UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 30, 1998
Commission file number 1-12055
PARACELSUS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3565943
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
515 W. Greens Road, Suite 800, Houston, Texas
(Address of principal executive offices)
77067 (281) 774-5100
(Zip Code) (Registrant's telephone number,
including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 30, 1998, Paracelsus Healthcare Corporation (the "Company") completed
the sale of substantially all of the assets of Chico Community Hospital, Inc.,
which included a 123 licensed bed acute care hospital and a 60 licensed bed
rehabilitation hospital, both located in Chico, California, to N.T. Enloe
Memorial Hospital and Enloe Health System, both California nonprofit public
benefit corporations, for $25.0 million in cash plus working capital and the
termination of a facility operating lease and an associated letter of credit
obligation. The working capital component of the transaction is subject to a
post-closing settlement. The purchase price was arrived at through an arms
length negotiation. Net proceeds of the transaction were applied to reduce
amounts outstanding under the Company's Amended and Restated Reducing Revolving
Credit Facility (the "Credit Facility"), the agent bank of which is Paribas,
and to reduce off - balance sheet commercial paper outstanding under the
Company's receivable financing program. The Company expects to report a gain of
approximately $4.2 million (net of tax) on the transaction.
On July 1, 1998, the Company (through its subsidiary, Paracelsus Healthcare
Corporation of North Dakota, Inc.) completed the purchase of Dakota Medical
Foundation's 50% partnership interest in a general partnership operating as
Dakota Heartland Health System ("DHHS" or the "Partnership") for $64.5 million
dollars, thereby giving the Company 100% ownership of DHHS. The purchase price
was pursuant to a right of the Dakota Medical Foundation to require the Company
to purchase its 50% interest. Such right was negotiated on an arms length
basis and was part of the original partnership agreement entered into as of
December 31, 1994, which also established the formula for the purchase price.
The Company funded the acquisition from borrowings under its Credit Facility.
Prior to the purchase, the Company owned 50% of DHHS and accounted for its
investment under the equity method. DHHS owns and operates a 218 licensed bed
tertiary care hospital in Fargo, North Dakota.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The historical financial statements for DHHS for the years ended December 31,
1996 and 1997, were previously reported in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(a) Financial Statements (attached following the signature page):
For the three months ended March 31, 1998 (Unaudited)
1. Consolidated Balance Sheet dated March 31, 1998
2. Consolidated Statements of Income for the three months ended
March 31, 1998 and 1997
3. Consolidated Statement of Partner's Equity for the three months
ended March 31, 1998
4. Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997
<PAGE> 3
For the years ended December 31, 1995 and 1994
1. Report of PricewaterhouseCoopers, L.L.P., Independent
Accountants, Dated February 16, 1996.
2. Balance Sheet dated December 31, 1995 and 1994
3. Statement of Income for the year ended December 31, 1995
4. Statement of Partners' Equity for the years ended December 31,
1995 and 1994
5. Statement of Cash Flows for the year ended December 31, 1995.
6. Notes to Financial Statements.
(b) Unaudited Pro Forma financial information:
Unaudited Pro Forma Condensed Combining Statement of Operations
For the Three Months Ended March 31, 1998
Unaudited Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1997
Unaudited Pro Forma Condensed Combining Balance Sheet -
March 31, 1998
Notes to Unaudited Pro Forma Condensed Combining Financial Statements
(c) Exhibits
10.67 The Second Amended and First Restated Asset Purchase Agreement for
Chico Community Hospital, dated December 15, 1997, and as amended dated June
12, 1998, among Paracelsus Healthcare Corporation, Chico Community Hospital,
Inc., N.T. Enloe Memorial Hospital, and Enloe Health System.
10.68 Asset Purchase Agreement For Chico Community Rehabilitation
Hospital, dated December 15, 1997, and as amended dated June 10, 1998, among
Paracelsus Healthcare Corporation, Chico Community Hospital, Inc., N.T. Enloe
Memorial Hospital, and Enloe Health System.
10.69 Agreement For Purchase and Sale of Partnership Interest, dated June
1, 1998, by and between Dakota Medical Foundation and Paracelsus Healthcare
Corporation of North Dakota, Inc.
23.1 Consent of PricewaterhouseCoopers L.L.P.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Paracelsus Healthcare Corporation
(Registrant)
Dated: July 9, 1998 By: /S/ JAMES G. VANDEVENDER
----------------------------------
James G. VanDevender
Senior Executive Vice President,
Chief Financial Officer
& Director
<PAGE> 5
PARACELSUS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following table presents the Unaudited Pro Forma Condensed Combining
Statements of Operations for the three months ended March 31, 1998, and the
year ended December 31, 1997, to illustrate the effect of the sale of Chico
Community Hospital and Chico Community Rehabilitation Hospital on June 30,
1998, and the Company's acquisition of Dakota Medical Foundation's (the
"Foundation") 50% partnership interest in a general partnership operating as
Dakota Heartland Health System ("DHHS")on July 1, 1998. The Unaudited Pro
Forma Condensed Combining Statements of Operations assume the above
transactions occurred at the beginning of each period. The Pro Forma Condensed
Combining Balance Sheet assumes the above transactions occurred on March 31,
1998.
On June 30, 1998, Paracelsus Healthcare Corporation (the "Company")
completed the sale of substantially all of the assets of Chico Community
Hospital, Inc., which included a 123 licensed bed acute care hospital and
a 60 licensed bed rehabilitation hospital, both located in Chico,
California, (collectively "Chico") to N.T. Enloe Memorial Hospital and
Enloe Health System, both California nonprofit public benefit
corporations, for $25.0 million in cash plus working capital and the
termination of a facility operating lease and an associated letter of credit
obligation. The working capital component of the transaction is
subject to a post-closing settlement. The purchase price was arrived at
through an arms length negotiation. Net proceeds of the transaction
were applied to reduce amounts outstanding under the Company's Amended and
Restated Reducing Revolving Credit Facility (the "Credit Facility"), the
agent bank of which is Paribas, and to reduce off-balance sheet commercial
paper outstanding under the Company's receivable financing program.
On July 1, 1998, the Company (through its subsidiary, Paracelsus Healthcare
Corporation of North Dakota, Inc.) completed the purchase of the Foundation's
50% partnership interest in a general partnership operating as Dakota Heartland
Health System ("DHHS" or the "Partnership") for $64.5 million dollars, thereby
giving the Company 100% ownership of DHHS. The purchase price was pursuant to a
right of the Dakota Medical Foundation to require the Company to purchase its
50% interest. Such right was negotiated on an arms length basis and was part
of the original partnership agreement entered into as of December 31, 1994,
which also established the formula for the purchase price. The Company funded
the acquisition from borrowings under its Credit Facility. Prior to the
purchase, the Company owned 50% of DHHS and accounted for its investment under
the equity method. DHHS owns and operates a 218 licensed bed tertiary care
hospital in Fargo, North Dakota.
These Unaudited Pro Forma Condensed Financial Statements do not purport to
present the financial position or results of operations of the Company had the
above transactions occurred on the dates specified, nor are they necessarily
indicative of results of operations that may be expected in the future. The
Unaudited Pro Forma Condensed Combining Financial Statements are qualified in
their entirety by reference to, and should be read in conjunction with, the
Company's audited consolidated financial statements for the year ended December
31, 1997, included in the Company's Annual Report on Form 10-K, the Company's
unaudited condensed consolidated financial statements for the quarter ended
March 31, 1998, included in the Company's Quarterly Report on Form 10-Q, the
audited historical financial statements of DHHS for the years ended December
31, 1995 and 1994, and the unaudited historical financial statements for DHHS
<PAGE> 6
for the quarter ended March 31, 1998, included elsewhere herein. The
historical financial statements for DHHS for the years ended December 31, 1996
and 1997, were previously reported in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
<PAGE> 7
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Paracelsus Chico Pro Forma DHHS
Healthcare Pro Forma Chico Pro Forma Pro Forma
Corporation Adjustments Rf Disposition DHHS Adjustments Rf Paracelsus
----------- ----------- -- ----------- ------- ----------- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) (1)
Net revenue $ 160,410 $(9,389) (2) $151,021 $ 26,473 $177,494
Costs and expenses:
Salaries and
benefits 65,430 (4,010) (2) 61,420 9,686 71,106
Other operating
expense 65,478 (3,420) (2) 62,058 9,265 71,323
Provision for
bad debts 9,692 (287) (2) 9,405 825 10,230
Interest 12,379 (621) (3) 11,758 $ 1,371 (3) 13,129
Depreciation &
amortization 8,188 (334) (2) 7,854 1,089 136 (5) 9,079
Equity in earnings
of DHHS (3,085) (3,085) 3,085 (6)
--------- ------- -------- --------- ------- --------
Total cost &
expenses 158,082 (8,672) 149,410 20,865 4,592 174,867
--------- ------- -------- --------- ------- --------
Income before minority
interest and
income taxes 2,328 (717) 1,611 5,608 (4,592) 2,627
Minority interest (61) (61) (61)
--------- ------- -------- --------- ------- --------
Income before
income taxes 2,267 (717) 1,550 5,608 (4,592) 2,566
Provision for
income taxes 642 (143) (4) 499 203 (4) 702
--------- ------- -------- --------- ------- --------
Net income $ 1,625 $ (574) $ 1,051 $ 5,608 $(4,795) $ 1,864
========= ======= ======== ========= ======= ========
Income per share
- - basic and
assuming
dilution $ 0.03 $ 0.02 $ 0.03
========= ======== ========
Weighted average
number of common
and common
equivalent
shares 57,539 57,539 57,539
========= ======== ========
</TABLE>
See notes to unaudited pro forma condensed combining financial statements.
<PAGE> 8
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Paracelsus Chico Pro Forma DHHS
Healthcare Pro Forma Chico Pro Forma Pro Forma
Corporation Adjustments Rf Disposition DHHS Adjustments Rf Paracelsus
----------- ----------- -- ----------- ------- ----------- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) (1)
Net revenue $ 659,219 $(33,751) (2) $625,468 $ 99,927 $725,395
Costs and expenses:
Salaries and
benefits 271,300 (16,086) (2) 255,214 36,509 291,723
Other operating
expenses 269,653 (14,030) (2) 255,623 37,608 293,231
Provision for
bad debts 46,606 (1,390) (2) 45,216 3,407 48,623
Interest 47,372 (2,305) (3) 45,067 $ 5,482 (3) 50,549
Depreciation and
amortization 30,179 (1,270) (2) 28,909 4,595 304 (5) 33,808
Equity in earnings
of DHHS (9,794) (9,794) 9,794 (6)
Impairment charges 7,782 7,782 7,782
Unusual items (6,531) (6,531) (6,531)
--------- ------- -------- --------- ------- --------
Total cost
& expenses 656,567 (35,081) 621,486 82,119 15,580 719,185
--------- ------- -------- --------- ------- --------
Income before
minority interest
and income taxes 2,652 1,330 3,982 17,808 (15,580) 6,210
Minority interest (1,996) (1,996) (1,996)
--------- ------- -------- --------- ------- --------
Income before
income taxes 656 1,330 1,986 17,808 (15,580) 4,214
Provision for
income taxes 1,812 546 (4) 2,358 913 (4) 3,271
--------- ------- -------- --------- ------- --------
Net loss $ (1,156) $ 784 $ (372) $ 17,808 $(16,493) $ 943
========= ======= ======== ========= ======= ========
Loss per share
- basic and
assuming
dilution $ (.02) $ (.01) $ .02
========= ======== ========
Weighted average
number of common
and common
equivalent
shares 54,946 54,946 1,392 (7) 56,338
========= ======== ======= ========
</TABLE>
See notes to unaudited pro forma condensed combining financial statements.
<PAGE> 9
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
PRO FORMA CONDENSED COMBINING BALANCE SHEET
MARCH 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Paracelsus Chico Pro Forma DHHS
Healthcare Pro Forma Chico Pro Forma Pro Forma
Corporation Adjustments Rf Disposition DHHS Adjustments Rf Paracelsus
----------- ----------- -- ----------- ------- ----------- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS: (1) (1)
Current assets:
Cash and cash
equivalents $ 14,117 $ (1,820) (8) $ 12,297 $ 4,359 $ 16,656
Restricted cash 6,636 6,636 6,636
Accounts
receivable, net 70,702 (3,197) (2) 67,505 17,744 85,249
Deferred income
taxes 25,906 (879) (9) 25,027 25,027
Other 43,892 (1,220) (2) 42,672 5,135 47,807
--------- ------- -------- --------- --------
Total current assets 161,253 (7,116) 154,137 27,238 181,375
--------- ------- -------- --------- --------
Property and (2)
equipment, net 306,402 (15,964) (9) 290,438 60,764 $ 7,443 (10) 358,645
Goodwill 113,463 113,463 29,770 (10) 143,233
Other assets 138,345 (2,005) (9) 136,340 3,350 (50,501)(10) 89,189
--------- ------- -------- --------- ------- --------
Total assets $719,463 $(25,085) $ 694,378 $ 91,352 $(13,288) $ 772,442
========= ======= ======== ========= ======= ========
</TABLE>
See notes to unaudited pro forma condensed combining financial statements
<PAGE> 10
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
PRO FORMA CONDENSED COMBINING BALANCE SHEET
MARCH 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Paracelsus Chico Pro Forma DHHS
Healthcare Pro Forma Chico Pro Forma Pro Forma
Corporation Adjustments Rf Disposition DHHS Adjustments Rf Paracelsus
----------- ----------- -- ----------- ------- ----------- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 45,034 $ (3,106) (2) $ 41,928 $ 5,970 $ 47,898
Accrued liabilities
and other 70,060 (1,547) (2) 68,513 7,116 75,629
Current maturities
of long-term debt 6,495 (6) (2) 6,489 6,489
--------- ------- -------- --------- --------
Total current
liabilities 121,589 (4,659) 116,930 13,086 130,016
--------- ------- -------- --------- --------
Long term debt 490,856 (24,576) (8) 466,280 $64,978 (3) 531,258
Other long-term
liabilities 64,565 64,565 64,565
Partners' equity 78,266 (78,266) (11)
Stockholders' equity
Common stock 224,475 224,475 224,475
Additional
paid-in capital 390 390 390
Unrealized gains on
marketable
securities 12 12 12
Accumulated
deficit (182,424) 4,150 (9) (178,274) (178,274)
--------- ------- -------- --------
Total stockholders'
equity 42,453 4,150 46,603 46,603
--------- ------- -------- --------
Total liabilities
& shareholders'
equity $ 719,463 $(25,085) $ 694,378 $ 91,352 $(13,288) $ 772,442
========= ======== ========= ======== ======= ========
</TABLE>
See notes to unaudited pro forma condensed combining financial statements
<PAGE> 11
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
<TABLE>
<CAPTION>
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -----------------------------------------------------------------------------
<S> <C>
(1) The statements of operations and balance sheet for Paracelsus
Healthcare Corporation are summarized from its quarterly and annual reports
on Form 10-Q and Form 10-K, respectively. DHHS' financial statements as of
and for the three months ended March 31, 1998, are summarized from the
unaudited consolidated historical financial statements included elsewhere
herein. DHHS' statement of operations for the year ended December 31, 1997,
are summarized from the Company's annual report on Form 10-K.
(2) To remove Chico's historical results of operations, assets sold,
liabilities assumed by the buyer, and liabilities paid by the Company in
conjunction with the sale of Chico.
(3) To record interest expense on (i) the net pro forma increase in the Credit
Facility resulting from the Company's acquisition of the Foundation's 50%
interest in DHHS, less net proceeds from the sale of Chico, and (ii)
the pro forma decrease in amounts outstanding under the Company's commercial
paper program as a result of the sale of Chico accounts receivable, certain
accounts of which served as collateral under the program.
With respect to Chico, the Unaudited Pro Forma Condensed Combining
Statements of Operations assume application of $24.6 million in net proceeds
from the Chico sale to reduce the Credit Facility (see Note 8) and a $3.1
million reduction in amounts outstanding under the Company's commercial
paper program. The average interest rate in effect under the Credit Facility
was 9.0% for the quarter ended March 31, 1998, and 8.3% for the year ended
December 31, 1997. The average interest rate in effect under the commercial
paper program was 6.8% for the quarter ended March 31, 1998, and 6.9% for the
year ended December 31, 1997.
With respect to DHHS, the Unaudited Pro Forma Condensed Combining
Statements of Operations assume the Company increased the principal amount
outstanding under the Credit Facility by $65.0 million (See Note 10). The
interest rate currently in effect under the revolver portion of the Credit
Facility is 8.4%
(4) To record the pro forma provision for income taxes after taking into
effect the sale of Chico and the consolidation of DHHS pursuant to the
Company's acquisition of the Foundation's 50% interest in DHHS, thereby giving
the Company 100% ownership of DHHS. Previously, the Company accounted for its
investment in DHHS under the equity method. The incremental effective tax
rate on income from continuing operations was 20% and 41% for the quarter
ended March 31, 1998, and the year ended December 31, 1997, respectively.
</TABLE>
<PAGE> 12
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -----------------------------------------------------------------------------
<S> <C>
(5) To adjust depreciation and amortization expense for the step up in basis
for the depreciable assets of DHHS and the increase in goodwill in
connection with the allocated purchase price (see Note 10). The acquired
assets are estimated to have an average remaining useful life of approximately
20 years based on management's assumptions that DHHS's assets consist of
65% building and 35% equipment with the useful life of such assets
determined in accordance with the Company's depreciation policy (35 years, 20
years and 10 years for buildings, improvements and equipment, respectively).
Cost in excess of fair market value of net assets acquired ("Goodwill") is
amortized on a straight line basis over a 20-year period. Based on this
preliminary allocation, depreciation and amortization expense increased
approximately $136,000 and $304,000 on a pro forma basis for the quarter
ended March 31, 1998, and the year ended December 31, 1997, respectively.
(6) To remove equity in the earnings of DHHS previously recorded by the Company.
(7) To adjust the common and common equivalent shares to include the effect of
dilutive securities on pro forma net income for the year ended
December 31, 1997.
(8) To reflect the pro forma sources and uses of cash in connection with the sale
of Chico (in thousands).
SOURCES:
Proceeds from the sale of:
Property and equipment $25,000
Pro forma net working capital(a) 3,904
-------
Total sources 28,904
-------
USES:
Estimated transaction costs 2,002
Repayment of Credit Facility (b) 24,576
Repayment of amounts outstanding
under commercial paper program(b) 3,115
Accrued employee benefits (a) 1,031
-------
Total uses 30,724
-------
Net use of funds $(1,820)
=======
(a) Based on working capital balances as of March 31, 1998. Actual proceeds to
be based on balances as of June 30, 1998, subject to adjustment and
final settlement by the parties.
(b) Based on actual amounts paid at or prior to the closing of the Chico sale.
</TABLE>
<PAGE> 13
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -----------------------------------------------------------------------------
<S> <C>
(9) To record the pro forma gain on the sale of property and equipment of
Chico. No gain or loss is anticipated on the sale of net working capital.
(in thousands)
Proceeds from the sale of property and equipment $25,000
Estimated transaction costs (2,002)
-------
Net proceeds 22,998
Basis of property and equipment sold (15,964)
-------
Pro forma gain before income taxes 7,034
Provision for income taxes (41%) 2,884
-------
Pro forma gain on sale $ 4,150
=======
ALLOCATION OF TAX LIABILITY:
Current $ 879
Long term 2,005
-------
$ 2,884
=======
(10) To record the acquisition of DHHS using the purchase method of
accounting, including the adjustment of DHHS's balance sheet to reflect
the estimated fair market value of property and equipment acquired in excess
of the DHHS' historical cost. The purchase price allocation reflected in the
Pro Forma Condensed Combining Balance Sheet is based upon the best
information currently available without a final independent appraisal of the
net assets of DHHS. For the purpose of allocating net acquisition costs among
the various assets acquired, the Company has tentatively allocated 20% of
the net excess acquisition cost over DHHS' carrying value of the acquired
assets to property and equipment and 80% to Goodwill. It is the Company's
intention to more fully evaluate the net assets acquired and, as a result, the
allocation of acquisition cost may change.
</TABLE>
<PAGE> 14
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -----------------------------------------------------------------------------
<S> <C>
(10) Note 10 (continued)
The Company does not expect the final allocation of acquisition cost to be
materially different from that assumed in the Pro Forma Condensed Combining
Balance Sheet. The following table summarizes the calculation of the
preliminary purchase price allocation(in thousands):
Total cash consideration (a) $ 64,528
Estimated transaction costs (a) 450
Company's prior investment in DHHS (b) 49,915
--------
Total cost to be allocated 114,893
Less net working capital acquired (14,152)
Less DHHS' investment in equity investees (3,350)
Plus intangible assets not allocated value (b) 586
Less DHHS' historical property and equipment value, net (60,764)
--------
Purchase price in excess of DHHS' cost 37,213
Purchase price allocated to property and equipment(c) 7,443
--------
Purchase price allocated to Goodwill $ 29,770
========
(a) Pro forma increase in credit facility, or $64,978.
(b) Pro forma reduction in other long term assets.
(c) Calculated as follows:
Total purchase price allocated to property
and equipment $ 75,649
Less DHHS' historical property and equipment
value, net (60,764)
--------
Step up in basis of property and equipment 14,885
Ownership percentage acquired 50%
--------
Purchase price allocated to property and
equipment in excess of the DHHS' cost $ 7,443
========
(11) To remove the Foundation's partnership equity.
</TABLE>
<PAGE> 15
DAKOTA HEARTLAND HEALTH SYSTEM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998
<PAGE> 16
DAKOTA HEARTLAND HEALTH SYSTEM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998
CONTENTS
Consolidated Balance Sheet 17
Consolidated Statements of Income 18
Consolidated Statements of Partners' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
<PAGE> 17
Dakota Heartland Health Center
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------------------------------
(Unaudited) (Note 1)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,358,737 $ 7,276,675
Patient receivables, net of allowance for
uncollectable accounts of $1,814,661 and
$1,278,500 at March 31, 1998, and
December 31, 1997, respectively 17,743,628 14,374,894
Supplies inventory 2,435,058 2,197,815
Prepaid expenses and other current assets 2,700,343 1,833,996
------------ ------------
Total current assets 27,237,766 25,683,380
Property and equipment, net 60,764,444 60,663,177
Other assets:
Investment in and advances to affiliates 2,496,668 2,316,137
Organizational costs, less accumulated
amortization of $489,075 and $435,300 in
March 31, 1998 and December 31, 1997,
respectively 586,411 640,186
Other 266,990 234,915
------------ ------------
Total assets $ 91,352,279 $ 89,537,795
============ ============
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 5,969,733 $ 5,017,075
Estimated third-party payor settlements 2,846,413 2,905,822
Accrued salaries and benefits 2,555,344 2,999,265
Other current liabilities 1,714,444 2,923,616
------------ ------------
Total current liabilities 13,085,934 13,845,778
Partners' equity 78,266,345 75,692,017
------------ ------------
Total liabilities and partners equity $ 91,352,279 $ 89,537,795
============ ============
</TABLE>
See accompanying notes.
<PAGE> 18
Dakota Heartland Health System
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
-----------------------------------------
<S> <C> <C>
Revenue:
Net patient service revenue $ 25,455,748 $ 23,882,534
Other revenue 1,016,757 800,176
------------- -------------
Net revenue 26,472,505 24,682,710
Expenses:
Salaries and benefits 9,686,615 8,910,903
Professional fees 2,534,854 3,287,530
Supplies 4,747,666 3,868,959
Depreciation and amortization 1,088,686 1,128,075
Provision for uncollectable accounts 824,836 858,328
Repairs and maintenance 409,007 227,553
Utilities 328,051 333,016
Rent and leases 296,702 366,322
Property taxes 271,198 285,914
Other 676,575 763,601
------------- -------------
Total expenses 20,864,190 20,030,201
------------- -------------
Net income $ 5,608,315 $ 4,652,509
============= =============
</TABLE>
See accompanying notes.
<PAGE> 19
Dakota Heartland Health System
Consolidated Statements of Partners' Equity
(Unaudited)
<TABLE>
<CAPTION>
PARACELSUS DAKOTA
HEALTHCARE MEDICAL
CORPORATION FOUNDATION TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Partners' equity at December 31, 1997 $ 48,621,776 $ 27,070,241 $ 75,692,017
Net income 3,084,573 2,523,742 5,608,315
Partners' distributions (1,668,693) (1,365,294) (3,033,987)
------------ ------------ ------------
Partners' equity at March 31, 1998 $ 50,037,656 $ 28,228,689 $ 78,266,345
============ ============ ============
</TABLE>
See accompanying notes.
<PAGE> 20
Dakota Heartland Health Center
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,608,315 $ 4,652,509
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,088,686 1,128,075
Provision for uncollectable accounts 824,836 858,328
Changes in operating assets and liabilities:
Patient receivables, net (4,193,570) 415,147
Supplies inventory (237,243) 3,868
Prepaid expenses and other current assets (866,347) (811,396)
Other assets (32,075) (79,649)
Accounts payable 952,658 (1,788,813)
Estimated third-party payor settlements (59,409) 232,429
Accrued salaries and benefits (443,921) (1,015,685)
Other current liabilities (1,209,172) (415,048)
----------- ------------
Net cash provided by operating activities 1,432,758 3,179,765
INVESTING ACTIVITIES
Purchase of property and equipment (1,136,178) (2,548,085)
Increase in investments and advances to affiliates (180,531) (144,631)
----------- ------------
Net cash used in investing activities (1,316,709) (2,692,716)
FINANCING ACTIVITIES
Partners' distributions (3,033,987) (3,713,142)
----------- ------------
Decrease in cash and cash equivalents (2,917,938) (3,226,093)
Cash and cash equivalents at beginning of year 7,276,675 6,718,589
----------- ------------
Cash and cash equivalents at end of year $ 4,358,737 $ 3,492,496
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for taxes $ 35,000 $ 150,301
</TABLE>
See accompanying notes.
<PAGE> 21
Dakota Heartland Health Center
Notes to Consolidated Financial Statements
March 31, 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
On December 21, 1994, Dakota Heartland Health System (the "Partnership"), a
general partnership, was formed by a wholly-owned subsidiary of Champion
Healthcare Corporation ("Champion") that owned Heartland Medical Center, a 140-
bed general acute facility in Fargo, North Dakota, and Dakota Medical
Foundation (the "Foundation"), a not-for-profit corporation that owned Dakota
Hospital, a 199-bed general acute care hospital also in Fargo, North Dakota.
Champion and the Foundation contributed certain assets and liabilities,
excluding long-term debt except capital leases, of their respective hospitals,
and Champion contributed an additional $20 million in cash, each in exchange
for 50% ownership in the Partnership. The Partnership then made a $20 million
cash distribution to the Foundation. On December 21, 1994, Champion entered
into an operating agreement with the Partnership to manage the combined
operations of the two hospitals. Champion will receive 55% of the net income
and distributable cash flow ("DCF") of the Partnership until such time as it
has recovered, on a cumulative basis, an additional $10 million of DCF in the
form of an "excess" distribution. In 1996, Paracelsus Healthcare Corporation
("Paracelsus") became the sole owner of Champion.
BASIS OF PRESENTATION - The accompanying unaudited condensed consolidated
financial statements of the Partnership have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
annual financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. The balance
sheet at December 31, 1997, has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The Partnership's business is seasonal in nature and
subject to general economic conditions and other factors. Accordingly,
operating results for the three months ending March 31, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. These financial statements should be read in conjunction
with the Partnership's audited consolidated financial statements and notes
thereto for the year ended December 31, 1997, included in Paracelsus Healthcare
Corporation's 1997 Form 10-K.
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.
INCOME TAXES - The Partnership's income is attributed to its partners for
income tax purposes. Accordingly, it has not accrued any liability for income
taxes. An entity owned by the Partnership has paid income taxes of $35,000 and
$150,301 for the quarters ended March 31, 1998 and 1997, respectively.
<PAGE> 22
Dakota Heartland Health Center
Notes to Consolidated Financial Statements
March 31, 1998
2. SUBSEQUENT EVENT
On August 20, 1997, the Foundation exercised its right to require Paracelsus to
purchase the Foundation's 50% ownership interest in the Partnership. On July 1,
1998, Paracelsus (through its subsidiary Paracelsus Healthcare Corporation of
North Dakota, Inc.) completed the purchase of the Foundation's 50% ownership in
the Partnership for a negotiated purchase price of $64.5 million, inclusive of
working capital, thereby giving Paracelsus 100% ownership of Dakota Heartland
Health System. Paracelsus has sole power and authority to wind up the
Partnership's business after July 1, 1998, and the Partnership shall terminate
as of the date Paracelsus completes the wind up of the Partnership's business.
<PAGE> 23
DAKOTA HEARTLAND HEALTH SYSTEM
REPORT ON AUDIT OF FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE> 24
C O N T E N T S
PAGE
Report of Independent Accountants 25
Financial Statements:
Balance Sheet 26
Statement of Income 27
Statement of Partners' Equity 28
Statement of Cash Flows 29
Notes to Financial Statements 30
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Governing Board of
Dakota Heartland Health System:
We have audited the accompanying balance sheet of Dakota Heartland Health
System (the Partnership) as of December 31, 1995 and 1994, and the related
statements of income, partners' equity and cash flows for the year ended
December 31, 1995. These financial statements are the responsibility of the
Partnership'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. 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 Dakota Heartland Health
System as of December 31, 1995 and 1994, and the results of its operations,
partners' equity and cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 16, 1996
3
<PAGE> 26
Dakota Heartland Health System
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,062,865 $ 397,300
Patient receivables, net of allowance for
uncollectible accounts of $3,396,655 and
$3,439,911 in 1995 and 1994, respectively 17,339,282 21,530,288
Due from partners 4,000,000
Supplies inventory 1,602,786 1,724,706
Prepaid expenses and other current assets 1,003,019 568,052
------------ ------------
Total current assets 39,007,952 28,220,346
Property and equipment, at cost 52,940,547 42,333,642
Other assets:
Investment in and advances to affiliates 1,835,223 1,964,073
Organizational costs, less accumulated
amortization of $45,291 1,057,215 --
Other 20,943 --
------------ ------------
Total assets $ 94,861,880 $ 72,518,061
============ ============
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 12,380,016 $ 3,788,183
Estimated third-party payor settlements 2,008,176 3,426,079
Accrued salaries, wages and employee benefits 3,548,505 4,754,690
Other current liabilities 2,043,794 242,563
------------ ------------
Total current liabilities 19,980,491 12,211,515
Other liabilities -- 91,404
Minority interest 56,877 38,478
Partners' equity 74,824,512 60,176,664
------------ ------------
Total liabilities and partners' equity $ 94,861,880 $ 72,518,061
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 27
DAKOTA HEARTLAND HEALTH SYSTEM
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Net patient service revenue $ 99,098,598
Other revenue 6,912,796
-------------
Net revenue 106,011,394
-------------
Expenses:
Salaries and benefits 38,796,941
Professional fees 20,446,296
Supplies 16,299,957
Depreciation and amortization 2,405,978
Repairs and maintenance 1,079,489
Utilities 1,224,450
Insurance 789,648
Rents and leases 2,003,288
Provision for uncollectible accounts 3,797,944
Property taxes 910,264
Other 2,109,291
-------------
Total expenses 89,863,546
-------------
Net income $ 16,147,848
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 28
DAKOTA HEARTLAND HEALTH SYSTEM
STATEMENT OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
CHAMPION DAKOTA TOTAL EQUITY
------------ ------------ ------------
<S> <C> <C> <C>
Net assets contributed $ 16,511,768 $ 39,664,896 $ 56,176,664
Cash contribution 20,000,000 20,000,000
Working capital contributions due from partners 2,000,000 2,000,000 4,000,000
Equalization of capital accounts 1,576,564 (1,576,564) - -
------------ ------------ ------------
Initial capital 40,088,332 40,088,332 80,176,664
Special distribution - - (20,000,000) (20,000,000)
------------ ------------ ------------
Partners' equity, December 31, 1994 40,088,332 20,088,332 60,176,664
Net income 8,881,316 7,266,532 16,147,848
Partners' distribution (825,000) (675,000) (1,500,000)
------------ ------------ ------------
Partners' equity, December 31, 1995 $ 48,144,648 $ 26,679,864 $ 74,824,512
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 29
DAKOTA HEARTLAND HEALTH SYSTEM
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 16,147,848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,405,978
Gain on sale of property, plant and equipment (1,388)
Provision for uncollectible accounts 3,797,944
Minority interest 18,399
Changes in operating assets and liabilities:
Patient receivables, net 393,062
Supplies inventory 121,920
Prepaid expenses and other current assets (434,967)
Other assets (20,943)
Accounts payable 8,591,833
Estimated third-party payor settlements (1,417,903)
Accrued expenses (1,206,185)
Other liabilities 1,709,827
-------------
Net cash provided by operating activities 30,105,425
-------------
Cash flows from investing activities:
Purchase of property and equipment (12,967,592)
Payment for organizational costs (1,102,506)
Contribution from partners 4,000,000
Other 130,238
-------------
Net cash used in investing activities (9,939,860)
-------------
Cash flows from financing activities:
Partners' draws (1,500,000)
-------------
Net cash used in financing activities (1,500,000)
-------------
Increase in cash and cash equivalents 18,665,565
-------------
Cash and cash equivalents, beginning of year 397,300
-------------
Cash and cash equivalents, end of year $ 19,062,865
=============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 15,236
Cash paid for taxes 447,207
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 30
DAKOTA HEARTLAND HEALTH SYSTEM
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND ACCOUNTING POLICIES:
On December 21, 1994, Dakota Heartland Health System, a general partnership
(the Partnership), was formed by a wholly owned subsidiary of Champion
Healthcare Corporation (Champion) that owned Heartland Medical Center, a
140-bed general acute care facility in Fargo, North Dakota, and Dakota
Hospital (Dakota), a not-for-profit corporation that owned Dakota Hospital,
a 199-bed general acute care hospital also in Fargo, North Dakota.
Champion and Dakota contributed certain assets and liabilities, excluding
long-term debt except capital leases, of their respective hospitals, and
Champion contributed an additional $20,000,000 in cash, each in exchange
for 50% ownership in the Partnership. The Partnership then made a
$20,000,000 cash distribution to Dakota. Also on December 21, 1994,
Champion entered into an operating agreement with the Partnership to manage
the combined operations of the two hospitals. Champion will receive 55% of
the net income and distributable cash flow (DCF) of the Partnership until
such time as it has recovered, on a cumulative basis, an additional
$10,000,000 of DCF in the form of an "excess" distribution (see also
Note 4).
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 net income during the
reporting period. Actual results could differ from those estimates. The
most significant areas which require the use of management's estimates
relate to the determination of the estimated third-party payor settlements,
the allowance for uncollectible accounts receivable and obsolete inventory.
CASH AND CASH EQUIVALENTS:
The Partnership considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
PATIENT RECEIVABLES:
Payments for services rendered to patients covered by third-party payor
programs are generally less than billed charges. Provisions for
contractual adjustments are made to reduce the charges to these patients to
estimated receipts based upon the third-party payor's principles of
payment/ reimbursement (either prospectively determined or retrospectively
determined costs).
SUPPLIES INVENTORY:
Supplies inventory is stated at the lower of cost or market, with cost
determined substantially on the first-in, first-out basis.
<PAGE> 31
DAKOTA HEARTLAND HEALTH SYSTEM
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND ACCOUNTING POLICIES, CONTINUED:
PROPERTY AND EQUIPMENT:
Property and equipment acquisitions are recorded at cost at the date of
receipt. Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets, ranging from 4 to 25
years. Maintenance and repairs are charged to expense as incurred while
renewals and betterments are capitalized. The costs and related
accumulated depreciation on asset disposals are removed from the accounts
and any gain or loss is included in income.
INCOME TAXES:
The Partnership's income is attributed to its partners for income tax
purposes. Accordingly, it has not accrued any liability for income taxes.
Entities owned by the Partnership have paid income taxes during 1995
totaling $447,207.
RECLASSIFICATIONS:
Certain reclassifications have been made in the 1994 financial statements
to conform to the 1995 presentation.
2. NET PATIENT SERVICE REVENUE:
The Company's facilities have entered into agreements with third-party
payors, including US government programs and managed care health plans,
under which the Company is paid based upon established charges, cost of
services provided, predetermined rates by diagnosis, fixed per diem rates
or discounts or discounts from established charges.
Net patient service revenues are recorded at estimated amounts due from
patients and third-party payors for health care services provided,
including anticipated settlements under reimbursement agreements with
third-party payors. Payments for services rendered to patients covered by
the Medicare and Medicaid programs are generally less than billed charges.
Provisions for contractual adjustments are made to reduce charges to these
patients to estimated receipts based upon each program's principle of
payment/reimbursement (either prospectively determined or retrospectively
determined costs). Final settlements under these programs are subject to
administrative review and audit. The Company records adjustments, if any,
resulting from such review or audits during the period in which these
adjustments become known. Allowance for contractual adjustments under
these programs are netted in accounts receivable in the accompanying
Balance Sheet. It is management's opinion that adequate allowance has been
provided for possible adjustments that might result from final settlements
under these programs.
<PAGE> 32
DAKOTA HEARTLAND HEALTH SYSTEM
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. PROPERTY AND EQUIPMENT:
A summary of property and equipment as of December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Land and land improvements $ 2,360,412 $ 2,387,095
Buildings and improvements 21,624,868 20,087,268
Fixed equipment 4,899,749 4,724,125
Major movable equipment 13,863,470 12,516,205
Minor movable equipment 1,003,318 1,101,633
Construction in progress 10,638,351 606,250
Property held for expansion 911,066 911,066
-------------- --------------
55,301,234 42,333,642
Less accumulated depreciation 2,360,687 --
-------------- --------------
$ 52,940,547 $ 42,333,642
============== ==============
</TABLE>
4. INVESTMENTS IN AND ADVANCES TO AFFILIATES:
The Partnership owns portions of several entities. The investments in these
entities are recorded on the equity method. The investments in and advances
to affiliated companies on the accompanying balance sheet consisted of the
following:
<TABLE>
<CAPTION>
Investments and Advances
Ownership ---------------------------------
Percentage 1995 1994
-------------- --------------
<S> <C> <C> <C>
Orthopro, Inc. 50% $ 203,155
Country Health, Inc. 49% $ 805,632 665,629
Health Care Incinerators, Inc.
/Thorn Linen 33% 210,701 193,235
Dakota Outpatient Center 50% 356,016 311,604
Dakota Day Surgery 50% 462,874 590,450
---------- -----------
$1,835,223 $ 1,964,073
========== ===========
</TABLE>
During 1995, the Partnership sold its 50% interest in Orthopro, Inc.
<PAGE> 33
DAKOTA HEARTLAND HEALTH SYSTEM
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INVESTMENTS IN AND ADVANCES TO AFFILIATES, CONTINUED:
The Partnership has a 50% interest in Dakota Outpatient Center (DOC), a
general partnership which owns and operates a medical and office building.
As a general partner, the Partnership is contingently liable on the
outstanding debt of DOC. As of December 31, 1995, the balance of the note
was $2,416,564.
DOC also leases its real property to Dakota Hospital, Dakota Day Surgery
(DDS) and Dakota Clinic, Ltd. (an unrelated corporation), under
noncancelable 10-year net operating leases. Future minimum annual lease
payments to be paid by the Hospital and DDS are $1,414,500 through 1998.
The Partnership also has a 50% interest in DDS, a general partnership which
provides outpatient surgical services. As a general partner, the
Partnership is contingently liable to cover any operating losses of DDS.
DDS had operating income in 1995.
5. CREDIT RISK
The Partnership's revenues consist primarily of amounts due from the
Medicare and Medicaid programs in addition to amounts due from insurance
carriers and individuals. The Partnership determines the adequacy of a
patient's third-party payor coverage upon admission. However, it generally
does not require any collateral prior to performing services. The
Partnership maintains reserves for contractual allowances and potential
credit losses based on past experience and management's current
expectations. Medicare and Medicaid gross revenue accounted for
approximately 46% and 9% of the Partnership's total gross revenue.
..
SECOND AMENDED AND FIRST RESTATED
ASSET PURCHASE AGREEMENT
FOR
CHICO COMMUNITY HOSPITAL
THIS SECOND AMENDED AND FIRST RESTATED ASSET PURCHASE AGREEMENT FOR
CHICO COMMUNITY HOSPITAL (this "AGREEMENT"), dated as of December 15, 1997,
among Paracelsus Healthcare Corporation ("PARACELSUS"), a California
corporation, Chico Community Hospital, Inc.("CCH" and "SELLER"), a
California corporation and N.T. Enloe Memorial Hospital, a California
nonprofit public benefit corporation ("BUYER") and Enloe Health System, a
California nonprofit public benefit corporation ("SYSTEM").
RECITALS
A. WHEREAS, Paracelsus is the parent corporation of Seller;
B. WHEREAS, CCH owns and operates a 123 bed licensed general acute
care hospital located at 560 Cohasset Road, Chico, California 95926
("CCH");
C. WHEREAS, Seller and Buyer have entered into that certain Asset
Purchase Agreement ("CRH AGREEMENT") whereunder Seller has agreed to assign
to Buyer all of Seller's right, title and interest in and to Seller's lease
of Chico Community Rehabilitation Hospital ("CRH") and to sell to Buyer
substantially all of the assets, real and personal, tangible and
intangible, used by Seller in the operation of CRH (collectively, "CRH
FACILITY").
D. WHEREAS, Paracelsus and CCH desire to sell to Buyer and Buyer
desires to purchase substantially all of the assets, real and personal,
tangible and intangible, used by CCH in the operation of CCH (collectively
the "BUSINESS");
W I T N E S S E T H:
NOW, THEREFORE, for and in consideration of the foregoing premises and
the agreements, covenants, representations and warranties hereinafter set
forth and 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. Subject to the terms and conditions of this
Agreement, 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 and other real property interests used in
connection with the operation of the Business or owned by Seller,
including, without limitation, the operations of the hospital known as
Chico Community Hospital (collectively the "HOSPITAL") together with all
buildings, improvements and fixtures located thereupon and all construction
in progress (such real property is referred to herein as the "REAL
PROPERTY"), such Real Property being more specifically described in
SCHEDULE 1.1(A);
(b) all tangible personal property (excluding cash and cash
equivalents) owned by Seller and used in connection with the Business,
including, without limitation, all equipment, furniture, fixtures,
machinery, vehicles, office furnishings, instruments, leasehold
improvements and spare parts described in SCHEDULE 1.1(B), 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"), but excluding the personal property described in
Section 1.2(ix) hereof.
(c) all rights, to the extent assignable or transferable, to all
licenses, certificates of need, certificates of exemption, franchises,
accreditations and registrations and other licenses or permits issued in
connection with the Business (the "LICENSES"), including, without
limitation, the Licenses described in SCHEDULE 1.1(C);
(d) all of Seller's interest in and to those real property and
personal property leases relating to the Business described in SCHEDULE
1.1(D) (all of such leases being referred to collectively as the "LEASES");
(e) all of Seller's interest in, to and under those contracts and
agreements relating to the Business set forth in SCHEDULE 1.1(E) (the
"CONTRACTS");
(f) any deposits, escrows, prepaid taxes or other advance payments
relating to any expenses of the Business, as identified on SCHEDULE 1.1(F)
as prepaid expenses to be transferred to Buyer (the "PREPAID EXPENSES"),
but excluding the prepaid expenses of Seller described in SCHEDULE 1.1(F)
hereof as prepaid expenses to be retained by Seller ("EXCLUDED PREPAID
EXPENSES");
(g) all inventories of supplies, drugs, food, janitorial and office
supplies and other disposables and consumables owned by Seller on the
Closing Date (as hereinafter defined) and located at the premises of Seller
or purchased by Seller for use in connection with the Business (the
"OPERATING INVENTORY");
(h) all accounts receivable with respect to the Business, including
all accounts receivable arising from the rendering of services to
inpatients and outpatients at the Hospital, billed and unbilled, recorded
or unrecorded, accrued and existing in respect of services up to the
effective date of the Closing, including those from any source, excluding,
however, the Excluded Receivables, as defined below (the "ACCOUNTS
RECEIVABLE");
(i) all documents, records, operating manuals and files, and computer
software owned by Seller, pertaining to or used in connection with the
Business, including, without limitation, all patient records, medical
records, financial records, equipment records, construction plans and
specifications, and medical and administrative libraries, but excluding
Seller's corporate minute books, minutes, tax records and any other records
of Seller required to be maintained as a matter of law.
