations, liabilities or penalties paid or incurred by
Buyer as a result of such failure as to the matters raised by the ACHA Survey,
UST Remediation, Medicaid Payment Issue or such Failed Indemnification, all as
defined herein, from the Additional Purchase Price due under the Promissory Note
(the "Off-Set Right"). Notwithstanding anything herein to the contrary, Buyer's
right to seek indemnification for any obligations or liabilities related to the
above not fully satisfied by the Off-Set Right shall in no way be limited by
such Off-Set Right. Buyer shall utilize said funds to satisfy third-party
liabilities or to reimburse itself for costs incurred by Buyer in its efforts to
satisfy any liabilities resulting from Sections 10.2, 10.3 and 10.4 or any event
for which it sought indemnification ("Indemnification Event"); provided,
however, to the extent Buyer obtains or receives a subsequent adjustment of the
amount of such payments, Buyer shall immediately pay to Seller said adjusted
amount and shall deliver to Seller written documentation that such obligations
have been satisfied.
11. TERMINATION.
11.1 Optional Termination. This Agreement may be terminated at any time
prior to the Closing as follows:
(a) by the mutual agreement of Buyer and Seller;
(b) by Buyer in accordance with the provisions of Sections 5.4,
7.7, 7.9, or 7.10;
(c) by Buyer or Seller, if any court of competent jurisdiction in
the United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and non-appealable;
(d) in the event either Seller or Buyer commits a material breach
of any of the terms hereof, by the non-breaching party; and
(e) by Buyer or Seller if the Closing has not occurred before June
30, 1999.
11.2 Notice of Abandonment. In the event of any termination pursuant to
Section 11.1, written notice shall forthwith be given to the other party hereto
except with respect to a termination pursuant to Section 11.1(a).
11.3 Effect of Termination. Except for the obligations contained in
Sections 1.4, 12.2, 12.9 and 12.10 hereof, upon the due termination of this
Agreement pursuant to Section 11.1(a), (b), (c) or (e), this Agreement shall
forthwith become null and void, and neither party hereto nor any of its
officers, directors, trustees, members or shareholders shall have liability
hereunder; provided, however, that in no event shall a party hereto be released
from liability for damages under this Agreement or otherwise in the event such
party's material breach resulted in the failure to close by any such termination
date and such breaching party was not otherwise excused from its obligation so
to close under this Agreement; provided, further, that if Buyer terminates this
Agreement, except pursuant to 11.1(b) or (d) hereof, it shall forfeit the
$100,000 deposit paid to Seller
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pursuant to Section 1.4(a) hereto. Notwithstanding anything herein to the
contrary, if Buyer terminates this Agreement pursuant to Section 11.1(b) or (d)
hereof, Seller shall immediately refund Buyer's $100,000 deposit.
12. GENERAL.
12.1 Exhibits, Schedules and Other Instruments. Each Exhibit,
Certificate and Schedule, if any, to this Agreement shall be considered a part
hereof as if set forth herein in full. Each Schedule hereto shall be updated by
Seller as of Closing.
12.2 Pre-Closing Access. In addition to Seller's covenants in Section
5.1, Seller shall give Buyer, its accountants, its counsel, and other
representatives reasonable access to the premises, books and records, and
offices of the Hospital, and make such information in respect thereof as Buyer
may reasonably request available to Buyer, as may be necessary for Buyer to
examine the Assets being acquired. No such inspection by Buyer shall interfere
with Seller's conduct of business in the ordinary course. Buyer shall, at
Buyer's expense, be responsible for any damage to the Hospital or the Assets
caused by Buyer during Buyer's investigation of the Assets.
12.3 Terminating Cost Report. Seller agrees to file a terminating cost
report in connection with third party receivables with applicable agencies
within forty five (45) days following the Closing.
12.4 Additional Assurances. The provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties except as
may be herein specifically provided to the contrary; provided, however, at the
request of any party, an other party shall execute such additional instruments
and take such additional acts as are reasonably necessary to effectuate this
Agreement.
12.5 Consents, Approvals and Discretion. Whenever this Agreement
requires any consent or approval to be given by any party or any party must or
may exercise discretion, the parties agree that such consent or approval shall
not be unreasonably withheld or delayed and such discretion shall be reasonably
exercised, subject to the applicable public records and Sunshine Laws.