(j) to the extent transferable by Seller, all unexpired warranties
and covenants not to compete relating to the Business for which Seller is
the beneficiary;
(k) to the extent transferable by Seller, all rights and interest of
Seller in all joint ventures, partnerships, corporations and other entities
listed on SCHEDULE 1.1(K) and accepted by Buyer;
(l) except as expressly excluded herein, all other property owned by
Seller, whether tangible or intangible, located at the premises of Seller
or used in connection with the Business whether or not reflected on the
balance sheet of Seller, and specifically including the name "Chico
Community Hospital"; and
(m) an amount equal to the Medicare Receivables, which shall be
evidenced by the Medicare Reconciliation Note.
The foregoing, which (except for the Excluded Assets, as defined in
Section 1.2) are hereafter referred to, collectively, as the "ASSETS",
comprise substantially all of the property and assets used in the conduct
and operation of the Business as of October 31, 1997, including without
limitation, those assets reflected on the unaudited balance sheet of Seller
dated October 31, 1997 (the "BALANCE SHEET"), and all assets acquired by
Seller between October 31, 1997 and the Closing.
1.2 EXCLUDED ASSETS. The following items which are related to the
Assets 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 cash and cash equivalents and temporary investments;
(ii) (a) all amounts payable or to become payable to Seller from third
party payors in respect of periods prior to the Cut-Off Point in
respect of third party payor cost reports, including, without
limitation, Medicare and Medi-Cal cost reports, filed or to be
filed by Seller (the "COST REPORT RECEIVABLES"),
(b) all accounts receivable from Medicare, MediCal and CHAMPUS
with respect to the Business arising from the rendering of
services to inpatients and outpatients at the Hospital, billed
and unbilled, recorded and unrecorded, accrued and existing in
respect of services up to the effective date of Closing (such
accounts receivable, excluding the Cost Report Receivables, are
referred to herein as the "MEDICARE RECEIVABLES"), and
(c) the accounts receivable set forth on SCHEDULE 1.2(II) hereto,
(such receivables referred to in clauses (a), (b) and (c) above,
the "EXCLUDED RECEIVABLES");
(iii) Seller's corporate minute books, minutes, tax records and other
records of Seller required to be maintained by Seller as a matter
of law (it being understood that patient medical records of the
Hospital are not intended to be excluded);
(iv) all Excluded Prepaid Expenses of Seller identified in SCHEDULE
1.1(F) hereto;
(v) all supplies, drugs, food and other disposables and consumables
disposed of in the ordinary course of business prior to the
Closing;
(vi) the name "Paracelsus" and all variations thereof;
(vii) all rights and privileges under contracts, agreements and leases
not listed on SCHEDULES 1.1(D) OR 1.1(E) hereto;
(viii) any claims by Seller against third parties whether known or
unknown, contingent or otherwise, except those expressly
described in Section 1.1(b);
(ix) all intercompany accounts of Seller and Paracelsus and their
affiliates;
(x) any proprietary information contained in Seller's employee or
operation manual that does not pertain to the ongoing operations
of the Hospital;
(xi) all commitments, contracts, leases, capital leases, notes, and
agreements between Seller, Paracelsus and their affiliates; and
(xii) the property described in SCHEDULE 1.2(XII) hereto.
1.3 ASSETS FREE AND CLEAR; ASSIGNMENT AND UNDERTAKING.
(a) The Assets shall be sold free and clear of all liabilities, liens
and encumbrances, except for Permitted Encumbrances (as hereinafter
defined). At Closing, the parties will execute and deliver an assignment
and undertaking (the "ASSIGNMENT AND UNDERTAKING"), in the form of APPENDIX
1.3, pursuant to which Seller shall assign to Buyer its future rights, and
Buyer shall assume from Seller its future obligations, under those
Contracts and Leases described in SCHEDULE 1.3; pursuant to which Buyer
shall assume from Seller, Seller's future obligations in respect of the
Assumed Liabilities (as hereinafter defined).
(b) As of the Cut-Off Point, and in conjunction with the transfer of
the Assets Buyer shall assume and/or agree to pay, perform and discharge
the Assumed Liabilities. As used in this Agreement, "ASSUMED LIABILITIES"
shall mean the following liabilities of Seller: (i) the obligations of
Seller arising subsequent to the Cut-Off Point under the Leases and
Contracts (collectively, the "SELLER CONTRACTS") (ii) Seller's current
payables, but only to the extent included in the determination of the
Working Capital (as hereinafter defined); (iii) Seller's obligations as of
the Cut-Off Point in respect of the accrued vacation, holiday and sick
leave of Seller's employees who are employed by Seller in connection with
the Business as of the Closing Date; (iv) the obligations of Seller under
capital leases described in the Financial Statements that pertain to the
Hospital; and (v) credit balances owed to third parties on account with
Seller as and to the extent such credit balances are reflected in the book
value of the Accounts Receivable or in the book value of the Medicare
Receivables that are reflected in the Medicare Reconciliation Note.
(c) Buyer shall not be liable for (1) any claims arising from
Seller's assignment and Buyer's assumption of the Seller Contracts, (2)
performance by Seller under, and defaults by Seller in performance of, the
Seller Contracts for periods prior to the Cut-Off Point, and (3) unpaid
amounts in respect of the Seller Contracts that are past due as of the Cut-
Off Point (unless included in Working Capital). Except as expressly
provided to the contrary in Section 1.3(b) above, under no circumstance
shall Buyer be obligated to pay or assume, and none of the Assets shall be
or become liable for or subject to, any liability of Seller or its
affiliates, including, without limitation, the following, whether fixed or
contingent, recorded or unrecorded (collectively, the "EXCLUDED
LIABILITIES"):
(I) current liabilities (to the extent not taken into
consideration in determining the Working Capital), long-term
liabilities (excluding capital lease obligations specifically
assumed) and all indebtedness and obligations or guarantees of
Seller;
(II) liabilities or obligations of Seller in respect of
periods prior to and including the Cut-Off Point arising under
the terms of the Medicare, Medi-Cal, Blue Cross or other managed
care or third party payor programs, including, but not limited
to, any retroactive denial of claims, recapture, civil monetary
penalties or any gain on sale that may be recognized under the
Medicare program as a result of the consummation of the
transactions described herein;
(III) federal, state or local tax liabilities or obligations
of Seller in respect of periods prior to Cut-Off Point or
resulting from the consummation of the transactions contemplated
herein, including, without limitation, any income tax, any
franchise tax, any tax recapture, any sales and/or use tax, any
indigent care tax, any state and local recording fees and taxes
which may arise upon the consummation of the transactions
contemplated herein and any FICA, FUTA, workers' compensation and
any and all other taxes or amounts due and payable as a result of
the exercise by any of Seller's employees of such employees'
right to vacation, sick leave and holiday benefits accrued while
in the employ of Seller (to the extent not taken into
consideration in determining the Working Capital);
(IV) liability for any and all claims by or on behalf of
Seller's employees relating to periods prior to Cut-Off Point,
including, without limitation, liability for any pension, profit
sharing, deferred compensation, or any other employee health and
welfare benefit plans, liability for violations of ERISA,
liability for any EEOC claim, wage and hour claim, unemployment
compensation claim, workers' compensation claim or any other
agreement, and liability for all employee wages and benefits,
including, without limitation, (but only to the extent not
assumed by Buyer pursuant to Section 1.3(b) hereof) accrued
vacation, sick leave and holiday pay, severance pay and related
taxes or other liability related thereto in respect of Seller's
employees (to the extent not taken into consideration in
determining the Working Capital);
(V) liabilities or obligations arising subsequent to Cut-Off
Point under contracts, commitments, leases or agreements to which
Seller is a party, except to the extent Buyer accepts benefits
under any such contracts, commitments, leases or agreements
subsequent to Cut-Off Point and except for the Seller Contracts;
(VI) liabilities or obligations arising out of any breach by
Seller of any Seller Contract;
(VII) any liability arising out of or in connection with
claims for acts or omissions of Seller and Seller's employees,
agents and independent contractors which allegedly occurred prior
to Cut-Off Point including, without limitation, all malpractice
and general liability claims, whether or not same are pending,
threatened, known, or unknown;
(VII) contracts and agreements between Seller and one or
more of Seller affiliates;
(IX) any debt, obligation, expense or liability of Seller
arising out of or incurred solely as a result of any transaction
of Seller occurring after Cut-Off Point or for any violation by
Seller of any law, regulation or ordinance at any time; and
(IX) any liability or obligation associated with or relating
to any of the Excluded Assets.
1.4 PURCHASE PRICE; PRORATIONS; ALLOCATION. (a) The purchase price
of the Assets (the "PURCHASE PRICE") shall be cash in the amount of TWENTY-
FOUR MILLION SEVEN HUNDRED THOUSAND DOLLARS ($24,700,000) PLUS Working
Capital (as hereinafter defined).
(b) At Closing, (i) the Earnest Money Deposit delivered to Paracelsus
by Buyer pursuant to the Earnest Money Deposit Agreement as provided in
Section 1.9 hereof will be applied against the Purchase Price, (ii) the
payment for Working Capital and the amount of the Medicare Reconciliation
Note shall initially be made based upon the determination of Initial
Working Capital (as hereinafter defined) and thereafter an adjusted payment
and an adjustment to the Medicare Reconciliation Note shall be made as
provided in Section 1.7.
(c) Buyer and Seller shall prorate real estate and personal property
lease payments, payments under any construction contracts assumed by Buyer
pursuant to the Assignment and Undertaking, interest, real estate and
personal property taxes, real estate lease deposits and escrows, other
assessments, plus all other revenues and expenses with respect to the
Business which are normally prorated upon the sale of assets of a going
concern; provided, however, that the parties will not prorate any Prepaid
Expenses. Seller shall order final readings of all power and other utility
charges to be made as of the Cut-Off Point and shall pay when due all
charges in respect thereof. All prorations contemplated by this Section
1.4(c) shall be made as of the Cut-Off Point.
(d) For income tax purposes, the Purchase Price shall be allocated
as provided in SCHEDULE 1.4(D) hereto.
1.5. INITIAL WORKING CAPITAL. (a) The "INITIAL WORKING CAPITAL"
shall be an amount equal to the value of Seller's Initial Net Working
Capital (as hereinafter defined) as of the date of, and based upon Seller's
latest regularly prepared balance sheet in respect of the Business (the
"INTERIM BALANCE SHEET") available prior to Closing, which shall be not
more than 61 days old. The Interim Balance Sheet shall be prepared using
the same methodologies and assumptions used in connection with the
preparation of Financial Statements (as hereinafter defined), and in
accordance with generally accepted accounting principles ("GAAP")
applicable to interim financial statements. The Interim Balance Sheet
shall also be used for purposes of determining the initial principal
balance of the Medicare Reconciliation Note and the amount of cash to be
delivered by Buyer to Seller with respect to the Medicare Reconciliation
Note.
For the purpose of the Initial Working Capital, "SELLER'S INITIAL NET
WORKING CAPITAL" shall be equal to THE SUM OF (A) the amounts set forth on
SCHEDULE 1.5.1(A); PLUS (B) the amount of any capital expenditures made by
Seller from and after December 1, 1997 until the Cut-Off Point (as defined
at Section 2.1); MINUS (C) the amount of Seller's capital leases
obligations assumed by Buyer, specifically excluding the lease from Bell
Atlantic Tricon Leasing Corporation relating to CRH.
(b) No increase to Seller's Initial Net Working Capital shall be
effected with respect to (i) any single item involving a capital
expenditure in excess of $25,000, or (ii) within any 30 day period, any two
or more items involving capital expenditures in excess of $50,000, in
either case unless Seller shall have obtained Buyer's prior written consent
to such expenditure. Buyer hereby acknowledges that it has consented to
the capital expenditures described in SCHEDULE 1.5.1(B), but such consent
is limited as to scope and dollar amount as described in SCHEDULE 1.5.1(B).
In order that Buyer may know the methodology to determine Seller's
Initial Net Working Capital, attached hereto as SCHEDULE 1.5.1(C) is a
determination of Seller's Net Working Capital based upon the October 31,
1997 unaudited balance sheet of Seller and Seller hereby agrees to use the
same methodology (as may be supplemented by the working papers thereto) to
prepare SCHEDULE 1.5.1(A).
1.6 WORKING CAPITAL DETERMINATION. (a) Not more than 60 days after
the Closing Date (i) Seller shall deliver to Buyer the balance sheet for
Seller with respect to the Business as of the Cut-Off Point (the "CLOSING
BALANCE SHEET"). The Closing Balance Sheet shall be prepared using the
same methodologies and assumptions used in connection with the preparation
of the Interim Balance Sheet, except as modified herein. The amount of the
Medicare Reconciliation Note shall be determined from the Closing Balance
Sheet.
(b) The "WORKING CAPITAL" shall be an amount equal to the value of
Seller's Net Working Capital (as hereinafter defined) as of the date of,
and based upon the Closing Balance Sheet.
(c) For the Working Capital, "SELLER'S NET WORKING CAPITAL" shall be
determined using the same methodologies used to determine Seller's Initial
Net Working Capital, but using the Closing Balance Sheet.
(d) No more than three days prior to the Closing Date, Seller and
Buyer shall conduct a physical inventory of the inventory and supplies on
hand at the Hospital. Based on such inventory, and Seller shall value the
supplies using the same methodology as Seller used in SCHEDULE 1.5.1(C) and
Seller shall prepare a schedule thereof. In calculating the Working
Capital, the amount of the inventory supplies shall be increased or
decreased, as appropriate, to reflect the value of the additions to, and
deletions from, the inventory and supplies between the inventory date and
the Cut-Off Point.
1.7 PAYMENT OF POST-CLOSING WORKING CAPITAL ADJUSTMENT; DISPUTE
RESOLUTION. (a) On or before 90 days after the Closing Date, Buyer will
pay to Seller the amount by which Working Capital exceeds Initial Seller's
Working Capital, or Seller will pay to Buyer the amount by which Seller's
Working Capital is less than Seller's Initial Working Capital, in each case
adjusted for differences in the amount of the Medicare Reconciliation Note
as determined from the Interim Balance Sheet and the Closing Balance Sheet.
Simultaneously with Seller's delivery of the Closing Balance Sheet to
Buyer, Seller shall deliver a schedule to Buyer detailing any adjustments
between the amount of the Purchase Price paid at Closing and any required
adjustments resulting from the determination of Working Capital and
adjustments to the principal amount of the Medicare Reconciliation Note.
(b) In the event that Seller and/or Buyer shall dispute the working
capital determination to be effected hereunder and such dispute is not
resolved to the mutual satisfaction of Seller and Buyer within 90 days
after the Closing Date, Seller and Buyer shall each have the right to
require that such disputed determinations be submitted to Coopers & Lybrand
LLP acting as experts and not as arbitrators, or to such other certified
public accounting firm as Seller and Buyer may then mutually agree upon in
writing, for computation or verification in accordance with the provisions
of this Agreement and interpretation, where applicable, in accordance with
GAAP. The certified public accounting firm so selected shall use its best
efforts to make the computations or verifications within 60 days of their
engagement. Both Seller and Buyer shall provide such access to the books
and records of Seller as may be requested by such certified public
accounting firm. The foregoing provisions for certified public accounting
firm review shall be specifically enforceable by the parties; the decision
of such accounting firm shall be final and binding upon Seller and Buyer;
there shall be no right of appeal from such decision; and such accounting
firm's fees and expenses for each such disputed determination shall be
borne by the party whose determination has been modified by such accounting
firm's report or by both parties in proportion to the relative amount each
party's determination has been modified.
1.8 RECEIVABLES. Seller shall promptly remit to Buyer any payments
it may receive which constitute payments of accounts receivable of Buyer,
including any of the Accounts Receivable purchased pursuant to this
Agreement. Seller also shall promptly remit to Buyer any payments it may
receive which constitute payments with respect to the Medicare Receivables
that Seller is obligated to pay to Buyer pursuant to the Medicare
Reconciliation Note. Buyer shall promptly remit to Seller any payments it
may receive that constitute payments of the Excluded Receivables except
payments it may receive which constitute payments with respect to the
Medicare Receivables that Seller is obligated to pay to Buyer pursuant to
the Medicare Reconciliation Note. Seller shall provide Buyer with such
agreements as may be necessary to permit Buyer to negotiate, deposit and
otherwise receive for its own account the Assets and receive payments on
the Medicare Reconciliation Note.
1.9 EARNEST MONEY DEPOSIT AGREEMENT. On the date this Agreement is
executed and delivered by the parties hereto and as a condition to the
effectiveness of this Agreement, Paracelsus, Seller, Buyer and System will
execute the Earnest Money Deposit Agreement providing for a deposit in the
initial amount of $2,000,000 as an "Earnest Money Deposit" to be held and
disbursed pursuant to the terms and conditions of the Earnest Money Deposit
Agreement.
2. CLOSING.
2.1 CLOSING. Subject to the conditions set forth in Articles 7 and 8
hereof, the consummation of the sale and purchase of the Assets
contemplated by and described in this Agreement (the "Closing") shall take
place in San Francisco, California, at the offices of Davis Wright Tremaine
LLP or other agreed upon location, at 10:00 A.M. local time (a) on February
27, 1998 (if the applicable waiting periods required by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 and all regulations promulgated
thereunder (the "HSR Act"), shall have expired or been terminated, or (b)
such date as may be agreed by the parties, not to extend past 180 days from
the date of this Agreement set forth in the preamble hereof, unless within
the 60 day period commencing on the 120th day from the date of this
Agreement set forth in the preamble hereof, the applicable waiting period
required by the HSR Act shall have terminated, in which case, Buyer may
elect to extend Closing for a period not to exceed 60 days from the date
such applicable waiting period under the HSR Act shall have terminated. The
date on which the Closing occurs is referred to herein as the "CLOSING
DATE." The Closing of the transactions shall be deemed to be effective as
of 11:59 P.M. (California time) on the Closing Date or such other time
which the parties may mutually designate in writing. The time at which the
Closing shall be deemed to be effective is referred to herein as the "CUT-
OFF POINT."
2.2 ACTION OF SELLER AT CLOSING. At the Closing, Seller shall
deliver or shall cause to be delivered to Buyer the following:
(a) a grant deed or deeds in recordable form, conveying to Buyer
fee title to the Real Property interests that are designated in
SCHEDULE 1.1(A) as parcels that are owned in fee simple by Seller,
subject only to Permitted Encumbrances;
(b) the Assignment and Undertaking;
(c) bills of sale and assignments conveying and assigning to
Buyer all other Assets;
(d) copies of corporate resolutions duly adopted by the
respective Boards of Directors of Seller and by the shareholder of
Seller, authorizing and approving each such corporation'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 each such corporation;
(e) certificates, dated as of the Closing Date, of appropriate
officers of each of Seller certifying that, to the best of such
officer's knowledge and belief, as of Closing all of the respective
representations and warranties by or on behalf of Seller contained in
this Agreement are true and correct and all respective covenants and
agreements of Seller to be performed prior to or as of Closing
pursuant to this Agreement have been performed;
(f) certificates of incumbency, dated as of the Closing Date, for
the officers of each Seller making certifications for Closing, or
executing deeds, the Assignment and Undertaking, the bill of sale, the
Information Systems Agreement (as hereinafter defined), the Medicare
Reconciliation Note, other agreements delivered at Closing or this
Agreement;
(g) certificates of corporate existence or good standing
certificates of each of Seller and Paracelsus from the State of
California, dated the most recent practical date prior to Closing;
(h) subject to Section 1.2 hereof, all of Seller's Contracts,
Leases, commitments, books, records and other data relating to the
Assets, and simultaneously with such delivery and Seller will take all
such steps as may reasonably be required to put Buyer in actual
possession and operating control of the Assets;
(i) the Information Systems Agreement;
(j) any documents required by the Title Company (as defined
herein) in order for the Title Company to deliver the Title Policies
(as defined herein) subject only to the Permitted Encumbrances;
(k) such agreements as may be necessary to permit Buyer to
negotiate, deposit and otherwise receive for its own account the
Assets and receive payments on the Medicare Reconciliation Note; and
(l) the Medicare Reconciliation Note.
2.3 ACTION OF BUYER AT CLOSING. At the Closing, Buyer shall deliver
to Seller the following:
(a) payment in cash or immediately available funds of an amount
equal to (i) the Purchase Price (less the amount of the Earnest Money
Deposit as the same may be increased by the terms of the Earnest Money
Deposit Agreement ), plus (ii) Working Capital;
(b) the Assignment and Undertaking;
(c) copies of corporate resolutions duly adopted by the Board of
Directors of Buyer authorizing and approving Buyer'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;
(d) certificates, dated as of the Closing Date, of appropriate
officers of Buyer certifying that, to the best of such officers'
knowledge and belief, as of Closing all of the respective
representations and warranties by or on behalf of the Buyer contained
in this Agreement are true and correct and all respective covenants
and agreements of Buyer to be performed prior to or as of Closing
pursuant to this Agreement have been performed;
(e) a certificate of incumbency, dated as of the Closing Date,
for the officers of Buyer making certifications for Closing or
executing the Assignment and Undertaking, the Information Systems
Agreement, or this Agreement;
(f) a certificate of corporate existence of Buyer from the State
of California, dated the most recent practical date prior to Closing;
and
(g) the Information Systems Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller represents and warrants to Buyer that:
3.1 CORPORATE CAPACITY. (a) Seller and Paracelsus are corporations
duly organized, validly existing and in good standing under the laws of
California, with all requisite corporate power and authority to own,
operate and lease their respective properties and to carry on their
businesses as now being conducted.
(b) SCHEDULE 3.1(B) contains a complete and correct copy of the
Articles of Incorporation and all amendments thereto to the date hereof and
the Bylaws as presently in effect of Seller and Paracelsus.
3.2 CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS,
ETC. (a) The execution and delivery by Seller and Paracelsus of this
Agreement and the performance of this Agreement and the other agreements
and transactions contemplated hereby to be executed and performed by Seller
and Paracelsus:
(i) are within Seller's and Paracelsus' respective corporate
powers, are not in contravention of the terms of Seller's or
Paracelsus' Articles of Incorporation, Bylaws or any amendments
thereto;
(ii) except as set forth on SCHEDULE 3.2, upon the Closing, (A)
will not result in any breach or acceleration of maturity of any
indenture, agreement, lease or instrument, to which Seller or
Paracelsus is a party or by which Seller or Paracelsus or any of the
Assets is bound, (B) will not constitute a violation of any judgment,
decree, or order of any court of competent jurisdiction applicable to
Seller or Paracelsus, (C) will not violate any law, rule or regulation
of any governmental authority applicable to the Seller, Paracelsus,
the Business 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 Paracelsus, and, as of the Closing, the other agreements and
instruments contemplated hereby to be executed and delivered by Seller
and/or Paracelsus will have been duly and validly executed and delivered by
Seller and, where applicable, Paracelsus. Upon approval of this Agreement
and the other agreements and instruments contemplated hereby by the Board
of Directors of Seller and Paracelsus, this Agreement will constitute, and
upon such approval and their execution and delivery, the other agreements
and instruments contemplated hereby to be executed and delivered by Seller
and/or Paracelsus will constitute, the valid, legal and binding obligation
of each of Seller and, where applicable, Paracelsus, enforceable against
each of them in accordance with their respective terms except as such
enforceability may be limited by bankruptcy, reorganization, insolvency, or
other laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies.
3.3 FINANCIAL STATEMENTS. SCHEDULE 3.3 hereto consists of true,
correct and complete copies of the unaudited income statement of Seller
with respect to the Business for the nine months ended October 31, 1997
(the "INCOME STATEMENT"), and the Balance Sheet as of the end of such
period (the Income Statement and the Balance Sheet are referred to
collectively as the "FINANCIAL STATEMENTS"). The Income Statement has been
prepared from and is in accordance with the books and records of Seller,
and fairly presents the operations of Seller for the period indicated,
except (a) as indicated by the notes thereto and (b) with respect to any
changes which would result from year-end audit adjustments which in the
aggregate are not materially adverse to the business or financial condition
of Seller.
3.4 POST-BALANCE SHEET RESULTS. Since October 31, 1997, with respect
to the Assets there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the Assets, taken as a
whole;
(b) any sale, lease, transfer or disposition by Seller of the
Assets except sales of inventories, supplies or accounts receivable
and except for sales, leases, transfers or dispositions of non-
material portions of the Assets 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, generally affecting the hospital service area
in which the Hospital is located, generally affecting the healthcare
industry, or resulting from the announcement of the transactions
contemplated hereby.
3.5 LICENSES. Seller has all licenses and permits relating to the
ownership of the Assets and operation of the Business as are necessary and
required for such ownership and operation except where the failure to
obtain such licenses or permits would not have a material adverse effect on
the ownership of the Assets or the operation of the Business. SCHEDULE 3.5
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 by Seller from the agency responsible for such
SCHEDULE 3.5 item, for which noncompliance with such notice or directive
would likely cause the revocation, suspension or diminution in term for
such item, all of which are, to Seller's knowledge, in good standing.
3.6 CERTAIN CONTRACTS. SCHEDULE 3.6 lists all contracts to which
Seller is a party involving obligations in respect of the Business for
payment, performance of services or delivery of goods in excess of $5,000
or which require Seller to continue to perform for a period of longer than
12 months ("SCHEDULED CONTRACTS"). Seller has delivered or made available
to Buyer true and correct copies of all Scheduled Contracts. Except as set
forth in SCHEDULE 3.6, all of the Contracts which Buyer has agreed to
assume pursuant to the Assignment and Undertaking are valid and binding
obligations of the parties thereto, are in full force and effect, and are
enforceable against the parties thereto in accordance with their respective
terms. To the best of Seller's knowledge, neither Seller nor any of the
other parties to those Contracts which Buyer has agreed to assume pursuant
to the Assignment and Undertaking (i) are in default under such contracts
or (ii) consider Seller to be in default thereunder. Except as expressly
noted in SCHEDULE 3.6, to the best of Seller's knowledge, no party to any
of those Contracts which Buyer has agreed to assume pursuant to the
Assignment and Undertaking intends to terminate or adversely modify its
agreement(s) with respect thereto, or adversely change the volume of
business done thereunder.
3.7 CERTAIN LEASES. SCHEDULE 3.7 lists all leases to which Seller is
a party in respect of the Business involving annual obligations on the part
of Seller for the payment of rent in excess of $5,000 or involving rental
of real property by Seller as lessor, lessee, sublessor or sublessee
("SCHEDULED LEASES"). Seller has delivered or made available to Buyer true
and correct copies of all Scheduled Leases. All of the Scheduled Leases
which Buyer has agreed to assume pursuant to the Assignment and Undertaking
are valid and binding obligations of the parties thereto, are in full force
and effect, and are enforceable against the parties thereto in accordance
with their terms; and to the best of Seller's knowledge, 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. To the best of Seller's
knowledge, neither Seller nor any of the other parties to any of those
Scheduled Leases which Buyer has agreed to assume pursuant to the
Assignment and Undertaking (i) is in default under any such Scheduled Lease
or (ii) considers Seller to be in default thereunder. Seller has not, as
lessor under any such Scheduled Lease, accepted prepaid rent more than one
month in advance or waived any rights or obligations thereunder. No
consents are required for Seller's assignments of the Scheduled Leases to
be assigned except as disclosed in SCHEDULE 3.7.
3.8 TITLE TO PROPERTIES AND RELATED MATTERS. On the Closing Date
Seller will hold and convey to Buyer good, valid and marketable title to
all of the Assets free and clear of all title defects, liens, pledges,
claims, charges, rights of first refusal (or other claims of interest),
security interests or other encumbrances except as otherwise hereinafter
provided. On the Closing Date, neither the Real Property owned by Seller
nor designated in SCHEDULE 1.1(A) as a Real Property interest for which a
Title Policies shall be obtained, will be subject to any recorded
mortgages, deeds of trust, liens, encumbrances, easements, rights of way,
claims, charges, equities, covenants, conditions, restrictions,
reservations, limitations or other matters affecting such Real Property or
Real Property interest except (i) those matters set forth in SCHEDULE
3.8(A); (ii) unrecorded leases as set forth in SCHEDULE 1.1(D); (iii) liens
for current taxes and assessments; (iv) zoning and building laws,
ordinances, resolutions and regulations; (v) such inchoate unfiled
mechanics', carriers', workmen's, repairman's and other statutory liens, if
any, which liens do not in the aggregate exceed $25,000 in amount; (vi)
those matters set forth in Schedule B, Part 1, Exceptions from Coverage
shown on the title insurance commitment for Real Property (Order No. 4-
62797DMS) issued by the Title Company (defined below) and dated November
21, 1997, as the same may be revised following receipt of a survey of each
property but only to the extent that Seller has not created or caused any
such matters, or has no knowledge of any such matters, or has disclosed
them in this Agreement; (vii) rights-of-way, building or use restrictions,
exceptions, variances, reservations or other limitations or matters
affecting title to or use of the Real Property (excluding any variance or
nonconforming use known to Seller but not disclosed in this Agreement)
which do not materially impair the value of the Real Property or materially
interfere with or impair the current use of the Real Property or any
portion thereof or for which title insurance coverage is being provided to
Buyer; (viii) such easements, rights-of-way, covenants, conditions,
restrictions, reservations, limitations and other encumbrances as do not
materially interfere with or impair the current use of the Real Property or
any portion thereof or materially impair the value of the Real Property,
but only to the extent that Seller has not created or caused any such
matters, or has no knowledge of any such matters, or has disclosed them in
this Agreement, or to the extent they are disclosed as special exceptions
in the title commitments provided to Buyer; and (ix) such minor defects,
irregularities, encumbrances, easements, rights-of-way, encroachments and
clouds on title as typically exist with respect to properties similar in
character to such Real Property, are not caused by or through Seller after
the date of this Agreement, and as do not (A) materially interfere with or
impair the current use and operation or any reasonably foreseeable future
development or operation of the Real Property or any part thereof, or (B)
materially impair Seller's title to such Real Property, or the value of the
Real Property, any portion thereof or Seller's interest therein, or (C)
prevent Seller from having good valid and marketable title to the Real
Property, or (D) materially limit the scope or coverage of the Title
Policies to be issued to Buyer (collectively "PERMITTED ENCUMBRANCES").
SCHEDULES 1.1(A) AND 1.1(D) include true and accurate descriptions of all
Real Property owned or leased by Seller and all tangible personal property
(excluding cash, property with an aggregate value in a non-material amount
and the other Excluded Assets) leased by Seller and reflected on Seller's
financial statements. Set forth on SCHEDULE 3.8(B) is a list of the most
current title insurance policies, commitments or binders issued to Seller
with respect to any of the Real Property or any portion thereof, and true
and accurate copies thereof have been supplied to Buyer. Seller is not
aware of and has not received any notice from any governmental agency of
any violation of any building, zoning or other law, ordinance or regulation
in respect of such property or structures or their use by Seller. To the
best knowledge of Seller and other than as set forth on SCHEDULE 3.8(A), no
portion of the Assets is subject to street or utility easements or a
condemnation or similar proceeding. The Assets consisting of owned
personal property are subject to no liens or encumbrances except the
security interests of record set forth on SCHEDULE 3.8(C), which Schedule
is a copy of a Uniform Commercial Code ("UCC") search duly obtained by
Seller in the last 30 days and which search shows security interests of
record relating to such Assets in the State of California. Seller agrees
to remove all security interests relating to property interests of Seller
included in the Assets reflected on such UCC search, if any, prior to the
Closing (except those 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 date of Closing. SCHEDULE 3.8(D) describes all
construction work, if any, which Seller or its predecessors have contracted
for and which is presently in progress in respect of the Business, and also
contains a good faith estimate, as of the date of this Agreement, of the
cost to complete each such project.
3.9 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.9 lists any "employee benefit
plans" that are described in the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"), that cover one or more employees of Seller and that are
sponsored or contributed to by Seller (other than any defined contribution
"employee pension benefit plan" as defined in ERISA, that does not require
any contribution by Seller, any paid time-off policy or
vacation/holiday/sick leave policy, and any "employee welfare benefit plan"
as defined in ERISA, that is sponsored by Seller). Neither Seller nor, to
the best knowledge of Seller and Paracelsus, any other person has engaged
in a transaction with respect to any employee benefit plan listed or
required to be listed on SCHEDULE 3.9 which could subject Buyer to a
penalty under ERISA or a tax under the Internal Revenue Code of 1986, as
amended (the "CODE"). Each of the employee benefit plans listed or
required to be listed on SCHEDULE 3.9 has been operated and administered in
accordance with applicable law, including without limitation ERISA, except
for any such failure which would not subject Buyer to any penalty or other
liability. Seller has not incurred nor presently expects to incur any
liability under Title IV of ERISA that could result in liability to Buyer.
Each employee benefit plan listed or required to be listed on SCHEDULE 3.9
that is a group health plan within the meaning of Section 5000(b)(1) of the
Code is in compliance with the provisions of Section 4980B(f) of the Code,
except for any such non-compliance which would not subject Buyer to any
penalty or liability.
3.10 LITIGATION OR PROCEEDINGS. SCHEDULE 3.10(A) contains a list of
each lawsuit or legal proceeding to which Seller is a party and which arose
out of or in connection with the Business or, to Seller's knowledge, which
has been threatened against Seller in connection with the Business. Except
as disclosed on SCHEDULE 3.10(B), Seller has not received notice of any
formal or informal investigations or proceedings of the California
Department of Health Services, the United States General Accounting Office,
the Health Care Financing Administration, the Department of Justice, the
Federal Trade Commission or other similar governmental agencies (except for
any investigations being conducted in the ordinary course of business and
applicable to all hospitals) with respect to the Business. There are no
such claims, actions, proceedings or investigations of which Seller has
received written notice pending or, to the best knowledge of Seller,
threatened challenging the validity or propriety of the transactions
contemplated by this Agreement. Except as disclosed in SCHEDULE 3.10(B),
Seller is not now, or has never been, a party to any injunction, order, or
decree restricting the method of the conduct of the Business or the
marketing of any of the Business' services, nor, except as disclosed on
SCHEDULE 3.10(B), has any governmental agency investigated or requested
(other than on a routine basis) information with respect to such methods of
business or marketing of services; Seller has not received any notice that
Seller currently violates any federal, state, or local law, ordinance, rule
or regulation, which could have an adverse effect on the Business and, to
the best of Seller's knowledge, no such claim is or has been threatened;
and there have been no developments materially adverse to Seller with
respect to any pending or threatened claim, action or proceeding of an
administrative or judicial nature, including but not limited to those
referred to in SCHEDULES 3.10(A) AND (B), and including without limitation
any such pending or threatened claim, action or proceeding arising from or
relating to (i) the assertion by any governmental authority of any
retroactive adjustment of the sums which Seller was entitled to receive
pursuant to government or third party reimbursement programs such as (but
not limited to) Medicare and Medi-Cal, or (ii) any 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 application for
reimbursement pursuant to the government or third party reimbursement
programs referred to in the preceding clause (i) while such individuals
were officers or employees of Seller.
3.11 INSURANCE. SCHEDULE 3.11 summarizes the professional and
general liability insurance policies covering the Business, and the
property insurance policies covering the Assets, which SCHEDULE 3.11
reflects the policies' numbers, terms, identity of insurers, amounts and
coverage. All such policies are currently in effect and to the best
knowledge of Seller there are no defaults or alleged defaults thereunder.
3.12 SELLER'S EMPLOYEES. (a) SCHEDULE 3.12 contains a list of all
of Seller's employees as of December 1, 1997, which list includes the then
current estimated annualized salaries based on then current hourly wage
rates and scheduled hours worked, department and job title or other summary
of the responsibilities of such employees, any severance arrangements with
such employees. Since December 1, 1997 there has not been any increase in
the compensation payable or to become payable by Seller to any of its
officers, employees or agents, or any bonus payment or arrangement made to
or with any such person, nor has there been any change in Seller's
personnel policies, except (in either case) in the ordinary course of
Seller's business in accordance with established personnel policies or
except as described in SCHEDULE 3.12.
(b) Except as set forth on SCHEDULE 3.12, none of Seller's employees
are employed by Seller pursuant to an employment agreement and/or severance
agreement. SCHEDULE 3.12 includes a list of all employees of Seller (other
than "part-time employees" as such term is defined in the Worker Adjustment
and Retraining Notification Act, hereinafter referred to as the "WARN Act")
who have been terminated or laid-off or whose employment with Seller
otherwise has ceased since November 1, 1997.
3.13 LABOR MATTERS. Seller does not have any collective bargaining
agreements with any labor union and there are no current negotiations with
a labor union. Seller is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice except
where such non-compliance would not have a material adverse effect on the
Business or the Assets. Seller has not received any notice of an unfair
labor practice complaint against Seller pending before the National Labor
Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending against or affecting Seller, nor has Seller received
notice of any threatened labor strike, dispute, slowdown or stoppage. No
grievance which might have an adverse effect on Seller or any such
arbitration proceeding arising out of or under collective bargaining
agreements is pending and Seller has no knowledge that any claim therefor
exists. Seller has not experienced any employee strikes since the date it
acquired the Business. 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 has current contractual arrangements with third
party payors. A complete and accurate copy of the existing third party
payor contracts of the Hospital has been furnished or made available to
Buyer. The Hospital is presently in compliance with all of the terms,
conditions and provisions of such contracts except where failure to be in
compliance would not have a material adverse effect on the Business or the
Assets. SCHEDULE 3.14(A) lists all third-party payor and managed care
agreements which are currently in effect and identifies all risk pools to
which Seller is a party.
(b) The Hospital is accredited as a general hospital by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") and
complete and accurate copies of its most recent survey reports, lists of
deficiencies, if any, and Certificates of Accreditation relating to the
Hospital have been furnished or made available to Buyer.
(c) The Hospital is qualified for participation in the Medicare
program. A complete and accurate copy of each existing Medicare contract
has been furnished or made available to Buyer. The Hospital is presently
in compliance with all of the terms, conditions and provisions of such
contracts except where failure to be in compliance would not have a
material adverse effect on the Business or the Assets.
(d) The Hospital is qualified for participation in the Medi-Cal
program. A complete and accurate copy of Seller's existing Medi-Cal
contracts have been furnished or made available to Buyer. The Hospital is
presently in compliance with all of the terms, conditions and provisions of
such contracts except where failure to be in compliance would not have a
material adverse effect on the Business or the Assets.
(e) The Hospital participates in the CHAMPUS program. The Hospital
is presently in compliance in all material respects with all of the terms
and conditions of such participation except where failure to be in
compliance would not have a material adverse effect on the Business or the
Assets.
(f) Complete and accurate copies of all fire marshal reports in
Seller's possession or, to the best of Seller's knowledge, available to
Seller with respect to the Hospital after January 1, 1997, have been, or
will be prior to Closing, furnished to Buyer.
(g) Seller has not received any written notice from any applicable
governmental agency, nor does it have knowledge, of any violation of local
building codes, ordinances or zoning laws applicable to the Hospital.
(h) Copies of all licensure survey reports of the Hospital by the
California Department of Health Services issued from and after January 1,
1996, that are in Seller's possession have been, or will be prior to
Closing, supplied or made available to Buyer.
(i) Copies of the Bylaws of the medical staffs of the Hospital,
together with copies of minutes of meetings thereof since January 1, 1996,
that are in Seller's possession have been supplied or will prior to Closing
be made available to Buyer. 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 Hospital's medical staffs or appealing any such
decision of such medical staff.
(j) The Hospital is licensed by the California Department of Health
Services as a general acute care hospital authorized to operate 123 beds in
its existing location in Chico, California. CCH is presently in compliance
with all the terms, conditions and provisions of such license except where
failure to be in compliance would not have a material adverse effect on the
Business or the Assets. SCHEDULE 3.14(J) contains a copy of such license.
The facilities, equipment, staffing and operations of CCH satisfy the
applicable hospital licensing requirements of the State of California
except where failure to be in compliance would not have a material adverse
effect on the Business or the Assets.
(k) The Hospital currently has a memorandum of understanding with the
appropriate peer review organization, and complete and accurate copies of
all such memoranda of understanding have been furnished or made available
to Buyer, or will prior to Closing be made available to Buyer.
(l) Seller is in material compliance with all applicable laws and
regulations that relate to the Assets and Business, except where the
failure thereof would not have a material adverse effect on the Business.
(m) Seller has not received any written notice of, nor has knowledge
of, any threatened termination, cancellation or limitation, or other
material adverse modification or change in, Seller's relationship with any
payor, physician, medical group (including IPAs), the medical staff or
suppliers.
3.15 REIMBURSEMENT MATTERS. Seller has delivered or made available
to Buyer complete copies of all Medicare cost reports and related forms
that have been filed during the past three years with respect to the
Business. Seller has not received any written notices that either Medicare
or Medi-Cal has 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 such Financial Statements. Seller has not been
indicted, convicted or, to the best of Seller's knowledge, subject to an
investigation of the Office of Inspector General of the Department of
Health and Human Services (the "OIG") or other applicable government
agency, or received a notice from the OIG or other applicable government
agency, with respect to a violation or an alleged violation of the Medicare
and Medi-Cal fraud and abuse provisions of the federal Social Security Act
or the physician ownership and referral provisions of the Ethics in Patient
Referral Act, and to the best of Seller's knowledge, has Seller not
committed a violation of any of such provisions.
3.16 TAXES. Seller has filed all tax returns required by law to be
filed by it 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. Seller has not conducted the Business or engaged in any
transaction which would cause the transaction contemplated hereby to be
taxable under the California sales and use tax laws.
3.17 ENVIRONMENTAL. Except as disclosed in the McLaren/Hart Phase I
Site Assessment of the Chico Community Hospital Acute Care Facility
(October 29, 1997) obtained by Buyer relating to the Assets (the
"Environmental Reports"):
(a) Seller is currently, and at all times has been, in
compliance with all Environmental Laws (as defined below) except where
failure to comply with such Environmental Laws would not have a material
adverse effect on the Business;
(b) Seller has all permits, authorizations or other
approvals required under environmental laws to operate the Assets and the
Real Property, and is in compliance with all such permits, authorizations
and approvals except where failure to comply with such permits,
authorizations or approvals, individually or in the aggregate, would not
have a material adverse effect on the Business;
(c) Seller has not generated, handled, stored, disposed of or
released any Hazardous Substance (as defined below) on any of the Real
Property, except in compliance with applicable Environmental Laws except
where failure to comply with such Environmental Laws, individually or in
the aggregate, would not have a material adverse effect on the Business;
(d) There are no polychlorinated biphenyls (PCBs) or
transformers, capacitors, ballasts or other equipment that contains
dielectric fluid containing PCBs at levels in excess of fifty parts per
million (50 ppm) present, constructed, placed, deposited, stored, disposed
of or located on the Real Property;
(e) There are currently no aboveground or underground
storage tanks for the storage of Hazardous Substances located on the Real
Property, and, to the best knowledge of Seller, there have never been any
such aboveground or underground storage tanks located on the Real Estate
Property;
(f) Seller has not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that Seller is not in full compliance with
Environmental Laws. There is no Environmental Claim (as defined below)
pending or threatened against Seller or with respect to the Assets.
(g) There are no present or, to the best of Seller's knowledge,
past actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the generation, storage, release, emission,
discharge, presence or disposal of any Hazardous Substance, that could form
the basis of any Environmental Claim against Seller under any Environmental
Law in effect at any time at or prior to the Closing.
(h) The inclusion of any item disclosed in SCHEDULE 3.17 and the
inclusion of the reference to the Environmental Reports hereinabove does
not constitute an admission by Seller, Paracelsus or Buyer that any matters
disclosed in such schedule or Environmental Report constitutes a violation
of any Environmental Law.
The following terms shall have the following meanings:
"ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity 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, whether
or not owned or operated by the 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 California), and local
environmental, health or safety laws, regulations, ordinances, rules and
policies and common law in effect on the date hereof and the Closing Date
relating to the generation, use, refinement, handling, treatment, removal,
storage, production, manufacture, transportation, disposal, arranging for
disposal, emissions, discharges, releases or threatened releases of
Hazardous Substances, or otherwise relating to protection of human health,
worker safety or 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 and regulations listed
below:
Federal Resource 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, 49 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.
Federal Occupational Safety & Health Act of 1970, 29 U.S.C. <section>
651, ET SEQ.
Medical Waste Tracking Act of 1988, 42 U.S.C. <section> 6992, ET SEQ.
Marine Protection Research & Sanctuaries Act of 1972, 33 U.S.C.
<section> 1401, ET SEQ.
The Act to Prevent Pollution from Ships, 33 U.S.C. <section> 1901, ET
SEQ.
California Environmental Quality Act of 1970 (CEQA), California
Government Code, <section>65914.
California Hazardous Waste Control Law, California Health & Safety
Code, Section 25100 et seq..
Nuclear Regulatory Commission Regulations, 10 C.F.R. Part 20 and 10
C.F.R. Part 61.
Public Health Service Regulations, 42 C.F.R. Part 72.
Food & Drug Administration Regulations, 21 C.F.R. Parts 58 and 211.
U.S. Department of Transportation Regulations, 49 C.F.R. Parts 171-
179.
U.S. Department of Agricultural Regulations, 9 C.F.R. Parts 50-56.
U.S. Postal Service Regulations, 39 Part III.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous waste, pollutants
or substances, explosives, radioactive materials, or Medical Waste (as
defined below), including, without limitation, friable asbestos, asbestos-
containing material, PCBs, petroleum products and byproducts, substances
defined or listed as "hazardous substance", "toxic substance", "toxic
pollutant", or similarly identified substance or mixture, in or pursuant to
any Environmental Law.
"MEDICAL WASTE" means any substance, pollutant, material, or
contaminant listed or regulated under the Medical Waste Tracking Act of
1988, 42 U.S.C. <section> 6992, ET SEQ., 49 C.F.R. <section> 173, 186,
and/or the California Waste Management Act, California Health & Safety
Code, <section>117600 et seq.
3.18 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or specifically reserved against (which reserves are believed
adequate in amount) in the Financial Statements, to the best of Seller's
knowledge, Seller did not have, at the date of such Financial Statements,
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due) required to be
reflected thereon or included therein, except for any liabilities which
have been incurred since the dates of such Financial Statements in the
ordinary course of business consistent with past practice or which have
been discharged or paid in full prior to the date hereof.
3.19 BROKERAGE. Neither Seller nor Paracelsus has engaged any
financial advisor, broker or similar entity in respect of the transactions
contemplated hereby which may be entitled to a fee or commission in
connection with such transactions, other than ABN-AMRO Chicago Corporation.
Any fee due to such firm is solely a liability of Seller and Paracelsus.
3.20 NO MISLEADING STATEMENTS. No representation or warranty by
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 representatives in connection with the transactions contemplated hereby
(the Schedules, including any supplement or amendment thereto, and such
Closing documents are herein referred to, collectively, as the "ADDITIONAL
DOCUMENTS"), contains or will contain any untrue statement of a material
fact, or, to the best knowledge of Seller and Paracelsus, omits or will
omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein
or therein not misleading. Copies of all documents described on any
Schedule hereto which have been furnished, provided or made available to
Buyer or are hereafter furnished, provided or made available to Buyer are
or shall be, to the best of Seller's knowledge, true, correct and complete.
3.21 DISCLAIMER OF WARRANTIES. The Assets will be sold by Seller and
purchased by Buyer in their condition at Closing, "AS IS", WITH NO WARRANTY
OF HABITABILITY OR FITNESS FOR HABITATION, with respect to the Real
Property, and WITH NO WARRANTIES, INCLUDING THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, with respect to the
Personal Property and Operating Inventory, any and all of which warranties
(both express and implied) Seller hereby disclaims. Nothing in this
Section 3.21 shall be construed to limit the scope or effect of the express
representations and warranties contained elsewhere in this Article III.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND SYSTEM.
As of the date hereof, Buyer and the System represent and warrant to
Seller and Paracelsus the following:
4.1 BUYER AND SYSTEM CAPACITY. (a) Buyer and System are nonprofit
public benefit corporations duly organized, validly existing and in good
standing under the laws of the States of California, with all requisite
corporate power and authority to own, operate and lease their properties.
(b) SCHEDULE 4.1 contains complete and correct copies of the Articles
of Incorporation and all amendments thereto to the date hereof and the
Bylaws as presently in effect of Buyer and System.
4.2 CORPORATE AUTHORIZATION/CONTRACT BINDING. (a) The execution,
delivery and performance by Buyer and System of this Agreement and the
other agreements and transactions contemplated hereby to be executed and
performed by Buyer:
(i) are within Buyer's and System's corporate powers, are not in
contravention of the terms of Buyer's or System's Articles of
Incorporation, Bylaws or any amendments thereto and have been duly
authorized by the board of directors of Buyer and System; and
(ii) except as set forth on SCHEDULE 4.2, on the Closing Date,
(A) will not result in any breach of any indenture, agreement, lease
or instrument to which Buyer or System is a party or by which Buyer or
System is bound, (B) will not constitute a violation of any judgment,
decree or order of any court of competent jurisdiction applicable to
Buyer or System, (C) will not violate any law, rule or regulation of
any governmental authority applicable to Buyer or System 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 Buyer and System, and, as of the Closing, the other agreements and
instruments contemplated hereby will have been duly and validly executed
and delivered by Buyer and System. 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 Buyer and System, enforceable against each in accordance
with their respective terms except as such enforceability may be limited by
bankruptcy, reorganization, insolvency, or other laws affecting the
enforcement of creditors' rights generally or the availability of
equitable remedies.
4.3 BROKERAGE. Buyer has not engaged any financial advisor, broker or
similar entity in respect of the transactions contemplated hereby which may
be entitled to a fee or commission in connection with such transactions.
5. COVENANTS OF SELLER 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 access to the Assets and will furnish to Buyer
such additional financial data and other information relating to the Assets
or the Business as Buyer may from time to time reasonably request; provided
such access shall occur at such time or times as will not disrupt delivery
of care to patients. Seller agrees to cooperate reasonably with 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, its 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 transaction herein
contemplated. Seller shall provide Buyer, when normally available, monthly
statements of income with respect to the Business for the interim period
between the effective date of this Agreement and Closing.
5.2 OPERATIONS. With respect to the ownership of the Assets and the
operation of the Business, Seller will use its reasonable best efforts to:
(a) carry on the Business in substantially the same manner as it
has been conducted heretofore and not make any change in personnel
(other than in the ordinary course of business) or operations, and not
make any change in finance or accounting policies;
(b) maintain the Assets in as good working order and condition as
at present, ordinary wear and tear excepted;
(c) perform in all material respects Seller's obligations under
agreements relating to or affecting the Assets or the Business;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use commercially reasonable efforts to maintain and preserve
the business organization of Seller intact, retain their present
employees and maintain their relationship with suppliers, customers
and others having business relations with Seller;
(f) within a reasonable time prior to Closing, permit Buyer to
make offers to any of the personnel who work at the Hospital or
otherwise in the Business for employment by Buyer subsequent to the
Closing, which personnel shall be allowed by Seller to accept or
reject such offers without penalty (for the purpose of this Section
5.2(f), "penalty" shall not be interpreted to refer to the
availability, or lack of availability of any severance benefit);
(g) without the consent of Buyer, which will not be unreasonably
withheld, Seller will not incur or commit to any obligation with
respect to (i) individual purchase orders in excess of $40,000 for
supplies or equipment, (ii) within any 30 day period, any two or more
purchase orders in excess of $450,000, (iii) any single capital
expenditure in excess of $25,000, or (iv) within any 30 day period,
any two or more items involving capital expenditures in excess of
$50,000; and
(h) except in the ordinary course of business, Seller will not
enter into, amend, or cancel Scheduled Contracts or Scheduled Leases
that will be assumed by Buyer, without Buyer's prior written consent.
5.3 CERTAIN CHANGES. Without the prior written consent of Buyer,
which consent will not be unreasonably withheld, Seller will not:
(a) sell or agree to sell any of the Assets except for the
depletion of inventories in the ordinary course of business; or
(b) engage in any transaction out of the ordinary course of
business, including any sale, transfer, lease, encumbrance or granting
of a lien upon or a security interest in any portion of the Assets
(except as provided in Section 5.3(a) above).
5.4 CASUALTY. If, prior to the Closing, the Hospital's facilities or
other Assets sustain damage or destruction that Seller has not repaired
prior to Closing, then the following provisions shall apply:
(a) If --
(i) such damage or destruction results in either Hospital
facility being unusable for its current purpose, or
(ii) the cost to repair such damage or destruction, or to replace
such damaged or destroyed facilities or other Assets
(collectively, the "Cost to Repair"), is greater than $2,500,000
and Seller does not have insurance coverage therefor,
then Buyer may elect either (1) to terminate this Agreement and
all obligations of the parties hereunder or (2) to complete the
transactions contemplated herein and receive as a credit to the
Purchase Price the amount of such Cost to Repair and thereafter
Seller shall have no obligation to repair such damage or
destruction;
(b) If subparagraph (a) does not apply, then:
(i) If Seller has insurance coverage for the Cost to Repair any
damage or destruction, then Buyer may elect either (1) to receive
from Seller all of the proceeds of such insurance paid or payable
and pay to Seller the full Purchase Price hereunder or (2) to
allow Seller to retain all such insurance proceeds subject to a
reduction of the Purchase Price in the amount thereof; and
(ii) If and to the extent that the Cost to Repair any damage or
destruction is not covered by insurance, including without
limitation costs that are subject to a deductible or self-insured
retention, then the Purchase Price shall be reduced by an amount
equal to that portion of the Cost to Repair such damage or
destruction that is not covered by insurance.
5.5 TITLE MATTERS.
(a) At the Closing, Seller shall convey to Buyer free and clear of
all liens and encumbrances except the Permitted Encumbrances good,
marketable and insurable fee simple title to all of the Real Property
designated in SCHEDULE 1.1(A) as parcels that are owned by Seller, and all
rights, privileges and easements appurtenant thereto. Such conveyances
shall be made by duly executed and acknowledged grant deeds (or assignments
with warranty of good title with respect to the portions of the Real
Property leased to Seller) which deeds and assignments shall be in the form
of APPENDIX 5.5 hereto (such deeds and assignments are herein collectively
referred to as "SELLER'S DEEDS"). Evidence of delivery of such good,
marketable and insurable title shall be the issuance of one or more ALTA
Owner's Policies of Title Insurance [(10-17-92)] with extended coverage, in
an aggregate amount equal to $___,000,000 (the "Title Policies") which
Seller shall deliver to Buyer at the Closing. In the event Seller delivers
more than one Title Policy at Closing, each such Title Policy shall be in
an amount requested by Buyer, subject, however, to the above limitation on
the aggregate amount of such Title Policies. The Title Policies will be
issued by Commonwealth Land Title Company 888 W. 6th St., Los Angeles,
California 90017 (such company hereinafter called the "TITLE COMPANY"), and
shall insure fee simple or leasehold (as applicable) title to the Real
Property, and the appurtenant rights, privileges and easements, in the
Buyer, subject only to Permitted Encumbrances and such other exceptions as
Buyer shall approve in writing. The policies for the Real Property for
which "as built" surveys are obtained pursuant to Section 5.5(b)(ii) below
shall contain endorsements insuring over all printed or typed general
exceptions for which insurance may be obtained by the delivery of such
surveys. All Title Policies shall contain a zoning endorsement and such
other endorsements as specified herein. Additional endorsements desired by
Buyer shall be at Buyer's expense.
(b) Seller has furnished to Buyer or will furnish to Buyer within 10
days prior to the Closing Date all of the following:
(i) TITLE INSURANCE COMMITMENTS. With respect to all of the Real
Property that are designated in SCHEDULE 1.1(A) as parcels that are
owned in fee simple by Seller, a currently dated commitment or
commitments for the Title Policies issued by the Title Company in
accordance with the requirements set forth in Section 5.5(a) above.
All examination fees, title premiums and other costs and expenses
relating to such commitments and the Title Policies and all required
endorsements shall be paid by Seller at Closing.
(ii) ALTA SURVEYS. An "as built" survey with respect to the
Hospital and each Real Property designated in SCHEDULE 1.1(A) hereto
as a Real Property for which an as-built survey shall be obtained.
Such surveys shall be prepared by surveyors licensed in the State of
California and shall be in accordance with ALTA-ASCM standards for
Class A urban-commercial surveys, shall be dated as of a date within
240 days prior to the Closing Date, shall be certified in favor of
Buyer and the Title Company, and shall be in sufficient detail to
provide the basis for the Title Company to issue the Title Policies
without survey exceptions. All such survey costs and expenses shall be
paid by Seller.
(iii) BOUNDARY SURVEYS. Boundary surveys for each Real Property
designated in SCHEDULE 1.1(A) as a Real Property for which a boundary
survey shall be obtained. Such surveys shall be prepared by surveyors
licensed in the State of California. All such survey costs and
expenses shall be paid by Seller.
5.6 BEST EFFORTS TO CLOSE. Seller and Paracelsus shall use their
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. Seller and/or Paracelsus shall notify Buyer as soon as
practicable of any event or matter which comes to Seller's or Paracelsus'
attention which may reasonably be expected to prevent the conditions to
Seller's obligation being met.
5.7 INSURANCE RATINGS. Seller shall take all action reasonably
requested by Buyer to enable Buyer to succeed to the Worker's Compensation
and Unemployment Insurance ratings, insurance policies, deposits and other
interests of Seller and other ratings for insurance or other purposes
established by Seller; provided, however, that the covenants contained in
this sentence shall not require Seller to expend its own funds to satisfy
such obligations, nor shall such covenants permit Buyer to acquire Seller's
deposits without compensation to 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.
5.8 NOTICE; EFFORTS TO REMEDY. Seller will notify Buyer promptly in
writing of, and contemporaneously will provide Buyer with true and
complete copies of any and all information and documents relating to, and
will use their best efforts to cure as soon as practicable (or by any
subsequent date agreed upon by the parties), any event, transaction or
circumstance occurring that causes or would cause any covenant or agreement
of Seller or Paracelsus under this Agreement to be breached, or that
renders or would render untrue any representation or warranty of Seller
contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Seller and Paracelsus also
will use their reasonable best efforts to cure, as soon as practicable (or
by any subsequent date agreed upon by the parties), any violation or breach
of any representation, warranty, covenant or agreement made by either of
them in this Agreement. Seller and Paracelsus shall have a reasonable time
within which to effect a cure of such breach or misrepresentations before
Buyer may terminate this Agreement (to the extent such remedy is available
to Buyer pursuant to Section 11.1(d) hereof); provided, however, that after
the date established by the parties for Closing, Buyer may terminate this
Agreement (to the extent such remedy is available to Buyer pursuant to
Section 11.1(d) hereof) unless such breach or misrepresentation has been
cured to the reasonable satisfaction of Buyer . Furthermore, Seller and
Paracelsus shall notify Buyer promptly in writing of any event, transaction
or circumstance occurring that causes or would cause any covenant or
agreement of Buyer under this Agreement to be breached, or that renders or
would render untrue any representation or warranty of Buyer contained in
this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Buyer shall have a reasonable time in which
to effect a cure of such breach or misrepresentation before Seller may
terminate this Agreement (to the extent such remedy is available to Seller
pursuant to Section 11.1(d) hereof); provided, however, that after the date
established by the parties for Closing, Seller may terminate this Agreement
(to the extent such remedy is available to Seller pursuant to Section
11.1(d) hereof) unless the breach or misrepresentation has been cured to
the reasonable satisfaction of Seller and Paracelsus. The failure of
Seller to notify Buyer of any such discovered event, transaction or
circumstance shall not release Buyer from any liability to Seller
resulting from the breach attendant to such discovered event, transaction
or circumstance; provided, however, that, unless Buyer had independent
knowledge of such event, circumstance or condition, Buyer's liability shall
be limited to the damages that would have nonetheless resulted to Seller
had Seller disclosed such discovered event, transaction or circumstance to
Buyer prior to Closing.
5.9 COOPERATION WITH BUYER. Seller shall cooperate in all reasonable
respects with Buyer in connection with Buyer's efforts to obtain regulatory
consents to and approvals of the transfer of the Licenses described in
SCHEDULE 3.5 hereof. Seller also agrees that upon the written request of
Buyer, Seller will use its reasonable best efforts to obtain any consents
necessary for the assignment of the contracts and leases to be assumed by
Buyer pursuant to the Assignment and Undertaking. The parties agree that
Buyer will be primarily responsible for obtaining all such approvals and
consents.
6. INDEMNIFICATION.
6.1 INDEMNITY BY BUYER AND SYSTEM. From and after Closing, Buyer and
System shall indemnify, defend and hold harmless Seller and Paracelsus and
their respective officers, 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, reasonable attorneys' fees, 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 of or arising from the
following:
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Buyer or
System in this Agreement or the other agreements contemplated hereby;
(ii) any liability imposed on any Buyer Indemnified Party to the
extent such liability has been expressly assumed by Buyer pursuant to
the Assignment and Undertaking;
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "BUYER ADDITIONAL
DOCUMENTS") furnished or to be furnished by or on behalf of Buyer or
System at Closing under this Agreement;
(iv) any liability, obligation or indebtedness of Buyer or any
alleged liability, obligation or indebtedness of Buyer , including
without limitation those relating to contractual obligations,
liabilities to Medicare or Medi-Cal programs, tax liabilities or
professional malpractice or general liability claims, arising out of
the operation of the Business after the Cut-Off Point which is imposed
on or made against any Buyer Indemnified Party, except to the extent
such liability or alleged liability arises out of a liability of
Seller that has not been expressly assumed by Buyer pursuant to the
Assignment and Undertaking;
(v) any claims for fees or commissions of a broker, agent or
similar entity employed or alleged to have been employed by or on
behalf of Buyer in connection with the transactions contemplated
hereby; and
(vi) any liability imposed on any Buyer Indemnified Party arising
out of the use by Buyer (or its assignees) of Seller's Drug
Enforcement Agency Registration Numbers pursuant to the powers of
attorney delivered in accordance with Section 9.10 of this Agreement.
6.2 INDEMNITY BY SELLER AND PARACELSUS. From and after the Closing,
Seller and Paracelsus, jointly and severally, shall indemnify, defend and
hold harmless Buyer and its respective officers, directors, employees,
shareholders, affiliates and agents (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 of or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Seller or
Paracelsus in this Agreement or the other agreements contemplated
hereby;
(ii) any liability, obligation or indebtedness of Seller or
Paracelsus or any alleged liability, obligation or indebtedness of
Seller or Paracelsus, including without limitation those relating to
contractual obligations, liabilities (including recapture of
depreciation) to the Medicare or Medi-Cal programs, tax liabilities or
professional malpractice or general liability claims, arising out of
the operation of the Business prior to the Cut-Off Point which is
imposed on or made against any Seller Indemnified Party, except to the
extent certain contractual obligations have been expressly assumed by
Buyer pursuant to the Assignment and Undertaking;
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "SELLER ADDITIONAL
DOCUMENTS") furnished or to be furnished by or on behalf of Seller or
Paracelsus at Closing under this Agreement; and
(iv) any claims for fees or commissions of a broker, agent or
similar entity employed or alleged to have been employed by or on
behalf of Seller or Paracelsus in connection with the transactions
contemplated hereby.
6.3 CLAIMS PROCEDURE. (a) If a party to this Agreement ("CLAIMING
PARTY") learns of a circumstance giving rise to a claim for another party
to this Agreement ("PERFORMING PARTY") to make payment, performance, or
indemnity under this Agreement, then the Claiming Party shall give the
Performing Party written notice thereof within a reasonable time
considering the circumstances. No delay in giving notice to the Performing
Party shall work a forfeiture of the rights of Claiming Party or shall
limit the Performing Party's obligations under this Agreement. If,
however, a delay in giving notice within a reasonable time prejudices the
Performing Party and materially impairs its ability to mitigate loss, then
the Performing Party shall have no obligation to pay that part of a loss
caused by the delay.
(b) The Performing Party shall defend, and shall have the right to
settle, claims or suits by third parties that are payable or that are to be
indemnified by the Performing Party under this Agreement. The Claiming
Party shall reasonably cooperate with the Performing Party in the defense
of claims and suits that the Performing Party defends, and the Performing
Party shall reimburse the Claiming Party for out-of-pocket expenses
incurred in cooperating at the Performing Party's request. The Claiming
Party shall not settle such claims or suits defended by the Performing
Party without the Performing Party's prior consent, which shall not be
unreasonably withheld. The Claiming Party shall have the right to approve
defense counsel selected by the Performing Party, which approval shall not
be unreasonably withheld, and the right fully to participate in the defense
of such claims and suits at the Claiming Party's sole cost and expense.
The Claiming Party shall have the right to defend and settle claims or
suits without prejudice to any of their rights against the Performing Party
under this Agreement if the Performing Party declines or is unable to
undertake the defense of a claim or suit within a reasonable time after the
Performing Party's receipt of notice thereof. If the Performing Party
disputes the Claiming Party's entitlement to indemnity and asserts the
right to defend a claim or suit, and if the Claiming Party reasonably
believes that the Performing Party's control of the defense of a claim or
suit might prejudice the Claiming Party, then the Claiming Party shall have
the right to defend such claim or suit. Performing Party shall have the
right fully to participate in the defense of such claim or suit, and
Claiming Party shall not settle such claim or suit without the Performing
Party's prior consent, which Performing Party shall not unreasonably
withhold.
6.4 LIMITATION ON CLAIMS.
(a) No Seller Indemnified Party nor Buyer Indemnified Party shall
make any claim for indemnification pursuant to Sections 6.1 or 6.2 with
respect to any matter unless:
(i) the amount of the Damages arising out of such matter is in
excess of $25,000 (a "RELEVANT CLAIM"); and
(ii) the aggregate amount of all Damages with respect to which a
Relevant Claim is being made by an Indemnified Party against any or
all of the applicable Indemnifying Parties (together with all such
Relevant Claims previously made by the applicable Indemnified Parties
against the applicable Indemnifying Parties) exceeds $250,000.
(b) Notwithstanding the provisions of Section 6.4(a), any indemnified
claim having its basis in any of the following shall not be subject to the
thresholds established by such provisions: (A) a breach of the
representations, warranties, covenants and agreements made in
1.3(c)(ii),3.15, 3.16, 3.17, 3.18, 3.19 and 4.3, (B) fraud or intentional
misrepresentation, (C) a breach by Buyer to pay or observe any obligation
of Seller assumed by Buyer pursuant to the Assignment and Undertaking, (D)
a breach by Seller of its obligations under Section 1.3 hereof to pay or
observe any of its obligations for trade payables, contracts, leases or
other liabilities reflected on Seller's financial statements (other than
those assumed by Buyer pursuant to the Assignment and Undertaking) and to
satisfy prior to Closing all obligations secured by a lien on, or a
security interest in, the Assets, (E) any breach by Buyer to pay the
Purchase Price hereunder, or (F) a breach by Buyer or Seller of its
obligation under Section 1.7.1 and 1.7.2 to pay any post-Closing adjustment
to the Purchase Price required by such Sections.
(c) Neither Seller nor Paracelsus shall be under any liability and no
claim under Section 6.2 of this Agreement shall be made to the extent that
any Damages may be recovered under a policy of insurance, except that
(subject to the other limitations set forth in this Agreement) Seller and
Paracelsus shall be liable to the extent of any deductibles under such
insurance policy.
(d) Neither Buyer nor System shall be under any liability and no
claim under Section 6.1 of this Agreement shall be made to the extent that
Paracelsus or Seller discovered such breach prior to the Closing Date and
failed to disclose such breach to Buyer as provided in Section 5.8 hereof,
except that Buyer and System shall be liable to the extent Buyer or System
had knowledge of such breach or to the extent Paracelsus or Seller would
have nonetheless suffered damages had such breach been disclosed to Buyer
prior to the Closing Date.
(e) Neither Seller nor Paracelsus shall be under any liability and no
claim under Section 6.2 of this Agreement shall be made to the extent that
Buyer discovered such breach prior to the Closing Date and failed to
disclose such breach to Paracelsus and Seller as provided in Section 9.9
hereof, except that Paracelsus and Seller shall be liable to the extent
either Paracelsus or Seller had knowledge of such breach or to the extent
Buyer would have nonetheless suffered damages had such breach been
disclosed to Paracelsus or Seller prior to the Closing Date.
(f) If an Indemnifying Party is liable to an Indemnified Party for
breach of any representation, warranty or undertaking, the liability of the
Indemnifying Party shall be reduced and any amount paid by such
Indemnifying Party shall be refunded to the extent that the Indemnified
Party is eligible to obtain a reduction in its liability for tax (whether
by way of credit or otherwise and calculated assuming that the Indemnified
Party is taxed at the maximum rate applicable to such entity) which it
would not have been eligible for had the breach which gave rise to
liability of the Indemnifying Party not arisen.
(g) Each Indemnified Party shall cooperate in all reasonable respects
with the reasonable requests of its applicable Indemnifying Parties in the
conduct of litigation, the making of settlements and the enforcement of any
right of contribution to which the Indemnified Parties may be entitled from
any person or entity in connection with the subject matter of any
litigation subject to indemnification hereunder. In addition, the
Indemnified Parties shall, upon the reasonable requests by their applicable
Indemnifying Parties or counsel selected by such Indemnifying Parties,
attend hearings and trials, assist in the securing and giving of evidence,
assist in obtaining the presence or cooperation of witnesses, make
available its own personnel, and assist in effecting settlements; and shall
take such action as is reasonably necessary and appropriate in connection
with such litigation. Seller Indemnified Parties shall not, except at
their own cost, voluntarily make any payment, assume any obligation, incur
any expense, or settle or compromise any claim without the express approval
of Seller Indemnifying Parties in connection with any matter that is
subject to indemnification hereunder.
(h) The indemnification provided under Sections 6.1 and 6.2 shall
survive the execution and delivery of this Agreement, the closing of the
transactions contemplated hereby and the satisfaction of all other
obligations of any party hereto under this Agreement. In respect of the
indemnification provided under Section 6.1(i) and 6.2(i) relating to or
arising out of a breach of a representation or warranty, and with respect
to the indemnification provided under Sections 6.1(iii) and 6.2(iii)
relating to or arising out of a misrepresentation in or omission from a
Buyer Additional Document or a Seller Additional Document and which
constitutes a "bring down" of a party's representations and warranties made
in this Agreement, no indemnification may be asserted under this Agreement
unless the party making the claim gives the party against whom the claim is
to be made notice of such claim before the end of the applicable Survival
Period (as defined in Section 12.18 hereto); PROVIDED, that such claim
shall survive the expiration of the Survival Period if notice thereof, as
required by Section 6.3, was given prior to the expiration of the Survival
Period. In respect of the other indemnification provided under Sections
6.1 and 6.2, there shall be no limitation on when a claim for
indemnification hereunder may be sought other than as set forth in Section
6.1 or 6.2, and the parties hereby waive any such limitation which may be
imposed by law.
(i) If a Performing Party pays a claim to a Claiming Party pursuant
to this Agreement, then such party shall be subrogated to all rights of the
party to or for whom the claim was paid against others for recovery of the
loss, except affiliates, employees, officers, directors, successors or
assigns of the party to or for whom the claim was paid.
6.5 JURISDICTION; SERVICE OF PROCESS. (a) Each of the parties hereto
severally agrees that any legal action or proceeding with respect to this
Agreement or to enforce any judgment obtained against any party hereto in
connection with this Agreement may be brought by any other party hereto or
any Seller Indemnified Party or Buyer Indemnified Party in the courts of
the State of California or in the United States District Courts which are
located in the City of Sacramento, California, or any other court to the
jurisdiction of which such party hereto or any of its respective properties
is or may be subject. In connection with any action or proceeding relating
to this Agreement, each of the parties hereto severally irrevocably submits
to the jurisdiction of the courts of the State of California and of the
United States District Courts located in the city of Sacramento,
California, and irrevocably waives any present or future objection to venue
in any such court, and any present or future claim that any such court is
an inconvenient forum. Nothing herein shall affect the right of the a
party to serve process in any manner permitted by law or to bring any civil
suit, action or proceeding against any party hereto or its respective
property in the courts of any jurisdiction in which venue may be granted.
(b) For the purposes of any legal action or proceeding brought by any
party hereto or by any Seller Indemnified Party or any Buyer Indemnified
Party with respect to this Agreement, each party hereto hereby irrevocably
designates and appoints CT Corporation System, currently located at 818 W.
7th Street, Los Angeles, California 90017, as its authorized agent for
service of process in the State of California. Each party hereto and each
Seller Indemnified Party and each Buyer Indemnified Party shall for all
purposes be entitled to treat such designee of each party hereto as the
authorized agent to receive for and on its behalf service of writs or
summons or other legal process in the State of California. In the event
that, for any reason, such agent or his successor shall no longer serve as
agent of any party hereto to receive service or process in the State of
California, such party shall appoint a person in the State of California as
a successor so to serve and advise the other parties hereto so that at all
times each party hereto will maintain an agent to receive service of
process in the State of California on its behalf with respect to this
Agreement. In the event that, for any reason, service of legal process
cannot be made in the manner described above, such service may be made in
such other manner as permitted by law.
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; COMPLIANCE WITH COVENANTS. 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 or Paracelsus 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 Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer,
Reynolds & Chalk L.L.P., counsel to Seller and Paracelsus, dated as of the
Closing Date, substantially in the form of APPENDIX 7.2.
7.3 PRE-CLOSING CONFIRMATIONS. Buyer shall not have received in
writing any notice from the California Department of Health Services or any
other applicable agencies or licensing authorities that Buyer shall not be
issued effective as of or promptly after the Closing a license to operate
the Hospital and licenses or permits to provide all presently authorized
supplemental and special services.
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 against any party hereto (and remain
unresolved) 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; nor shall any party hereto have received
notification from any governmental agency of the United States of America
or the State of California of such agency's current intent to seek
injunctive relief in anticipation of the sale of the Assets to prohibit the
sale of the Assets to Buyer.
7.5 [OMITTED]
7.6 TITLE POLICIES AND SURVEYS. Buyer and its counsel shall have
received:
(a) The form of the Title Policies which shall be issued on ALTA
Owner's Policy [(10-17-92)] form with extended coverage and contain
the endorsements described in Section 5.5(a).
(b) The surveys described in Section 5.5.
7.7 CONVEYANCES AND DELIVERY OF TITLE POLICIES. Seller shall have
delivered to Buyer all of Seller's Deeds and the Title Policies and
required endorsements or irrevocable title insurance commitments in
accordance with Section 5.5(a).
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 INFORMATION SYSTEMS AGREEMENT. Paracelsus and Buyer shall have
executed and delivered an Information Systems Agreement (the "INFORMATION
SYSTEMS AGREEMENT"), in substantially the form attached hereto as APPENDIX
7.9.
7.10 CERTIFICATE OF NON-FOREIGN STATUS. Seller shall have duly
executed and delivered to Buyer a Certificate of Non-Foreign Status in the
form attached hereto as APPENDIX 7.10.
7.11 HSR APPROVAL. The all applicable waiting periods specified in
the HSR Act shall have expired or been terminated.
7.12 MEDICARE RECONCILIATION NOTE. Seller shall have delivered to
Buyer a promissory note in the form of APPENDIX 7.12 hereto (the "MEDICARE
RECONCILIATION NOTE"). The original principal balance of the Medicare
Reconciliation Note will be an amount equal to the book value of the
Medicare Receivables, net of the allowance for doubtful accounts and
contractual adjustments related thereto, all as reflected on the Interim
Balance Sheet. As provided in such Medicare Reconciliation Note and in
Sections 1.6 and 1.7 hereof, the principal balance of such note will be
adjusted to reflect changes in such net book value amount between the date
of the Interim Balance Sheet and the date of the Closing Balance Sheet.
7.13 BUYER AND SYSTEM BOARD APPROVAL. The Board of Directors of
Buyer and System shall have approved this Agreement and the transactions
contemplated hereby.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND PARACELSUS.
The obligations of Seller and Paracelsus hereunder are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Seller and Paracelsus:
8.1 REPRESENTATIONS/WARRANTIES; COMPLIANCE WITH COVENANTS. 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 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
Davis Wright Tremaine LLP, counsel to Buyer , an opinion dated as of the
Closing Date and addressed to Seller and Paracelsus, substantially in the
form of APPENDIX 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 against any party hereto (and remain
unresolved) 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; nor shall any party hereto have received
notification from any governmental agency of the United States of America
or the State of California of such agency's current intent to seek
injunctive relief in anticipation of the sale of the Assets to prohibit the
sale of the Assets to Buyer or the parties' execution.
8.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the Buyer shall
have delivered to Seller all documents, agreements and instruments
contemplated by Section 2.3.
8.5 HSR APPROVAL. The all applicable waiting periods specified in
the HSR Act shall have expired or been terminated.
8.6 SELLER AND PARACELSUS BOARD APPROVAL. The Board of Directors of
Seller and Paracelsus shall have approved this Agreement and the
transactions contemplated hereby.
9. PARTICULAR COVENANTS OF BUYER.
9.1 BEST EFFORTS TO CLOSE. Buyer and System shall use their 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 shall notify Seller as soon as practicable of any
event or matter which may reasonably be expected to prevent the conditions
to Buyer's obligations being met.
9.2 EMPLOYMENT OF EMPLOYEES OF SELLER; ADDITIONAL EMPLOYEE MATTERS.
(a) (i) Prior to Closing, Buyer shall offer, effective as of the Cut-Off
Point, employment to all employees of Seller (except as provided in
subsection (d) below) who are on the active payroll of Seller with respect
to the Business on the Closing Date (including for this purpose any
employee of Seller who elects to be treated as a retiree of Seller as of
the Cut-Off Point for the purpose of qualifying for certain employee
benefits). Buyer shall give the same offer of employment to any employee
who is in paid or unpaid inactive status as of the Closing, and who is
available for return to active status within 90 days after Closing (or at
such later date as may be required by applicable law). All such employees
who accept Buyer's offer of employment shall be referred to as the "Hired
Employees."
(ii) Each offer of employment under paragraph 9.2(a)(i) shall be for a
substantially equivalent position, and at a substantially similar wage or
salary, as provided by Seller to the Hired Employee immediately prior to
the Closing Date (or, as to any employee who is in paid or unpaid inactive
status as of the Closing Date who receives an offer of employment from
Buyer upon becoming available to return to active status, immediately prior
to the first day of such employee's paid or unpaid leave from Seller. As
to each Hired Employee, Buyer shall also provide employee welfare benefits
and paid time-off that are commensurate with those of other employees of
Buyer having similar positions. Buyer agrees that, for the purpose of
determining welfare benefits coverage and other related matters (including
eligibility and participation, but not vesting or benefit accrual, under
any Buyer pension benefit plan), each Hired Employee will be considered to
have commenced employment with Buyer on the date such Hired Employee
commenced uninterrupted employment with Seller (whichever is earlier).
Notwithstanding the preceding sentence, Buyer shall not be obligated to
provide Hired Employees any accrued sick or vacation days upon hiring them
except as and to the extent provided in Sections 9.2(e) and (f) hereof.
For the purpose of determining vesting and benefit accrual under all Buyer
pension benefit plans, each Hired Employee will be considered to have
commenced employment with Buyer on the Employment Commencement Date (as
defined below). Health benefits coverage provided by Buyer for Hired
Employees (and any dependents thereof) shall apply to covered expenses
incurred on and after the Employment Commencement Date, and Buyer agrees to
waive any limitations for pre-existing conditions with respect to any
conditions affecting any Hired Employees (and any dependents thereof);
subject to the following limitations: (x) the pre-existing condition
provisions of Seller's health benefit plans shall apply in lieu of the pre-
existing condition provisions of Buyer's plans to all Hired Employees (and
their dependents) who are eligible for benefits under Seller's health
benefits plans as of the Closing Date but who are subject to pre-existing
condition limitations as of the Closing Date and (y) the pre-existing
conditions limitations under Buyer's medical benefits plans shall apply to
any Hired Employee (and his or her dependents) who is not eligible for
benefits under Seller's health benefits plans as of the Closing Date, and
any such Hired Employee shall be treated as having been hired by Buyer on
the date such employee commenced employment with Seller for purposes of
applying such pre-existing condition limitations to such Hired Employee
(and such Hired Employee's dependents).
(iii) The term "EMPLOYEE COMMENCEMENT DATE" shall mean the day
immediately following the Cut-Off Point; provided, however, that with
respect to any employee who is in paid or unpaid inactive status as of the
Closing Date and to whom Buyer offers employment pursuant to this Section
9.2(a) the term "EMPLOYEE COMMENCEMENT DATE" shall mean such employee's
first day of employment with Buyer.
(b) Subject to the accuracy of Seller's representations and
warranties in Section 3.12 and SCHEDULE 3.12, (i) on and after the Closing
Date, Buyer shall be responsible for any and all notices required with
respect to Buyer's termination of employees, and (ii) any liabilities or
obligations arising under the WARN Act on or after the Closing Date shall
be those of Buyer and not Seller.
(c) After the Closing, Buyer will, upon reasonable request, give
assistance to human resources personnel of Paracelsus and/or Seller in the
post-closing administration of the respective employee benefit plans of
Seller as they apply to Hired Employees. For this purpose, "assistance"
includes reasonable access to the pre-Closing personnel records of Hired
Employees.
(d) Notwithstanding the provisions of Section 9.2(a), Buyer shall not
be required to offer employment to (i) any person whom Buyer could
otherwise terminate for cause, (ii) any person whom Buyer has prior to
Closing previously employed and subsequently terminated for cause, or (iii)
the President and Chief Executive Officer, the Chief Financial Officer or
the Chief Operating Officer of Seller.
(e) Buyer agrees that it shall assume, from and after the Cut-Off
Point, the accrued liability of Seller for accrued vacation, holiday and
sick day benefits and related taxes that relate to the Hired Employees, to
the extent such amounts are included in Working Capital. Buyer agrees that
(i) Hired Employees will be entitled to use such benefits in accordance
with the generally applicable policies and procedures established by Buyer
for use of paid leave, (ii) that such benefits will be in addition to any
holidays, vacation days, sick days or other paid leave earned by the Hired
Employees after the Cut-Off Point as employees of Buyer, and (iii) that
such benefits will not (unless previously paid by Seller) be eliminated by
Buyer without payment in full to the Hired Employees. Seller agrees that
it will furnish to Buyer at Closing a schedule (dated as of the most recent
date practicable prior to Closing) showing the name of each Hired Employee
(and each employee of Seller on inactive status) and as to each such person
the amount of accrued APL that such person has as of such date. As soon as
possible after the Closing, Seller will furnish to Buyer a schedule showing
such information as of the Cut-Off Point.
9.3 [OMITTED]
9.4 CONSENTS AND REGULATORY APPROVALS. Buyer acknowledge that
except as provided in Section 5.9 hereof, neither Seller nor Paracelsus
shall have any responsibility for obtaining any regulatory consents to and
approvals of the transfer of the Licenses described in SCHEDULE 3.5 hereof
or for obtaining any necessary consents to the assignment of the contracts
and leases. Buyer agrees to use its reasonable best efforts to secure such
approvals and consents as soon as practicable and prior to the Closing.
9.5 CHANGE OF NAME. Buyer agrees that it will cause all signs, if
any, incorporating the names "Paracelsus" and "Paracelsus Healthcare"(and
all variations thereof) which are located at any of the Real Property or
the improvements thereto to be removed or modified as soon as reasonably
practicable after the Closing Date and in any event within 30 days after
the Closing Date, such that such names are no longer used at such Real
Property or upon such improvements.
9.6 BUYER'S PAYMENT OF THE PURCHASE PRICE. Subject to the conditions
to Closing set forth in this Agreement, Buyer shall pay the Purchase Price
for the Assets in accordance with Section 2.3(a).
9.7 [OMITTED]
9.8 PRESERVATION AND ACCESS TO BOOKS AND RECORDS AFTER THE CLOSING.
(a) After the Closing, Buyer shall keep and preserve all medical records
and medical charts existing as of the Closing of patients of the Hospital
for so long as Buyer is required by law to maintain such records (but in no
event less that seven years, beginning on the Closing Date). Buyer
acknowledges that as a result of entering into this Agreement and operating
the Business, it will gain access to patient and other information which is
subject to rules and regulations concerning confidentiality. Buyer agrees
to abide by any such rules and regulations relating to the confidential
information it acquires. Buyer agrees after Closing to maintain the
patient records at the Business in accordance with applicable law
(including, if applicable, Section 1861(v)(i)(I) of the Social Security Act
(42 U.S.C. <section> 1395x(v)(1)(I)) and requirements of relevant insurance
carriers. In addition, Seller and Paracelsus shall be entitled to remove
from the Hospital any such patient records, but only for purposes of
pending litigation involving a patient to whom such records refer, as
certified in writing prior to removal by counsel retained by Seller or
Paracelsus in connection with such litigation; provided, however, that to
the extent Paracelsus or Seller are not required by subpoena or court order
to use originals of the patient records for such purposes, Paracelsus shall
(a) use copies of patient records, where appropriate and (b) cause Seller
to use copies of patient records. Any original patient records so removed
from the Business shall be promptly returned to Buyer following its use by
Seller or Paracelsus. Notwithstanding the foregoing provisions, Seller or
Paracelsus shall not be entitled to review, have access to, have copies of
or remove from the premises of the Business any medical records or patient
charts relating to any period after the expiration of the applicable
statute of limitations expires for the bringing of any action against
Seller for its ownership of the Business prior to the Cut-Off Point.
(b) After the Closing, Buyer shall keep and preserve all other
records of the Business existing as of the Closing which are delivered to
Buyer by Seller for a period of 7 years or such longer period (if any) as
such records are required to be kept and preserved by any federal or state
law or regulation. After the Closing, upon reasonable written notice by
Seller to Buyer, Seller shall be entitled, during regular business hours,
to have access to and make copies of all records pertaining to the
operation of the Business (other than medical records which shall be
governed by the provisions of Section 9.8(a) hereof) prior to the Closing
for any lawful corporate purpose.
(c) Should Buyer decide to dispose of any books or records which they
have been obligated to maintain pursuant to Section 9.8, Buyer shall advise
Seller in writing of such intention and Seller shall have not less than 60
days after receipt of such notice to elect in writing to have Buyer deliver
such records to Seller.
9.9 NOTICE; EFFORTS TO REMEDY. Buyer will notify Seller and
Paracelsus promptly in writing of, and contemporaneously will provide
Seller and Paracelsus with true and complete copies of any and all
information and documents relating to, and will use their best efforts to
cure as soon as practicable (or by any subsequent date agreed upon by the
parties), any event, transaction or circumstance occurring that causes or
would cause any covenant or agreement of Buyer under this Agreement to be
breached, or that renders or would render untrue any representation or
warranty of Buyer contained in this Agreement as if the same were made on
or as of the date of such event, transaction or circumstance. Buyer also
will use their best efforts to cure, as soon as practicable (or by any
subsequent date agreed upon by the parties), any violation or breach of any
representation, warranty, covenant or agreement made by either of them in
this Agreement. Buyer shall have a reasonable time within which to effect
a cure of such breach or misrepresentations before Seller or Paracelsus may
terminate this Agreement (to the extent such remedy is available to Seller
or Paracelsus pursuant to Section 11.1(d) hereof); provided, however, that
after the date established by the parties for Closing, Seller or Paracelsus
may terminate this Agreement (to the extent such remedy is available to
Seller or Paracelsus pursuant to Section 11.1(d) hereof) unless such breach
or misrepresentation has been cured to the reasonable satisfaction of
Seller or Paracelsus. Furthermore, Buyer shall notify Seller and
Paracelsus promptly in writing of any event, transaction or circumstance
occurring that causes or would cause any covenant or agreement of Seller or
Paracelsus under this Agreement to be breached, or that renders or would
render untrue any representation or warranty of Seller or Paracelsus
contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Seller and Paracelsus shall
have a reasonable time in which to effect a cure of such breach or
misrepresentation before Buyer may terminate this Agreement (to the extent
such remedy is available to Buyer pursuant to Section 11.1(d) hereof);
provided, however, that after the date established by the parties for
Closing, Buyer may terminate this Agreement (to the extent such remedy is
available to Buyer pursuant to Section 11.1(d) hereof) unless the breach or
misrepresentation has been cured to the reasonable satisfaction of Buyer .