12.6 Choice of Law. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA,
THE VENUE FOR ALL SUCH DISPUTES SHALL BE PALM BEACH COUNTY, FLORIDA.
12.7 Benefit/Assignment. Subject to the provisions herein to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that no party may assign this Agreement without the prior written consent of the
other party.
12.8 Finders, Brokerage. Seller on one hand and Province and Buyer on
the other hand agree to indemnify the other from and against all loss, cost,
damage or expense arising out of claims for fees or commissions of brokers
employed or alleged to have been employed by such indemnifying party.
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<PAGE> 35
12.9 Cost of Transaction. Whether or not the transactions contemplated
hereby shall be consummated, the parties agree as follows: (i) Seller will pay
the fees, expenses, and disbursements of Seller and its consultants, agents,
advisers, attorneys and accountants incurred in connection with the subject
matter hereof and any amendments hereto, the costs of the title insurance upon
the real property to be acquired and the cost of an "as built" survey as
contemplated in Section 5.5 hereof and (ii) Buyer shall pay the fees, expenses
and disbursements of Buyer and its consultants, agents, advisers, attorneys and
accountants incurred in connection with the subject matter hereof and any
amendments hereto, and Buyer shall pay all expenses of inspecting the Hospital
and Assets, including the cost of a Phase I environmental survey. If the
Transaction closes Seller and Buyer shall each pay fifty percent (50%) of the
cost of all required documentary stamps and transfer taxes relating to the deed
with respect to the Real Property.
12.10 Confidentiality. Subject to the Sunshine Laws and Public Records
Laws of the State of Florida, it is understood by the parties that any
information provided by another party (the "Providing Party") concerning such
Providing Party, obtained directly or indirectly, from the Providing Party in
connection with transactions contemplated by this Agreement ("Confidential
Information"), and the documents and instruments delivered to, a receiving party
(the "Receiving Party") or its shareholder, affiliates, officers, employees or
agents of Receiving Party (collectively, "Agents") are of a confidential and
proprietary nature. To the extent permitted by law, the Receiving Party agrees
that it will and will use its reasonable best efforts to cause the Agents to
maintain the confidentiality of all such information, documents or instruments
acquired by or delivered to the Receiving Party and the Agents in connection
with the negotiation of this Agreement or in compliance with the terms,
conditions and covenants hereof and only to disclose such information, documents
and instruments to such duly authorized persons as are necessary to effect the
transactions contemplated hereby. The parties further agree that if the
transactions contemplated hereby are not consummated, the Receiving Party and
it's Agents will return all documents and instruments acquired from the
Providing Party or its affiliates and all copies thereof in their possession to
the Providing Party, and the Receiving Party will not use, and will not
knowingly permit others to use, any such Confidential Information in any way to
compete with the Providing Party or Providing Party's respective affiliates,
successors or assigns or in a manner which would be detrimental to the business,
financial affairs or reputations of the Providing Party or Providing Party's
respective officers and affiliates, successors and assigns. Each party for
itself and its Agents recognizes that any breach of this Section would result in
irreparable harm to the Providing Party and the Providing Party's respective
officers and affiliates and that therefore either the Providing Party, or any of
the Providing Party's respective officers and affiliates shall be entitled to an
injunction to prohibit any such breach by the Receiving Party and the Receiving
Party's Agents in addition to all of their other legal and equitable remedies.
Nothing in this Section shall prohibit the use of such Confidential Information,
documents or information for such governmental filings as are required by law or
governmental regulations or the disclosure of such confidential information if
such disclosure is compelled by judicial or administrative process or, in the
opinion of the Providing Party's counsel, other requirements of law. For
purposes hereof, Confidential Information shall not include information (i)
ascertainable or obtained from public or published information, (ii) received
from a third party not known by the Receiving Party to be under an obligation to
the Providing Party to keep such information confidential, (iii) which is or
becomes
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known to the public (other than through a breach of this Agreement), (iv) which
was in the Receiving Party's possession prior to the disclosure thereof to
Receiving Party in connection herewith, or (v) which the Providing Party
utilized in any materials used in connection with the Providing Party's
solicitation of buyers for the Assets.