The failure of Buyer to notify Seller and Paracelsus of any such discovered
event, transaction or circumstance shall not release Seller and Paracelsus
from any liability to Buyer resulting from the breach attendant to such
discovered event, transaction or circumstance; provided, however, that,
unless Seller or Paracelsus had independent knowledge of such event,
circumstance or condition, Paracelsus' and Seller's liability shall be
limited to the damages that would have nonetheless resulted to Buyer had
Buyer disclosed such discovered event, transaction or circumstance to
Seller and Paracelsus prior to Closing.
9.10 POWER OF ATTORNEY FOR D.E.A. REGISTRATION NUMBER(S) AND
CALIFORNIA PHARMACY LICENSE(S). Buyer covenants that it shall promptly
apply for all necessary United States Department of Justice Drug
Enforcement Agency ("D.E.A.") registration(s) or California Pharmacy
License(s) with respect to the Hospital as soon as possible. At or prior
to Closing, Seller shall execute in favor of Buyer one or more Powers of
Attorney for Order Forms authorizing Buyer or a representative of Buyer to
execute applications for books of official order forms and to sign such
order forms, under Seller's D.E.A. Registration Number(s) or Seller's
Pharmacy License(s) as required for all necessary controlled substances on
an interim basis until such time as Buyer shall receive approval of all
necessary D.E.A. registration(s) or California Pharmacy License(s). Seller
covenants that it shall cooperate with Buyer and provide such information
as Buyer may reasonably request in making all such applications for
registration or licensing.
9.11 GOVERNMENTAL APPROVALS. Buyer shall assist and cooperate with
Seller and Seller's representatives and counsel in obtaining all
governmental consents, approvals and licenses which Seller reasonably deems
necessary or appropriate and 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 contemplated herein.
9.12 FTC NOTIFICATION. Buyer shall, if and to the extent required by
law, (i) file all reports or other documents required under the HSR Act or
requested by the DOJ or the FTC under the HSR Act, and all regulations
promulgated thereunder, or in order to permit all applicable waiting
periods under the HSR Act to expire, (ii) seek early termination of such
waiting periods concerning the transactions contemplated hereby, and
(iii)comply promptly with any requests by the FTC or DOJ for additional
information concerning such transactions, so that the applicable waiting
period specified in the HSR Act will expire as soon as reasonably possible
after the execution and delivery of this Agreement. Buyer agrees to
furnish to Seller such information concerning Buyer as Seller needs to
perform its obligations under Section 10.3 of this Agreement.
10. PARTICULAR COVENANTS OF SELLER AND PARACELSUS.
10.1 REIMBURSEMENT OF BUYER. If any third party payor deducts any
amount from payments due Buyer in respect of claims against or amounts owed
by Paracelsus or Seller, then Paracelsus and/or Seller will promptly
reimburse Buyer for the amounts so deducted within 10 days after written
demand therefor by Buyer. Buyer agrees to give prompt notice to Seller and
Paracelsus of the assertion of any claim, formal or informal, by any third
party payor for which, if deducted by such third party payor, Buyer would
be entitled to reimbursement by Paracelsus and/or Seller hereunder and will
cooperate in good faith, at no out-of-pocket cost to Buyer, so as to permit
Paracelsus and/or Seller to mitigate the amount of any such claim by any
such third party payor.
10.2 GOVERNMENTAL APPROVALS. Seller and Paracelsus shall assist and
cooperate with Buyer and Buyer's representatives and counsel in obtaining
all governmental consents, approvals and licenses which Buyer reasonably
deems necessary or appropriate and 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 contemplated herein.
10.3 FTC NOTIFICATION. Seller and Paracelsus shall, if and to the
extent required by law, (i) file all reports or other documents required
under the HSR Act or requested by the DOJ or the FTC under the HSR Act, and
all regulations promulgated thereunder, or in order to permit all
applicable waiting periods under the HSR Act to expire, (ii) seek early
termination of such waiting periods concerning the transactions
contemplated hereby, and (iii)comply promptly with any requests by the FTC
or DOJ for additional information concerning such transactions, so that the
applicable waiting period specified in the HSR Act will expire as soon as
reasonably possible after the execution and delivery of this Agreement.
Seller and Paracelsus agree to furnish to Buyer such information concerning
Seller and Paracelsus as Buyer needs to perform its obligations under
Section 9.12 of this Agreement.
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 Section 5.4;
(c) by either 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 Paracelsus, on one hand, or
either Buyer or System on the other hand, commits a material breach of
any representation, warranty, covenant or agreement made herein, which
breach, if left uncured, would result in a material adverse effect on
the condition or value of the Assets or the operation of the Business,
by either Buyer or Seller, provided such terminating party did not
commit such breach and not an affiliate of the party that committed
such breach, and provided further that this right to terminate shall
be subject to the parties' rights to cure set forth herein; and
(e) by either Buyer or Seller if the Closing has not occurred by
the 180th day after the date of this Agreement as set forth in the
preamble hereof because a condition to the terminating party's
obligation to close set forth, in respect of Buyer in Article 7, or
such later date as permitted under Section 2.1(b), and, in respect of
Seller and Paracelsus in Article 8, was not satisfied on such date,
unless the date for Closing has been extended by the mutual agreement
of the parties hereto.
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
parties 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 6.1(v), 6.2(v), 12.8, 12.9 and 12.21 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 following termination under Section 11.1(d) in
the event such party's 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. Any and all claims or
awards for damages (including without limitation punitive damages)
following termination under Section 11.1(d), together with any and all
claims for damages by the non-breaching party under the Earnest Money
Deposit Agreement, shall not exceed $25,000,000. Parties specific
agreement to and acknowledgment of the preceding:
_______________[Paracelsus initials], _______________[CCH initials],
_______________[Enloe initials], and _______________[System initials].
12. GENERAL.
12.1 EXHIBITS, SCHEDULES AND OTHER INSTRUMENTS. Each Exhibit,
Certificate, Appendix and Schedule, if any, to this Agreement shall be
considered a part hereof as if set forth herein in full. Any fact disclosed
on one Schedule hereto shall be deemed to be disclosed on each other
applicable schedule. Buyer shall have 10 days following receipt of any
Schedule not provided on the date of execution of this Agreement to approve
or disapprove of any such Schedule. Seller shall have the right to update
any Schedule prior to Closing, which updated Schedule shall also be subject
to Buyer's approval. Buyer shall not unreasonably disapprove of any
updated Schedule that reflects only changes resulting from operations of
the Hospital in the ordinary course. Upon receiving notice from Buyer of a
disapproved Schedule, Seller shall use its best efforts to remove or remedy
any item or event disclosed in the disapproved Schedule, but if sit is
unable to do so within 10 business days, Buyer shall have the option of
waiving its disapproval or terminating this Agreement without liability to
either party.
12.2 PRE-CLOSING ACCESS. Seller shall give Buyer, its accountants,
counsel, and other representatives access to the premises and offices of
the Hospital, management and supervisory employees of the Hospital, and
make such information as Buyer may reasonably request available to Buyer,
as may be necessary for Buyer to examine the Assets and Business being
acquired. No such inspection by Buyer shall unreasonably interfere with
Seller's conduct of business in the ordinary course.
12.3 TERMINATING COST REPORT. Seller agrees to file a terminating
cost report in connection with third party receivables of the Business with
applicable agencies and shall provide Buyer with a copy thereof prior to
such filing.
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 either party, the 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 either party or either
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.
12.6 CHOICE OF LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA AND VENUE SHALL BE BUTTE OR SACRAMENTO COUNTIES.
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 legal representatives, successors
and assigns; provided, however, that no party may assign this Agreement
without the prior written consent of the other party.
12.8 COSTS OF TRANSACTION. Subject to the other terms and provisions
hereof, whether or not the transactions contemplated hereby shall be
consummated, the parties agree as follows: (i) Seller and Paracelsus will
pay the fees, expenses, and disbursements of Seller and Paracelsus and
their respective agents, representatives, accountants, and counsel incurred
in connection with the subject matter hereof and any amendments hereto; and
(ii) Buyer shall pay the fees, expenses and disbursements of Buyer and its
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter hereof and any amendments hereto. Buyer
shall pay any transfer taxes and recording fees resulting from the
consummation of the transactions contemplated hereby.
12.9 CONFIDENTIALITY. With respect to Confidential Information
provided by Paracelsus or Seller in connection with and relative to the
transactions contemplated by this Agreement, Buyer agrees to use reasonable
best efforts to cause its officers, employees, representatives and agents
to hold all such Confidential Information in strict confidence and only to
disclose such Confidential Information to such duly authorized persons as
are necessary to effect the transactions contemplated hereby, and, if
requested, to return all originals and copies of any such written
Confidential Information to Seller or Paracelsus in the event for any
reason the sale of the Assets is not consummated. Nothing in this Section
shall prohibit the use of such Confidential 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
Buyer's counsel, other requirements of law. Subject to Paracelsus'
disclosure obligations under federal securities laws, any release to the
public of information with respect to the transactions contemplated hereby
will be made only in the form and manner approved by the parties and their
respective representatives. Buyer agrees that it will not use, and will
not knowingly permit others to use, any Confidential Information in a
manner detrimental to the Business, Paracelsus or Seller or to their
competitive disadvantage. Buyer , its officers, employees and agents
recognize that any breach of this Section would result in irreparable harm
to Seller and Paracelsus and that therefore either Seller or Paracelsus
shall be entitled to an injunction to prohibit any such breach by Buyer and
its officers, employees and agents in addition to all of their other legal
and equitable remedies. For the purposes hereof, "CONFIDENTIAL
INFORMATION" shall mean all information of any kind concerning Paracelsus
or Seller obtained, directly or indirectly, from Paracelsus or Seller in
connection with the transactions contemplated by this Agreement except
information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known by Buyer to be
under an obligation to keep such information confidential, (iii) which is
or becomes known to the public (other than through a breach of this
Agreement), or (iv) which was in Buyer's possession prior to disclosure
thereof to Buyer in connection herewith.
12.10 WAIVER. The waiver by either 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.
12.11 TAX ALLOCATION. The allocation of the Purchase Price for tax
purposes shall be set forth in a statement prepared in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended, which
statement shall be prepared in a manner generally consistent with the form
of Internal Revenue Service Form 8594 and a manner consistent with the
Purchase Price allocation provided under Section 1.4. 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, and if, required by
applicable law.
12.12 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. Whenever any matter herein is
represented, warranted or stated herein to be to the "KNOWLEDGE OF," to the
"BEST KNOWLEDGE OF" or to the "BEST KNOWLEDGE AND BELIEF OF" Seller or
Paracelsus, or words of similar import, such representation, warranty or
statement shall mean all matters with respect to which (a) Seller has
received written notice or (b) any of the following persons has knowledge
or with reasonable inquiry under the circumstances would have knowledge:
any director or officer of Seller, or any administrator, assistant
administrator or controller at the Hospital.
12.13 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, when received by
telegraphic or other electronic means (including telefax and telex) or
overnight courier, or five days after being deposited in the United States
mail, with postage prepaid, certified mail, return receipt requested,
addressed as follows:
Buyer: N.T. Enloe Memorial Hospital
W. 5th Avenue & The Esplanade
Chico, California 95926
Attention: Chief Executive Officer
Seller: Paracelsus Healthcare Corporation
515 W. Greens Road, Suite 800
Houston, Texas 77067
Attention: President
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.
12.14 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.
12.15 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.
12.16 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.
12.17 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
during the Contract Period (as defined below) the benefit under any such
claims, rights, contracts, licenses, leases, commitments, sales orders or
purchase orders, including, without limitation, enforcement, at no 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. To the extent that any claim, right, contract,
license, lease, commitment, sales order or purchase order to be assigned to
or acquired by Buyer pursuant to this Agreement also applies to facilities
or operations other than those being sold pursuant hereto, then Seller also
agrees that during the Contract Period, upon the written request of Buyer,
it will use its reasonable best efforts to cause the services, property or
other benefits provided or made available under such claim, right,
contract, license, lease, commitment, sales order or purchase order to
continue to be available to Buyer on terms and conditions substantially
similar to those presently in effect. The term "CONTRACT PERIOD" shall
mean with respect to any contract or other right the period beginning on
the Closing Date and ending on the earlier of (a) the expiration of the
term of the given contract or other right and (b) the third anniversary of
the Closing Date.
12.18 SURVIVAL. The representations, warranties, covenants and
agreements made by the parties herein shall survive the Closing; provided,
however, that the representations and warranties made by the parties herein
shall expire on the first anniversary of the Closing Date except with
respect to matters for which Buyer has given notice of claim under Section
6.3, and except with respect to the representations and warranties set
forth in Sections 3.1, 3.2, 3.10, 3.15, 3.16, 3.17, 3.19, 4.1, 4.2 and 4.3
(and the indemnities with respect thereto), which shall survive for the
applicable statute of limitations periods (collectively, the "SURVIVAL
PERIOD").
12.19 ENTIRE AGREEMENT/AMENDMENT. Except for the Confidentiality
Agreement between Paracelsus and Superior California Medical Center (now
known as the System), dated June 16, 1997 (which Confidentiality Agreement
will survive the execution and delivery of this Agreement) and the Second
Amended and First Restated Earnest Money Deposit Agreement, 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 (other than the
Confidentiality Agreement) 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 (or in the Confidentiality Agreement) and no amendments or
modifications hereto, shall be binding unless made in writing and signed by
the party to be charged. Without limiting the foregoing, this Second
Amended and First Restated Asset Purchase Agreement for Chico Community
Hospital supersedes and replaces that certain Asset Purchase Agreement,
dated December 15, 1997 among Paracelsus, Seller, Buyer and System, with
respect to the Business.
12.20 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.
12.21 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.
12.22 PUBLIC ANNOUNCEMENT. Paracelsus and Seller, on one hand, and
Buyer, on the other hand, mutually agree that, prior to the Closing, no
party shall issue any press release or make any public announcement of the
transaction which is the subject of this Agreement without the prior
consent of each other party, except where a public announcement is required
by law as reasonably determined by such party. Additionally, Paracelsus
and Seller, on one hand, and Buyer on the other hand, each agrees that,
prior to the Closing, it will not, and will cause its officers, directors,
partners, employees, counselors and representatives not to, discuss any
aspects of this Agreement with any third party (other than their respective
representatives, lenders, prospective underwriters and counselors) without
the prior written consent of the other party hereto.
[The next page of this Agreement is the signature page, which is
page number "S-1."]
<PAGE>
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.
PARACELSUS HEALTHCARE CORPORATION
By:
Title:
SELLER:
CHICO COMMUNITY HOSPITAL, INC.
By:
Title:
N.T. ENLOE MEMORIAL HOSPITAL
By:
Title:
ENLOE HEALTH SYSTEM
By:
Title:
S:\8-K\PUR2AMD.AGR
<PAGE>
THIRD AMENDMENT TO
SECOND AMENDED AND FIRST RESTATED
ASSET PURCHASE AGREEMENT
FOR
CHICO COMMUNITY HOSPITAL
THIS THIRD AMENDMENT ("THIRD AMENDMENT") to the Second Amended and
First Restated Asset Purchase Agreement for Chico Community Hospital (the
"AGREEMENT") is entered into as of this 12th day of June, 1998, by and
between PARACELSUS HEALTHCARE CORPORATION ("PARACELSUS"), a California
corporation, CHICO COMMUNITY HOSPITAL, INC. ("CCH"), a California
corporation (Paracelsus and CCH together "SELLER"), and N.T. ENLOE MEMORIAL
HOSPITAL ("ENLOE"), a California nonprofit public benefit corporation, and
ENLOE HEALTH SYSTEM ("SYSTEM"), a California nonprofit public benefit
corporation (Enloe and System together "BUYER").
WHEREAS, Buyer and Seller have entered into the Agreement dated as of
December 15, 1997 for the purchase by Enloe of the Business of CCH (as
defined in the Agreement); and
WHEREAS, Buyer and Seller wish to amend certain terms of the Agreement
to reflect a later than anticipated closing of the Transaction.
NOW THEREFORE, BUYER AND SELLER AGREE AS FOLLOWS:
1. Section 2.1 of the Agreement is hereby amended in its entirety, as
follows:
2.1 CLOSING. Subject to the conditions set forth in Articles 7
and 8 hereof, the consummation of the sale and purchase of the
Assets contemplated by and described in this Agreement (the
"Closing") shall take place in San Francisco, California, at the
offices of Davis Wright Tremaine LLP or other agreed upon
location, at 10:00 A.M. local time on such date as may be agreed
by the parties, not to extend past June 30, 1998. The date on
which the Closing occurs is referred to herein as the "CLOSING
DATE." The Closing of the transactions shall be deemed to be
effective as of 11:59 P.M. (California time) on the Closing Date
or such other time which the parties may mutually designate in
writing. The time at which the Closing shall be deemed to be
effective is referred to herein as the "CUT-OFF POINT."
2. Section 11.1(e) is of the Agreement is hereby amended in its entirety,
as follows:
(e) by either Buyer or Seller if the Closing has not
occurred by June 30, 1998, because a condition to the terminating
party's obligation to close set forth, in respect of Buyer in
Article 7, and, in respect of Seller and Paracelsus in Article 8,
was not satisfied on such date, unless the date for Closing has
been extended by the mutual agreement of the parties hereto.
3. Except as amended by this Third Amendment, the Agreement is hereby
ratified and confirmed by the parties and shall remain in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLER:
PARACELSUS HEALTHCARE CORPORATION
a California corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
CHICO COMMUNITY HOSPITAL, INC.
a California corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
<PAGE>
BUYER:
N.T. ENLOE MEMORIAL HOSPITAL
a California nonprofit public benefit corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
ENLOE HEALTH SYSTEM
a California nonprofit public benefit corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
ASSET PURCHASE AGREEMENT
FOR
CHICO COMMUNITY REHABILITATION HOSPITAL
THIS ASSET PURCHASE AGREEMENT FOR CHICO COMMUNITY REHABILITATION
HOSPITAL (this "AGREEMENT"), dated as of December 15, 1997, among
Paracelsus Healthcare Corporation ("PARACELSUS"), a California corporation,
Chico Community Hospital, Inc.("CCH" and "SELLER"), a California
corporation and N.T. Enloe Memorial Hospital, a California nonprofit public
benefit corporation ("BUYER") and Enloe Health System, a California
nonprofit public benefit corporation ("SYSTEM").
RECITALS
A. WHEREAS, Paracelsus is the parent corporation of Seller;
B. WHEREAS, CCH leases and operates a 60 bed licensed general acute
care rehabilitation hospital at 340 W. East Avenue, Chico, California 95926
and conducts such business as Chico Community Rehabilitation Hospital
("CRH");
C. WHEREAS, Seller and Buyer have entered into that certain Asset
Purchase Agreement and First Amendment to Asset Purchase Agreement and
Earnest Money Deposit Agreement (collectively, the "CCH AGREEMENT")
whereunder Seller has agreed to sell to Buyer substantially all of the
assets, real and personal, tangible and intangible, used by Seller in the
operation of Chico Community Hospital (collectively, "CCH FACILITY");
D. WHEREAS, Paracelsus and CCH desire to sell to Buyer and Buyer
desires to purchase substantially all of the assets, real and personal,
tangible and intangible, used by CCH in the operation of CRH, including
Buyer's assumption of Seller's leasehold estate (the "CRH LEASE") in CRH
(collectively the "BUSINESS");
E. WHEREAS, Paracelsus, Seller, Buyer and System acknowledge the
uncertainty related to Seller's ability to assign the CRH Lease and for
Buyer to assume the CRH Lease based on the existing terms of the CRH Lease,
the difference in the corporate status of the parties and other factors
which render uncertainty in the ability of the parties to consummate that
transaction;
F. WHEREAS, Paracelsus, Seller, Buyer and System entered into that
certain First Amendment to Asset Purchase Agreement and Earnest Money
Deposit Agreement dated December 15, 1997 providing for Seller's granting
to Buyer of an option, and Buyer's exercise of that option, to accomplish
the sale and purchase of the Business pursuant to this Agreement.
W I T N E S S E T H:
NOW, THEREFORE, for and in consideration of the foregoing premises and
the agreements, covenants, representations and warranties hereinafter set
forth and 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. Subject to the terms and conditions of this
Agreement, 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) the assignment of leasehold interests held by Seller in real
property and other real property interests used in connection with the
operation of the Business or owned by Seller, including, without
limitation, the lease and related obligations from Bell Atlantic Tricon
Leasing Corporation and its successors or assigns (the "FACILITY LEASE")
for Chico Community Rehabilitation Hospital (the "HOSPITAL"), such
leasehold interests being more specifically described in SCHEDULE 1.1(A);
(b) all tangible personal property (excluding cash and cash
equivalents) owned by Seller and used in connection with the Business,
including, without limitation, all equipment, furniture, fixtures,
machinery, vehicles, office furnishings, instruments, leasehold
improvements and spare parts described in SCHEDULE 1.1(B), 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"), but excluding the personal property described in
Section 1.2(ix) hereof.
(c) all rights, to the extent assignable or transferable, to all
licenses, certificates of need, certificates of exemption, franchises,
accreditations and registrations and other licenses or permits issued in
connection with the Business (the "LICENSES"), including, without
limitation, the Licenses described in SCHEDULE 1.1(C);
(d) all of Seller's interest in and to those personal property leases
relating to the Business described in SCHEDULE 1.1(D) (all of such leases,
including the Facility Lease, being referred to collectively as the
"LEASES");
(e) all of Seller's interest in, to and under those contracts and
agreements relating to the Business set forth in SCHEDULE 1.1(E) (the
"CONTRACTS");
(f) any deposits, escrows, prepaid taxes or other advance payments
relating to any expenses of the Business, as identified on SCHEDULE 1.1(F)
as prepaid expenses to be transferred to Buyer (the "PREPAID EXPENSES"),
but excluding the prepaid expenses of Seller described in SCHEDULE 1.1(F)
hereof as prepaid expenses to be retained by Seller ("EXCLUDED PREPAID
EXPENSES");
(g) all inventories of supplies, drugs, food, janitorial and office
supplies and other disposables and consumables owned by Seller on the
Closing Date (as hereinafter defined) and located at the premises of Seller
or purchased by Seller for use in connection with the Business (the
"OPERATING INVENTORY");
(h) all accounts receivable with respect to the Business, including
all accounts receivable arising from the rendering of services to
inpatients and outpatients at the Hospital, billed and unbilled, recorded
or unrecorded, accrued and existing in respect of services up to the
effective date of the Closing, including those from any source, excluding,
however, the Excluded Receivables, as defined below (the "ACCOUNTS
RECEIVABLE");
(i) all documents, records, operating manuals and files, and computer
software owned by Seller, pertaining to or used in connection with the
Business, including, without limitation, all patient records, medical
records, financial records, equipment records, construction plans and
specifications, and medical and administrative libraries, but excluding
Seller's corporate minute books, minutes, tax records and any other records
of Seller required to be maintained as a matter of law.
(j) to the extent transferable by Seller, all unexpired warranties
and covenants not to compete relating to the Business for which Seller is
the beneficiary;
(k) to the extent transferable by Seller, all rights and interest of
Seller in all joint ventures, partnerships, corporations and other entities
listed on SCHEDULE 1.1(K) and accepted by Buyer;
(l) except as expressly excluded herein, all other property owned by
Seller, whether tangible or intangible, located at the premises of Seller
or used in connection with the Business whether or not reflected on the
balance sheet of Seller, and specifically including the name "Chico
Community Rehabilitation Hospital"; and
(m) an amount equal to the Medicare Receivables, which shall be
evidenced by the Medicare Reconciliation Note.
The foregoing, which (except for the Excluded Assets, as defined in
Section 1.2) are hereafter referred to, collectively, as the "ASSETS",
comprise substantially all of the property and assets used in the conduct
and operation of the Business as of October 31, 1997, including without
limitation, those assets reflected on the unaudited balance sheet of Seller
dated October 31, 1997 (the "BALANCE SHEET"), and all assets acquired by
Seller between October 31, 1997 and the Closing.
1.2 EXCLUDED ASSETS. The following items which are related to the
Assets 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 cash and cash equivalents and temporary investments;
(ii) (a) all amounts payable or to become payable to Seller from third
party payors in respect of periods prior to the Cut-Off Point in
respect of third party payor cost reports, including, without
limitation, Medicare and Medi-Cal cost reports, filed or to be
filed by Seller (the "COST REPORT RECEIVABLES"),
(b) all accounts receivable from Medicare, MediCal and CHAMPUS
with respect to the Business arising from the rendering of
services to inpatients and outpatients at the Hospital, billed
and unbilled, recorded and unrecorded, accrued and existing in
respect of services up to the effective date of Closing (such
accounts receivable, excluding the Cost Report Receivables,
are referred to herein as the "MEDICARE RECEIVABLES"), and
(c) the accounts receivable set forth on SCHEDULE 1.2(II) hereto,
(such receivables referred to in clauses (a), (b) and (c) above,
the "EXCLUDED RECEIVABLES");
(iii) Seller's corporate minute books, minutes, tax records and other
records of Seller required to be maintained by Seller as a matter
of law (it being understood that patient medical records of the
Hospital are not intended to be excluded);
(iv) all Excluded Prepaid Expenses of Seller identified in SCHEDULE
1.1(F) hereto;
(v) all supplies, drugs, food and other disposables and consumables
disposed of in the ordinary course of business prior to the
Closing;
(vi) the name "Paracelsus" and all variations thereof;
(vii) all rights and privileges under contracts, agreements and leases
not listed on SCHEDULES 1.1(D) OR 1.1(E) hereto;
(viii) any claims by Seller against third parties whether known or
unknown, contingent or otherwise, except those expressly
described in Section 1.1(b);
(ix) all intercompany accounts of Seller and Paracelsus and their
affiliates;
(x) any proprietary information contained in Seller's employee or
operation manual that does not pertain to the ongoing operations
of the Hospital;
(xi) all commitments, contracts, leases, capital leases, notes, and
agreements between Seller, Paracelsus and their affiliates.
(xii) the property described in SCHEDULE 1.2(XII) hereto.
1.3 ASSETS FREE AND CLEAR; ASSIGNMENT AND UNDERTAKING.
(a) The Assets shall be sold free and clear of all liabilities, liens
and encumbrances, except for Permitted Encumbrances (as hereinafter
defined). At Closing, the parties will execute and deliver an assignment
and undertaking (the "ASSIGNMENT AND UNDERTAKING"), in the form of APPENDIX
1.3, pursuant to which Seller shall assign to Buyer its future rights, and
Buyer shall assume from Seller its future obligations, under those
Contracts and Leases described in SCHEDULE 1.3; pursuant to which Buyer
shall assume from Seller, Seller's future obligations in respect of the
Assumed Liabilities (as hereinafter defined).
(b) As of the Cut-Off Point, and in conjunction with the transfer of
the Assets Buyer shall assume and/or agree to pay, perform and discharge
the Assumed Liabilities. As used in this Agreement, "ASSUMED LIABILITIES"
shall mean the following liabilities of Seller: (i) the obligations of
Seller arising subsequent to the Cut-Off Point under the Leases and
Contracts (collectively, the "SELLER CONTRACTS") (ii) Seller's current
payables, but only to the extent included in the determination of the
Working Capital (as hereinafter defined); (iii) Seller's obligations as of
the Cut-Off Point in respect of the accrued vacation, holiday and sick
leave of Seller's employees who are employed by Seller in connection with
the Business as of the Closing Date; (iv) the obligations of Seller under
capital leases described in the Financial Statements; (v) the Facility
Lease; and (vi) credit balances owed to third parties on account with
Seller as and to the extent such credit balances are reflected in the book
value of the Accounts Receivable or in the book value of the Medicare
Receivables that are reflected in the Medicare Reconciliation Note.
(c) Buyer shall not be liable for (1) any claims arising from
Seller's assignment and Buyer's assumption of the Seller Contracts, (2)
performance by Seller under, and defaults by Seller in performance of, the
Seller Contracts for periods prior to the Cut-Off Point, and (3) unpaid
amounts in respect of the Seller Contracts that are past due as of the Cut-
Off Point (unless included in Working Capital). Except as expressly
provided to the contrary in Section 1.3(b) above, under no circumstance
shall Buyer be obligated to pay or assume, and none of the Assets shall be
or become liable for or subject to, any liability of Seller or its
affiliates, including, without limitation, the following, whether fixed or
contingent, recorded or unrecorded (collectively, the " Excluded
Liabilities"):
(I) current liabilities (to the extent not taken into
consideration in determining the Working Capital), long-term
liabilities (excluding capital lease obligations specifically
assumed) and all indebtedness and obligations or guarantees of
Seller;
(II) liabilities or obligations of Seller in respect of
periods prior to and including the Cut-Off Point arising under
the terms of the Medicare, Medi-Cal, Blue Cross or other managed
care or third party payor programs, including, but not limited
to, any retroactive denial of claims, recapture, civil monetary
penalties or any gain on sale that may be recognized under the
Medicare program as a result of the consummation of the
transactions described herein;
(III) federal, state or local tax liabilities or obligations
of Seller in respect of periods prior to Cut-Off Point or
resulting from the consummation of the transactions contemplated
herein, including, without limitation, any income tax, any
franchise tax, any tax recapture, any sales and/or use tax, any
indigent care tax, any state and local recording fees and taxes
which may arise upon the consummation of the transactions
contemplated herein and any FICA, FUTA, workers' compensation and
any and all other taxes or amounts due and payable as a result of
the exercise by any of Seller's employees of such employees'
right to vacation, sick leave and holiday benefits accrued while
in the employ of Seller (to the extent not taken into
consideration in determining the Working Capital);
(IV) liability for any and all claims by or on behalf of
Seller's employees relating to periods prior to Cut-Off Point,
including, without limitation, liability for any pension, profit
sharing, deferred compensation, or any other employee health and
welfare benefit plans, liability for violations of ERISA,
liability for any EEOC claim, wage and hour claim, unemployment
compensation claim, workers' compensation claim or any other
agreement, and liability for all employee wages and benefits,
including, without limitation, (but only to the extent not
assumed by Buyer pursuant to Section 1.3(b) hereof) accrued
vacation, sick leave and holiday pay, severance pay and related
taxes or other liability related thereto in respect of Seller's
employees (to the extent not taken into consideration in
determining the Working Capital);
(V) liabilities or obligations arising subsequent to Cut-Off
Point under contracts, commitments, leases or agreements to which
Seller is a party, except to the extent Buyer accepts benefits
under any such contracts, commitments, leases or agreements
subsequent to Cut-Off Point and except for the Seller Contracts;
(VI) liabilities or obligations arising out of any breach by
Seller of any Seller Contract;
(VII) any liability arising out of or in connection with
claims for acts or omissions of Seller and Seller's employees,
agents and independent contractors which allegedly occurred prior
to Cut-Off Point including, without limitation, all malpractice
and general liability claims, whether or not same are pending,
threatened, known, or unknown;
(VII) contracts and agreements between Seller and one or
more of Seller affiliates;
(IX) any debt, obligation, expense or liability of Seller
arising out of or incurred solely as a result of any transaction
of Seller occurring after Cut-Off Point or for any violation by
Seller of any law, regulation or ordinance at any time; and
(IX) any liability or obligation associated with or relating
to any of the Excluded Assets.
1.4 PURCHASE PRICE; PRORATIONS; ALLOCATION.
(a) The purchase price of the Assets (the "PURCHASE PRICE") shall be
cash in the amount of THREE HUNDRED THOUSAND DOLLARS ($300,000) PLUS
Working Capital (as hereinafter defined).
(b) At Closing, the payment for Working Capital and the amount of the
Medicare Reconciliation Note shall initially be made based upon the
determination of Initial Working Capital (as hereinafter defined) and
thereafter an adjusted payment and an adjustment to the Medicare
Reconciliation Note shall be made as provided in Section 1.7.
(c) Buyer and Seller shall prorate real estate and personal property
lease payments, payments under any construction contracts assumed by Buyer
pursuant to the Assignment and Undertaking, interest, real estate and
personal property taxes, real estate lease deposits and escrows, other
assessments, plus all other revenues and expenses with respect to the
Business which are normally prorated upon the sale of assets of a going
concern; provided, however, that the parties will not prorate any Prepaid
Expenses. Seller shall order final readings of all power and other utility
charges to be made as of the Cut-Off Point and shall pay when due all
charges in respect thereof. All prorations contemplated by this Section
1.4(c) shall be made as of the Cut-Off Point.
(d) For income tax purposes, the Purchase Price shall be allocated
as provided in SCHEDULE 1.4(D) hereto.
1.5. INITIAL WORKING CAPITAL. (a) The "INITIAL WORKING CAPITAL" shall
be an amount equal to the value of Seller's Initial Net Working Capital (as
hereinafter defined) as of the date of, and based upon Seller's latest
regularly prepared balance sheet in respect of the Business (the "INTERIM
BALANCE SHEET") available prior to Closing, which shall be not more than 61
days old.. The Interim Balance Sheet shall be prepared using the same
methodologies and assumptions used in connection with the preparation of
Financial Statements (as hereinafter defined), and in accordance with
generally accepted accounting principles ("GAAP") applicable to interim
financial statements. The Interim Balance Sheet shall also be used for
purposes of determining the initial principal balance of the Medicare
Reconciliation Note and the amount of cash to be delivered by Buyer to
Seller with respect to the Medicare Reconciliation Note.
For the purpose of the Initial Working Capital, "SELLER'S INITIAL NET
WORKING CAPITAL" shall be equal to THE SUM OF (A) the amounts set forth on
SCHEDULE 1.5.1(A); PLUS (B) the amount of any capital expenditures made by
Seller from and after December 1, 1997 until the Cut-Off Point (as defined
at Section 2.1); MINUS (C) the amount of Seller's capital leases
obligations assumed by Buyer, other than the Facility Lease.
(b) No increase to Seller's Initial Net Working Capital shall be
effected with respect to (i) any single item involving a capital
expenditure in excess of $25,000, or (ii) within any 30 day period, any two
or more items involving capital expenditures in excess of $50,000, in
either case unless Seller shall have obtained Buyer's prior written consent
to such expenditure. Buyer hereby acknowledges that it has consented to
the capital expenditures described in SCHEDULE 1.5.1(B), but such consent
is limited as to scope and dollar amount as described in SCHEDULE 1.5.1(B).
In order that Buyer may know the methodology to determine Seller's
Initial Net Working Capital, attached hereto as SCHEDULE 1.5.1(C) is a
determination of Seller's Net Working Capital based upon the October 31,
1997 unaudited balance sheet of Seller and Seller hereby agrees to use the
same methodology (as may be supplemented by the working papers thereto) to
prepare SCHEDULE 1.5.1(A).
1.6 WORKING CAPITAL DETERMINATION.
(a) Not more than 60 days after the Closing Date (i) Seller shall
deliver to Buyer the balance sheet for Seller with respect to the Business
as of the Cut-Off Point (the "CLOSING BALANCE SHEET"). The Closing Balance
Sheet shall be prepared using the same methodologies and assumptions used
in connection with the preparation of the Interim Balance Sheet, except as
modified herein. The amount of the Medicare Reconciliation Note shall be
determined from the Closing Balance Sheet.
(b) The "WORKING CAPITAL" shall be an amount equal to the value of
Seller's Net Working Capital (as hereinafter defined) as of the date of,
and based upon the Closing Balance Sheet.
(c) For the Working Capital, "SELLER'S NET WORKING CAPITAL" shall be
determined using the same methodologies used to determine Seller's Initial
Net Working Capital, but using the Closing Balance Sheet.
(d) No more than three days prior to the Closing Date, Seller and
Buyer shall conduct a physical inventory of the inventory and supplies on
hand at the Hospital. Based on such inventory, and Seller shall value the
supplies using the same methodology as Seller used in SCHEDULE 1.5.1(C) and
Seller shall prepare a schedule thereof. In calculating the Working
Capital, the amount of the inventory supplies shall be increased or
decreased, as appropriate, to reflect the value of the additions to, and
deletions from, the inventory and supplies between the inventory date and
the Cut-Off Point.
1.7 PAYMENT OF POST-CLOSING WORKING CAPITAL ADJUSTMENT; DISPUTE
RESOLUTION.
(a) On or before 90 days after the Closing Date, Buyer will pay to
Seller the amount by which Working Capital exceeds Initial Seller's Working
Capital, or Seller will pay to Buyer the amount by which Seller's Working
Capital is less than Seller's Initial Working Capital, in each case
adjusted for differences in the amount of the Medicare Reconciliation Note
as determined from the Interim Balance Sheet and the Closing Balance Sheet.
Simultaneously with Seller's delivery of the Closing Balance Sheet to
Buyer, Seller shall deliver a schedule to Buyer detailing any adjustments
between the amount of the Purchase Price paid at Closing and any required
adjustments resulting from the determination of Working Capital and
adjustments to the principal amount of the Medicare Reconciliation Note.
(b) In the event that Seller and/or Buyer shall dispute the working
capital determination to be effected hereunder and such dispute is not
resolved to the mutual satisfaction of Seller and Buyer within 90 days
after the Closing Date, Seller and Buyer shall each have the right to
require that such disputed determinations be submitted to Coopers & Lybrand
LLP acting as experts and not as arbitrators, or to such other certified
public accounting firm as Seller and Buyer may then mutually agree upon in
writing, for computation or verification in accordance with the provisions
of this Agreement and interpretation, where applicable, in accordance with
GAAP. The certified public accounting firm so selected shall use its best
efforts to make the computations or verifications within 60 days of their
engagement. Both Seller and Buyer shall provide such access to the books
and records of Seller as may be requested by such certified public
accounting firm. The foregoing provisions for certified public accounting
firm review shall be specifically enforceable by the parties; the decision
of such accounting firm shall be final and binding upon Seller and Buyer;
there shall be no right of appeal from such decision; and such accounting
firm's fees and expenses for each such disputed determination shall be
borne by the party whose determination has been modified by such accounting
firm's report or by both parties in proportion to the relative amount each
party's determination has been modified.
1.8 RECEIVABLES. Seller shall promptly remit to Buyer any payments
it may receive which constitute payments of accounts receivable of Buyer,
including any of the Accounts Receivable purchased pursuant to this
Agreement. Seller also shall promptly remit to Buyer any payments it may
receive which constitute payments with respect to the Medicare Receivables
that Seller is obligated to pay to Buyer pursuant to the Medicare
Reconciliation Note. Buyer shall promptly remit to Seller any payments it
may receive that constitute payments of the Excluded Receivables except
payments it may receive which constitute payments with respect to the
Medicare Receivables that Seller is obligated to pay to Buyer pursuant to
the Medicare Reconciliation Note. Seller shall provide Buyer with such
agreements as may be necessary to permit Buyer to negotiate, deposit and
otherwise receive for its own account the Assets and receive payments on
the Medicare Reconciliation Note.
2. CLOSING.
2.1 CLOSING. Subject to the conditions set forth in Articles 7 and 8
hereof, the consummation of the sale and purchase of the Assets
contemplated by and described in this Agreement (the "Closing") shall take
place in San Francisco, California, at the offices of Davis Wright Tremaine
LLP or other agreed upon location, at 10:00 A.M. local time (a) on February
27, 1998 (if the applicable waiting periods required by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 and all regulations promulgated
thereunder (the "HSR Act"), shall have expired or been terminated, or (b)
such date as may be agreed by the parties, not to extend past 180 days from
the date of this Agreement set forth in the preamble hereof, unless within
the 60 day period commencing on the 120th day from the date of this
Agreement set forth in the preamble hereof, the applicable waiting period
required by the HSR Act shall have terminated, in which case, Buyer may
elect to extend Closing for a period not to exceed 60 days from the date
such applicable waiting period under the HSR Act shall have terminated.
Notwithstanding the foregoing, the Closing shall not occur prior to the
Closing Date (as defined in Section 2.1 of the CCH Agreement. The date on
which the Closing occurs is referred to herein as the "CLOSING DATE." The
Closing of the transactions shall be deemed to be effective as of 11:59
P.M. (California time) on the Closing Date or such other time which the
parties may mutually designate in writing. The time at which the Closing
shall be deemed to be effective is referred to herein as the "CUT-OFF
POINT."
2.2 ACTION OF SELLER AT CLOSING. At the Closing, Seller shall
deliver or shall cause to be delivered to Buyer the following:
(a) consent of Bell Atlantic Tricon Leasing Corporation or its
successors or assigns to the assignment of the Facility Lease on terms
mutually agreed to by Buyer and Seller, including without limitation
an Estoppel Certificate reasonably acceptable to Buyer, which consent,
estoppel certificate and such other agreements executed by the parties
shall be attached hereto as SCHEDULE 2.2.A;
(b) the Assignment and Undertaking;
(c) bills of sale and assignments conveying and assigning to Buyer all
other Assets;
(d) copies of corporate resolutions duly adopted by the respective
Boards of Directors of Seller and by the shareholder of Seller,
authorizing and approving each such corporation'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 each such corporation;
(e) certificates, dated as of the Closing Date, of appropriate
officers of each of Seller certifying that, to the best of such
officer's knowledge and belief, as of Closing all of the respective
representations and warranties by or on behalf of Seller contained in
this Agreement are true and correct and all respective covenants and
agreements of Seller to be performed prior to or as of Closing
pursuant to this Agreement have been performed;
(f) certificates of incumbency, dated as of the Closing Date, for the
officers of each Seller making certifications for Closing, or
executing deeds, the Assignment and Undertaking, the bill of sale, the
Information Systems Agreement (as hereinafter defined), the Medicare
Reconciliation Note, other agreements delivered at Closing or this
Agreement;
(g) certificates of corporate existence or good standing certificates
of each of Seller and Paracelsus from the State of California, dated
the most recent practical date prior to Closing;
(h) subject to Section 1.2 hereof, all of Seller's Contracts, Leases,
commitments, books, records and other data relating to the Assets, and
simultaneously with such delivery and Seller will take all such steps
as may reasonably be required to put Buyer in actual possession and
operating control of the Assets;
(i) the Information Systems Agreement (if not executed separately from
the Information Systems Agreement executed by the parties pursuant to
Section 2.2(i) of the CCH Agreement).
(j) such agreements as may be necessary to permit Buyer to negotiate,
deposit and otherwise receive for its own account the Assets and
receive payments on the Medicare Reconciliation Note; and
(k) the Medicare Reconciliation Note.
2.3 ACTION OF BUYER AT CLOSING. At the Closing, Buyer shall deliver
to Seller the following:
(a) payment in cash or immediately available funds of an amount equal
to (i) the Purchase Price; plus (ii) Working Capital;
(b) the Assignment and Undertaking;
(c) copies of corporate resolutions duly adopted by the Board of
Directors of Buyer authorizing and approving Buyer'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;
(d) certificates, dated as of the Closing Date, of appropriate
officers of Buyer certifying that, to the best of such officers'
knowledge and belief, as of Closing all of the respective
representations and warranties by or on behalf of the Buyer contained
in this Agreement are true and correct and all respective covenants
and agreements of Buyer to be performed prior to or as of Closing
pursuant to this Agreement have been performed;
(e) a certificate of incumbency, dated as of the Closing Date, for the
officers of Buyer making certifications for Closing or executing the
Assignment and Undertaking, the Information Systems Agreement, or this
Agreement;
(f) a certificate of corporate existence of Buyer from the State of
California, dated the most recent practical date prior to Closing; and
(g) the Information Systems Agreement (if not executed separately
from the Information Systems Agreement executed by the parties
pursuant to Section 2.2(i) of the CCH Agreement).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller represents and warrants to Buyer that:
3.1 CORPORATE CAPACITY. (a) Seller and Paracelsus are corporations
duly organized, validly existing and in good standing under the laws of
California, with all requisite corporate power and authority to own,
operate and lease their respective properties and to carry on their
businesses as now being conducted.
(b) SCHEDULE 3.1(B) contains a complete and correct copy of the
Articles of Incorporation and all amendments thereto to the date hereof and
the Bylaws as presently in effect of Seller and Paracelsus.
3.2 CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS,
ETC.
(a) The execution and delivery by Seller and Paracelsus of this
Agreement and the performance of this Agreement and the other agreements
and transactions contemplated hereby to be executed and performed by Seller
and Paracelsus:
(i) are within Seller's and Paracelsus' respective corporate
powers, are not in contravention of the terms of Seller's or
Paracelsus' Articles of Incorporation, Bylaws or any amendments
thereto;
(ii) except as set forth on SCHEDULE 3.2, upon the Closing, (A)
will not result in any breach or acceleration of maturity of any
indenture, agreement, lease or instrument, to which Seller or
Paracelsus is a party or by which Seller or Paracelsus or any of the
Assets is bound, (B) will not constitute a violation of any judgment,
decree, or order of any court of competent jurisdiction applicable to
Seller or Paracelsus, (C) will not violate any law, rule or regulation
of any governmental authority applicable to the Seller, Paracelsus,
the Business 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 Paracelsus, and, as of the Closing, the other agreements and
instruments contemplated hereby to be executed and delivered by Seller
and/or Paracelsus will have been duly and validly executed and delivered by
Seller and, where applicable, Paracelsus. Upon approval of this Agreement
and the other agreements and instruments contemplated hereby by the Board
of Directors of Seller and Paracelsus, this Agreement will constitute, and
upon such approval and their execution and delivery, the other agreements
and instruments contemplated hereby to be executed and delivered by Seller
and/or Paracelsus will constitute, the valid, legal and binding obligation
of each of Seller and, where applicable, Paracelsus, enforceable against
each of them in accordance with their respective terms except as such
enforceability may be limited by bankruptcy, reorganization, insolvency, or
other laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies.
3.3 FINANCIAL STATEMENTS. SCHEDULE 3.3 hereto consists of true,
correct and complete copies of the unaudited income statement of Seller
with respect to the Business for the nine months ended October 31, 1997
(the "INCOME STATEMENT"), and the Balance Sheet as of the end of such
period (the Income Statement and the Balance Sheet are referred to
collectively as the "FINANCIAL STATEMENTS"). The Income Statement has been
prepared from and is in accordance with the books and records of Seller,
and fairly presents the operations of Seller for the period indicated,
except (a) as indicated by the notes thereto and (b) with respect to any
changes which would result from year-end audit adjustments which in the
aggregate are not materially adverse to the business or financial condition
of Seller.
3.4 POST-BALANCE SHEET RESULTS. Since October 31, 1997, with respect
to the Assets there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance)materially adversely affecting the Assets, taken as
a whole;
(b) any sale, lease, transfer or disposition by Seller of the Assets
except sales of inventories, supplies or accounts receivable and
except for sales, leases, transfers or dispositions of non-material
portions of the Assets 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, generally affecting the hospital service area in
which the Hospital is located, generally affecting the healthcare
industry, or resulting from the announcement of the transactions
contemplated hereby.
3.5 LICENSES. Seller has all licenses and permits relating to the
ownership of the Assets and operation of the Business as are necessary and
required for such ownership and operation except where the failure to
obtain such licenses or permits would not have a material adverse effect on
the ownership of the Assets or the operation of the Business. SCHEDULE 3.5
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 by Seller from the agency responsible for such
SCHEDULE 3.5 item, for which noncompliance with such notice or directive
would likely cause the revocation, suspension or diminution in term for
such item, all of which are, to Seller's knowledge, in good standing.
3.6 CERTAIN CONTRACTS. SCHEDULE 3.6 lists all contracts to which
Seller is a party involving obligations in respect of the Business for
payment, performance of services or delivery of goods in excess of $5,000
or which require Seller to continue to perform for a period of longer than
12 months ("SCHEDULED CONTRACTS"). Seller has delivered or made available
to Buyer true and correct copies of all Scheduled Contracts. Except as set
forth in SCHEDULE 3.6, all of the Contracts which Buyer has agreed to
assume pursuant to the Assignment and Undertaking are valid and binding
obligations of the parties thereto, are in full force and effect, and are
enforceable against the parties thereto in accordance with their respective
terms. To the best of Seller's knowledge, neither Seller nor any of the
other parties to those Contracts which Buyer has agreed to assume pursuant
to the Assignment and Undertaking (i) are in default under such contracts
or (ii) consider Seller to be in default thereunder. Except as expressly
noted in SCHEDULE 3.6, to the best of Seller's knowledge, no party to any
of those Contracts which Buyer has agreed to assume pursuant to the
Assignment and Undertaking intends to terminate or adversely modify its
agreement(s) with respect thereto, or adversely change the volume of
business done thereunder.
3.7 CERTAIN LEASES. SCHEDULE 3.7 lists all leases to which Seller is
a party in respect of the Business involving annual obligations on the part
of Seller for the payment of rent in excess of $5,000 or involving rental
of real property by Seller as lessor, lessee, sublessor or sublessee
("SCHEDULED LEASES"). Seller has delivered or made available to Buyer true
and correct copies of all Scheduled Leases. All of the Scheduled Leases
which Buyer has agreed to assume pursuant to the Assignment and Undertaking
are valid and binding obligations of the parties thereto, are in full force
and effect, and are enforceable against the parties thereto in accordance
with their terms; and to the best of Seller's knowledge, 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. To the best of Seller's
knowledge, neither Seller nor any of the other parties to any of those
Scheduled Leases which Buyer has agreed to assume pursuant to the
Assignment and Undertaking (i) is in default under any such Scheduled Lease
or (ii) considers Seller to be in default thereunder. Seller has not, as
lessor under any such Scheduled Lease, accepted prepaid rent more than one
month in advance or waived any rights or obligations thereunder. No
consents are required for Seller's assignments of the Scheduled Leases to
be assigned except as disclosed in SCHEDULE 3.7 and the lease from Bell
Atlantic Tricon Leasing Corporation relating to CRH.
3.8 TITLE TO PROPERTIES AND RELATED MATTERS. On the Closing Date
Seller will hold and convey to Buyer good, valid and marketable title to
all of the Assets free and clear of all title defects, liens, pledges,
claims, charges, rights of first refusal (or other claims of interest),
security interests or other encumbrances except as otherwise hereinafter
provided. SCHEDULES 1.1(A) AND 1.1(D) include true and accurate
descriptions of all real property owned or leased by Seller and all
tangible personal property (excluding cash, property with an aggregate
value in a non-material amount and the other Excluded Assets) leased by
Seller and reflected on Seller's financial statements. The Assets
consisting of owned personal property are subject to no liens or
encumbrances except the security interests of record set forth on SCHEDULE
3.8(C), which Schedule is a copy of a Uniform Commercial Code ("UCC")
search duly obtained by Seller in the last 30 days and which search shows
security interests of record relating to such Assets in the State of
California. Seller agrees to remove all security interests relating to
property interests of Seller included in the Assets reflected on such UCC
search, if any, prior to the Closing (except those 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 date of Closing.
SCHEDULE 3.8(D) describes all construction work, if any, which Seller or
its predecessors have contracted for and which is presently in progress in
respect of the Business, and also contains a good faith estimate, as of the
date of this Agreement, of the cost to complete each such project.
3.9 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.9 lists any "employee benefit
plans" that are described in the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"), that cover one or more employees of Seller and that are
sponsored or contributed to by Seller (other than any defined contribution
"employee pension benefit plan" as defined in ERISA, that does not require
any contribution by Seller, any paid time-off policy or
vacation/holiday/sick leave policy, and any "employee welfare benefit plan"
as defined in ERISA, that is sponsored by Seller). Neither Seller nor, to
the best knowledge of Seller and Paracelsus, any other person has engaged
in a transaction with respect to any employee benefit plan listed or
required to be listed on SCHEDULE 3.9 which could subject Buyer to a
penalty under ERISA or a tax under the Internal Revenue Code of 1986, as
amended (the "CODE"). Each of the employee benefit plans listed or
required to be listed on SCHEDULE 3.9 has been operated and administered in
accordance with applicable law, including without limitation ERISA, except
for any such failure which would not subject Buyer to any penalty or other
liability. Seller has not incurred nor presently expects to incur any
liability under Title IV of ERISA that could result in liability to Buyer.
Each employee benefit plan listed or required to be listed on SCHEDULE 3.9
that is a group health plan within the meaning of Section 5000(b)(1) of the
Code is in compliance with the provisions of Section 4980B(f) of the Code,
except for any such non-compliance which would not subject Buyer to any
penalty or liability.
3.10 LITIGATION OR PROCEEDINGS. SCHEDULE 3.10(A) contains a list of
each lawsuit or legal proceeding to which Seller is a party and which arose
out of or in connection with the Business or, to Seller's knowledge, which
has been threatened against Seller in connection with the Business. Except
as disclosed on SCHEDULE 3.10(B), Seller has not received notice of any
formal or informal investigations or proceedings of the California
Department of Health Services, the United States General Accounting Office,
the Health Care Financing Administration, the Department of Justice, the
Federal Trade Commission or other similar governmental agencies (except for
any investigations being conducted in the ordinary course of business and
applicable to all hospitals) with respect to the Business. There are no
such claims, actions, proceedings or investigations of which Seller has
received written notice pending or, to the best knowledge of Seller,
threatened challenging the validity or propriety of the transactions
contemplated by this Agreement. Except as disclosed in SCHEDULE 3.10(B),
Seller is not now, or has never been, a party to any injunction, order, or
decree restricting the method of the conduct of the Business or the
marketing of any of the Business' services, nor, except as disclosed on
SCHEDULE 3.10(B), has any governmental agency investigated or requested
(other than on a routine basis) information with respect to such methods of
business or marketing of services; Seller has not received any notice that
Seller currently violates any federal, state, or local law, ordinance, rule
or regulation, which could have an adverse effect on the Business and, to
the best of Seller's knowledge, no such claim is or has been threatened;
and there have been no developments materially adverse to Seller with
respect to any pending or threatened claim, action or proceeding of an
administrative or judicial nature, including but not limited to those
referred to in SCHEDULES 3.10(A) AND (B), and including without limitation
any such pending or threatened claim, action or proceeding arising from or
relating to (i) the assertion by any governmental authority of any
retroactive adjustment of the sums which Seller was entitled to receive
pursuant to government or third party reimbursement programs such as (but
not limited to) Medicare and Medi-Cal, or (ii) any 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 application for
reimbursement pursuant to the government or third party reimbursement
programs referred to in the preceding clause (i) while such individuals
were officers or employees of Seller.
3.11 INSURANCE. SCHEDULE 3.11 summarizes the professional and
general liability insurance policies covering the Business, and the
property insurance policies covering the Assets, which SCHEDULE 3.11
reflects the policies' numbers, terms, identity of insurers, amounts and
coverage. All such policies are currently in effect and to the best
knowledge of Seller there are no defaults or alleged defaults thereunder.
3.12 SELLER'S EMPLOYEES. (a) SCHEDULE 3.12 contains a list of all
of Seller's employees as of December 1, 1997, which list includes the then
current estimated annualized salaries based on then current hourly wage
rates and scheduled hours worked, department and job title or other summary
of the responsibilities of such employees, any severance arrangements with
such employees. Since December 1, 1997 there has not been any increase in
the compensation payable or to become payable by Seller to any of its
officers, employees or agents, or any bonus payment or arrangement made to
or with any such person, nor has there been any change in Seller's
personnel policies, except (in either case) in the ordinary course of
Seller's business in accordance with established personnel policies or
except as described in SCHEDULE 3.12.
(b) Except as set forth on SCHEDULE 3.12, none of Seller's employees
are employed by Seller pursuant to an employment agreement and/or severance
agreement. SCHEDULE 3.12 includes a list of all employees of Seller (other
than "part-time employees" as such term is defined in the Worker Adjustment
and Retraining Notification Act, hereinafter referred to as the "WARN ACT")
who have been terminated or laid-off or whose employment with Seller
otherwise has ceased since November 1, 1997.
3.13 LABOR MATTERS. Seller does not have any collective bargaining
agreements with any labor union and there are no current negotiations with
a labor union. Seller is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice except
where such non-compliance would not have a material adverse effect on the
Business or the Assets. Seller has not received any notice of an unfair
labor practice complaint against Seller pending before the National Labor
Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending against or affecting Seller, nor has Seller received
notice of any threatened labor strike, dispute, slowdown or stoppage. No
grievance which might have an adverse effect on Seller or any such
arbitration proceeding arising out of or under collective bargaining
agreements is pending and Seller has no knowledge that any claim therefor
exists. Seller has not experienced any employee strikes since the date it
acquired the Business. 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 has current contractual arrangements with third
party payors. A complete and accurate copy of the existing third party
payor contracts of the Hospital has been furnished or made available to
Buyer. The Hospital is presently in compliance with all of the terms,
conditions and provisions of such contracts except where failure to be in
compliance would not have a material adverse effect on the Business or the
Assets. SCHEDULE 3.14(A) lists all third-party payor and managed care
agreements which are currently in effect and identifies all risk pools to
which Seller is a party.
(b) The Hospital is accredited as a general hospital by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") and
complete and accurate copies of its most recent survey reports, lists of
deficiencies, if any, and Certificates of Accreditation relating to the
Hospital have been furnished or made available to Buyer.
(c) The Hospital is qualified for participation in the Medicare
program. A complete and accurate copy of each existing Medicare contract
has been furnished or made available to Buyer. The Hospital is presently
in compliance with all of the terms, conditions and provisions of such
contracts except where failure to be in compliance would not have a
material adverse effect on the Business or the Assets.
(d) The Hospital is qualified for participation in the Medi-Cal
program. A complete and accurate copy of Seller's existing Medi-Cal
contracts have been furnished or made available to Buyer. The Hospital is
presently in compliance with all of the terms, conditions and provisions of
such contracts except where failure to be in compliance would not have a
material adverse effect on the Business or the Assets.
(e) The Hospital participates in the CHAMPUS program. The Hospital
is presently in compliance in all material respects with all of the terms
and conditions of such participation except where failure to be in
compliance would not have a material adverse effect on the Business or the
Assets.
(f) Complete and accurate copies of all fire marshal reports in
Seller's possession or, to the best of Seller's knowledge, available to
Seller with respect to the Hospital after January 1, 1997, have been, or
will be prior to Closing, furnished to Buyer.
(g) Seller has not received any written notice from any applicable
governmental agency, nor does it have knowledge, of any violation of local
building codes, ordinances or zoning laws applicable to the Hospital.
(h) Copies of all licensure survey reports of the Hospital by the
California Department of Health Services issued from and after January 1,
1996, that are in Seller's possession have been, or will be prior to
Closing, supplied or made available to Buyer.
(i) Copies of the Bylaws of the medical staff of the Hospital,
together with copies of minutes of meetings thereof since January 1, 1996,
that are in Seller's possession have been supplied or will prior to Closing
be made available to Buyer. 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 Hospital medical staffs or appealing any such decision
of such medical staff.
(j) CRH is licensed by the California Department of Health Services
as a general acute care rehabilitation hospital authorized to operate 60
beds in its existing location in Chico, California. CRH is presently in
compliance with all the terms, conditions and provisions of such license
except where failure to be in compliance would not have a material adverse
effect on the Business or the Assets. SCHEDULE 3.14(J) contains a copy of
such license. The facilities, equipment, staffing and operations of CRH
satisfy the applicable hospital licensing requirements of the State of
California except where failure to be in compliance would not have a
material adverse effect on the Business or the Assets.
(k) The Hospital currently has a memorandum of understanding with the
appropriate peer review organization, and complete and accurate copies of
all such memoranda of understanding have been furnished or made available
to Buyer, or will prior to Closing be made available to Buyer.
(l) Seller is in material compliance with all applicable laws and
regulations that relate to the Assets and Business, except where the
failure thereof would not have a material adverse effect on the Business.
(m) Seller has not received any written notice of, nor has knowledge
of, any threatened termination, cancellation or limitation, or other
material adverse modification or change in, Seller's relationship with any
payor, physician, medical group (including IPAs), the medical staff or
suppliers.
3.15 REIMBURSEMENT MATTERS. Seller has delivered or made available
to Buyer complete copies of all Medicare cost reports and related forms
that have been filed during the past three years with respect to the
Business. Seller has not received any written notices that either Medicare
or Medi-Cal has 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 such Financial Statements. Seller has not been
indicted, convicted or, to the best of Seller's knowledge, subject to an
investigation of the Office of Inspector General of the Department of
Health and Human Services (the "OIG") or other applicable government
agency, or received a notice from the OIG or other applicable government
agency, with respect to a violation or an alleged violation of the Medicare
and Medi-Cal fraud and abuse provisions of the federal Social Security Act
or the physician ownership and referral provisions of the Ethics in Patient
Referral Act, and to the best of Seller's knowledge, has Seller not
committed a violation of any of such provisions.
3.16 TAXES. Seller has filed all tax returns required by law to be
filed by it 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. Seller has not conducted the Business or engaged in any
transaction which would cause the transaction contemplated hereby to be
taxable under the California sales and use tax laws.
3.17 ENVIRONMENTAL. Except as disclosed in the McLaren/Hart Phase I
Site Assessment of the Chico Community Hospital Rehabilitation Facility
(October 24, 1997) obtained by Buyer relating to the Assets (the
"Environmental Reports"):
(a) Seller is currently, and at all times has been, in compliance
with all Environmental Laws (as defined below) except where failure to
comply with such Environmental Laws would not have a material adverse
effect on the Business;
(b) Seller has all permits, authorizations or other approvals
required under environmental laws to operate the Assets and the Real
Property, and is in compliance with all such permits, authorizations and
approvals except where failure to comply with such permits, authorizations
or approvals, individually or in the aggregate, would not have a material
adverse effect on the Business;
(c) Seller has not generated, handled, stored, disposed of or
released any Hazardous Substance (as defined below) on any of the Real
Property, except in compliance with applicable Environmental Laws except
where failure to comply with such Environmental Laws, individually or in
the aggregate, would not have a material adverse effect on the Business;
(d) There are no polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts or other equipment that contains dielectric fluid
containing PCBs at levels in excess of fifty parts per million (50 ppm)
present, constructed, placed, deposited, stored, disposed of or located on
the Real Property;
(e) There are currently no aboveground or underground storage tanks
for the storage of Hazardous Substances located on the Real Property, and,
to the best knowledge of Seller, there have never been any such aboveground
or underground storage tanks located on the Real Property;
(f) Seller has not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or
otherwise, that alleges that Seller is not in full compliance with
Environmental Laws. There is no Environmental Claim (as defined below)
pending or threatened against Seller or with respect to the Assets.
(g) There are no present or, to the best of Seller's knowledge, past
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the generation, storage, release, emission,
discharge, presence or disposal of any Hazardous Substance, that could form
the basis of any Environmental Claim against Seller under any Environmental
Law in effect at any time at or prior to the Closing.
(h) The inclusion of any item disclosed in SCHEDULE 3.17 and the
inclusion of the reference to the Environmental Reports hereinabove does
not constitute an admission by Seller, Paracelsus or Buyer that any matters
disclosed in such schedule or Environmental Report constitutes a violation
of any Environmental Law.
The following terms shall have the following meanings:
"ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity 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, whether
or not owned or operated by the 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 California), and local
environmental, health or safety laws, regulations, ordinances, rules and
policies and common law in effect on the date hereof and the Closing Date
relating to the generation, use, refinement, handling, treatment, removal,
storage, production, manufacture, transportation, disposal, arranging for
disposal, emissions, discharges, releases or threatened releases of
Hazardous Substances, or otherwise relating to protection of human health,
worker safety or 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 and regulations listed
below:
Federal Resource 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, 49 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.
Federal Occupational Safety & Health Act of 1970, 29 U.S.C. <section>
651, ET SEQ.
Medical Waste Tracking Act of 1988, 42 U.S.C. <section> 6992, ET SEQ.
Marine Protection Research & Sanctuaries Act of 1972, 33 U.S.C.
<section> 1401, ET SEQ.
The Act to Prevent Pollution from Ships, 33 U.S.C. <section> 1901, ET
SEQ.
California Environmental Quality Act of 1970 (CEQA), California
Government Code, <section>65914.
California Hazardous Waste Control Law, California Health & Safety
Code, Section 25100 et seq..
Nuclear Regulatory Commission Regulations, 10 C.F.R. Part 20 and 10
C.F.R. Part 61.
Public Health Service Regulations, 42 C.F.R. Part 72.
Food & Drug Administration Regulations, 21 C.F.R. Parts 58 and 211.
U.S. Department of Transportation Regulations, 49 C.F.R. Parts 171-
179.
U.S. Department of Agricultural Regulations, 9 C.F.R. Parts 50-56.
U.S. Postal Service Regulations, 39 Part III.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous waste, pollutants
or substances, explosives, radioactive materials, or Medical Waste (as
defined below), including, without limitation, friable asbestos, asbestos-
containing material, PCBs, petroleum products and byproducts, substances
defined or listed as "hazardous substance", "toxic substance", "toxic
pollutant", or similarly identified substance or mixture, in or pursuant to
any Environmental Law.
"MEDICAL WASTE" means any substance, pollutant, material, or
contaminant listed or regulated under the Medical Waste Tracking Act of
1988, 42 U.S.C. <section> 6992, ET SEQ., 49 C.F.R. <section> 173, 186,
and/or the California Waste Management Act, California Health & Safety
Code, <section>117600 et seq.
3.18 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or specifically reserved against (which reserves are believed
adequate in amount) in the Financial Statements, to the best of Seller's
knowledge, Seller did not have, at the date of such Financial Statements,
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise and whether due or to become due) required to be
reflected thereon or included therein, except for any liabilities which
have been incurred since the dates of such Financial Statements in the
ordinary course of business consistent with past practice or which have
been discharged or paid in full prior to the date hereof.
3.19 BROKERAGE. Neither Seller nor Paracelsus has engaged any
financial advisor, broker or similar entity in respect of the transactions
contemplated hereby which may be entitled to a fee or commission in
connection with such transactions, other than ABN-AMRO Chicago Corporation.
Any fee due to such firm is solely a liability of Seller and Paracelsus.
3.20 NO MISLEADING STATEMENTS. No representation or warranty by
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 representatives in connection with the transactions contemplated hereby
(the Schedules, including any supplement or amendment thereto, and such
Closing documents are herein referred to, collectively, as the "ADDITIONAL
DOCUMENTS"), contains or will contain any untrue statement of a material
fact, or, to the best knowledge of Seller and Paracelsus, omits or will
omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein
or therein not misleading. Copies of all documents described on any
Schedule hereto which have been furnished, provided or made available to
Buyer or are hereafter furnished, provided or made available to Buyer are
or shall be, to the best of Seller's knowledge, true, correct and complete.
3.21 DISCLAIMER OF WARRANTIES. The Assets will be sold by Seller and
purchased by Buyer in their condition at Closing, "AS IS", WITH NO WARRANTY
OF HABITABILITY OR FITNESS FOR HABITATION, with respect to the Real
Property, and WITH NO WARRANTIES, INCLUDING THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, with respect to the
Personal Property and Operating Inventory, any and all of which warranties
(both express and implied) Seller hereby disclaims. Nothing in this
Section 3.21 shall be construed to limit the scope or effect of the express
representations and warranties contained elsewhere in this Article III.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND SYSTEM.
As of the date hereof, Buyer and the System represent and warrant to
Seller and Paracelsus the following:
4.1 BUYER AND SYSTEM CAPACITY.
(a) Buyer and System are nonprofit public benefit corporations duly
organized, validly existing and in good standing under the laws of the
States of California, with all requisite corporate power and authority to
own, operate and lease their properties.
(b) SCHEDULE 4.1 contains complete and correct copies of the Articles
of Incorporation and all amendments thereto to the date hereof and the
Bylaws as presently in effect of Buyer and System.
4.2 CORPORATE AUTHORIZATION/CONTRACT BINDING. (a) The execution,
delivery and performance by Buyer and System of this Agreement and the
other agreements and transactions contemplated hereby to be executed and
performed by Buyer:
(i) are within Buyer's and System's corporate powers, are not in
contravention of the terms of Buyer's or System's Articles of
Incorporation, Bylaws or any amendments thereto and have been duly
authorized by the board of directors of Buyer and System; and
(ii) except as set forth on SCHEDULE 4.2, on the Closing Date,
(A) will not result in any breach of any indenture, agreement, lease
or instrument to which Buyer or System is a party or by which Buyer or
System is bound, (B) will not constitute a violation of any judgment,
decree or order of any court of competent jurisdiction applicable to
Buyer or System, (C) will not violate any law, rule or regulation of
any governmental authority applicable to Buyer or System 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 Buyer and System, and, as of the Closing, the other agreements and
instruments contemplated hereby will have been duly and validly executed
and delivered by Buyer and System. 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 Buyer and System, enforceable against each in accordance
with their respective terms except as such enforceability may be limited by
bankruptcy, reorganization, insolvency, or other laws affecting the
enforcement of creditors' rights generally or the availability of
equitable remedies.
4.3 BROKERAGE. Buyer has not engaged any financial advisor, broker or
similar entity in respect of the transactions contemplated hereby which may
be entitled to a fee or commission in connection with such transactions.
5. COVENANTS OF SELLER 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 access to the Assets and will furnish to Buyer
such additional financial data and other information relating to the Assets
or the Business as Buyer may from time to time reasonably request; provided
such access shall occur at such time or times as will not disrupt delivery
of care to patients. Seller agrees to cooperate reasonably with 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, its 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 transaction herein
contemplated. Seller shall provide Buyer, when normally available, monthly
statements of income with respect to the Business for the interim period
between the effective date of this Agreement and Closing.
5.2 OPERATIONS. With respect to the ownership of the Assets and the
operation of the Business, Seller will use its reasonable best efforts to:
(a) carry on the Business in substantially the same manner as it has
been conducted heretofore and not make any change in personnel (other
than in the ordinary course of business) or operations, and not make
any change in finance or accounting policies;
(b) maintain the Assets in as good working order and condition as at
present, ordinary wear and tear excepted;
(c) perform in all material respects Seller's obligations under
agreements relating to or affecting the Assets or the Business;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use commercially reasonable efforts to maintain and preserve the
business organization of Seller intact, retain their present employees
and maintain their relationship with suppliers, customers and others
having business relations with Seller;
(f) within a reasonable time prior to Closing, permit Buyer to make
offers to any of the personnel who work at the Hospital or otherwise
in the Business for employment by Buyer subsequent to the Closing,
which personnel shall be allowed by Seller to accept or reject such
offers without penalty (for the purpose of this Section 5.2(f),
"penalty" shall not be interpreted to refer to the availability, or
lack of availability of any severance benefit);
(g) without the consent of Buyer, which will not be unreasonably
withheld, Seller will not incur or commit to any obligation with
respect to (i) individual purchase orders in excess of $40,000 for
supplies or equipment, (ii) within any 30 day period, any two or more
purchase orders in excess of $450,000, (iii) any single capital
expenditure in excess of $25,000, or (iv) within any 30 day period,
any two or more items involving capital expenditures in excess of
$50,000; and
(h) except in the ordinary course of business, Seller will not enter
into, amend, or cancel Scheduled Contracts or Scheduled Leases that
will be assumed by Buyer, without Buyer's prior written consent.
5.3 CERTAIN CHANGES. Without the prior written consent of Buyer,
which consent will not be unreasonably withheld, Seller will not:
(a) sell or agree to sell any of the Assets except for the depletion
of inventories in the ordinary course of business; or
(b) engage in any transaction out of the ordinary course of business,
including any sale, transfer, lease, encumbrance or granting of a lien
upon or a security interest in any portion of the Assets (except as
provided in Section 5.3(a) above).
5.4 CASUALTY. If, prior to the Closing, the Hospital facility or
other Assets sustain damage or destruction that Seller has not repaired
prior to Closing, then the following provisions shall apply:
(a) If --
(i) such damage or destruction results in either Hospital
facility being unusable for its current purpose, or
(ii) the cost to repair such damage or destruction, or to replace
such damaged or destroyed facilities or other Assets
(collectively, the "Cost to Repair"), is greater than $2,500,000
and Seller does not have insurance coverage therefor,
then Buyer may elect either (1) to terminate this Agreement and all
obligations of the parties hereunder or (2) to complete the transactions
contemplated herein and receive as a credit to the Purchase Price the
amount of such Cost to Repair and thereafter Seller shall have no
obligation to repair such damage or destruction;
(b) If subparagraph (a) does not apply, then:
(i) If Seller has insurance coverage for the Cost to Repair any
damage or destruction, then Buyer may elect either (1) to receive
from Seller all of the proceeds of such insurance paid or payable
and pay to Seller the full Purchase Price hereunder or (2) to
allow Seller to retain all such insurance proceeds subject to a
reduction of the Purchase Price in the amount thereof; and
(ii) If and to the extent that the Cost to Repair any damage or
destruction is not covered by insurance, including without
limitation costs that are subject to a deductible or self-insured
retention, then the Purchase Price shall be reduced by an amount
equal to that portion of the Cost to Repair such damage or
destruction that is not covered by insurance.
5.5 This Section intentionally omitted.
5.6 BEST EFFORTS TO CLOSE. Seller and Paracelsus shall use their
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. Seller and/or Paracelsus shall notify Buyer as soon as
practicable of any event or matter which comes to Seller's or Paracelsus'
attention which may reasonably be expected to prevent the conditions to
Seller's obligation being met.
5.7 INSURANCE RATINGS. Seller shall take all action reasonably
requested by Buyer to enable Buyer to succeed to the Worker's Compensation
and Unemployment Insurance ratings, insurance policies, deposits and other
interests of Seller and other ratings for insurance or other purposes
established by Seller; provided, however, that the covenants contained in
this sentence shall not require Seller to expend its own funds to satisfy
such obligations, nor shall such covenants permit Buyer to acquire Seller's
deposits without compensation to 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.
5.8 NOTICE; EFFORTS TO REMEDY. Seller will notify Buyer promptly in
writing of, and contemporaneously will provide Buyer with true and
complete copies of any and all information and documents relating to, and
will use their best efforts to cure as soon as practicable (or by any
subsequent date agreed upon by the parties), any event, transaction or
circumstance occurring that causes or would cause any covenant or agreement
of Seller or Paracelsus under this Agreement to be breached, or that
renders or would render untrue any representation or warranty of Seller
contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Seller and Paracelsus also
will use their reasonable best efforts to cure, as soon as practicable (or
by any subsequent date agreed upon by the parties), any violation or breach
of any representation, warranty, covenant or agreement made by either of
them in this Agreement. Seller and Paracelsus shall have a reasonable time
within which to effect a cure of such breach or misrepresentations before
Buyer may terminate this Agreement (to the extent such remedy is available
to Buyer pursuant to Section 11.1(d) hereof); provided, however, that after
the date established by the parties for Closing, Buyer may terminate this
Agreement (to the extent such remedy is available to Buyer pursuant to
Section 11.1(d) hereof) unless such breach or misrepresentation has been
cured to the reasonable satisfaction of Buyer . Furthermore, Seller and
Paracelsus shall notify Buyer promptly in writing of any event, transaction
or circumstance occurring that causes or would cause any covenant or
agreement of Buyer under this Agreement to be breached, or that renders or
would render untrue any representation or warranty of Buyer contained in
this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Buyer shall have a reasonable time in which
to effect a cure of such breach or misrepresentation before Seller may
terminate this Agreement (to the extent such remedy is available to Seller
pursuant to Section 11.1(d) hereof); provided, however, that after the date
established by the parties for Closing, Seller may terminate this Agreement
(to the extent such remedy is available to Seller pursuant to Section
11.1(d) hereof) unless the breach or misrepresentation has been cured to
the reasonable satisfaction of Seller and Paracelsus. The failure of
Seller to notify Buyer of any such discovered event, transaction or
circumstance shall not release Buyer from any liability to Seller
resulting from the breach attendant to such discovered event, transaction
or circumstance; provided, however, that, unless Buyer had independent
knowledge of such event, circumstance or condition, Buyer's liability shall
be limited to the damages that would have nonetheless resulted to Seller
had Seller disclosed such discovered event, transaction or circumstance to
Buyer prior to Closing.
5.9 COOPERATION WITH BUYER. Seller shall cooperate in all reasonable
respects with Buyer in connection with Buyer's efforts to obtain regulatory
consents to and approvals of the transfer of the Licenses described in
SCHEDULE 3.5 hereof. Seller also agrees that upon the written request of
Buyer, Seller will use its reasonable best efforts to obtain any consents
necessary for the assignment of the contracts and leases to be assumed by
Buyer pursuant to the Assignment and Undertaking. The parties agree that
Buyer will be primarily responsible for obtaining all such approvals and
consents.
6. INDEMNIFICATION.
6.1 INDEMNITY BY BUYER AND SYSTEM. From and after Closing, Buyer and
System shall indemnify, defend and hold harmless Seller and Paracelsus and
their respective officers, 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, reasonable attorneys' fees, 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 of or arising from the
following:
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Buyer or
System in this Agreement or the other agreements contemplated hereby;
(ii) any liability imposed on any Buyer Indemnified Party to the
extent such liability has been expressly assumed by Buyer pursuant to
the Assignment and Undertaking;
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "BUYER ADDITIONAL
DOCUMENTS") furnished or to be furnished by or on behalf of Buyer or
System at Closing under this Agreement;
(iv) any liability, obligation or indebtedness of Buyer or any
alleged liability, obligation or indebtedness of Buyer, including
without limitation those relating to contractual obligations,
liabilities to Medicare or Medi-Cal programs, tax liabilities or
professional malpractice or general liability claims, arising out of
the operation of the Business after the Cut-Off Point which is imposed
on or made against any Buyer Indemnified Party, except to the extent
such liability or alleged liability arises out of a liability of
Seller that has not been expressly assumed by Buyer pursuant to the
Assignment and Undertaking;
(v) any claims for fees or commissions of a broker, agent or
similar entity employed or alleged to have been employed by or on
behalf of Buyer in connection with the transactions contemplated
hereby; and
(vi) any liability imposed on any Buyer Indemnified Party arising
out of the use by Buyer (or its assignees) of Seller's Drug
Enforcement Agency Registration Numbers pursuant to the powers of
attorney delivered in accordance with Section 9.10 of this Agreement.
6.2 INDEMNITY BY SELLER AND PARACELSUS. From and after the Closing,
Seller and Paracelsus, jointly and severally, shall indemnify, defend and
hold harmless Buyer and its respective officers, directors, employees,
shareholders, affiliates and agents (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 of or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Seller or
Paracelsus in this Agreement or the other agreements contemplated
hereby;
(ii) any liability, obligation or indebtedness of Seller or
Paracelsus or any alleged liability, obligation or indebtedness of
Seller or Paracelsus, including without limitation those relating to
contractual obligations, liabilities (including recapture of
depreciation) to the Medicare or Medi-Cal programs, tax liabilities or
professional malpractice or general liability claims, arising out of
the operation of the Business prior to the Cut-Off Point which is
imposed on or made against any Seller Indemnified Party, except to the
extent certain contractual obligations have been expressly assumed by
Buyer pursuant to the Assignment and Undertaking;
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "SELLER ADDITIONAL
DOCUMENTS") furnished or to be furnished by or on behalf of Seller or
Paracelsus at Closing under this Agreement; and
(iv) any claims for fees or commissions of a broker, agent or
similar entity employed or alleged to have been employed by or on
behalf of Seller or Paracelsus in connection with the transactions
contemplated hereby.
6.3 CLAIMS PROCEDURE. (a) If a party to this Agreement ("CLAIMING
PARTY") learns of a circumstance giving rise to a claim for another party
to this Agreement ("PERFORMING PARTY") to make payment, performance, or
indemnity under this Agreement, then the Claiming Party shall give the
Performing Party written notice thereof within a reasonable time
considering the circumstances. No delay in giving notice to the Performing
Party shall work a forfeiture of the rights of Claiming Party or shall
limit the Performing Party's obligations under this Agreement. If,
however, a delay in giving notice within a reasonable time prejudices the
Performing Party and materially impairs its ability to mitigate loss, then
the Performing Party shall have no obligation to pay that part of a loss
caused by the delay.
(b) The Performing Party shall defend, and shall have the right to
settle, claims or suits by third parties that are payable or that are to be
indemnified by the Performing Party under this Agreement. The Claiming
Party shall reasonably cooperate with the Performing Party in the defense
of claims and suits that the Performing Party defends, and the Performing
Party shall reimburse the Claiming Party for out-of-pocket expenses
incurred in cooperating at the Performing Party's request. The Claiming
Party shall not settle such claims or suits defended by the Performing
Party without the Performing Party's prior consent, which shall not be
unreasonably withheld. The Claiming Party shall have the right to approve
defense counsel selected by the Performing Party, which approval shall not
be unreasonably withheld, and the right fully to participate in the defense
of such claims and suits at the Claiming Party's sole cost and expense.
The Claiming Party shall have the right to defend and settle claims or
suits without prejudice to any of their rights against the Performing Party
under this Agreement if the Performing Party declines or is unable to
undertake the defense of a claim or suit within a reasonable time after the
Performing Party's receipt of notice thereof. If the Performing Party
disputes the Claiming Party's entitlement to indemnity and asserts the
right to defend a claim or suit, and if the Claiming Party reasonably
believes that the Performing Party's control of the defense of a claim or
suit might prejudice the Claiming Party, then the Claiming Party shall have
the right to defend such claim or suit. Performing Party shall have the
right fully to participate in the defense of such claim or suit, and
Claiming Party shall not settle such claim or suit without the Performing
Party's prior consent, which Performing Party shall not unreasonably
withhold.
6.4 LIMITATION ON CLAIMS.
(a) No Seller Indemnified Party nor Buyer Indemnified Party shall
make any claim for indemnification pursuant to Sections 6.1 or 6.2 with
respect to any matter unless:
(i) the amount of the Damages arising out of such matter is in
excess of $25,000 (a "RELEVANT CLAIM"); and
(ii) the aggregate amount of all Damages with respect to which a
Relevant Claim is being made by an Indemnified Party against any or
all of the applicable Indemnifying Parties (together with all such
Relevant Claims previously made by the applicable Indemnified Parties
against the applicable Indemnifying Parties) exceeds $250,000.
(b) Notwithstanding the provisions of Section 6.4(a), any indemnified
claim having its basis in any of the following shall not be subject to the
thresholds established by such provisions: (A) a breach of the
representations, warranties, covenants and agreements made in
1.3(c)(ii),3.15, 3.16, 3.17, 3.18, 3.19 and 4.3, (B) fraud or intentional
misrepresentation, (C) a breach by Buyer to pay or observe any obligation
of Seller assumed by Buyer pursuant to the Assignment and Undertaking, (D)
a breach by Seller of its obligations under Section 1.3 hereof to pay or
observe any of its obligations for trade payables, contracts, leases or
other liabilities reflected on Seller's financial statements (other than
those assumed by Buyer pursuant to the Assignment and Undertaking) and to
satisfy prior to Closing all obligations secured by a lien on, or a
security interest in, the Assets, (E) any breach by Buyer to pay the
Purchase Price hereunder, or (F) a breach by Buyer or Seller of its
obligation under Section 1.7.1 and 1.7.2 to pay any post-Closing adjustment
to the Purchase Price required by such Sections.
(c) Neither Seller nor Paracelsus shall be under any liability and no
claim under Section 6.2 of this Agreement shall be made to the extent that
any Damages may be recovered under a policy of insurance, except that
(subject to the other limitations set forth in this Agreement) Seller and
Paracelsus shall be liable to the extent of any deductibles under such
insurance policy.
(d) Neither Buyer nor System shall be under any liability and no
claim under Section 6.1 of this Agreement shall be made to the extent that
Paracelsus or Seller discovered such breach prior to the Closing Date and
failed to disclose such breach to Buyer as provided in Section 5.8 hereof,
except that Buyer and System shall be liable to the extent Buyer or System
had knowledge of such breach or to the extent Paracelsus or Seller would
have nonetheless suffered damages had such breach been disclosed to Buyer
prior to the Closing Date.
(e) Neither Seller nor Paracelsus shall be under any liability and no
claim under Section 6.2 of this Agreement shall be made to the extent that
Buyer discovered such breach prior to the Closing Date and failed to
disclose such breach to Paracelsus and Seller as provided in Section 9.9
hereof, except that Paracelsus and Seller shall be liable to the extent
either Paracelsus or Seller had knowledge of such breach or to the extent
Buyer would have nonetheless suffered damages had such breach been
disclosed to Paracelsus or Seller prior to the Closing Date.
(f) If an Indemnifying Party is liable to an Indemnified Party for
breach of any representation, warranty or undertaking, the liability of the
Indemnifying Party shall be reduced and any amount paid by such
Indemnifying Party shall be refunded to the extent that the Indemnified
Party is eligible to obtain a reduction in its liability for tax (whether
by way of credit or otherwise and calculated assuming that the Indemnified
Party is taxed at the maximum rate applicable to such entity) which it
would not have been eligible for had the breach which gave rise to
liability of the Indemnifying Party not arisen.
(g) Each Indemnified Party shall cooperate in all reasonable respects
with the reasonable requests of its applicable Indemnifying Parties in the
conduct of litigation, the making of settlements and the enforcement of any
right of contribution to which the Indemnified Parties may be entitled from
any person or entity in connection with the subject matter of any
litigation subject to indemnification hereunder. In addition, the
Indemnified Parties shall, upon the reasonable requests by their applicable
Indemnifying Parties or counsel selected by such Indemnifying Parties,
attend hearings and trials, assist in the securing and giving of evidence,
assist in obtaining the presence or cooperation of witnesses, make
available its own personnel, and assist in effecting settlements; and shall
take such action as is reasonably necessary and appropriate in connection
with such litigation. Seller Indemnified Parties shall not, except at
their own cost, voluntarily make any payment, assume any obligation, incur
any expense, or settle or compromise any claim without the express approval
of Seller Indemnifying Parties in connection with any matter that is
subject to indemnification hereunder.
(h) The indemnification provided under Sections 6.1 and 6.2 shall
survive the execution and delivery of this Agreement, the closing of the
transactions contemplated hereby and the satisfaction of all other
obligations of any party hereto under this Agreement. In respect of the
indemnification provided under Section 6.1(i) and 6.2(i) relating to or
arising out of a breach of a representation or warranty, and with respect
to the indemnification provided under Sections 6.1(iii) and 6.2(iii)
relating to or arising out of a misrepresentation in or omission from a
Buyer Additional Document or a Seller Additional Document and which
constitutes a "bring down" of a party's representations and warranties made
in this Agreement, no indemnification may be asserted under this Agreement
unless the party making the claim gives the party against whom the claim is
to be made notice of such claim before the end of the applicable Survival
Period (as defined in Section 12.18 hereto); PROVIDED, that such claim
shall survive the expiration of the Survival Period if notice thereof, as
required by Section 6.3, was given prior to the expiration of the Survival
Period. In respect of the other indemnification provided under Sections
6.1 and 6.2, there shall be no limitation on when a claim for
indemnification hereunder may be sought other than as set forth in Section
6.1 or 6.2, and the parties hereby waive any such limitation which may be
imposed by law.
(i) If a Performing Party pays a claim to a Claiming Party pursuant
to this Agreement, then such party shall be subrogated to all rights of the
party to or for whom the claim was paid against others for recovery of the
loss, except affiliates, employees, officers, directors, successors or
assigns of the party to or for whom the claim was paid.
6.5 JURISDICTION; SERVICE OF PROCESS. (a) Each of the parties hereto
severally agrees that any legal action or proceeding with respect to this
Agreement or to enforce any judgment obtained against any party hereto in
connection with this Agreement may be brought by any other party hereto or
any Seller Indemnified Party or Buyer Indemnified Party in the courts of
the State of California or in the United States District Courts which are
located in the City of Sacramento, California, or any other court to the
jurisdiction of which such party hereto or any of its respective properties
is or may be subject. In connection with any action or proceeding relating
to this Agreement, each of the parties hereto severally irrevocably submits
to the jurisdiction of the courts of the State of California and of the
United States District Courts located in the city of Sacramento,
California, and irrevocably waives any present or future objection to venue
in any such court, and any present or future claim that any such court is
an inconvenient forum. Nothing herein shall affect the right of the a
party to serve process in any manner permitted by law or to bring any civil
suit, action or proceeding against any party hereto or its respective
property in the courts of any jurisdiction in which venue may be granted.
(b) For the purposes of any legal action or proceeding brought by any
party hereto or by any Seller Indemnified Party or any Buyer Indemnified
Party with respect to this Agreement, each party hereto hereby irrevocably
designates and appoints CT Corporation System, currently located at 818 W.