12.11 Waiver. The waiver by any party of a breach or violation of any
term or provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach of the same provision by any party or of the
breach of any other term or provision of this Agreement. The delay or a failure
of a party to transmit any written notice hereunder shall not constitute a
waiver by such party of any default hereunder or of any other or further default
under this Agreement except as may expressly be provided for by the terms of
this Agreement.
12.12 Tax Allocation. The allocation of the Purchase Price for tax
purposes shall be made by the parties hereto in accordance with Schedule 12.12
and shall be set forth in a statement prepared in accordance with Section 1060
of the Code, which statement shall be prepared in a manner generally consistent
with the form of Internal Revenue Service Form 8594 and Schedule 12.12. Buyer
and Seller shall cooperate in the preparation of such statement of allocation
and each party hereto shall file a copy of such statement as required by
applicable law.
12.13 Interpretation. Each of the parties has agreed to the use of the
particular language of the provisions of this Agreement including all attached
Exhibits and Schedules and any questions of doubtful interpretation shall not be
resolved by any rule or interpretation against the draftsman but rather in
accordance with the fair meaning thereof, having due regard to the benefits and
rights intended to be conferred upon the parties hereto and the limitations and
restrictions upon such rights and benefits intended to be provided.
12.14 Notice. Any notice, demand or communication required, permitted,
or desired to be given hereunder shall be in writing and shall be deemed
effectively given when personally delivered or mailed by prepaid certified mail,
return receipt requested, by overnight courier charges to be paid by sender or
via facsimile with confirmation, addressed as follows:
Seller:
Palm Beach County Health Care District
324 Datura Street, Suite 401
West Palm Beach, Florida 33401
Attention: Cecil Bennett
With a copy to:
Sachs, Sax & Klein, P.A.
Northern Trust Plaza
301 Yamato Road, Suite 4150
Boca Raton, Florida 33481-0081
Attention: Ronald Klein, Esq.
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<PAGE> 37
Buyer and/or
Province:
Province Healthcare Company
109 Westpark Drive, Suite 180
Brentwood, Tennessee 37027
Attention: General Counsel
With a copy to:
Waller Lansden Dortch & Davis,
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Nashville, Tennessee 37219-1760
Attention: George W. Bishop III, Esq.
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party.
12.15 Severability. In the event any provision of this Agreement is
held to be invalid, illegal or unenforceable for any reason and in any respect,
such invalidity, illegality, or unenforceability shall in no event affect,
prejudice or disturb the validity of the remainder of this Agreement, which
shall be in full force and effect, enforceable in accordance with its terms,
including, without limitation, those terms which contemplate or require the
further agreements of the parties. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and still be legal, valid or
enforceable.
12.16 Gender and Number. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine
and neuter, and the number of all words herein shall include the singular and
plural.
12.17 Divisions and Headings. The divisions of this Agreement into
Sections and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall have no legal effect in
construing the provisions of this Agreement.
12.18 Consented Assignment. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
claim, right, contract, license, lease, commitment, sales order or purchase
order if an attempted assignment thereof without the consent of another party
thereto would constitute a breach thereof or in any material way affect the
rights of Seller thereunder, unless such consent is obtained. If such consent is
not obtained, or if an attempted assignment would be ineffective or would
materially affect Seller's rights thereunder so that Buyer would not in fact
receive all such rights, Seller shall cooperate in any reasonable arrangement
designed to provide for Buyer the benefit under any such claims, rights,
contracts, licenses, leases, commitments, sales orders or purchase orders,
including, without limitation, enforcement, at no
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<PAGE> 38
out-of-pocket cost to Seller, of any and all rights of Seller against the other
party or parties thereto arising out of the breach or cancellation by such other
party or otherwise.
12.19 Survival. All statements made by the parties hereto herein or in
the Schedules or in any other financial statement, document, instrument,
certificate, Exhibit or list delivered to each other hereunder by or on behalf
of parties hereto shall be deemed representations and warranties of the parties
hereto regardless of any investigation made by or on behalf of another party.
Furthermore, the representations, warranties, covenants and agreements made by
the parties herein shall survive the Closing but shall expire on the second
anniversary of the Closing Date, except (i) with respect to the representations,
warranties and covenants set forth in Sections 3.7, 3.15, 3.16, 3.17 and 3.18,
and the indemnities with respect thereto, which shall survive for the applicable
statute of limitations periods (collectively, the "Survival Period").