7th Street, Los Angeles, California 90017, as its authorized agent for
service of process in the State of California. Each party hereto and each
Seller Indemnified Party and each Buyer Indemnified Party shall for all
purposes be entitled to treat such designee of each party hereto as the
authorized agent to receive for and on its behalf service of writs or
summons or other legal process in the State of California. In the event
that, for any reason, such agent or his successor shall no longer serve as
agent of any party hereto to receive service or process in the State of
California, such party shall appoint a person in the State of California as
a successor so to serve and advise the other parties hereto so that at all
times each party hereto will maintain an agent to receive service of
process in the State of California on its behalf with respect to this
Agreement. In the event that, for any reason, service of legal process
cannot be made in the manner described above, such service may be made in
such other manner as permitted by law.
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; COMPLIANCE WITH COVENANTS. 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 or Paracelsus 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 Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer,
Reynolds & Chalk L.L.P., counsel to Seller and Paracelsus, dated as of the
Closing Date, substantially in the form of APPENDIX 7.2.
7.3 PRE-CLOSING CONFIRMATIONS. Buyer shall not have received in
writing any notice from the California Department of Health Services or any
other applicable agencies or licensing authorities that Buyer shall not be
issued effective as of or promptly after the Closing a license to operate
the Hospital and licenses or permits to provide all presently authorized
supplemental and special services.
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 against any party hereto (and remain
unresolved) 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; nor shall any party hereto have received
notification from any governmental agency of the United States of America
or the State of California of such agency's current intent to seek
injunctive relief in anticipation of the sale of the Assets to prohibit the
sale of the Assets to Buyer.
7.5 [OMITTED]
7.6 [OMITTED]
7.7 [OMITTED]
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 INFORMATION SYSTEMS AGREEMENT. If applicable, Paracelsus and
Buyer shall have executed and delivered an Information Systems Agreement
(the "INFORMATION SYSTEMS AGREEMENT"), in substantially the form attached
hereto as APPENDIX 7.9.
7.10 CERTIFICATE OF NON-FOREIGN STATUS. Seller shall have duly
executed and delivered to Buyer a Certificate of Non-Foreign Status in the
form attached hereto as APPENDIX 7.10.
7.11 HSR APPROVAL. The all applicable waiting periods specified in
the HSR Act shall have expired or been terminated.
7.12 MEDICARE RECONCILIATION NOTE. Seller shall have delivered to
Buyer a promissory note in the form of APPENDIX 7.12 hereto (the "MEDICARE
RECONCILIATION NOTE"). The original principal balance of the Medicare
Reconciliation Note will be an amount equal to the book value of the
Medicare Receivables, net of the allowance for doubtful accounts and
contractual adjustments related thereto, all as reflected on the Interim
Balance Sheet. As provided in such Medicare Reconciliation Note and in
Sections 1.6 and 1.7 hereof, the principal balance of such note will be
adjusted to reflect changes in such net book value amount between the date
of the Interim Balance Sheet and the date of the Closing Balance Sheet.
7.13 BUYER AND SYSTEM BOARD APPROVAL. The Board of Directors of Buyer
and System shall have approved this Agreement and the transactions
contemplated hereby.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND PARACELSUS.
The obligations of Seller and Paracelsus hereunder are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Seller and Paracelsus:
8.1 REPRESENTATIONS/WARRANTIES; COMPLIANCE WITH COVENANTS. 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 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
Davis Wright Tremaine LLP, counsel to Buyer, an opinion dated as of the
Closing Date and addressed to Seller and Paracelsus, substantially in the
form of APPENDIX 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 against any party hereto (and remain
unresolved) 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; nor shall any party hereto have received
notification from any governmental agency of the United States of America
or the State of California of such agency's current intent to seek
injunctive relief in anticipation of the sale of the Assets to prohibit the
sale of the Assets to Buyer or the parties' execution.
8.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the Buyer shall
have delivered to Seller all documents, agreements and instruments
contemplated by Section 2.3.
8.5 HSR APPROVAL. The all applicable waiting periods specified in
the HSR Act shall have expired or been terminated.
8.6 SELLER AND PARACELSUS BOARD APPROVAL. The Board of Directors of
Seller and Paracelsus shall have approved this Agreement and the
transactions contemplated hereby.
9. PARTICULAR COVENANTS OF BUYER.
9.1 BEST EFFORTS TO CLOSE. Buyer and System shall use their 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 shall notify Seller as soon as practicable of any
event or matter which may reasonably be expected to prevent the conditions
to Buyer's obligations being met.
9.2 EMPLOYMENT OF EMPLOYEES OF SELLER; ADDITIONAL EMPLOYEE MATTERS.
(a) (i) Prior to Closing, Buyer shall offer, effective as of the Cut-Off
Point, employment to all employees of Seller (except as provided in
subsection (d) below) who are on the active payroll of Seller with respect
to the Business on the Closing Date (including for this purpose any
employee of Seller who elects to be treated as a retiree of Seller as of
the Cut-Off Point for the purpose of qualifying for certain employee
benefits). Buyer shall give the same offer of employment to any employee
who is in paid or unpaid inactive status as of the Closing, and who is
available for return to active status within 90 days after Closing (or at
such later date as may be required by applicable law). All such employees
who accept Buyer's offer of employment shall be referred to as the "Hired
Employees."
(ii) Each offer of employment under paragraph 9.2(a)(i) shall be for a
substantially equivalent position, and at a substantially similar wage or
salary, as provided by Seller to the Hired Employee immediately prior to
the Closing Date (or, as to any employee who is in paid or unpaid inactive
status as of the Closing Date who receives an offer of employment from
Buyer upon becoming available to return to active status, immediately prior
to the first day of such employee's paid or unpaid leave from Seller. As
to each Hired Employee, Buyer shall also provide employee welfare benefits
and paid time-off that are commensurate with those of other employees of
Buyer having similar positions. Buyer agrees that, for the purpose of
determining welfare benefits coverage and other related matters (including
eligibility and participation, but not vesting or benefit accrual, under
any Buyer pension benefit plan), each Hired Employee will be considered to
have commenced employment with Buyer on the date such Hired Employee
commenced uninterrupted employment with Seller (whichever is earlier).
Notwithstanding the preceding sentence, Buyer shall not be obligated to
provide Hired Employees any accrued sick or vacation days upon hiring them
except as and to the extent provided in Sections 9.2(e) and (f) hereof.
For the purpose of determining vesting and benefit accrual under all Buyer
pension benefit plans, each Hired Employee will be considered to have
commenced employment with Buyer on the Employment Commencement Date (as
defined below). Health benefits coverage provided by Buyer for Hired
Employees (and any dependents thereof) shall apply to covered expenses
incurred on and after the Employment Commencement Date, and Buyer agrees to
waive any limitations for pre-existing conditions with respect to any
conditions affecting any Hired Employees (and any dependents thereof);
subject to the following limitations: (x) the pre-existing condition
provisions of Seller's health benefit plans shall apply in lieu of the pre-
existing condition provisions of Buyer's plans to all Hired Employees (and
their dependents) who are eligible for benefits under Seller's health
benefits plans as of the Closing Date but who are subject to pre-existing
condition limitations as of the Closing Date and (y) the pre-existing
conditions limitations under Buyer's medical benefits plans shall apply to
any Hired Employee (and his or her dependents) who is not eligible for
benefits under Seller's health benefits plans as of the Closing Date, and
any such Hired Employee shall be treated as having been hired by Buyer on
the date such employee commenced employment with Seller for purposes of
applying such pre-existing condition limitations to such Hired Employee
(and such Hired Employee's dependents).
(iii) The term "EMPLOYEE COMMENCEMENT DATE" shall mean the day
immediately following the Cut-Off Point; provided, however, that with
respect to any employee who is in paid or unpaid inactive status as of the
Closing Date and to whom Buyer offers employment pursuant to this Section
9.2(a) the term "EMPLOYEE COMMENCEMENT DATE" shall mean such employee's
first day of employment with Buyer.
(b) Subject to the accuracy of Seller's representations and
warranties in Section 3.12 and SCHEDULE 3.12, (i) on and after the Closing
Date, Buyer shall be responsible for any and all notices required with
respect to Buyer's termination of employees, and (ii) any liabilities or
obligations arising under the WARN Act on or after the Closing Date shall
be those of Buyer and not Seller.
(c) After the Closing, Buyer will, upon reasonable request, give
assistance to human resources personnel of Paracelsus and/or Seller in the
post-closing administration of the respective employee benefit plans of
Seller as they apply to Hired Employees. For this purpose, "assistance"
includes reasonable access to the pre-Closing personnel records of Hired
Employees.
(d) Notwithstanding the provisions of Section 9.2(a), Buyer shall not
be required to offer employment to (i) any person whom Buyer could
otherwise terminate for cause, (ii) any person whom Buyer has prior to
Closing previously employed and subsequently terminated for cause, or (iii)
the President and Chief Executive Officer, the Chief Financial Officer or
the Chief Operating Officer of Seller.
(e) Buyer agrees that it shall assume, from and after the Cut-Off
Point, the accrued liability of Seller for accrued vacation, holiday and
sick day benefits and related taxes that relate to the Hired Employees, to
the extent such amounts are included in Working Capital. Buyer agrees that
(i) Hired Employees will be entitled to use such benefits in accordance
with the generally applicable policies and procedures established by Buyer
for use of paid leave, (ii) that such benefits will be in addition to any
holidays, vacation days, sick days or other paid leave earned by the Hired
Employees after the Cut-Off Point as employees of Buyer, and (iii) that
such benefits will not (unless previously paid by Seller) be eliminated by
Buyer without payment in full to the Hired Employees. Seller agrees that
it will furnish to Buyer at Closing a schedule (dated as of the most recent
date practicable prior to Closing) showing the name of each Hired Employee
(and each employee of Seller on inactive status) and as to each such person
the amount of accrued APL that such person has as of such date. As soon as
possible after the Closing, Seller will furnish to Buyer a schedule showing
such information as of the Cut-Off Point.
9.3 [omitted]
9.4 CONSENTS AND REGULATORY APPROVALS. Buyer acknowledge that
except as provided in Section 5.9 hereof, neither Seller nor Paracelsus
shall have any responsibility for obtaining any regulatory consents to and
approvals of the transfer of the Licenses described in SCHEDULE 3.5 hereof
or for obtaining any necessary consents to the assignment of the contracts
and leases. Buyer agrees to use its reasonable best efforts to secure such
approvals and consents as soon as practicable and prior to the Closing.
9.5 CHANGE OF NAME. Buyer agrees that it will cause all signs, if
any, incorporating the names "Paracelsus" and "Paracelsus Healthcare"(and
all variations thereof) which are located at any of the Real Property or
the improvements thereto to be removed or modified as soon as reasonably
practicable after the Closing Date and in any event within 30 days after
the Closing Date, such that such names are no longer used at such Real
Property or upon such improvements.
9.6 BUYER'S PAYMENT OF THE PURCHASE PRICE. Subject to the conditions
to Closing set forth in this Agreement, Buyer shall pay the Purchase Price
for the Assets in accordance with Section 2.3(a).
9.7 [omitted]
9.8 PRESERVATION AND ACCESS TO BOOKS AND RECORDS AFTER THE CLOSING.
(a) After the Closing, Buyer shall keep and preserve all medical records
and medical charts existing as of the Closing of patients of the Hospital
for so long as Buyer is required by law to maintain such records (but in no
event less that seven years, beginning on the Closing Date). Buyer
acknowledges that as a result of entering into this Agreement and operating
the Business, it will gain access to patient and other information which is
subject to rules and regulations concerning confidentiality. Buyer agrees
to abide by any such rules and regulations relating to the confidential
information it acquires. Buyer agrees after Closing to maintain the
patient records at the Business in accordance with applicable law
(including, if applicable, Section 1861(v)(i)(I) of the Social Security Act
(42 U.S.C. <section> 1395x(v)(1)(I)) and requirements of relevant insurance
carriers. In addition, Seller and Paracelsus shall be entitled to remove
from the Hospital any such patient records, but only for purposes of
pending litigation involving a patient to whom such records refer, as
certified in writing prior to removal by counsel retained by Seller or
Paracelsus in connection with such litigation; provided, however, that to
the extent Paracelsus or Seller are not required by subpoena or court order
to use originals of the patient records for such purposes, Paracelsus shall
(a) use copies of patient records, where appropriate and (b) cause Seller
to use copies of patient records. Any original patient records so removed
from the Business shall be promptly returned to Buyer following its use by
Seller or Paracelsus. Notwithstanding the foregoing provisions, Seller or
Paracelsus shall not be entitled to review, have access to, have copies of
or remove from the premises of the Business any medical records or patient
charts relating to any period after the expiration of the applicable
statute of limitations expires for the bringing of any action against
Seller for its ownership of the Business prior to the Cut-Off Point.
(b) After the Closing, Buyer shall keep and preserve all other
records of the Business existing as of the Closing which are delivered to
Buyer by Seller for a period of 7 years or such longer period (if any) as
such records are required to be kept and preserved by any federal or state
law or regulation. After the Closing, upon reasonable written notice by
Seller to Buyer, Seller shall be entitled, during regular business hours,
to have access to and make copies of all records pertaining to the
operation of the Business (other than medical records which shall be
governed by the provisions of Section 9.8(a) hereof) prior to the Closing
for any lawful corporate purpose.
(c) Should Buyer decide to dispose of any books or records which they
have been obligated to maintain pursuant to Section 9.8, Buyer shall advise
Seller in writing of such intention and Seller shall have not less than 60
days after receipt of such notice to elect in writing to have Buyer deliver
such records to Seller.
9.9 NOTICE; EFFORTS TO REMEDY. Buyer will notify Seller and
Paracelsus promptly in writing of, and contemporaneously will provide
Seller and Paracelsus with true and complete copies of any and all
information and documents relating to, and will use their best efforts to
cure as soon as practicable (or by any subsequent date agreed upon by the
parties), any event, transaction or circumstance occurring that causes or
would cause any covenant or agreement of Buyer under this Agreement to be
breached, or that renders or would render untrue any representation or
warranty of Buyer contained in this Agreement as if the same were made on
or as of the date of such event, transaction or circumstance. Buyer also
will use their best efforts to cure, as soon as practicable (or by any
subsequent date agreed upon by the parties), any violation or breach of any
representation, warranty, covenant or agreement made by either of them in
this Agreement. Buyer shall have a reasonable time within which to effect
a cure of such breach or misrepresentations before Seller or Paracelsus may
terminate this Agreement (to the extent such remedy is available to Seller
or Paracelsus pursuant to Section 11.1(d) hereof); provided, however, that
after the date established by the parties for Closing, Seller or Paracelsus
may terminate this Agreement (to the extent such remedy is available to
Seller or Paracelsus pursuant to Section 11.1(d) hereof) unless such breach
or misrepresentation has been cured to the reasonable satisfaction of
Seller or Paracelsus. Furthermore, Buyer shall notify Seller and
Paracelsus promptly in writing of any event, transaction or circumstance
occurring that causes or would cause any covenant or agreement of Seller or
Paracelsus under this Agreement to be breached, or that renders or would
render untrue any representation or warranty of Seller or Paracelsus
contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Seller and Paracelsus shall
have a reasonable time in which to effect a cure of such breach or
misrepresentation before Buyer may terminate this Agreement (to the extent
such remedy is available to Buyer pursuant to Section 11.1(d) hereof);
provided, however, that after the date established by the parties for
Closing, Buyer may terminate this Agreement (to the extent such remedy is
available to Buyer pursuant to Section 11.1(d) hereof) unless the breach or
misrepresentation has been cured to the reasonable satisfaction of Buyer .
The failure of Buyer to notify Seller and Paracelsus of any such discovered
event, transaction or circumstance shall not release Seller and Paracelsus
from any liability to Buyer resulting from the breach attendant to such
discovered event, transaction or circumstance; provided, however, that,
unless Seller or Paracelsus had independent knowledge of such event,
circumstance or condition, Paracelsus' and Seller's liability shall be
limited to the damages that would have nonetheless resulted to Buyer had
Buyer disclosed such discovered event, transaction or circumstance to
Seller and Paracelsus prior to Closing.
9.10 POWER OF ATTORNEY FOR D.E.A. REGISTRATION NUMBER(S) AND
CALIFORNIA PHARMACY LICENSE(S). Buyer covenants that it shall promptly
apply for all necessary United States Department of Justice Drug
Enforcement Agency ("D.E.A.") registration(s) or California Pharmacy
License(s) with respect to the Hospital as soon as possible. At or prior
to Closing, Seller shall execute in favor of Buyer one or more Powers of
Attorney for Order Forms authorizing Buyer or a representative of Buyer to
execute applications for books of official order forms and to sign such
order forms, under Seller's D.E.A. Registration Number(s) or Seller's
Pharmacy License(s) as required for all necessary controlled substances on
an interim basis until such time as Buyer shall receive approval of all
necessary D.E.A. registration(s) or California Pharmacy License(s). Seller
covenants that it shall cooperate with Buyer and provide such information
as Buyer may reasonably request in making all such applications for
registration or licensing.
9.11 GOVERNMENTAL APPROVALS. Buyer shall assist and cooperate with
Seller and Seller's representatives and counsel in obtaining all
governmental consents, approvals and licenses which Seller reasonably deems
necessary or appropriate and 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 contemplated herein.
9.12 FTC NOTIFICATION. Buyer shall, if and to the extent required by
law, (i) file all reports or other documents required under the HSR Act or
requested by the DOJ or the FTC under the HSR Act, and all regulations
promulgated thereunder, or in order to permit all applicable waiting
periods under the HSR Act to expire, (ii) seek early termination of such
waiting periods concerning the transactions contemplated hereby, and (iii)
comply promptly with any requests by the FTC or DOJ for additional
information concerning such transactions, so that the applicable waiting
period specified in the HSR Act will expire as soon as reasonably possible
after the execution and delivery of this Agreement. Buyer agrees to
furnish to Seller such information concerning Buyer as Seller needs to
perform its obligations under Section 10.3 of this Agreement.
10. PARTICULAR COVENANTS OF SELLER AND PARACELSUS.
10.1 REIMBURSEMENT OF BUYER. If any third party payor deducts any
amount from payments due Buyer in respect of claims against or amounts owed
by Paracelsus or Seller, then Paracelsus and/or Seller will promptly
reimburse Buyer for the amounts so deducted within 10 days after written
demand therefor by Buyer. Buyer agrees to give prompt notice to Seller and
Paracelsus of the assertion of any claim, formal or informal, by any third
party payor for which, if deducted by such third party payor, Buyer would
be entitled to reimbursement by Paracelsus and/or Seller hereunder and will
cooperate in good faith, at no out-of-pocket cost to Buyer, so as to permit
Paracelsus and/or Seller to mitigate the amount of any such claim by any
such third party payor.
10.2 GOVERNMENTAL APPROVALS. Seller and Paracelsus shall assist and
cooperate with Buyer and Buyer's representatives and counsel in obtaining
all governmental consents, approvals and licenses which Buyer reasonably
deems necessary or appropriate and 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 contemplated herein.
10.3 FTC NOTIFICATION. Seller and Paracelsus shall, if and to the
extent required by law, (i) file all reports or other documents required
under the HSR Act or requested by the DOJ or the FTC under the HSR Act, and
all regulations promulgated thereunder, or in order to permit all
applicable waiting periods under the HSR Act to expire, (ii) seek early
termination of such waiting periods concerning the transactions
contemplated hereby, and (iii) comply promptly with any requests by the FTC
or DOJ for additional information concerning such transactions, so that the
applicable waiting period specified in the HSR Act will expire as soon as
reasonably possible after the execution and delivery of this Agreement.
Seller and Paracelsus agree to furnish to Buyer such information concerning
Seller and Paracelsus as Buyer needs to perform its obligations under
Section 9.12 of this Agreement.
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 Section 5.4;
(c) by either 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 Paracelsus, on one hand, or either
Buyer or System on the other hand, commits a material breach of any
representation, warranty, covenant or agreement made herein, which
breach, if left uncured, would result in a material adverse effect on
the condition or value of the Assets or the operation of the Business,
by either Buyer or Seller, provided such terminating party did not
commit such breach and not an affiliate of the party that committed
such breach, and provided further that this right to terminate shall
be subject to the parties' rights to cure set forth herein; and
(e) by either Buyer or Seller if the Closing has not occurred by the
180th day after the date of this Agreement as set forth in the
preamble hereof because a condition to the terminating party's
obligation to close set forth, in respect of Buyer in Article 7, or
such later date as permitted under Section 2.1(b), and, in respect of
Seller and Paracelsus in Article 8, was not satisfied on such date,
unless the date for Closing has been extended by the mutual agreement
of the parties hereto.
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
parties 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 6.1(v), 6.2(v), 12.8, 12.9 and 12.21 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 following termination under Section 11.1(d) in
the event such party's 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. Any and all claims or
awards for damages (including without limitation punitive damages)
following termination under Section 11.1(d) shall not exceed $5,000,000.
Parties specific agreement to and acknowledgment of the preceding:
_______________[Paracelsus initials], _______________[CCH initials],
_______________[Enloe initials], and _______________[System initials].
12. GENERAL.
12.1 EXHIBITS, SCHEDULES AND OTHER INSTRUMENTS. Each Exhibit,
Certificate, Appendix and Schedule, if any, to this Agreement shall be
considered a part hereof as if set forth herein in full. Any fact disclosed
on one Schedule hereto shall be deemed to be disclosed on each other
applicable schedule. Buyer shall have 10 days following receipt of any
Schedule not provided on the date of execution of this Agreement to approve
or disapprove of any such Schedule. Seller shall have the right to update
any Schedule prior to Closing, which updated Schedule shall also be subject
to Buyer's approval. Buyer shall not unreasonably disapprove of any
updated Schedule that reflects only changes resulting from operations of
the Hospital in the ordinary course. Upon receiving notice from Buyer of a
disapproved Schedule, Seller shall use its best efforts to remove or remedy
any item or event disclosed in the disapproved Schedule, but if sit is
unable to do so within 10 business days, Buyer shall have the option of
waiving its disapproval or terminating this Agreement without liability to
either party.
12.2 PRE-CLOSING ACCESS. Seller shall give Buyer, its accountants,
counsel, and other representatives access to the premises and offices of
the Hospital, management and supervisory employees of the Hospital, and
make such information as Buyer may reasonably request available to Buyer,
as may be necessary for Buyer to examine the Assets and Business being
acquired. No such inspection by Buyer shall unreasonably interfere with
Seller's conduct of business in the ordinary course.
12.3 TERMINATING COST REPORT. Seller agrees to file a terminating
cost report in connection with third party receivables of the Business with
applicable agencies and shall provide Buyer with a copy thereof prior to
such filing.
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 either party, the 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 either party or either
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.
12.6 CHOICE OF LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA AND VENUE SHALL BE BUTTE OR SACRAMENTO COUNTIES.
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 legal representatives, successors
and assigns; provided, however, that no party may assign this Agreement
without the prior written consent of the other party.
12.8 COSTS OF TRANSACTION. Subject to the other terms and provisions
hereof, whether or not the transactions contemplated hereby shall be
consummated, the parties agree as follows: (i) Seller and Paracelsus will
pay the fees, expenses, and disbursements of Seller and Paracelsus and
their respective agents, representatives, accountants, and counsel incurred
in connection with the subject matter hereof and any amendments hereto; and
(ii) Buyer shall pay the fees, expenses and disbursements of Buyer and its
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter hereof and any amendments hereto. Buyer
shall pay any transfer taxes and recording fees resulting from the
consummation of the transactions contemplated hereby.
12.9 CONFIDENTIALITY. With respect to Confidential Information
provided by Paracelsus or Seller in connection with and relative to the
transactions contemplated by this Agreement, Buyer agrees to use reasonable
best efforts to cause its officers, employees, representatives and agents
to hold all such Confidential Information in strict confidence and only to
disclose such Confidential Information to such duly authorized persons as
are necessary to effect the transactions contemplated hereby, and, if
requested, to return all originals and copies of any such written
Confidential Information to Seller or Paracelsus in the event for any
reason the sale of the Assets is not consummated. Nothing in this Section
shall prohibit the use of such Confidential 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
Buyer's counsel, other requirements of law. Subject to Paracelsus'
disclosure obligations under federal securities laws, any release to the
public of information with respect to the transactions contemplated hereby
will be made only in the form and manner approved by the parties and their
respective representatives. Buyer agrees that it will not use, and will
not knowingly permit others to use, any Confidential Information in a
manner detrimental to the Business, Paracelsus or Seller or to their
competitive disadvantage. Buyer , its officers, employees and agents
recognize that any breach of this Section would result in irreparable harm
to Seller and Paracelsus and that therefore either Seller or Paracelsus
shall be entitled to an injunction to prohibit any such breach by Buyer and
its officers, employees and agents in addition to all of their other legal
and equitable remedies. For the purposes hereof, "CONFIDENTIAL
INFORMATION" shall mean all information of any kind concerning Paracelsus
or Seller obtained, directly or indirectly, from Paracelsus or Seller in
connection with the transactions contemplated by this Agreement except
information (i) ascertainable or obtained from public or published
information, (ii) received from a third party not known by Buyer to be
under an obligation to keep such information confidential, (iii) which is
or becomes known to the public (other than through a breach of this
Agreement), or (iv) which was in Buyer's possession prior to disclosure
thereof to Buyer in connection herewith.
12.10 WAIVER. The waiver by either 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.
12.11 TAX ALLOCATION. The allocation of the Purchase Price for tax
purposes shall be set forth in a statement prepared in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended, which
statement shall be prepared in a manner generally consistent with the form
of Internal Revenue Service Form 8594 and a manner consistent with the
Purchase Price allocation provided under Section 1.4. 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, and if, required by
applicable law.
12.12 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. Whenever any matter herein is
represented, warranted or stated herein to be to the "KNOWLEDGE OF," to the
"BEST KNOWLEDGE OF" or to the "BEST KNOWLEDGE AND BELIEF OF" Seller or
Paracelsus, or words of similar import, such representation, warranty or
statement shall mean all matters with respect to which (a) Seller has
received written notice or (b) any of the following persons has knowledge
or with reasonable inquiry under the circumstances would have knowledge:
any director or officer of Seller, or any administrator, assistant
administrator or controller at the Hospital.
12.13 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, when received by
telegraphic or other electronic means (including telefax and telex) or
overnight courier, or five days after being deposited in the United States
mail, with postage prepaid, certified mail, return receipt requested,
addressed as follows:
Buyer: N.T. Enloe Memorial Hospital
W. 5th Avenue & The Esplanade
Chico, California 95926
Attention: Chief Executive Officer
Seller: Paracelsus Healthcare Corporation
515 W. Greens Road, Suite 800
Houston, Texas 77067
Attention: President
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.
12.14 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.
12.15 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.
12.16 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.
12.17 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
during the Contract Period (as defined below) the benefit under any such
claims, rights, contracts, licenses, leases, commitments, sales orders or
purchase orders, including, without limitation, enforcement, at no 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. To the extent that any claim, right, contract,
license, lease, commitment, sales order or purchase order to be assigned to
or acquired by Buyer pursuant to this Agreement also applies to facilities
or operations other than those being sold pursuant hereto, then Seller also
agrees that during the Contract Period, upon the written request of Buyer,
it will use its reasonable best efforts to cause the services, property or
other benefits provided or made available under such claim, right,
contract, license, lease, commitment, sales order or purchase order to
continue to be available to Buyer on terms and conditions substantially
similar to those presently in effect. The term "CONTRACT PERIOD" shall
mean with respect to any contract or other right the period beginning on
the Closing Date and ending on the earlier of (a) the expiration of the
term of the given contract or other right and (b) the third anniversary of
the Closing Date.
12.18 SURVIVAL. The representations, warranties, covenants and
agreements made by the parties herein shall survive the Closing; provided,
however, that the representations and warranties made by the parties herein
shall expire on the first anniversary of the Closing Date except with
respect to matters for which Buyer has given notice of claim under Section
6.3, and except with respect to the representations and warranties set
forth in Sections 3.1, 3.2, 3.10, 3.15, 3.16, 3.17, 3.19, 4.1, 4.2 and 4.3
(and the indemnities with respect thereto), which shall survive for the
applicable statute of limitations periods (collectively, the "SURVIVAL
PERIOD").
12.19 ENTIRE AGREEMENT/AMENDMENT. Except for the Confidentiality
Agreement between Paracelsus and Superior California Medical Center (now
known as the System), dated June 16, 1997 (which Confidentiality Agreement
will survive the execution and delivery of this Agreement), 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 (other than the
Confidentiality Agreement) 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 (or in the Confidentiality Agreement) and no amendments or
modifications hereto, shall be binding unless made in writing and signed by
the party to be charged. Without limiting the foregoing, this Asset
Purchase Agreement for Chico Community Rehabilitation Hospital supersedes
and replaces that certain Asset Purchase Agreement dated December 15, 1997
among Paracelsus, Seller, Buyer and System, with respect to the Business.
12.20 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.
12.21 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.
12.22 PUBLIC ANNOUNCEMENT. Paracelsus and Seller, on one hand, and
Buyer, on the other hand, mutually agree that, prior to the Closing, no
party shall issue any press release or make any public announcement of the
transaction which is the subject of this Agreement without the prior
consent of each other party, except where a public announcement is required
by law as reasonably determined by such party. Additionally, Paracelsus
and Seller, on one hand, and Buyer on the other hand, each agrees that,
prior to the Closing, it will not, and will cause its officers, directors,
partners, employees, counselors and representatives not to, discuss any
aspects of this Agreement with any third party (other than their respective
representatives, lenders, prospective underwriters and counselors) without
the prior written consent of the other party hereto.
The next page of this Agreement is the signature page, which is
page number "S-1."
<PAGE>
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.
PARACELSUS HEALTHCARE CORPORATION
By:
Title:
SELLER:
CHICO COMMUNITY HOSPITAL, INC.
By:
Title:
N.T. ENLOE MEMORIAL HOSPITAL
By:
Title:
ENLOE HEALTH SYSTEM
By:
Title:
<PAGE>
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
FOR
CHICO COMMUNITY REHABILITATION HOSPITAL
THIS FIRST AMENDMENT ("FIRST AMENDMENT") to the Asset Purchase
Agreement for Chico Community Rehabilitation Hospital (the "AGREEMENT") is
entered into as of the effective date set forth in Section 10 hereof, by
and between PARACELSUS HEALTHCARE CORPORATION ("PARACELSUS"), a California
corporation, CHICO COMMUNITY HOSPITAL, INC. ("CCH" and "SELLER"), a
California corporation, and N.T. ENLOE MEMORIAL HOSPITAL ("BUYER"), a
California nonprofit public benefit corporation, and ENLOE HEALTH SYSTEM
("SYSTEM"), a California nonprofit public benefit corporation.
WHEREAS, Buyer, System, Seller and Paracelsus have entered into the
Agreement dated as of December 15, 1997 for the purchase by Enloe of the
Business of CRH (as defined in the Agreement); and
WHEREAS, the Agreement contemplated that Seller would assign to Buyer
at Closing all its interests in the Facility Lease (as defined in the
Agreement); and
WHEREAS, Buyer has entered into a Purchase and Sale Agreement with
Finova Capital Corporation ("FINOVA"), the landlord under the Facility
Lease, whereunder Buyer will purchase all of Finova's interest in the real
and personal property comprising CRH, and the parties to the Facility Lease
and related agreements and leases will terminate the Facility Lease and the
related agreement and leases, all occurring concurrent with the Closing
under the Agreement; and
WHEREAS, Buyer and Seller wish to amend certain terms of the Agreement
to reflect the purchase of the real and personal property as well as a
later than anticipated closing of the Transaction.
NOW THEREFORE, BUYER, SYSTEM, SELLER AND PARACELSUS AGREE AS FOLLOWS:
1. Recitals D and E are hereby amended in their entirety, as follows:
D. WHEREAS, Paracelsus and CCH desire to sell to Buyer and
Buyer desires to purchase substantially all of the assets, real
and personal, tangible and intangible, used by CCH in the
operation of CRH (collectively the "BUSINESS);
E. WHEREAS, Enloe and Finova Capital Corporation ("FINOVA"),
a Delaware corporation which owns all of the real property and a
substantial amount of the personal property comprising CRH and
leases such real and personal property to CCH, have entered into
that certain Purchase and Sale Agreement (the "FINOVA AGREEMENT")
whereunder Buyer will purchase all of Finova's interest in the
real and personal property comprising CRH; it is the intent of
the parties hereto that the closing on this Agreement shall be
concurrent with the closing by the parties to the Finova
Agreement; and
2. Section 1.1(a) of the Agreement is deleted in its entirety.
3. Section 1.1(d) of the Agreement is amended by deleting "including the
Facility Lease," in the second line thereof.
4. Section 1.3(b) is amended by deleting "(v) the Facility Lease; and
(vi)" and inserting "and (v)."
5. Section 2.1 of the Agreement is hereby amended in its entirety, as
follows:
2.1 CLOSING. Subject to the conditions set forth in Articles 7
and 8 hereof, the consummation of the sale and purchase of the
Assets contemplated by and described in this Agreement (the
"CLOSING") shall take place in San Francisco, California, at the
offices of Davis Wright Tremaine LLP or other agreed upon
location, at 10:00 A.M. local time on such date as may be agreed
by the parties, not to extend past June 30, 1998. The date on
which the Closing occurs is referred to herein as the "CLOSING
DATE." The Closing of the transactions shall be deemed to be
effective as of 11:59 P.M. (California time) on the Closing Date
or such other time which the parties may mutually designate in
writing. The time at which the Closing shall be deemed to be
effective is referred to herein as the "CUT-OFF POINT."
6. Section 2.2(a) is deleted in its entirety.
7. Section 3.7 is amended to read by deleting "and the lease from Bell
Atlantic Tricon Leasing Corporation relating to CRH" in the final line
thereof.
8. Sections 7.5 and 7.6 are amended in their entirety to read as follows:
7.5 TERMINATION OF FACILITY LEASE AND RELATED AGREEMENTS.
Effective the Closing Date, the respective parties to the leases
and agreements set forth below have terminated all such leases
and agreements on terms acceptable to Buyer and the parties
thereto, which terms shall include without limitation (i) the
agreement and acknowledgment by the parties that Buyer shall have
no liability whatsoever related to any claim, dispute, default or
other matter arising out of the performance of the parties to
such leases and agreements prior to the termination date thereof;
(ii) that no party to the termination agreements shall have
recourse against Buyer or the real or personal property which are
the subjects of the leases and agreements arising out of any
claim, dispute, default or other matter arising out of the
performance of the parties to such leases and agreements prior to
the termination date thereof; and (iii) there has been no
assignment of the rights and/or obligations of any parties to
each terminated lease or agreement. The leases and agreements to
be terminated shall include the following:
(a) The Facility Lease dated June 7, 1991, as amended
December 20, 1991 and June 30, 1994 by and between CCH, as
assignee of Chico Rehabilitation Hospital, Inc. ("CRHI"), and
Finova, as successor in interest to Bell Atlantic Tricon Leasing
Corporation ("BATLC").
(b) The following agreements between CCH and Finova, each of
which CCH has assumed from CRHI and Finova has succeeded to the
interest therein of BATLC:
(i) Memorandum of Lease and Grant of Option for North
Valley Rehabilitation Hospital, dated June 7, 1991;
(ii) Tax Indemnity Agreement, dated as of June 7, 1991
and amended on December 20, 1991;
(iii) Equipment Lease No. 2911 dated December 27, 1990,
as amended by Amendment One dated December 27, 1990, Amendment
Two dated December 27, 1990 and Amendment Three dated March 28,
1991;
(iv) Subordination and Continuous Ownership Agreement,
dated June 7, 1991;
(v) Security Agreement and Assignment, dated June 7,
1991; and
(vi) the Financing Statements identified on Schedule A
hereto.
(c) The following agreements entered into by Paracelus, as
assignee of Continental Medical Systems, Inc., a Delaware
corporation ("CMS") with or for the benefit of Finova, each of
which Finova has succeeded to the interest therein of BATLC:
(i) the Tax Indemnity Agreement, dated as of June 7,
1991 and amended on December 20, 1991;
(ii) the Subordination and Continuous Ownership
Agreement, dated June 7, 1991;
(iii) Guaranty Agreement, dated June 7, 1991; and
(iv) Guaranty, dated December 29, 1990 (guaranteeing
the obligations of CCH under the Equipment Lease).
d. The Memorandum of Repurchase Option whereunder
Paracelsus, and CCH granted an option to CRHI, CMS and any
majority-owned subsidiary of CMS to repurchase CRH.
7.6 CLOSING OF THE FINOVA AGREEMENT. The parties to the Finova
Agreement have closed the transaction contemplated therein
concurrent with the Closing.
9. Section 8 is amended by adding new Sections 8.7 and 8.8 as follows:
8.7 TERMINATION OF FACILITY LEASE AND RELATED AGREEMENTS. Effective
the Closing Date, the respective parties to the leases and agreements
set forth in Section 7.5 have terminated all such leases and
agreements on terms acceptable to Seller and the parties thereto.
8.8 CLOSING OF THE FINOVA AGREEMENT. The parties to the Finova
Agreement have closed the transaction contemplated therein concurrent
with the Closing.
10. Section 11.1(e) is of the Agreement is hereby amended in its entirety,
as follows:
(e) by either Buyer or Seller if the Closing has not
occurred by June 30, 1998, because a condition to the terminating
party's obligation to close set forth, in respect of Buyer in
Article 7, and, in respect of Seller and Paracelsus in Article 8,
was not satisfied on such date, unless the date for Closing has
been extended by the mutual agreement of the parties hereto.
11. The First Amendment shall be effective upon the execution by Enloe and
Finova of the Finova Agreement.
12. Except as amended by this First Amendment, the Agreement is hereby
ratified and confirmed by the parties and shall remain in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PARACELSUS:
PARACELSUS HEALTHCARE CORPORATION
a California corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
SELLER:
CHICO COMMUNITY HOSPITAL, INC.
a California corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
BUYER:
N.T. ENLOE MEMORIAL HOSPITAL
a California nonprofit public benefit corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
SYSTEM:
ENLOE HEALTH SYSTEM
a California nonprofit public benefit corporation
By:
Name:
Its authorized agent
By:
Name:
Its authorized agent
AGREEMENT FOR PURCHASE AND
SALE OF PARTNERSHIP INTERESTS
by and between
DAKOTA MEDICAL FOUNDATION
AND
PARACELSUS HEALTHCARE CORPORATION OF NORTH DAKOTA, INC.
DATED AS OF
JUNE 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1.
Definitions 1
1.01. Definitions 1
1.02. Other Definitions 8
Section 2.Sale and Purchase 8
2.01. Sale and Purchase 8
2.02. Purchase Price 8
2.03. Method of Payment 8
2.04. Escrow 8
2.05. Full Payment 8
Section 3.Additional Covenants and Agreements 8
3.01. Effect on Prior Agreements 9
a. Prior Agreements 9
b. Survival of Representations 9
c. Rights Not Affected By Knowledge 9
3.02. Specific Actions on Prior Agreements 10
a. Partnership Agreement 10
b. Contribution Agreement 10
c. Operating Agreement 10
3.03 Exercise of Put Right 10
3.04 Effect on Partnership 10
a. Dissolution 10
b. Winding Up 11
c. Termination 12
3.05. Tax Matters 12
3.06. Disclaimer of Fiduciary Obligations 12
3.07. Resignation of Positions with Partnership 12
3.08. Maintain Existence & Preserve Proceeds 12
3.09. Mutual Releases 13
3.10. No Disparagement 13
3.11. Information for Tax Returns 14
3.12. Noncompetition & Nonsolicitation Covenants 14
a. Statement of Enforceability 14
b. Noncompetition Covenant 14
c. Nonsolicitation Covenant 15
d. Injunctive Remedy 15
<PAGE>
e. Other Relief 16
f. Information 17
3.13. Maintenance of Insurance 17
3.14. Confidentiality of Records 17
Section 4.Representations and Warranties of Dakota about Dakota 18
4.01. Authorization of Transaction 18
4.02. Organization; Good Standing 18
4.03. Membership 19
4.04 No Subsidiaries or Affiliates 19
4.05. Litigation and Related Matters 19
4.06. Insurance Coverages 19
4.07. Financial Statements 19
4.08. No Undisclosed Liabilities 20
4.09. No Joint Partner Liabilities 20
4.10. Compliance with Prior Agreements 20
4.11. Compliance with Legal Requirements 20
4.12. Good Title to Dakota Partnership Interest 20
4.13. No Conflict; Effect of Agreement 20
4.14. Taxes 22
4.15. Solvency 22
4.16. No Other Agreements 22
4.17. No Broker's Fee 23
4.18. No Consents Required 23
4.19. Statements True and Correct 23
Section 5.Mutual Representations and Warranties about Partnership 23
5.01. Organization; Good Standing 23
5.02. Capitalization 23
5.03. Full and Complete Information 23
5.04. Compliance with Prior Agreements 23
Section 6.Representations and Warranties of Paracelsus ND 24
6.01. Authorization of Transaction 24
6.02. Organization; Good Standing 24
6.03. Insurance Coverages 25
6.04. Financial Statements 25
6.05. No Undisclosed Liabilities 25
6.06. No Joint Partner Liabilities 26
6.07. Compliance With Prior Agreements 26
6.08. Compliance With Legal Requirements 26
6.09. No Conflict, Effect of Agreement 26
<PAGE>
6.10. Taxes 27
6.11. Solvency 28
6.12. No Other Agreements, No Liens 28
6.13. No Broker's Fee 28
6.14. No Consents Required 28
6.15. Statements True and Correct 29
6.16. Operation of Partnership 29
Section 7.Rights and Obligations Pending Closing 29
7.01. Confidential Information 29
7.02. Public Announcements 30
7.03. Access and Investigation 30
7.04. Maintenance of the Business of Partnership 31
7.05. Negative Covenant Paracelsus ND 31
7.06. Required Approvals; Governmental Authorizations 31
7.07. Best Efforts 31
7.08. Notification 31
7.09. No Negotiation 32
Section 8.Conditions Precedent to Paracelsus ND's Obligation to Close 32
8.01. Closing Certificate 32
a. Representations and Warranties of Dakota 32
b. Obligations of Dakota 32
8.02. Secretary's Certificate 33
8.03. Legal Matters 33
8.04. No Prohibition 33
8.05. Necessary Consents 33
8.06. No Claim Regarding Ownership or Sale Proceeds 33
8.07. Delivery of Documents 33
8.08. Legal Opinion 34
Section 9.Conditions Precedent to Dakota's Obligation to Close 34
9.01 Closing Certificate 34
. a. Representations and Warranties of Paracelsus ND 34
b. Obligations of Paracelsus ND 34
9.02. Secretary's Certificate 34
9.03. Payment of Purchaser Price 35
9.04. Delivery of Documents 35
9.05. Legal Opinions 35
Section 10.Deliveries at Closing; Post-Closing Further Assurances 35
<PAGE>
10.01. Deliveries by Dakota 35
a. Corporate Documents and Certificates 35
b. Closing Certificate 35
c. Secretary's Certificate 35
d. Written Resignation 35
e. Escrow Agreement 35
f. Partnership Interest Assignment 35
g. Legal Opinion 36
h. Other Documents 36
10.02. Further Assurances by Dakota 36
10.03. Deliveries by Paracelsus ND 36
a. Corporate Documents and Certificates 36
b. Closing Certificate 36
c. Secretary's Certificate 36
d. Purchase Price 36
e. Escrow Agreement 36
f. PHC Guaranty Agreement 36
g. Legal Opinion 36
Section 11. Closing 37
11.01. Closing; Effective Time 37
a. Closing 37
b. Effective Time 37
Section 12. Termination 27
12.01. Grounds For Termination 28
12.02. Effect of Termination 28
Section 13. Tolling 38
13.01. Exercise of Tolling Right 38
13.02. Duration of Tolling Period 38
a. Litigation Intervention 38
b. Failure of Dakota to Close 39
13.03. Distributions During Tolling 39
13.04. Paracelsus ND's Rights Upon Tolling 39
13.05. Effect of Tolling 39
<PAGE>
Section 14.Survival of Representations; Indemnification 39
14.01. Survival of Representations 39
a. Survival Period 39
b. Rights Not Affected by Knowledge 40
14.02 Survival of Indemnification Provisions in Prior Agreements 40
a. Contribution Agreement 40
b. Operating Agreement 40
14.03. Indemnification of Paracelsus ND 40
14.04. Indemnification of Dakota 41
14.05. Limitations on Liability 42
14.06. Thresholds 42
14.07. Effect of Taxes and Insurance 42
14.08. Escrow Fund Setoff Right; Notice 43
14.09. Procedure for Indemnification; Third Party Claims 43
14.10. Procedure for Indemnification; Other Claims 44
Section 15.Notice 45
15.01. Notices 45
Section 16.Miscellaneous 46
16.01. Transaction Costs and Expenses 46
16.02. Assignability; Binding Effect; Third Parties 46
16.03. Waiver 47
16.04. Severability 47
16.05. Further Assurances 47
16.06. Entire Agreement; Headings; Incorporation by Reference 47
16.07. Governing Law; Venue; Attorney's Fees 47
16.08. Multiple Counterparts 48
Signatures 49
<PAGE>
SCHEDULES
Schedule 3.12.b - Restricted Territory
Dakota Disclosure Schedule
Paracelsus ND Disclosure Schedule
EXHIBITS
Exhibit "A " - Form of Escrow Agreement
Exhibit "B " - Form of PHC Guaranty Agreement
Exhibit "C " - Form of Partnership Interest Assignment
<PAGE>
AGREEMENT FOR PURCHASE AND
SALE OF PARTNERSHIP INTERESTS
This Agreement for Purchase and Sale of Partnership Interests, dated
as of June 1, 1998 (the "AGREEMENT"), is entered into by and between DAKOTA
MEDICAL FOUNDATION, a North Dakota non-profit corporation (f/k/a Dakota
Hospital) ("DAKOTA"), and PARACELSUS HEALTHCARE CORPORATION OF NORTH
DAKOTA, INC., a North Dakota corporation (f/k/a Champion Healthcare
Corporation of North Dakota, Inc.) ("PARACELSUS ND").
RECITALS
WHEREAS, Dakota and Paracelsus ND previously entered into a
partnership agreement forming a North Dakota general partnership on
November 18, 1994 and thereafter entered into as of December 31,1994 the
Partnership Agreement and the Partnership began doing business as Dakota
Heartland Health System ("DHHS"); and
WHEREAS, under the provisions of the Partnership Agreement, Dakota
and Paracelsus ND each own fifty percent (50%) of the Partnership
Interests; and
WHEREAS, under Section 3.03(g) of the Partnership Agreement, Dakota
has the right to require Paracelsus ND to purchase the Dakota Partnership
Interest (the "PUT"), and by letter dated August 20, 1997 (the "PUT
EXERCISE DATE"), Dakota gave Paracelsus ND notice that it was exercising
the Put; and
WHEREAS, in accordance with the Put, Paracelsus ND desires to
purchase from Dakota, and Dakota desires to sell to Paracelsus ND, the
Dakota Partnership Interest, upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated herein, and the other
good and valuable consideration exchanged between the parties, the receipt
and sufficiency of which is hereby acknowledged, the parties intending to
be legally bound agree as follows:
SECTION 1.
DEFINITIONS
1.01. DEFINITIONS. As used herein, the following terms have the
meanings specified or referred to in this section (unless specifically
defined or the context clearly requires otherwise):
"ACT" means the North Dakota Uniform Partnership Act, as amended and
any corresponding provisions of succeeding law, and the regulations
promulgated thereunder.
<PAGE>
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with that first Person.
For purposes of this definition, the terms "control" and "controlled by"
and "under common control with" mean, (i) with respect to any corporation
or other entity having voting shares or the equivalent and elected or
appointed directors, managers, or other Persons performing similar
functions, the ownership or power to vote more than 50% of shares or the
equivalent having the power to vote in the election or appointment of
directors, managers, or other Persons performing similar functions or the
ability to direct its business affairs through Contract or otherwise, and
(ii) with respect to any other Person, the ability to direct its business
and affairs through Contract or otherwise.
"AGREEMENT" has the meaning given that term in the opening paragraph
hereof, as such may be amended from time to time.
"AVAILABLE CASH" has the meaning given that term in Section 1.01 of
the Partnership Agreement.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of North Dakota
are closed.
"CLOSING" has the meaning given that term in SECTION 11.01.A hereof.
"CLOSING DATE" has the meaning given that term in SECTION 11.01.A
hereof.
"CONFIDENTIAL INFORMATION" has the meaning given that term in SECTION
7.01.A hereof.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTRACT" means any contract, agreement, obligation, promise,
commitment, arrangement, document, instrument, or undertaking (whether
written or oral, and whether express or implied) that is legally binding.
"CONTRIBUTION AGREEMENT" means that certain Contribution Agreement,
dated as of November 18, 1994, as amended, between Dakota, DHE II,
Paracelsus ND, PHC/CHC, and the Partnership.
"DAKOTA" has the meaning given that term in the opening paragraph
hereof.
"DAKOTA CLAIMS" has the meaning given that term in SECTION 14.03
hereof.
"DAKOTA DISCLOSURE SCHEDULE" has the meaning given that term in the
opening paragraph of SECTION 4 hereof.
<PAGE>
"DAKOTA FINANCIAL STATEMENTS" has the meaning given that term in
SECTION 4.07 hereof.
"DAKOTA INDEMNIFIED PARTIES" has the meaning given that term in
SECTION 14.03 hereof.
"DAKOTA INTERIM FINANCIAL STATEMENTS" has the meaning given that term
in SECTION 4.07 hereof.
"DAKOTA PARTNERSHIP INTEREST" means the entire Partnership Interest of
Dakota.
"DAKOTA PERMITTED CLAIM" has the meaning given that term in SECTION
14.05.
"DAKOTA THRESHOLD" has the meaning given that term in SECTION 14.05.
"DEFAULT CLOSING DATE" has the meaning given that term in SECTION
13.02.
"DHE II" means Dakota Health Enterprises II, Inc., a North Dakota
corporation.
"DHHS" has the meaning given that term in the first recital paragraph
hereof.
"EFFECTIVE TIME" has the meaning given that term in SECTION 11.01.B
hereof.
"ESCROW AGENT" means Norwest Investment Services, Inc., and its
successors and permitted assigns.
"ESCROW AGREEMENT" means that certain Escrow Agreement, dated as of
the Closing Date, between Paracelsus ND, Dakota, and the Escrow Agent, in
substantially the form attached hereto as EXHIBIT "A ".
"ESCROW FUND" has the meaning given that term in SECTION 2.03 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and any corresponding provisions of succeeding law, and the regulations
promulgated thereunder.
"GAAP" means the generally accepted accounting principles in the
United States, in effect from time to time.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" means any (i) nation, state, county, city, town,
village, district, or other jurisdiction of any nature, (ii) federal,
state, local, municipal, foreign, or other government, (iii) governmental
<PAGE>
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal), (iv) multi-national organization or body, or (v) body
exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of
any nature.
"GUARANTY AGREEMENT" means that certain Guaranty Agreement, dated
December 21, 1994, as amended, between PHC/CHC, the Partnership, and
Dakota.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended and any corresponding provisions of succeeding law, and
the regulations promulgated thereunder.
"INDEMNITEE" means a party seeking indemnification.
"INDEMNITOR" means a party against whom a claim for indemnification is
made.
"IRC" means the Internal Revenue Code of 1986, as amended and any
corresponding provisions of succeeding law, and the regulations promulgated
thereunder.
"KNOWLEDGE" with respect to:
(i) an individual, is deemed to exist of a particular fact or other
matter if, such individual is, or has at any time been, (y) actually
aware of such fact or other matter, or (z) a prudent individual could
be expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonable inquiry about
the existence of such fact or other matter; and
(ii) any Person (other than an individual), is deemed to exist of a
particular fact or other matter if, any individual who is serving, or
who at any time has served, as a director, officer, partner, executor,
or trustee of such Person (or in any similar capacity) has, or at any
time had, knowledge (as defined in "(i)" above) of such fact or other
matter.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute,
or treaty.
"LIENS" means all mortgages, deeds of trust, claims, liens, judgments,
security interests, pledges, leases, conditional sale contracts, rights of
first refusal, options, charges, liabilities, debts, obligations,
agreements, powers of attorney, limitations, reservations, restrictions,
and other encumbrances or adverse claims of every kind and nature,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any attribute of ownership.
"LOSSES" has the meaning given that term in SECTION 14.02 hereof.
<PAGE>
"OPERATING AGREEMENT" means that certain Operating Agreement, dated
December 21, 1994, as amended, between PHC/CHC, the Partnership, Dakota,
and Paracelsus ND.
"NEW CLOSING DATE" has the meaning given that term in SECTION 13.02.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person that
is:
(i) consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such
Person;
(ii) not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar
authority), and is not required to be specifically authorized by the
parent company, if any, of such Person; and
(iii) similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (of by any Person
or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are
in the same line of business as such Person.
"PARACELSUS ND" has the meaning given that term in the opening
paragraph hereof.
"PARACELSUS ND CLAIMS" has the meaning given that term in the last
sentence of SECTION 14.02 hereof.
"PARACELSUS ND DISCLOSURE SCHEDULE" has the meaning given that term in
the opening paragraph of SECTION 6 hereof.
"PARACELSUS ND INDEMNIFIED PARTIES" has the meaning given that term in
SECTION 14.02 hereof.
"PARACELSUS ND PERMITTED CLAIM" has the meaning given that term in
SECTION 14.05.
"PARACELSUS ND THRESHOLD" shall have the meaning given that term in
SECTION 14.05.
"PARTNERSHIP" means the North Dakota general partnership named
Dakota/Champion Partnership formed pursuant to the Partnership Agreement
and doing business as Dakota Heartland Health System.
"PARTNERSHIP AGREEMENT" means that certain Amended and Restated
Partnership Agreement of Dakota/Champion Partnership, dated as of December
21, 1994, as amended, between Dakota and Paracelsus ND.
<PAGE>
"PARTNERSHIP INTEREST" means the entire ownership interest of a
partner in the Partnership, including, without limitation, rights to
distributions (liquidating or otherwise), allocations, information, and to
consent or approve.
"PARTNERSHIP INTEREST ASSIGNMENT" means that certain Partnership
Interest Assignment, dated as of the Closing Date, given by Dakota in favor
of Paracelsus ND, in substantially the form attached hereto as EXHIBIT "C".
"PERSON" includes any individual, partnership, joint venture, limited
partnership, limited liability company, trust, estate, corporation
(including a non-profit corporation), association, custodian, trustee,
executor, administrator, or other entity or Governmental Body.
"PHC" means Paracelsus Healthcare Corporation, a California
corporation.
"PHC/CHC" means PHC/CHC Holdings, Inc., a Delaware corporation (f/k/a
Champion Healthcare Corporation).
"PHC GUARANTY AGREEMENT" means that certain Guaranty Agreement, dated
as of the Closing Date, between PHC and Dakota, in substantially the form
attached hereto as EXHIBIT "B".
"PRIME RATE" has the meaning given that term in SECTION 14.07 hereof.
"PRIOR AGREEMENTS" has the meaning given that term in SECTION 3.01.A
hereof.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted,
or heard by or before, or otherwise involving, any Governmental Body or
arbitrator.
"PROPOSED CLOSING DATE" has the meaning given that term in SECTION
13.02.
"PURCHASE PRICE" has the meaning given that term in SECTION 2.02
hereof.
"PUT" has the meaning given that term in the third recital paragraph
hereof.
"PUT CLOSING PERIOD" has the meaning given that term in SECTION 13.01
hereof.
"PUT EXERCISE DATE" has the meaning given that term in the third
recital paragraph hereof.
"REPRESENTATIVES" means the members, directors, trustees, officers,
employees, agents, financial advisers, accountants, and attorneys of a
Person in such capacity.
"RESTRICTED ACTIVITY" has the meaning given that term in SECTION
3.12.B hereof.
<PAGE>
"RESTRICTED CAPACITY" has the meaning given that term in SECTION
3.12.B hereof.
"RESTRICTED PERIOD" has the meaning given that term in SECTION 3.12.B
hereof.
"RESTRICTED TERRITORY" has the meaning given that term in SECTION
3.12.B hereof.
"RESTRICTIONS" has the meaning given that term in SECTION 3.12.E
hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended and any
corresponding provisions of succeeding law, and the regulations promulgated
thereunder.
"SUBSIDIARY" means, with respect to any Person (the "OWNER"), any
corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board
of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other
than securities or other interests having such power only upon the
happening of a contingency that has not occurred) are held by the Owner or
one or more of its Subsidiaries.
"TAX" or "TAXES" means any Governmental Body tax assessment, penalty,
interest, fee, or other charge.
"TAX RETURN" means any return (including an information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to,
any Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"TOLLING DATE" has the meaning given that term in SECTION 13.01
hereof.
"TOLLING NOTICE" has the meaning given that term in SECTION 13.01
hereof.
"TOLLING NOTICE RESPONSE" has the meaning given that term in SECTION
13.02 hereof.
"TOLLING PERIOD" has the meaning given that term in SECTION 13.02
hereof.
"TOLLING PERIOD NOTICE" has the meaning given that term in SECTION
13.02 hereof.
"TRANSACTION" means the sale and purchase of the Dakota Partnership
Interest and performance of the other covenants and agreements described
herein.
<PAGE>
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement,
the PHC Guaranty Agreement, the Partnership Interest Assignment, and the
documents, instruments, exhibits, schedules, certificates, and lists
referred to herein relating to each of the foregoing, as applicable to each
of Paracelsus ND and Dakota.
1.02. OTHER DEFINITIONS. Other terms may be defined elsewhere herein
and have the meanings so given to them.
SECTION 2.
SALE AND PURCHASE
2.01. SALE AND PURCHASE. Upon the terms and subject to the conditions
set forth herein, at the Closing, Dakota agrees to sell, transfer, convey,
assign and deliver to Paracelsus ND, free and clear of all Liens, and
Paracelsus ND thereupon agrees to purchase and acquire from Dakota, the
Dakota Partnership Interest.
2.02. PURCHASE PRICE. The total purchase price to be paid by
Paracelsus ND for the Dakota Partnership Interest shall be SIXTY-FOUR
MILLION FIVE HUNDRED TWENTY-EIGHT THOUSAND FOUR HUNDRED AND SIXTEEN DOLLARS
($64,528,416) (the "PURCHASE PRICE").
2.03. METHOD OF PAYMENT. At the Closing, Paracelsus ND shall pay to
Dakota the Purchase Price by wire transfer or delivery of other immediately
available funds to the account or accounts designated by Dakota, less
$6,450,000 (the "ESCROW FUND") which shall be wire transferred by
Paracelsus ND to the Escrow Agent to be held, invested, and disbursed
pursuant to the Escrow Agreement.
2.04. ESCROW. Dakota shall not be entitled to receive any portion of
the Escrow Fund, except pursuant to the terms of the Escrow Agreement, and
after deducting and offsetting all amounts permitted hereunder or
thereunder.
2.05. FULL PAYMENT. The payment of the Purchase Price under SECTION
2.03 hereof shall be payment in full for the Dakota Partnership Interest
and the other rights and privileges granted to Paracelsus ND hereunder.
SECTION 3.
ADDITIONAL COVENANTS AND AGREEMENTS
Paracelsus ND and Dakota covenant and agree as follows:
<PAGE>
3.01. EFFECT ON PRIOR AGREEMENTS.
A. PRIOR AGREEMENTS. Paracelsus ND and Dakota acknowledge
having previously entered into the Partnership Agreement, Contribution
Agreement, and Operating Agreement (collectively, the "PRIOR AGREEMENTS"),
and agree that the provisions of the Prior Agreements which specifically
survive termination according to the provisions thereof shall continue in
full force and effect both after the date hereof and the Closing Date in
accordance with their respective provisions, except as specifically
amended, modified, or terminated by this Agreement. Except as specifically
set forth herein, neither this Agreement nor the amendment, modification,
or termination of the Prior Agreements, or any provisions thereof, shall
relieve or otherwise release any of the parties thereto from any failure to
perform or other breach thereunder during the period such Prior Agreements
were in effect. To the extent there is a conflict between the provisions
of any of the Prior Agreements and the Transaction Documents, the
provisions of the Transaction Documents shall govern.
B. SURVIVAL OF REPRESENTATIONS.
I. Paracelsus ND and Dakota each ratify and confirm that
they have complied in all material respects with their respective
covenants and agreements in the Prior Agreements.
II. Notwithstanding the provisions of the Contribution
Agreement, (i) Dakota agrees that its representations, warranties,
covenants, and agreements in the following sections of the
Contribution Agreement are extended and shall survive the Closing for
a period of ten (10) years thereafter: Section 5.1 (Corporate
Capacity), Section 5.3 (Corporate Powers, Etc.), Section 5.6
(Extraordinary Liabilities), Section 5.10 (Medicare
Participation/Accreditation), Section 5.11 (Compliance with Law),
Section 5.12 (Agreements and Commitments), Section 5.22 (Third Party
Payor Cost Reports), and Section 5.27 (Full Disclosure); and (ii)
Paracelsus ND agrees that its representations, warranties, covenants,
and agreements in the following sections of the Contribution Agreement
are extended and shall survive the Closing for a period of ten (10)
years thereafter: Section 6.1 (Corporate Capacity), Section 6.2
(Corporate Powers, Etc.), Section 6.4 (Extraordinary Liabilities),
Section 6.8 (Medicare Participation/Accreditation), Section 6.9
(Compliance with Law), Section 6.10 (Agreements and Commitments),
Section 6.19 (Third Party Payor Cost Reports), and Section 6.24 (Full
Disclosure). Neither party shall be deemed as making, as of the
effective date hereof or as of the Closing Date, the representations,
warranties, covenants, and agreements in the sections of the
Contribution Agreement referenced in this SECTION 3.01.B.II.
C. RIGHTS NOT AFFECTED BY KNOWLEDGE. Each party is entitled
to and is deemed to have reasonably relied upon the representations,
warranties, covenants, and agreements of the other party in the Prior
<PAGE>
Agreements. The right to indemnification and other remedies based upon
such representations, warranties, covenants, and agreements will not be
lost, waived, reduced, or otherwise affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired)
at any time, whether before or after the execution and delivery of any of
the Prior Agreements or any of the Transaction Documents on the Closing
Date, with respect to the accuracy or inaccuracy of or compliance or
failure to comply with, any such representation, warranty, covenant, or
agreement. Further, no such right to indemnification and other remedies
shall be affected by Paracelsus ND's belief that any such representation or
warranty is or has been false or inaccurate, or that any such covenant or
agreement is or has been breached. Further, the waiver of any condition
based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or agreement, will not
affect the right to indemnification or any other remedy based on such
representations, warranties, covenants, or agreements.
3.02. SPECIFIC ACTIONS ON PRIOR AGREEMENTS.
A. PARTNERSHIP AGREEMENT. Subject to SECTION 3.04 hereof, the
Partnership Agreement shall continue in full force and effect until such
time as the Partnership has terminated, at which time the Partnership
Agreement shall also terminate.
B. CONTRIBUTION AGREEMENT. Effective upon the Closing, Section
11.2 of the Contribution Agreement shall terminate, Section 11.1 of the
Contribution Agreement shall be superseded in its entirety by SECTION 3.12
hereof, and, except as expressly amended by this Agreement, all other
provisions of the Contribution Agreement shall remain in full force and
effect.
C. OPERATING AGREEMENT. Effective upon the Closing, the
Operating Agreement shall terminate.
3.03. EXERCISE OF PUT RIGHT. Dakota acknowledges that it exercised
the Put on the Put Exercise Date.
3.04. EFFECT ON PARTNERSHIP.
A. DISSOLUTION.
I. Paracelsus ND and Dakota agree that, effective upon the
Closing, Dakota shall be deemed to have voluntarily withdrawn from the
Partnership without any further action and the Partnership shall be
dissolved by mutual agreement. Dakota agrees that, after the
Closing, it (i) will not be a partner in the Partnership, (ii) shall
have no power or authority with respect to the Partnership, and (iii)
shall not hold itself out as, and shall affirmatively give notice to
any Person who reasonably should be so informed, that it is no longer
<PAGE>
a partner in the Partnership. Paracelsus ND shall have the right to
review and approve, in advance of being filed or given, any Statement
of Disassociation under the Act or other filings or notices filed or
given by Dakota.
II. Dakota agrees that it shall have no right after the
Closing to participate in or receive any portion of the Partnership's
business, profits, losses, assets, capital, or distributions, or any
other element of a Partnership Interest, but shall only have the right
to receive payment of the Purchase Price and any other amounts
specifically set forth herein. Dakota agrees that the Purchase Price
is payment in complete liquidation and satisfaction of all rights and
interests it has in the Partnership, including, but not limited to,
the Dakota Partnership Interest.
III. Except as may be limited by SECTION 13.05, Paracelsus
shall within sixty (60) days after Closing determine whether as of
Closing, there is Available Cash, and if there is Available Cash,
distribute to Dakota its share thereof within five (5) days of such
determination in accordance with the Partnership Agreement and provide
Dakota with the accounting and financial statements upon which it
relied when calculating the amount of the Available Cash.
B. WINDING UP.
I. Dakota agrees that Paracelsus ND shall have the sole
power and authority over winding up the Partnership's business after
Closing. Except as required in Paracelsus ND's discretion for
winding up the Partnership's business, no further business shall be
conducted by Paracelsus ND or Dakota in the name of or on behalf of
the Partnership after the Closing.
II. As the sole event of winding up the Partnership's
business, Paracelsus ND shall promptly after the Closing assume and be
assigned, delegated, and distributed all of the assets, capital,
rights, liabilities, obligations, and business of the Partnership as
it exists on the Closing Date. This provision shall not in any way
limit the rights and obligations specifically set forth herein.
III. Dakota agrees that, in the absence of fraud, it shall
have no right to, and hereby waives, any right to an accounting or
settlement of or right to compel liquidation of the Partnership
following dissolution of the Partnership.
IV. From and after the Closing, the parties shall not owe
any duties or have any obligations or liabilities to each other with
respect to the Partnership, in the process of winding up or otherwise,
except as specifically set forth herein.
V. Dakota agrees not to take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the
Partnership's business in Paracelsus ND's discretion, and further
<PAGE>
agrees to take such actions and execute and deliver such documents as
Paracelsus ND may reasonably request for winding up the Partnership's
business and terminating the Partnership.
C. TERMINATION. The Partnership shall terminate for all
purposes when the winding up of its business has been completed by
Paracelsus ND.
3.05. TAX MATTERS. The Partnership's items of income, gain, loss,
and deduction shall be allocated to Paracelsus ND and Dakota for the Tax
year that includes the Closing Date in accordance with Article V of the
Partnership Agreement. Dakota shall not be allocated a share of any such
Partnership items of income, gain, loss, or deduction for any subsequent
year. The parties shall each timely file all required Tax Returns and
reports relating to their Partnership Interests and the Transaction.
3.06. DISCLAIMER OF FIDUCIARY OBLIGATIONS. Dakota and Paracelsus ND
agree that, with respect to this Transaction, each is an independent party.
Each is an experienced and sophisticated business entity, and is relying on
its own Representatives in determining to enter into and consummate the
Transaction. The relationship between Dakota and Paracelsus ND as partners
in the Partnership shall not create fiduciary obligations with respect to
each other for the purposes of the Transaction.
3.07. RESIGNATION OF POSITIONS WITH PARTNERSHIP. At the Closing,
Dakota shall tender to the Secretary of the Governing Board of the
Partnership the written resignations of all its nominees or appointees to
the Governing Board or other offices or positions with the Partnership,
effective as of the Closing Date, from all offices and positions with the
Partnership.
3.08. MAINTAIN EXISTENCE AND PRESERVE PROCEEDS.
A. Dakota agrees to maintain and preserve:
I. The corporate existence and good standing of Dakota under
the applicable Legal Requirements of the State of North Dakota for a
period of at least ten (10) years after the Closing Date; and
II. The Escrow Fund (in the amounts as required from
time-to-time under the Escrow Agreement), subject to the rights of
Paracelsus ND under this Agreement and the Escrow Agreement; and
III. The principal amount of the Purchase Price, less the
Escrow Fund (in the amounts as required from time-to-time under the
Escrow Agreement), for a period of at least nine (9) years after the
Closing Date, subject only to distributions thereof required by North
Dakota or Federal statute or regulation for it to maintain its tax
exempt status as a private foundation described in <section>501(c)(3)
and <section>509(a) of the IRC.
<PAGE>
B. Dakota further agrees not to intentionally, at any time,
dissolve, liquidate, or take any other action, or fail to take any action,
which would diminish the principal amount of the Purchase Price or the
Escrow Fund as required to be maintained and preserved in accordance with
SECTION 3.08.A hereof or otherwise adversely affect the rights of
Paracelsus ND or any of the other Paracelsus Indemnified Parties under any
of the Transaction Documents or Prior Agreements.
3.09. MUTUAL RELEASES. Except for those matters for which
indemnification is specifically provided for herein, upon the Closing (i)
Dakota irrevocably and unconditionally forever releases, discharges, and
covenants not to sue Paracelsus ND, PHC/CHC, PHC, or the Partnership, or
any of their respective successors, assigns, Affiliates, Subsidiaries,
insurers, or Representatives, and (ii) Paracelsus ND irrevocably and
unconditionally forever releases, discharges, and covenants not to sue
Dakota, or any of it's successors, assigns, Affiliates (such term in this
SECTION 3.09 shall not include the Dakota Clinic, Ltd., its owners or
employees), Subsidiaries, insurers, or current or past Representatives,
from and against any and all complaints, grievances, demands, obligations,
promises, agreements, claims, damages, actions, causes of action, and costs
and expenses (including, but not limited to, attorney and expert witness
fees), of whatsoever kind or nature, whether known or unknown, asserted or
not asserted, accruing or arising prior to or existing on the Closing Date
which such party may have or claim to have against any of the foregoing
released Persons regarding any and all matters between any of them;
PROVIDED, HOWEVER, this section shall not release or otherwise apply to any
of the liabilities or obligations set forth in, provided for, or created by
this Agreement or any of the other Transaction Documents. In addition,
except as otherwise permitted by this Agreement or required by applicable
Legal Requirement, Paracelsus ND and Dakota each hereby covenant and agree
that it shall not, with the intent of a claim or action being brought
against the other, take any action to solicit, promote, facilitate,
encourage, or assist any third party or any Governmental Body in bringing
such a claim or action.
3.10. NO DISPARAGEMENT. During the Restricted Period:
A. Dakota agrees, on behalf of itself and its Representatives
while acting in such Person's capacity as a Representative, that any future
statement or comment, whether written or oral, that any such Person may
make about Dakota's relationship and dealings with Paracelsus ND, PHC/CHC,
or PHC prior to the Closing Date, or the operations of the Partnership
prior to the Closing Date, will not be of a derogatory nature and will not
disparage, question, or impugn the reputation, business ability or acumen,
or standing in the business community or in the community as a whole, of
Paracelsus ND, PHC/CHC, PHC, or the Partnership, or any of the respective
Representatives thereof, in such Person's capacity as a Representative; and
B. Paracelsus ND agrees, on behalf of itself and its
Representatives while acting in such Person's capacity as a Representative,
that any future statement or comment, whether written or oral, that any
such Person may make about Paracelsus ND's relationship and dealings with
<PAGE>
Dakota prior to the Closing Date, or the operations of the Partnership
prior to the Closing Date, will not be of a derogatory nature and will not
disparage, question, or impugn the reputation, business ability or acumen,
or standing in the business community or in the community as a whole, of
Dakota or any of the respective Representatives thereof, in such Person's
capacity as a Representative; PROVIDED HOWEVER
C. The restrictions in this SECTION 3.10 shall not place a
limitation on either party or their Representatives in filing a court
action, filing a response to any court action, filing court documents in
furtherance of any court action or providing sworn statements or testimony
directly related to a court action.
3.11. INFORMATION FOR TAX RETURNS. Dakota shall cooperate with
Paracelsus ND and the Partnership after the Closing, by providing either or
both of them, without any additional consideration, promptly upon request,
such records and other information regarding the Partnership, as may
reasonably be requested from time to time by either or both of them, in
connection with the preparation or audit of federal, state and local income
and other Tax returns, and audits, disputes, refund claims or litigation
relating thereto. In such connection, and strictly for such purpose,
Dakota will afford Representatives of Paracelsus ND and the Partnership
access to books and records relating to the Partnership which are not
acquired by Paracelsus ND hereunder or retained by the Partnership.
3.12. NONCOMPETITION AND NONSOLICITATION COVENANTS. For purposes of
this SECTION 3.12 the term "Affiliate(s)" shall not include members of
Dakota who are physicians, the Dakota Clinic, Ltd. or the employees of the
Dakota Clinic, Ltd. The exclusion of physicians from the definition of
Affiliate(s) in this SECTION 3.12 is not intended to allow Dakota to engage
in any Restricted Activity with any such physician(s).
A. STATEMENT OF ENFORCEABILITY. Dakota acknowledges that this
SECTION 3.12 is entered into in conjunction with the sale of a partnership
interest and upon or in anticipation of a dissolution of a partnership and,
therefore, is fully enforceable as written under N.D.C.C <section>
9-08-06(2) and other applicable Legal Requirements. Dakota further
acknowledges that the provisions in this section are conditions precedent
and material inducements to Paracelsus ND entering into this Agreement and
consummating the Transaction.
B. NONCOMPETITION COVENANT. Dakota agrees, for itself and its
Affiliates, that during the period beginning on the Closing Date and
continuing for a period of five (5) years thereafter (the "RESTRICTED
PERIOD"), neither Dakota nor any of its Affiliates will, directly or
indirectly, either as an employee, employer, independent contractor,
consultant, agent, principal, owner, partner, shareholder, member, officer,
director, or in any other individual or representative capacity
(collectively, the "RESTRICTED CAPACITY"), own, manage, operate, consult
with, control, engage in, loan money to, finance, guaranty the performance,
obligation or indebtedness of, or otherwise fund or participate in any
manner whatsoever in, (i) any healthcare facility (which shall include,
without limitation, general acute care hospitals, speciality hospitals,
comprehensive rehabilitation facilities, rehabilitation agencies,
<PAGE>
diagnostic imaging centers, ambulatory or other types of surgery centers
and home health agencies, but shall exclude inpatient or outpatient
psychiatric or substance abuse facilities), or (ii) any Person which
directly or indirectly owns any healthcare facility, which provides either
inpatient or outpatient acute care medical services that are on the date of
this Agreement provided by the Partnership (collectively, the "RESTRICTED
ACTIVITY"), that is located within the geographic area described in
SCHEDULE 3.12.B hereto (the "RESTRICTED TERRITORY"), which is the primary
and secondary service areas of the Partnership's hospitals; PROVIDED,
HOWEVER, that Dakota or any of its Affiliates may invest in the securities
of any enterprise (without otherwise participating in the activities of
such enterprise) if (x) such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of
the Exchange Act and are actively traded by the public, and (y) none of
them beneficially owns (as defined by Rule 13d-3 promulgated under the
Exchange Act) in excess of five percent (5%) of the outstanding equity or
debt securities of such enterprise. This restriction does not prevent
Dakota from carrying out during the Restricted Period its charitable
mission in the healthcare industry by providing grants to worthy medical
causes on an evenhanded basis provided that such grants are (i) not made to
any Person, which if such Person were subject to this SECTION 3.12.B, would
be in breach of the terms hereof by engaging in a Restricted Activity
within the Restricted Territory, and (ii) based on an unmet community need
and the result of such grant(s) would not negatively impact the business of
Paracelsus ND in a disparate way from any other similar health care
provider in the Restricted Territory.
C. NONSOLICITATION COVENANT. Dakota agrees, for itself and its
Affiliates, that it will not, at any time during the Restricted Period,
directly or indirectly, (i) solicit any employee, independent contractor,
or consultant of Paracelsus ND or the Partnership for the purpose of
causing that employee, independent contractor, or consultant to terminate
his employment or contractual relationship with Paracelsus ND or the
Partnership, or (ii) take any deliberate action or engage in any course of
conduct to divert or attempt to divert from Paracelsus ND or the
Partnership any business, through any means, including, but not limited to,
taking any deliberate action or engaging in any course of conduct to
influence or attempt to influence any of the customers, patients, or
physicians with which Paracelsus ND or the Partnership has done business
during the term of the Partnership Agreement or this Agreement.
D. INJUNCTIVE REMEDY. Dakota acknowledges that the foregoing
restrictions in this SECTION 3.12 (collectively, the "RESTRICTIONS"), in
view of the nature of the business in which each of Paracelsus ND and the
Partnership is and has been engaged, are reasonable and necessary in order
to protect their legitimate business interests, and that any violation
thereof would result in immediate and irreparable injury to them, and
Dakota therefore further acknowledges that, in the event it violates, or
threatens to violate, any of such Restrictions, Paracelsus ND and the
Partnership, or either of them, shall be entitled to obtain from any court
of competent jurisdiction, without the posting of any bond or other
security, preliminary and permanent injunctive relief as well as damages
and an equitable accounting of all earnings, profits, and other benefits
arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies in law or equity to which they may
be entitled. If Paracelsus ND notifies Dakota in writing that it believes
<PAGE>
Dakota has violated a Restriction and Dakota does not cure such violation
within the time period specified in SECTION 3.12.E below, the Restricted
Period shall be tolled from the date of notice until such alleged violation
is cured to the reasonable satisfaction of Paracelsus ND. If any
Restrictions, or any part thereof, are determined in any Proceeding to be
invalid or unenforceable, the remainder of the Restrictions shall not
thereby be affected and shall be given full effect without regard to the
invalid provisions. If the Restrictions should be adjudged unreasonable in
any Proceeding, then the reviewing Governmental Body or other Person shall
have the power to reform the Restrictions to the extent reasonably
necessary to make the Restrictions valid and enforceable and, in the
modified form, such provisions shall then be enforceable and shall be
enforced.
E. OTHER RELIEF. In the event Paracelsus ND believes Dakota
has breached or threatened to breach the provisions of this SECTION 3.12,
before Paracelsus ND pursues any remedy or relief other than injunctive
relief, Dakota shall have twenty (20) Business Days to cure such breach or
threatened breach after the date on which it receives notice from
Paracelsus ND of the alleged violation hereof. If Dakota cures the breach
or threatened breach within such period, there shall be no breach or
default of this section relating to that incident of prohibited conduct by
Dakota.
F. INFORMATION. If Paracelsus ND believes at any time during
the Restricted Period that Dakota has breached or threatened to breach the
provisions of this SECTION 3.12, Paracelsus ND may request that Dakota
supply it with such information as Paracelsus ND reasonably determines is
necessary to ascertain compliance with or breach of the provisions of this
section. Paracelsus ND shall specifically request in writing the requested
information. Dakota agrees to furnish the requested information to
Paracelsus ND within a reasonable period of time under the circumstances
(but, in any event, not to exceed ten (10) Business Days) after receiving
the request; PROVIDED, HOWEVER, that Dakota shall not be required to
furnish any requested information which is privileged, confidential, or
proprietary, as determined in reasonable, good faith by Dakota.
3.13. MAINTENANCE OF INSURANCE. For a period of ten (10) years after
the Closing Date, Paracelsus shall maintain insurance customary for the
operation of a general acute care hospital with continuous coverage
beginning on December 21, 1994, in amounts customary within the industry
for hospitals similarly situated, with financially sound carriers, and
consistent with its past practices.
3.14. CONFIDENTIALITY OF RECORDS. The parties acknowledge that
Paracelsus ND will after the Closing be the custodian for all books,
records, data, materials, policies, agreements and all other information in
any medium whatsoever of the Dakota Assets, as defined in Section 2.1 of
the Contribution Agreement (collectively, the "Records") to the extent the
Records exist on the Closing Date. Except as permitted or required by this
SECTION 3.14, Paracelsus ND hereby covenants and agrees that, for a period
of ten (10) years after the Closing Date, Paracelsus ND shall maintain in
full confidence and not disclose or allow disclosure of any Record or any
other information it has acquired (whether written, visually, orally,
electronically or otherwise) regarding the Dakota Assets during its
<PAGE>
operation of the Partnership (together with Records, the "Confidential
Data"). Notwithstanding the preceding sentence, Confidential Data shall
not include any documents, data or other information (i) received by
Paracelsus ND from sources other than Dakota; (ii) made public or disclosed
by any Person other than Paracelsus ND; (iii) currently existing in the
public domain as of the date of the Closing; (iv) entered into the public
domain after the Closing otherwise than through Paracelsus ND;
(v) disclosed in any public document, report or filing; or (vi) created by
Paracelsus ND or the Partnership during the term of the Partnership.
Nothing in this SECTION 3.14 shall prevent Paracelsus ND from:
(1) disclosing and using Confidential Data upon receipt of legal
process, which shall without limitation include, civil,
administrative or criminal subpoena, and requests for production
or inspection of documents in any civil, administrative or
criminal proceeding;
(2) disclosing and using Confidential Data necessary to defend or
pursue a claim by or against any third party in any Proceeding;
(3) disclosing and using Confidential Data to refute or correct any
statement or publication by a third party that is reasonably
necessary to maintain the reputation, standing and goodwill of
Paracelsus ND in the community;
(4) using Confidential Data or disclosing Confidential Data to
Representatives or medical staff of Paracelsus ND as necessary
to the operation of Paracelsus ND in the normal and ordinary
course of business or as required by any Legal Requirement.
Paracelsus ND shall give Dakota prompt notice of its receipt of legal
process requiring disclosure and use of Confidential Data or its need to
disclose and use Confidential Data to defend or pursue a claim by or
against any third party in any Proceeding, so that Dakota may seek an
appropriate protective order, agreement of confidentiality, or other remedy
to ensure the continued confidentiality of the Confidential Data.
Notwithstanding the obligation in the preceding sentence, Paracelsus ND
shall not be required to give such notice with respect to any legal process
or claim which is normal and customary for a general acute care hospital
and for which insurance coverage is generally applicable. In the event
that such protective order, agreement of confidentiality or other remedy is
not obtained, or Dakota waives compliance with this SECTION 3.14,
Paracelsus ND or its Representative will furnish or use only the
Confidential Data that is required or reasonably necessary. Except for
(i) those matters for which indemnification is specifically provided for
herein; and (ii) the exception provided for in "(1)" immediately above, in
no event shall disclosure of any Record by Paracelsus ND in accordance with
this SECTION 3.14 be used by Paracelsus ND separately or in concert or
cooperation with a third party to pursue a claim against Dakota.
<PAGE>
Paracelsus ND acknowledges that the requirements regarding
confidentiality of Confidential Data described in this SECTION 3.14, are
reasonable and necessary in order to protect the legitimate business
interests of Dakota, and that any violation thereof would result in
immediate and irreparable injury to Dakota, and Paracelsus ND therefore
further acknowledges that, in the event it violates, or threatens to
violate, any of the requirements regarding confidentiality of Confidential
Data described in this SECTION 3.14, Dakota shall be entitled to obtain
from any court of competent jurisdiction, without the posting of any bond
or other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits, and other
benefits arising from such violation, which rights shall be cumulative and
in addition to any other rights or remedies in law or equity to which it
may be entitled.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF DAKOTA ABOUT DAKOTA
Dakota represents and warrants to Paracelsus ND that, except as
disclosed on the disclosure schedule attached hereto, which shall be
arranged in paragraphs corresponding to the numbered and lettered sections
of this SECTION 4 and initialed by the parties (the "DAKOTA DISCLOSURE
SCHEDULE"), each of the following statements is true and accurate on the
date hereof and will be true and accurate in all respects on and as of the
Closing Date:
4.01. AUTHORIZATION OF TRANSACTION. Dakota has the absolute and
unrestricted full right, power, and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
perform its obligations under this Agreement and the other Transaction
Documents to which it is a party. Each of this Agreement and the other
Transaction Documents to which Dakota is a party constitutes the legal,
valid, and binding obligation of Dakota, enforceable against Dakota in
accordance with the respective terms thereof. The execution and delivery
of this Agreement and the other Transaction Documents to which Dakota is a
party, and the consummation of the Transaction, has been duly authorized
and no other proceeding by Dakota is necessary with respect thereto.
Dakota will take, or cause to be taken, all action necessary to consummate
the Transaction.
4.02. ORGANIZATION; GOOD STANDING. Dakota is a non-profit corporation
duly incorporated, validly existing, and in good standing under the
applicable Legal Requirements of the State of North Dakota. Dakota has the
full power and authority (corporate and otherwise) to own, lease, and
operate all of the assets and properties it presently owns, leases, and
operates, and to conduct business as it is presently being conducted by it.
Dakota is duly qualified as a foreign corporation in all jurisdictions
where the nature of its business requires it to be so qualified. Dakota
has delivered to Paracelsus ND complete and accurate copies of its Articles
of Incorporation and Bylaws, as amended and in effect on the Closing Date.
Each officer and director of Dakota in office has been duly elected or
appointed in full compliance with the Articles of Incorporation and Bylaws
of Dakota and any applicable Legal Requirements.
<PAGE>
4.03. MEMBERSHIP. All the members of Dakota are listed by name and
address in Section 4.03 of the Dakota Disclosure Schedule.
4.04. NO SUBSIDIARIES OR AFFILIATES. Dakota has no Subsidiaries,
except for the "Family House." Except for the Partnership, Dakota has no
Affiliates (such term in this SECTION 4.04 shall not include the Dakota
Clinic, Ltd.).
4.05. LITIGATION AND RELATED MATTERS. Dakota is not subject to any
currently existing Proceeding by any Governmental Body, and there is no
Proceeding against Dakota pending before any Governmental Body or before
any private arbitration tribunal or, to its Knowledge, threatened against
Dakota, either (a) involving any challenge to, or seeking damages or other
relief in connection with, the Transaction, or (b) that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with the
Transaction. Except as described in Section 4.05 of the Dakota Disclosure
Schedule, Dakota has no Knowledge of the assertion of any Proceeding
involving it by any Governmental Body or any Person or entity regarding
any violation of any Legal Requirement.
4.06. INSURANCE COVERAGES.
A. All insurance policies or other Contracts for the transfer
or sharing of any risk under which Dakota has been covered at any time
since January 1, 1995 are listed and briefly described in Section 4.06 of
the Dakota Disclosure Schedule. All such insurance policies or other
Contracts that are in full force and effect are so noted in Section 4.06 of
the Dakota Disclosure Schedule, and Dakota is not in default under any of
them. Dakota has delivered to Paracelsus ND true and accurate copies of
all such insurance policies or other Contracts. Dakota has not been
refused any insurance coverage which it has applied for or sought.
B. All such insurance policies of Dakota are issued by an
insurer that is financially sound. In the aggregate, such insurance
policies and other Contracts provide adequate coverage for all the risks to
which the assets and operations, including, but not limited to, the
ownership of the Dakota Partnership Interest, are exposed. All such
insurance policies and other Contracts will continue in full force and
effect following the Closing. Dakota has given notice to its insurers of
all claims that may be insured thereby.
4.07. FINANCIAL STATEMENTS. The audited financial statements,
including an income statement, balance sheet, and statement of cash flows
as of and for Dakota's fiscal year ending December 31, 1997, and an
unaudited income statement and balance sheet (the "DAKOTA INTERIM FINANCIAL
STATEMENTS") as of and for the three (3) months ended March 31, 1998
(collectively, the "DAKOTA FINANCIAL STATEMENTS"), and all other financial
records, data, and information about Dakota furnished by, or at the
direction of, Dakota to Paracelsus ND since January 1, 1995, fully and
fairly present the financial condition of Dakota as of the dates and for
the periods indicated, are complete and accurate in all material respects,
and have been prepared in accordance with GAAP consistently applied
throughout the periods involved, except for the absence of notes as to the
<PAGE>
Dakota Interim Financial Statements. Dakota has delivered to Paracelsus ND
complete and accurate copies of the Dakota Financial Statements.
4.08. NO UNDISCLOSED LIABILITIES. Dakota has no actual Knowledge of
any fact or circumstance regarding the business of the Partnership that
occurred since December 21, 1994 that is not within the actual Knowledge
of Paracelsus ND that could reasonably be expected to create a liability of
the Partnership or itself.
4.09. NO JOINT PARTNER LIABILITIES. Since December 21, 1994 Dakota
has neither taken nor failed to take any action which has resulted, or
reasonably could be foreseen to result in, any liability or obligation to
Paracelsus ND by virtue of Paracelsus ND having been a partner of Dakota in
the Partnership on or prior to the Closing Date, that is not within the
actual Knowledge of Paracelsus ND.