Notwithstanding the foregoing, this Section 12.19 shall not provide third
parties any benefit or longer period of time in which to assert a claim beyond
that which is provided by the relevant statute of limitations.
12.20 Board of Trustees. Following Closing, the Hospital and
Replacement Hospital will have a Board of Trustees comprised of no less than
seven (7) members who will be selected by Buyer, provided that the Board shall
be comprised in part of no less than two physicians practicing in the community
and no less than four members of the community and the chief executive officer
of the Hospital. The Board of Trustees will be responsible for reviewing quality
and utilization management programs, recommending capital and operating budgets,
seeking community input for new services and technology, developing and
recommending community health status projects, monitoring JCAHO activities and
all the specific aspects of a hospital board's role as defined by the JCAHO.
12.21 Misdirected Payments, etc. Seller and Buyer covenant and agree to
remit, with reasonable promptness, to the other any payments received, which
payments are on or in respect of accounts or notes receivable owned by (or are
otherwise payable to) the other.
12.22 Entire Agreement/Amendment. This Agreement supersedes all prior
contracts, understandings and agreements, whether written or oral, and
constitutes the entire agreement of the parties respecting the within subject
matter and no party shall be entitled to benefits other than those specified
herein. As between or among the parties, no oral statements or prior written
material not specifically included herein shall be of any force and effect; the
parties specifically acknowledge that in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements
contained in this Agreement and no others. No terms, conditions, warranties, or
representations, other than those contained herein and no amendments or
modifications hereto, shall be binding unless made in writing and signed by the
party to be charged.
12.23 Counterparts. This Agreement may be executed in multiple
originals or counterparts, each and all of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.
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12.24 Risk of Loss. Notwithstanding any other provision hereof to the
contrary, the risk of loss in respect of casualty to the Assets shall be borne
by Seller through the time of Closing and by the Buyer thereafter.
12.25 Press Releases. Except as otherwise required by law, any release
to the public of information concerning this Agreement or the transactions
contemplated hereby will be made only in the form and manner approved by the
parties hereto. Each party shall furnish the other with drafts of all such
releases prior to their publication or dissemination.
12.26 Knowledge. "Knowledge", "to the knowledge", "to the best
knowledge" or any similar phrase shall be deemed to refer to the actual
knowledge of the Chief Executive Officer of Seller, Cecil Bennett, the Chief
Executive Officer of the Hospital, the Chief Financial Officer of the Hospital
and the specific "department head" of the Hospital reasonably expected to have
knowledge regarding such representation and warranty, as listed on each
applicable schedule with respect to the respective representation and warranty,
and to include the assurance that such knowledge is based upon a reasonable
inquiry of the department heads listed on the Schedule to be performed by Seller
unless otherwise expressly provided.
12.27 Schedules and Exhibits. The parties recognize that the Schedules
and Exhibits referred to herein will not be attached at execution. Seller shall
deliver the proposed Schedules to Buyer for review and approval no later than
ten (10) business days prior to Closing. Buyer shall advise Seller of any
objections it may have to the Schedules within four (4) business days of receipt
thereof. If Seller has not delivered final Schedules which are approved by Buyer
at least two (2) business days prior to Closing then Buyer shall have the right
to terminate this Agreement and all obligations of the parties hereunder;
provided however, if Buyer terminates this Agreement pursuant to this Section
12.27, it shall forfeit the Deposit.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple originals by their duly authorized officers and their
corporate seals duly affixed hereto, all as of the day and year first above
written.
BUYER:
PHC-BELLE GLADE, INC.
/s/ Howard T. Wall
--------------------------------------
By: Howard T. Wall
-----------------------------------
Title: Vice President
--------------------------------
SELLER:
PALM BEACH COUNTY HEALTH CARE
DISTRICT
/s/ W.C. Bennett
--------------------------------------
By: W.C. Bennett
----------------------------------
Title: CEO
--------------------------------
Province is executing this Purchase Agreement solely for the purpose of agreeing
to be bound by the provisions of Articles 4 and 9 and Sections 1.4 and 6.1
hereof.
PROVINCE HEALTHCARE COMPANY
By: /s/ Howard T. Wall
-----------------------------------
Title: Senior VP and Secretary
--------------------------------
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SCHEDULE 9.3
REPLACEMENT HOSPITAL
Replacement Hospital. Subject to required regulatory approvals, Buyer
shall have commenced the construction of the Replacement Hospital pursuant to
plans, specifications and a budget mutually agreeable to Buyer and Seller, by
the earlier of (i) 120 days after the end of the fifth fiscal year, if the
Hospital EBITDA (as defined below) equaled or exceeded $7,200,000 (the "Required
EBITDA") for any of the first five fiscal years after Closing, (ii) 120 days
after the end of the second consecutive fiscal year in which the Hospital EBITDA
equaled or exceeded $7,200,000 during the first five fiscal years, and (iii) 120
days after any fiscal year after the fifth fiscal year in which the Hospital
EBITDA equaled or exceeded $7,200,000. Buyer shall purchase the Performance Bond
when Buyer becomes obligated to commence construction on the Replacement
Hospital.
Buyer shall spend $20,500,000 on capital expenditures (the "Required
Capital Expenditures") to improve the Hospital and associated facilities prior
to the twentieth fiscal year after Closing. Buyer shall spend an average of $1.0
million a year for the first five fiscal years after Closing and Buyer shall
spend an additional $10,000,000 within the first ten fiscal years following
Closing (the "Ten Year Period"). The remaining $5,500,000 of Required Capital
Expenditures shall be spent by Buyer any time prior to the twentieth fiscal year
after Closing. Buyer's obligation to spend any amounts not previously spent of
the Required Capital Expenditures shall terminate at such time as Buyer
commences construction of the Replacement Hospital.
In addition, if the Hospital fails to achieve the Required EBITDA in
the Ten Year Period but: (i) the Hospital's average EBITDA equals or exceeds $6
million in any four consecutive years during the Ten Year Period, or (ii) the
Hospital EBITDA equals or exceeds $6 million for any two consecutive years
during the fourth through tenth fiscal years after Closing, the Buyer shall at
its sole option, either (a) commence construction on the Replacement Hospital at
the end of the fiscal year in which the Hospital satisfies (i) or (ii) above; or
(b) shall be obligated to spend an additional $10,000,000 on capital
expenditures to improve the Hospital and associated facilities (the "Additional
Capital Expenditures") to the Hospital in the eleventh through fifteenth fiscal
years after Closing; provided however, Buyer's obligation to spend any amounts
not previously spent of the Additional Capital Expenditures shall terminate at
such time as Buyer commences construction of the Replacement Hospital.
For purposes herein, the term "Hospital EBITDA" means income (loss)
from Hospital operations, including all operations of Buyer in the Hospital
Service Area (as defined below), including without limitation, all ambulatory
surgery centers, physician joint ventures, clinics and offices operated by Buyer
before provisions for interest expense, income taxes, depreciation and
amortization. The parties agree that corporate overhead of Province and any
management fee payable to Province or Buyer shall not be considered as a
hospital expense in determining the income (loss) in Hospital operations and
shall not be used in any way to reduce Hospital EBITDA. An example of the method
of calculating EBITDA is attached hereto as
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Exhibit A. This example was prepared using the actual financial data of Glades
General Hospital for the month ended February 28, 1999.
The term "Replacement Hospital" means an acute care hospital built in
Western Palm Beach County with at least 73 licensed beds, including the property
on which it is situated, a medical office building and those subordinate and
related facilities, furnishings, fixtures and equipment having a cost currently
estimated to be at least Twenty-Five Million Dollars ($25,000,000) that Buyer
deems adequate to meet the health care needs of the Hospital Service Area. Buyer
shall acquire the land it deems necessary and suitable for the project, arrange
for the design of the facility by competent professional architects, seek the
necessary approvals and engage a contractor to accomplish the construction and
the purchase of necessary equipment. After the Closing, Seller and Buyer shall
execute whatever documents are reasonably necessary to enable the project to
proceed including, without limitation, contracts and agreements associated with
the design, construction and equipping of the Replacement Hospital. Seller shall
cooperate as requested and shall actively support Buyer's efforts to secure the
necessary approvals for the Replacement Hospital, including, without limitation,
approval of an application for a certificate of need from the appropriate state
licensing authority and reasonably requested changes in zoning, variances in
zoning and any other land use restrictions. Once construction is commenced,
Buyer shall use commercially reasonable efforts to pursue completion of
construction of the Replacement Hospital in a good and workmanlike manner and in
accordance with the Plans and Specifications for the Replacement Hospital
approved by Seller, and shall obtain the final certificate of occupancy, as soon
as practicable but in no event later than 36 months after commencement of
construction.
At the end of the fifth fiscal year, Seller may engage an independent
auditor to verify the Hospital EBITDA for such fiscal year. Buyer shall be
responsible for the cost of such auditor not to exceed $30,000. In addition
Seller may engage an independent auditor to verify the Hospital EBITDA for any
other fiscal year, at Seller's expense. For purposes solely of this Schedule
9.3, if the Buyer and Seller are unable to agree on the Hospital EBITDA and
cannot after good faith negotiations resolve such dispute concerning the
Hospital EBITDA, the parties shall submit the issue to a panel of three auditors
(the "Auditors"). Each party shall select a certified public accountant as an
Auditor and the third Auditor shall be selected by the other two Auditors. The
Auditors shall determine the Hospital EBITDA in accordance with generally
accepted accounting principles. The Auditors" determination of Hospital EBITDA
shall be binding on the parties and not appealable. The costs of such dispute
resolution shall be shared equally by the parties.
"Hospital Service Area" shall mean the service area currently served by
the Hospital and any additional geographic areas served by Hospital, including
but not necessarily limited to that certain region located in Western Palm Beach
County known as the Glades, at any time during the term of Buyer's obligations
under this Schedule 9.3.
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EXHIBIT A
EXAMPLE OF EBITDA CALCULATION(1)
REVENUES
Inpatient 3,046,532
Outpatient 2,047,696
Belle Glade Medical Group 407,087
---------
GROSS PATIENT REVENUE 5,501,315
DEDUCTIONS FROM REVENUE
Provision for Bad Debts 546,390
Charity 69,364
Contractual Adjustments 2,979,457
---------
TOTAL DEDUCTIONS FROM REVENUE 3,595,211
Net Patient Service Revenue 1,906,104
Health Care District Operating Revenue 0
Other Operating Revenue 98,939
---------
TOTAL OPERATING REVENUE 2,005,043
OPERATING EXPENSES
Salaries and Wages 749,739
Employee Benefits 175,253
Physician Fees 130,679
Purchased Services - Agency Personnel 10,235
Purchased Services - Other 207,780
Supply Costs 287,300
Utilities/Telephone 27,960
Maintenance and Repairs 28,478
Leases and Rentals 27,495
Insurance 21,584
Assessment and Licenses 44,518
Professional Development 11,766
Other Expenses 15,713
---------
TOTAL OPERATING COSTS 1,738,500
=========
FEBRUARY EBITDA(2) 266,543
- ----------
(1) This example is for demonstrating the method of calculating EBITDA. This
example of EBITDA calculation was prepared using the actual financial data of
Glades General Hospital for the month ended 2/28/99. Please note that this is
only an example. Additional items may be included as operating expenses from
time to time in computing the Hospital EBITDA, for example, any property taxes
paid would be an operating expense. The corporate overhead of Province and any
management fee payable to Province or Buyer, however, shall never be considered
as a hospital expense in determining the income (loss) in Hospital operations
and shall not be used in any way to reduce Hospital EBITDA.
(2) EBITDA equals earnings before interest, income taxes, depreciation and
amortization.
<PAGE> 1
Exhibit 23.1
KPMG LLP
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-56987), pertaining to the Employee Stock Purchase
Plan and the 1997 Long-Term Equity Incentive Plan of Province Healthcare
Company, of our report dated November 20, 1998, except as to Note 7, which is as
of December 17, 1998, and Notes 15 and 16, which are as of June 22, 1999, with
respect to the financial statements of Glades General Hospital (a division of
the Palm Beach County Health Care District), included in this Current Report
(Form 8-K/A Amendment No. 1) of Province Healthcare Company dated June 25, 1999.
/s/ KPMG LLP
Miami, Florida
June 25, 1999