4.10. COMPLIANCE WITH PRIOR AGREEMENTS. Dakota has neither taken any
action nor failed to take any action prohibited or required, as the case
may be, under any of the Prior Agreements with respect to the business,
assets, operations, or management of the Partnership. Each of the Prior
Agreements (except for the provisions thereof which are amended, modified,
or terminated by any of the Transaction Documents) are legal, valid, and
binding obligations of Dakota or DHE II, as the case may be, enforceable
against Dakota or DHE II, as the case may be, in accordance with the
respective terms thereof.
4.11. COMPLIANCE WITH LEGAL REQUIREMENTS.
A. To its Knowledge, Dakota has at all times since December 21,
1994, been in full compliance with each Legal Requirement that is or was
applicable to it, the violation of which would have a material adverse
effect on its financial condition.
B. Since December 21, 1994, no event has occurred that (with
or without the giving of notice or the lapse of time or both)(i) may
constitute or result in a violation by Dakota of, or a failure on the part
of Dakota to comply with, any Legal Requirement, or (ii) may give rise to
any obligation on the part of Dakota to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature, that in either
(i) or (ii) the result of which would have a material adverse effect on
its financial condition.
4.12. GOOD TITLE TO DAKOTA PARTNERSHIP INTEREST. Dakota is the sole
legal and beneficial owner and holder of the Dakota Partnership Interest
and has good, marketable, and valuable title to such Dakota Partnership
Interest free and clear of all Liens, and to its Knowledge has taken no
action that has created a Lien on the Dakota Partnership Interest.
4.13. NO CONFLICT; EFFECT OF AGREEMENT. The execution, delivery, and
performance of this Agreement and the other Transaction Documents and the
consummation by Dakota of the Transaction and the compliance by Dakota with
<PAGE>
the applicable provisions of this Agreement and the other Transaction
Documents to which it is a party does not and will not (with or without the
giving of notice or the lapse of time or both):
A. Except as specifically provided under the provisions of this
Agreement or the other Transaction Documents, cause or result in a default
under, or result in the modification or termination of, any Contract to
which Dakota or the Partnership is a party or by which any of their
respective assets are bound or subject;
B. Result in the creation or imposition of any Lien upon the
Dakota Partnership Interest or any asset of Dakota or the Partnership;
C. Contravene, conflict with, or result in the violation of any
provision of the Articles of Incorporation or Bylaws of Dakota or any
resolution or written consent adopted by the directors or members of
Dakota;
D. Contravene, conflict with, or result in the violation of any
provision of the Prior Agreements or any resolution or written consent
adopted by the partners or Board of Governors of the Partnership;
E. Except as specifically provided under the provisions of this
Agreement or the other Transaction Documents, contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge the Transaction or to exercise any remedy or obtain any
relief under, any judgment, order, writ, injunction, decree, or Legal
Requirement to which Dakota, the Dakota Partnership Interest, or the
Partnership may be bound or subject;
F. Contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Dakota or that otherwise relates to the
business of, or any of the assets owned or used by, Dakota or the
Partnership;
G. Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract to which
Dakota is a party, or Dakota, the Dakota Partnership Interest, or the
Partnership may be bound or subject;
H. Result in the imposition or creation of any Lien upon or
with respect to any of the assets owned or used by Dakota or the
Partnership; or
I. violate any judgment, order, writ, injunction, or decree
outstanding against Dakota or the Partnership.
<PAGE>
4.14. TAXES.
A. Dakota has filed, or caused to be filed, on a timely basis
since becoming a partner in the Partnership, all Tax Returns that are or
were required to be filed by or with respect to the Dakota Partnership
Interest pursuant to any applicable Legal Requirement. Dakota has
delivered, or made available, to Paracelsus ND copies of all such Tax
Returns.
B. Dakota is not delinquent in the payment of any Tax, and
there is no Tax deficiency asserted against Dakota, and there is no unpaid
assessment, proposal for additional Tax, deficiency, or delinquency in the
payment of any Tax. There are no Tax Liens upon any property or assets of
Dakota, nor does Dakota have notice of any event which could result in such
a Lien.
C. The Tax Returns of Dakota for calendar years after 1994 have
not been audited by the Internal Revenue Service or any other Taxing
authority, and there is no audit, investigation, or other proceeding
relating to Tax pending or threatened against Dakota. Dakota has no
Knowledge, and has not received any notice, of any circumstance that will
likely result in an audit of the Tax Returns. All Tax Returns that have
been filed by Dakota are true, correct, and complete.
D. Dakota was granted federal Tax exempt status under Section
501(c)(3) of the IRC in May of 1962. Since that date, Dakota has complied
with all Legal Requirements for obtaining and maintaining such federal Tax
exempt status.
4.15. SOLVENCY. Dakota is neither now insolvent nor will it be
rendered insolvent by the consummation of the Transaction. Furthermore,
immediately after the Closing, (a) Dakota will be able to pay its current
liabilities as they become due, (b) Dakota will not have unreasonably small
capital and will not have insufficient capital with which to conduct its
present or proposed business, and (c) taking into account pending and
threatened litigation, final judgments against Dakota in actions for money
damages are not reasonably anticipated to be rendered at a time when, or in
amounts such that, Dakota will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash
available to Dakota, after taking into account all other anticipated uses
of such cash, will be sufficient to pay any such judgments promptly in
accordance with their terms. As used in this section, (x) "INSOLVENT"
means, for any Person, that the sum of the present fair saleable value of
its assets does not and/or will not exceed its debts and other probable
liabilities, and (y) the term "DEBTS" includes any legal liability, whether
matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent, disputed or undisputed or secured or unsecured.
4.16. NO OTHER AGREEMENTS. Other than this Agreement, the other
Transaction Documents, and the Prior Agreements, neither Dakota nor any of
<PAGE>
its Affiliates (such term in this SECTION 4.16 shall not include the Dakota
Clinic, Ltd.) has any Contract with any of Paracelsus ND, CHC/PHC, or the
Partnership, and there are no other liabilities or obligations owing by any
of Paracelsus ND, PHC/CHC, or the Partnership, on the one hand, to Dakota
or any of its Affiliates, on the other hand. To the extent there are any
Contracts between Dakota or any of its Affiliates, on the one hand, and any
of Paracelsus ND, CHC/PHC, or the Partnership, on the other hand (other
than as pursuant to this Agreement or the other Transaction Documents or
the Prior Agreements), each such Contract is listed and briefly described
in Section 4.16 of the Dakota Disclosure Schedule. None of Paracelsus ND,
PHC/CHC, or the Partnership is in breach or default of any of their
respective obligations under any such listed Contract. Dakota has no Liens
against any of Paracelsus ND, PHC/CHC, or the Partnership, or any of their
respective assets.
4.17. NO BROKER'S FEE. Dakota has not incurred any obligation or
liability for broker's or finder's fees or similar payments with respect to
the Transaction.
4.18. NO CONSENTS REQUIRED. Except for any Consent required under the
HSR Act, Dakota neither is nor will be required to give any notice to or
obtain any Consent from any Governmental Body or other Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of the Transaction.
4.19. STATEMENTS TRUE AND CORRECT. No representation or warranty of
Dakota in this Agreement or the other Transaction Documents, and no
statement or information in any certificates, lists, documents, schedules,
or exhibits furnished by Dakota in connection with the Transaction,
contains any untrue statement of material fact or omits to state a material
fact necessary to make the statements herein or therein, in the light of
the circumstances in which they were made, not false or misleading (with
the foregoing being to the best of the Knowledge of Dakota with respect to
underlying statements and information which are expressly so qualified).
SECTION 5.
MUTUAL REPRESENTATIONS AND WARRANTIES ABOUT PARTNERSHIP
Each party represents and warrants to the other that each of the
following statements is true and accurate on the date hereof and will be
true and accurate in all respects on and as of the Closing Date:
5.01. ORGANIZATION; GOOD STANDING. The Partnership is a general
partnership duly organized, validly existing, and in good standing under
the laws of the State of North Dakota. The Partnership has the full power
and authority (partnership and otherwise) to own, lease, and operate all of
the assets and properties it presently owns, leases, and operates, and to
conduct business as it is presently being conducted by it. The Partnership
is duly qualified as a foreign general partnership in all jurisdictions
where the nature of its business requires it to be so qualified.
<PAGE>
5.02. CAPITALIZATION. The aggregate of one hundred percent (100%) of
the Partnership Interests in the Partnership are legally and beneficially
owned and held by Dakota and Paracelsus ND. The Dakota Partnership
Interest equals fifty percent (50%) of the Partnership Interests. There
are no other partners of the Partnership or other Persons with any
ownership interest in the Partnership. There are no Contracts relating to
the issuance, sale, or transfer of any ownership interests of the
Partnership. None of the Partnership Interests was issued in violation of
the Securities Act or any other Legal Requirement. Except as set forth in
is audited balance sheet dated December 31, 1997, the Partnership does not
own, or have any Contract to acquire, any equity securities or interests or
other interests in any other Person.
5.03. FULL AND COMPLETE INFORMATION. Each party has full and complete
access to all records and information about the Partnership. Each party
has Knowledge of the past and present operations and financial condition of
the Partnership. Each party has, since the formation of the Partnership
been a partner and had representatives as officers and on the Governing
Board of the Partnership.
5.04. COMPLIANCE WITH PRIOR AGREEMENTS. To each party's Knowledge,
the Partnership and its business have been managed and operated in
compliance with the Prior Agreements.
SECTION 6.
REPRESENTATIONS AND WARRANTIES OF PARACELSUS ND
Paracelsus ND represents and warrants to Dakota that, except as
disclosed on the disclosure schedule attached hereto, which shall be
arranged in paragraphs corresponding to the numbered and lettered sections
of this SECTION 6 and initialed by the parties (the "PARACELSUS ND
DISCLOSURE SCHEDULE"), each of the following statements is true and
accurate on the date of this Agreement and will be true and accurate in all
respects on and as of the Closing Date:
6.01. AUTHORIZATION OF TRANSACTION. Paracelsus ND has the absolute and
unrestricted full right, power, and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
perform its obligations under this Agreement and the other Transaction
Documents to which it is a party. Each of this Agreement and the other
Transaction Documents to which Paracelsus ND is a party constitutes the
legal, valid, and binding obligation of Paracelsus ND, enforceable against
Paracelsus ND in accordance with the respective terms thereof. The
execution and delivery of this Agreement and the other Transaction
Documents to which Paracelsus ND is a party, and the consummation of the
Transaction, has been duly authorized and no other proceedings (corporate
or otherwise) by Paracelsus ND is necessary with respect thereto.
Paracelsus ND will take, or cause to be taken, all action (corporate or
otherwise) necessary to consummate the Transaction.
6.02. ORGANIZATION; GOOD STANDING. Paracelsus ND is a corporation
duly incorporated, validly existing, and in good standing under the laws
<PAGE>
of the State of North Dakota. Paracelsus ND has the full power and
authority (corporate and otherwise) to own, lease, and operate all of the
assets and properties it presently owns, leases, and operates, and to
conduct business as it is presently being conducted by it. Paracelsus ND
is duly qualified as a foreign corporation in all jurisdictions where the
nature of its business requires it to be so qualified. Paracelsus ND has
delivered to Dakota complete and accurate copies of its Articles of
Incorporation and Bylaws, as amended and in effect on the Closing Date.
Each officer and director of Paracelsus ND in office was duly elected or
appointed in full compliance with the Articles of Incorporation and Bylaws
of Paracelsus ND and any applicable Legal Requirements.
6.03. INSURANCE COVERAGES.
A. All insurance policies or other Contracts for the transfer
or sharing of any risk under which Paracelsus ND has been covered at any
time since January 1, 1995 are listed and briefly described in Section 6.03
of the Paracelsus ND Disclosure Schedule. All such insurance policies or
other Contracts that are in full force and effect are so noted in Section
6.03 of the Paracelsus ND Disclosure Schedule, and Paracelsus ND is not in
default under any of them. Paracelsus ND has delivered to Dakota true and
accurate copies of all such insurance policies or other Contracts.
Paracelsus ND has not been refused any insurance coverage which it has
applied for or sought.
B. All such insurance policies of Paracelsus ND are issued by
an insurer that is financially sound. In the aggregate, such insurance
policies and other Contracts provide adequate coverage for all the risks to
which its assets and operations are exposed. All such insurance policies
and other Contracts will continue in full force and effect following the
Closing. Paracelsus ND has given notice to its insurers of all claims that
may be insured thereby.
6.04. FINANCIAL STATEMENTS. The audited financial statements,
including an income statement, balance sheet, and statement of cash flows
as of and for PHC's fiscal year ending December 31, 1997, and an unaudited
income statement and balance sheet (the "PHC INTERIM FINANCIAL STATEMENTS")
as of and for the three (3) months ended March 31, 1998 (collectively, the
"PHC FINANCIAL STATEMENTS"), fully and fairly present the financial
condition of PHC as of the dates and for the periods indicated, are
complete and accurate in all material respects, and have been prepared in
accordance with GAAP consistently applied throughout the periods involved,
except for the PHC Interim Financial Statements, which meet the
requirements of Regulation S-X under the Federal Securities Laws for
interim financial statements. Paracelsus ND has delivered to Dakota
complete and accurate copies of the PHC Financial Statements.
6.05. NO UNDISCLOSED LIABILITIES. Paracelsus ND has no actual
Knowledge of any fact or circumstance regarding the business of the
Partnership that occurred since December 21,1994 that is not within the
actual Knowledge of Dakota that could reasonably be expected to create a
liability of the Partnership or itself.
<PAGE>
6.06. NO JOINT PARTNER LIABILITIES. Since December 21, 1994
Paracelsus ND has neither taken nor failed to take any action which has
resulted, or reasonably could be foreseen to result in, any liability or
obligation to Dakota by virtue of Dakota having been a partner of
Paracelsus ND in the Partnership on or prior to the Closing Date, that is
not within the actual Knowledge of Dakota.
6.07. COMPLIANCE WITH PRIOR AGREEMENTS. Paracelsus ND has neither
taken any action nor failed to take any action prohibited or required, as
the case may be, under any of the Prior Agreements with respect to the
business, assets, operations, or management of the Partnership. Each of
the Prior Agreements (except for the provisions thereof which are amended,
modified, or terminated by any of the Transaction Documents) are legal,
valid, and binding obligations of Paracelsus ND, enforceable against
Paracelsus ND in accordance with the respective terms thereof.
6.08. COMPLIANCE WITH LEGAL REQUIREMENTS.
A. To its Knowledge, Paracelsus ND has at all times since
December 21, 1994 been in full compliance with each Legal Requirement that
is or was applicable to it, the violation of which would have a material
adverse effect on its financial condition.
B. Since December 21,1994, no event has occurred that (with or
without the giving of notice or the lapse of time or both) (i) may
constitute or result in a violation by Paracelsus ND of, or a failure on
the part of Paracelsus ND to comply with, any Legal Requirement, or (ii)
may give rise to any obligation on the part of Paracelsus ND to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature, that in either (i) or (ii) the result of which would have a
material adverse effect on its financial condition
6.09. NO CONFLICT; EFFECT OF AGREEMENT. The execution, delivery, and
performance of this Agreement and the other Transaction Documents and the
consummation by Paracelsus ND of the Transaction and the compliance by
Paracelsus ND with the applicable provisions of this Agreement and the
other Transaction Documents to which it is a party does not and will not
(with or without the giving of notice or the lapse of time or both):
A. Except as specifically provided under the provisions of this
Agreement or the other Transaction Documents, cause or result in a default
under, or result in the modification or termination of, any Contract to
which Paracelsus ND or the Partnership is a party or by which any of their
respective assets are bound or subject;
B. Contravene, conflict with, or result in the violation of any
provision of the Articles of Incorporation or Bylaws of Paracelsus ND or
any resolution or written consent adopted by the board of directors of
Paracelsus ND;
<PAGE>
C. Contravene, conflict with, or result in the violation of any
provision of the Prior Agreements or any resolution or written consent
adopted by the partners or Board of Governors of the Partnership;
D. Except as specifically provided under the provisions of this
Agreement or the other Transaction Documents, contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge the Transaction or to exercise any remedy or obtain any
relief under, any judgment, order, writ, injunction, decree, or Legal
Requirement to which Paracelsus ND or the Partnership may be bound or
subject;
E. Contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Paracelsus ND or that otherwise relates to
the business of, or any of the assets owned or used by, Paracelsus ND or
the Partnership;
F. Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract to which
Paracelsus ND is a party, or Paracelsus ND or the Partnership may be bound
or subject;
G. Except for Liens resulting from the senior bank loan
agreement of PHC, result in the imposition or creation of any Lien upon or
with respect to any of the assets owned or used by Paracelsus ND or the
Partnership; or
H. Violate any judgment, order, writ, injunction, or decree
outstanding against Paracelsus ND or the Partnership.
6.10. TAXES.
A. Paracelsus ND has filed, or caused to be filed, on a timely
basis since becoming a partner in the Partnership, all Tax Returns that are
or were required to be filed by or with respect to its interest in the
Partnership pursuant to any applicable Legal Requirement.
B. Paracelsus ND is not delinquent in the payment of any Tax,
and there is no Tax deficiency asserted against Paracelsus ND, and there is
no unpaid assessment, proposal for additional Tax, deficiency, or
delinquency in the payment of any Tax. There are no Tax Liens upon any
property or assets of Paracelsus ND, nor does Paracelsus ND have notice of
any event which could result in such a Lien.
C. The Tax Returns filed by or with respect to the interest of
Paracelsus ND in the Partnership for calendar years after 1994 have not
been audited by the Internal Revenue Service or any other Taxing authority,
<PAGE>
and there is no audit, investigation, or other proceeding relating to Taxes
pending or threatened against Paracelsus ND. Paracelsus ND has no
Knowledge, and has not received any notice, of any circumstance that will
likely result in an audit of the Tax Returns filed by or with respect to
the interest of Paracelsus ND in the Partnership. All such Tax Returns
that have been filed are true, correct, and complete.
6.11. SOLVENCY. Paracelsus ND is neither now insolvent nor will it be
rendered insolvent by the consummation of the Transaction. Furthermore,
immediately after the Closing, (a) Paracelsus ND will be able to pay its
current liabilities as they become due, (b) Paracelsus ND will not have
unreasonably small capital and will not have insufficient capital with
which to conduct its present or proposed business, and (c) taking into
account pending and threatened litigation, final judgments against
Paracelsus ND in actions for money damages are not reasonably anticipated
to be rendered at a time when, or in amounts such that, Paracelsus ND will
be unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum probable amount of such judgments in
any such actions and the earliest reasonable time at which such judgments
might be rendered). The cash available to Paracelsus ND, after taking into
account all other anticipated uses of such cash, will be sufficient to pay
any such judgments promptly in accordance with their terms. As used in this
section, (x) "INSOLVENT" means, for any Person, that the sum of the present
fair saleable value of its assets does not and/or will not exceed its debts
and other probable liabilities, and (y) the term "DEBTS" includes any legal
liability, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, disputed or undisputed or secured or
unsecured.
6.12. NO OTHER AGREEMENTS, NO LIENS. Other than this Agreement, the
other Transaction Documents, and the Prior Agreements, neither Paracelsus
ND nor any of its Affiliates has any Contract with Dakota or the
Partnership, and there are no other liabilities or obligations owing by
Paracelsus ND or the Partnership (other than as distributions from the
Partnership may be required), on the one hand, to Dakota or any of its
Affiliates (such term in this SECTION 6.12 shall not include the Dakota
Clinic, Ltd.), on the other hand. To the extent there are any Contracts
between Dakota or any of its Affiliates, on the one hand, and any of
Paracelsus ND, CHC/PHC, or the Partnership, on the other hand (other than
as pursuant to this Agreement or the other Transaction Documents or the
Prior Agreements), each such Contract is listed and briefly described in
SECTION 6.12 of the Paracelsus ND Disclosure Schedule. Neither Dakota, nor
the Partnership is in breach or default of any of their respective
obligations under any such listed Contract. Paracelsus ND has no Liens
against Dakota or the Partnership, or any of their respective assets.
6.13. NO BROKER'S FEE. Paracelsus ND has not incurred any obligation
or liability for broker's or finder's fees or similar payments with respect
to the Transaction.
6.14. NO CONSENTS REQUIRED. Except for any Consent required under the
HSR Act and change of control filings and other routine filings resulting
from the Transaction, Paracelsus ND neither is nor will be required to give
<PAGE>
any notice to or obtain any Consent from any Governmental Body or other
Person in connection with the execution and delivery of this Agreement or
the consummation or performance of the Transaction.
6.15. STATEMENTS TRUE AND CORRECT. No representation or warranty of
Paracelsus ND in this Agreement or the other Transaction Documents, and no
statement or information in any certificates, lists, documents, schedules,
or exhibits furnished by Paracelsus ND in connection with the Transaction,
contains any untrue statement of material fact or omits to state a material
fact necessary to make the statements herein or therein, in the light of
the circumstances in which they were made, not false or misleading (with
the foregoing being to the best of the Knowledge of Paracelsus ND with
respect to underlying statements and information which are expressly so
qualified).
6.16. OPERATION OF PARTNERSHIP. The Partnership has been operated
in accordance with the Operating Agreement; the annual financial statements
of the Partnership fully and fairly present the financial condition of the
Partnership as of the dates and for the periods indicated and are complete,
accurate in all material respects, and have been prepared in accordance
with GAAP consistently applied throughout the periods involved; full,
complete and accurate operational and financial information of the
Partnership that was material to the Governing Board has been provided to
the Governing Board of the Partnership; except as to any actual Knowledge
of Dakota, the Partnership has been operated in compliance with each Legal
Requirement that is or was applicable to it; and the Partnership has
maintained policies of insurance customary for the operation of a general
acute care hospital, in amounts customary within the industry for hospitals
similarly situated, and with financially sound carriers.
SECTION 7.
RIGHTS AND OBLIGATIONS PENDING CLOSING
7.01. CONFIDENTIAL INFORMATION.
A. Prior to consummation of the Transaction or termination of
this Agreement, the parties to this Agreement will be providing one another
with or have access to information about each other and the Partnership
which is protected, secret, non-public, or proprietary in nature (the
"CONFIDENTIAL INFORMATION"). Each party agrees to hold confidential, to
protect, and not to disclose the Confidential Information, except on a
"need-to-know" basis to its Representatives, and that the Confidential
Information will not, without the prior written consent of the other party,
be disclosed to any other Person by such party or it Representatives. Each
party shall be fully liable for any breach of this Agreement by its
Representatives. Notwithstanding the foregoing, for the purposes of this
section, Confidential Information shall not include information that,
without violating this Agreement, (i) was known to such party prior to the
disclosure by another party, (ii) is or becomes generally available to the
public other than by violating this Agreement, or (iii) otherwise becomes
lawfully available to a party to this Agreement on a nonconfidential basis
from a third party who is not, to the best of the Knowledge of such party
to this Agreement, under an obligation of confidence to the other party to
this Agreement. If this Agreement is terminated prior to consummation of
the Transaction, then each party shall return all documents and other
<PAGE>
material, whether or not confidential, provided to it pursuant to this
Agreement by or on behalf of the other party to this Agreement. The
foregoing obligations of confidentiality and nondisclosure shall be in
effect for a period of three (3) years beyond such termination. During
such period, no party shall use any of the Confidential Information
received from a party to the detriment of any other party.
B. In the event that a party, or anyone to whom it supplies the
Confidential Information, receives a request to disclose all or any part of
the Confidential Information under the terms of a subpoena or order issued
by a Governmental Body, the party agrees (i) to notify the other party
immediately of the existence, terms, and circumstances surrounding such
request, (ii) to consult with the other party on the advisability of taking
legally available steps to resist or narrow such request, and (iii) if
disclosure of such Confidential Information is required to prevent a party
from being held in contempt or subject to other penalty, to furnish only
such portion of the Confidential Information as the disclosing party is
legally compelled to disclose and to exercise its best efforts to obtain an
order or other reliable assurance that confidential treatment will be
accorded to the disclosed Confidential Information.
7.02. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Transaction will be issued,
if at all, at such time and in such manner as Paracelsus ND and Dakota
mutually agree, or at such time as PHC may be required to disclose pursuant
to law or stock exchange rules. Dakota and Paracelsus ND will consult with
each other concerning the means by which the Partnership's employees,
customers, patients, and suppliers and others having dealings with the
Partnership will be informed, if at all, of the Transaction, and Paracelsus
ND will have the right to review in advance any such written communication
and to be present for any such oral communication.
7.03. ACCESS AND INVESTIGATION. Between the date hereof and the
Closing Date, each of Dakota and Paracelsus ND will, to the fullest extent
of its power and authority (i) afford the other party and its
Representatives full and free access to their personnel, properties,
Contracts, books and records, and other documents and data relating to the
Partnership or their Partnership Interest, (ii) furnish the other party and
its Representatives with copies of all such Contracts, books and records,
and other existing documents and data as may reasonably be requested, and
(iii) furnish the other party and its Representatives with such additional
related financial, operating, and other data and information as may
reasonably be requested.
7.04. MAINTENANCE OF THE BUSINESS OF PARTNERSHIP. Between the date
hereof and the Closing Date, Dakota will, to the fullest extent of its
power and authority:
A. Comply with the Prior Agreements; and
B. Use its best efforts to preserve intact the current business
organization of the Partnership, keep available the services of the current
<PAGE>
officers, employees, and agents of the Partnership, and maintain the
relations and goodwill with suppliers, customers, patients, landlords,
creditors, employees, agents, and others having business relationships with
the Partnership.
7.05. NEGATIVE COVENANT PARACELSUS ND. Except as otherwise expressly
permitted by this Agreement, between the date hereof and the Closing Date,
Paracelsus ND will not to the fullest extent of its power and authority,
without the prior consent of Dakota, take any affirmative action, or fail
to take any reasonable action within its control, as a result of which:
A. it fails to comply with the Prior Agreements; or
B. subject to its business judgement, fails to use its best
efforts to preserve intact the current business organization of the
Partnership, keep available the services of the current officers,
employees, and agents of the Partnership, and maintain the relations and
goodwill with suppliers, customers, patients, landlords, creditors,
employees, agents, and others having business relationships with the
Partnership.
7.06. REQUIRED APPROVALS; GOVERNMENTAL AUTHORIZATIONS. Dakota shall
assist and cooperate with Paracelsus ND and its Representatives in (i)
making all filings that Paracelsus ND elects to make or is required by
Legal Requirements to be make in order to consummate the Transaction
(including all filings under the HSR Act), and (ii) obtaining all
Governmental Authorizations and Consents from any other Persons which are
conditions precedent to the consummation of the Transaction or otherwise
necessary or appropriate with respect to this Transaction (including taking
all actions requested by Paracelsus ND to cause early termination of any
applicable waiting period under the HSR Act).
7.07. BEST EFFORTS. Between the date hereof and the Closing Date,
Dakota and Paracelsus ND will each use its best efforts to cause the
conditions in SECTION 8 and SECTION 9 hereof to be satisfied.
7.08. NOTIFICATION. Between the date of this Agreement and the
Closing Date, each party will promptly notify the other party if it
becomes aware of any fact or condition that causes or constitutes a breach
of the other party's representations and warranties as of the date of this
Agreement, or if either party becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of
any such representation or warranty had such representation or warranty
been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Dakota Disclosure Schedule or Paracelsus ND Disclosure Schedule, if such
disclosure schedules were dated the date of the occurrence or discovery of
any such fact or condition, the party required to make such disclosure
will promptly deliver to the other party a supplement to the applicable
Disclosure Schedule, specifying such change, any of which such supplements
is subject to the approval of the non-supplementing party in its sole
discretion. During the same period, each party will promptly notify the
other party of the occurrence of any breach of any covenant or agreement of
<PAGE>
such party in this SECTION 7 or of the occurrence of any event that may
make the satisfaction of the conditions in SECTION 8 and SECTION 9 hereof
impossible or unlikely.
7.09. NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Dakota will not, directly or indirectly, solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Paracelsus
ND) relating to any transaction involving the sale of the Dakota
Partnership Interest or the business or assets (other than in the Ordinary
Course of Business) of the Partnership, or any of the Partnership
Interests, or any merger, consolidation, business combination, or similar
transaction involving the Partnership.
SECTION 8.
CONDITIONS PRECEDENT TO PARACELSUS ND'S OBLIGATION TO CLOSE
The obligation of Paracelsus ND to close under this Agreement is
subject to each of the following conditions (any of which may, in
Paracelsus ND's discretion, be waived, in whole or in part) existing on the
Closing Date or such other applicable date:
8.01. CLOSING CERTIFICATE. The President (or other authorized
corporate officer) of Dakota shall have executed and delivered to
Paracelsus ND a certificate dated as of the Closing Date certifying that:
A. REPRESENTATIONS AND WARRANTIES OF DAKOTA. The
representations and warranties made by Dakota in or pursuant to this
Agreement or the other Transaction Documents are true and accurate in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as
of such date. In determining whether there has been a material
misrepresentation or material adverse event, all occurrences and adverse
events shall be aggregated to determine the applicability or breach of the
provisions of this Agreement.
B. OBLIGATIONS OF DAKOTA. Dakota has performed and complied in
all material respects with all of its obligations under this Agreement and
the other Transaction Documents which are to be performed or complied with
by it prior to or on the Closing Date.
8.02. SECRETARY'S CERTIFICATE. Paracelsus ND shall have received a
certificate of the Secretary (or other authorized corporate officer) of
Dakota certifying as true, accurate, and complete, as of the Closing Date:
(a) a copy of the resolutions of Dakota's board of directors authorizing
the execution, delivery, and performance of this Agreement and the other
Transaction Documents to which it is a party and the consummation by Dakota
of the Transaction; (b) a copy of the resolutions of Dakota's members
authorizing the exercise and consummation of the Put; (c) a certified copy
of the Articles of Incorporation of Dakota issued by the Secretary of State
of North Dakota; (d) a copy of the Bylaws of Dakota; and (e) the
<PAGE>
incumbency of the officer or officers authorized to execute on behalf of
Dakota the Agreement and the other Transaction Documents to which it is a
party.
8.03. LEGAL MATTERS. There must not have been commenced or threatened
against Paracelsus ND, Dakota, the Partnership, or any of their respective
Affiliates, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, the Transaction, or (b) that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with the Transaction.
8.04. NO PROHIBITION. Neither the consummation nor the performance of
the Transaction will, directly or indirectly (with or without the giving of
notice or the lapse of time or both), materially contravene, or conflict
with, or result in a material violation of, or cause Paracelsus ND or any
of its Affiliates to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or judgment, order, writ, injunction, or
decree, or (b) any Legal Requirement or judgment, order, writ, injunction,
or decree that has been published, introduced, or otherwise proposed by or
before any Governmental Body.
8.05. NECESSARY CONSENTS. The Consent of all Persons necessary for
the consummation of the Transaction shall have been granted and be in full
force and effect, including, without limitation, the Consent of or required
by or pursuant to, as the case may be the HSR Act.
8.06. NO CLAIM REGARDING OWNERSHIP OR SALE PROCEEDS. There must not
have been made or threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, the Dakota Partnership
Interest or any Partnership Interests of, or any other voting, equity, or
ownership interest in, the Partnership, or (b) is entitled to all or any
portion of the Purchase Price payable for the Dakota Partnership Interest.
8.07. DELIVERY OF DOCUMENTS. Dakota shall have executed and
delivered, or caused the execution and delivery, to Paracelsus ND the:
documents required to be executed by Dakota and Dakota's legal counsel
under SECTION 10.01.
8.08. LEGAL OPINION. Dakota shall have delivered to Paracelsus ND a
legal opinion from Dakota's legal counsel, Dorsey & Whitney LLP, dated the
Closing Date and in form and substance satisfactory to Paracelsus ND's
legal counsel, to the effect that (a) Dakota is a nonprofit corporation
duly incorporated, validly existing and in good standing with the laws of
the State of North Dakota; (b) such counsel has no knowledge of the
existence of any facts indicating that Dakota does not have full power and
authority to convey, assign, transfer and deliver the Dakota Partnership
Interest to Paracelsus ND as provided in this Agreement; (c) all corporate
and other proceedings required to be taken by Dakota to authorize it to
carry out this Agreement have been duly and properly taken; (d) this
Agreement has been duly executed by Dakota and, except as may be limited by
<PAGE>
bankruptcy, insolvency or other similar laws affecting creditors generally,
is a legal, valid and binding obligation of Dakota, enforceable in
accordance with its terms; (e) the instruments delivered by Dakota at the
closing are legal, valid and binding in accordance with their terms; and
(f) Dakota is not a party to any action or proceeding before any
Governmental Body that would have a material adverse impact on the Dakota
Partnership Interest or the operation of the Partnership. In issuing such
opinion, such counsel may refrain from opining about (i) the legality of
the transaction contemplated by this Agreement under state or federal
antitrust laws or (ii) whether this Agreement is equitably enforceable.
8.09. DELIVERY OF OTHER DOCUMENTS. Dakota shall have delivered, or
caused to be delivered, all documents, instruments, exhibits, schedules,
certificates, and lists required by this Agreement and the other
Transaction Documents to be delivered or as requested by Paracelsus ND's
legal counsel.
SECTION 9.
CONDITIONS PRECEDENT TO DAKOTA'S OBLIGATION TO CLOSE
The obligation of Dakota to close on the Closing Date under this
Agreement is subject to each of the following conditions (any of which may,
in Dakota's discretion, be waived in writing) existing on the Closing Date
or such other applicable date:
9.01. CLOSING CERTIFICATE. The President (or other authorized
corporate officer) of Paracelsus ND shall have executed and delivered to
Dakota a certificate dated as of the Closing Date certifying that:
A. REPRESENTATIONS AND WARRANTIES OF PARACELSUS ND. The
representations and warranties made by Paracelsus ND in or pursuant to this
Agreement or the other Transaction Documents are true and accurate in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as
of such date. In determining whether there has been a material
misrepresentation or material adverse event, all occurrences and adverse
events shall be aggregated to determine the applicability or breach of the
provisions of this Agreement.
B. OBLIGATIONS OF PARACELSUS ND. Paracelsus ND has performed
and complied in all material respects with all of its obligations under
this Agreement and the other Transaction Documents which are to be
performed or complied with by it prior to or on the Closing Date.
9.02. SECRETARY'S CERTIFICATE. Dakota shall have received a
certificate of the Secretary (or other authorized corporate officer) of
Paracelsus ND certifying as true, accurate, and complete, as of the Closing
Date: (a) a copy of the resolutions of Paracelsus ND's board of directors
authorizing the execution, delivery, and performance of this Agreement and
the other Transaction Documents to which it is a party and the consummation
by Paracelsus ND of the Transaction; (b) a certified copy of the Articles
of Incorporation of Paracelsus ND issued by the Secretary of State of North
Dakota; (c) a copy of the Bylaws of Paracelsus ND; and (d) the incumbency
of the officer or officers authorized to execute on behalf of Paracelsus ND
the Agreement and the other Transaction Documents to which it is a party.
<PAGE>
9.03. PAYMENT OF PURCHASE PRICE. Paracelsus ND shall have delivered
to Escrow Agent, on behalf of Dakota, the total sum of the Purchase Price.
9.04. DELIVERY OF DOCUMENTS. Paracelsus ND shall have executed and
delivered, or caused the execution and delivery, to Dakota the documents
required to be executed Paracelsus ND, PHC and Paracelsus ND's legal
counsel under SECTION 10.03.
9.05. LEGAL OPINION. Paracelsus ND shall have delivered to Dakota a
legal opinion from Paracelsus ND's legal counsel, Michener, Larimore,
Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P. ( which firm
may rely to the extent it deems necessary on the opinions of Paracelsus
ND's local North Dakota legal counsel, Gunhus, Grinnell, Klinger, Swenson &
Guy, Ltd.), dated the Closing Date and in form and substance satisfactory
to Dakota's legal counsel, to the effect that (a) Paracelsus ND is a
business corporation duly incorporated, validly existing and in good
standing with the laws of the State of North Dakota; (b) PHC is a business
corporation duly incorporated, validly existing and in good standing with
the laws of the State of California; (c) all corporate and other
proceedings required to be taken by Paracelsus ND and PHC to authorize it
to carry out this Agreement have been duly and properly taken, (d) this
Agreement has been duly executed by Paracelsus ND and, except as may be
limited by bankruptcy, insolvency or other similar laws affecting creditors
generally, is a legal, valid and binding obligation of Paracelsus ND,
enforceable in accordance with its terms; (e) the instruments delivered by
Paracelsus ND at the closing are legal, valid and binding in accordance
with their terms; and (f) Paracelsus ND is not a party to any action or
proceeding before any Governmental Body that would have a material adverse
impact on the operation of the Partnership. In issuing such opinion, such
counsel may refrain from opining about (i) the legality of the transaction
contemplated by this Agreement under state or federal antitrust laws or
(ii) whether this Agreement is equitably enforceable.
SECTION 10.
DELIVERIES AT CLOSING; POST-CLOSING FURTHER ASSURANCES
10.01. DELIVERIES BY DAKOTA. Dakota shall deliver, or cause to be
delivered, to Paracelsus ND or such other Person as required hereby, at the
Closing:
A. CORPORATE DOCUMENTS AND CERTIFICATES.
I. A Certificate of Good Standing for Dakota issued by the
Comptroller of the State of North Dakota dated within twenty
(20) days prior to the Closing Date; and
<PAGE>
II. A Certificate of Existence for Dakota issued by the
Secretary of the State of North Dakota dated within twenty (20)
days prior to the Closing Date.
B. CLOSING CERTIFICATE. The Closing Certificate of Dakota, as
required by SECTION 8.01 hereof.
C. SECRETARY'S CERTIFICATE. The Secretary's Certificate of
Dakota, as required by SECTION 8.02 hereof.
D. WRITTEN RESIGNATIONS. The written resignations of all
Dakota's nominees or appointees to the Governing Board or other offices or
positions with the Partnership, as required by SECTION 3.07 hereof.
E. ESCROW AGREEMENT. The Escrow Agreement, as required by
SECTION 2.03 hereof.
F. PARTNERSHIP INTEREST ASSIGNMENT. The Partnership Interest
Assignment.
G. LEGAL OPINION. The legal opinion of Dakota's legal counsel,
as required by SECTION 8.08 hereof.
H. OTHER DOCUMENTS. Such other documents as Paracelsus ND may
reasonably request.
10.02. FURTHER ASSURANCES BY DAKOTA. From time to time after the
Closing, upon Paracelsus ND's request, Dakota agrees to execute and deliver
such additional instruments of conveyance and transfer and take such
further actions as may be required in conformity with this Agreement and
the other Transaction Documents for the complete sale and transfer to
Paracelsus ND of the Dakota Partnership Interest.
10.03. DELIVERIES BY PARACELSUS ND. Paracelsus ND shall deliver, or
cause to be delivered, to Dakota, or such other Person as required hereby,
at the Closing:
A. CORPORATE DOCUMENTS AND CERTIFICATES.
I. A Certificate of Good Standing for Paracelsus ND issued
by the Comptroller of the State of North Dakota dated within
twenty (20) days prior to the Closing Date; and
II. A Certificate of Existence for Paracelsus ND issued by
the Secretary of the State of North Dakota dated within twenty
(20) days prior to the Closing Date.
<PAGE>
B. CLOSING CERTIFICATE. The Closing Certificate of Paracelsus
ND, as required by SECTION 9.01 hereof.
C. SECRETARY'S CERTIFICATE. The Secretary's Certificate of
Paracelsus ND, as required by SECTION 9.02 hereof.
D. PURCHASE PRICE. The Purchase Price, as required by SECTION
2.03 hereof.
E. ESCROW AGREEMENT. The Escrow Agreement, as required by
SECTION 2.03 hereof.
F. PHC GUARANTY AGREEMENT. The PHC Guaranty Agreement.
G. LEGAL OPINION. The legal opinion of Paracelsus ND's legal
counsel, as required by SECTION 9.05 hereof.
SECTION 11.
CLOSING
11.01. CLOSING; EFFECTIVE TIME.
A. CLOSING. Subject to the provisions for termination of this
Agreement in SECTION 12 hereof, the closing for the consummation of the
Transaction (the "CLOSING") shall take place at the offices of Dorsey &
Whitney LLP, Dakota Center, Suite 402, 51 North Broadway, Fargo, North
Dakota 58107, at 10:00 a.m., local time, on the later of (i) June 1, 1998,
or (ii) the third Business Day after the termination of the applicable
waiting period under the HSR Act, or on such other date mutually agreed
upon in writing by Paracelsus ND and Dakota. The date on which the Closing
actually occurs, whether on a date set forth in the preceding sentence or
as such may be extended as permitted hereby, is referred to herein as the
"CLOSING DATE". Subject to the provisions of SECTION 12 hereof, failure to
consummate the Transaction on the date determined pursuant to this SECTION
11.01 will not result in the termination of this Agreement and will not
relieve any party of any obligation hereunder.
B. EFFECTIVE TIME. The Transaction shall be effective for Tax
and accounting purposes as of 12:01 a.m. on the day immediately following
the Closing Date (the "EFFECTIVE TIME"), unless otherwise mutually agreed
upon in writing by Paracelsus ND and Dakota.
SECTION 12.
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may, by notice given
prior to or at the Closing, be terminated only:
<PAGE>
A. By Paracelsus ND if any of the conditions in SECTION 8
hereof have not been satisfied as of the Closing Date or if satisfaction of
such conditions is or becomes impossible (other than through the failure of
Paracelsus ND to comply with its obligations hereunder) and Paracelsus ND
has not waived such conditions on or before the Closing Date;
B. By Dakota with the consent of Paracelsus ND, or
C. By Dakota if the condition in either SECTION 9.03 or SECTION
9.04 hereof is not satisfied on the Closing Date and all other conditions
to Closing in SECTION 8 (to the extent any condition therein is not waived
by Paracelsus ND) and SECTION 9 have been met on or before the Closing
Date.
12.02. EFFECT OF TERMINATION. The right of termination under this
SECTION 12 is in addition to any other rights a party may have under this
Agreement or otherwise, and the exercise of a right of termination is not
an election of remedies. If this Agreement is terminated pursuant to this
section, all further obligations of the parties under this Agreement will
terminate, except that the obligations in SECTION 3.04, SECTION 7.01,
SECTION 13.04, and SECTION 16.01 hereof will survive; PROVIDED, HOWEVER,
that if this Agreement is terminated by a party because of the breach of
this Agreement by the other party, the terminating party's right to pursue
all its legal rights and remedies will survive such termination unimpaired.
SECTION 13.
TOLLING
13.01. EXERCISE OF TOLLING RIGHT. If the Closing does not occur by
August 7, 1998 (the "TOLLING DATE") for any of the following reasons: (a)
there is in effect an order by a court of competent jurisdiction enjoining
or otherwise prohibiting or materially limiting the consummation of the
Put, or there exists pending, or there is overtly threatened (by any
federal or state agency or department) litigation that seeks to prohibit or
materially limit the consummation of the Put; (b) the applicable waiting
period under the HSR Act has not expired or been terminated; or (c) at the
date set for Closing or if no such date is set, the Tolling Date,
Paracelsus ND is prepared to deliver those items specified in SECTION 10.03
hereof and at such time Dakota fails to deliver the items specified in
SECTION 10.01 hereof, Paracelsus ND may, in its sole discretion, toll and
suspend the running of the twelve (12) month period under SECTION 3.03(G)
of the Partnership Agreement which commenced on the Put Exercise Date and
during which it is required to complete its purchase of the Dakota
Partnership Interest (the "PUT CLOSING PERIOD"). Paracelsus ND shall
exercise such tolling right by giving written notice thereof to Dakota,
including a statement of the ground or grounds relied upon for exercising
its tolling right, within three (3) Business Days after the Tolling Date
(the "TOLLING NOTICE").
<PAGE>
13.02. DURATION OF TOLLING PERIOD.
A. LITIGATION INTERVENTION. If Paracelsus ND delivers a Tolling
Notice to Dakota exercising the tolling right for the reasons described in
either Section 13.01 (a) or (b), the Tolling Notice shall specify a certain
Business Day in the future on which the Closing will occur (the "NEW
CLOSING DATE") which New Closing Date shall in no event be later than one
(1) year after the date of the Tolling Notice. The period of time from the
date of Tolling Notice to the New Closing Date as provided for in this
SECTION 13.02.A is referred to as the "TOLLING PERIOD". If the Closing
does not occur on or before the New Closing Date, the Tolling Period
expires, unless (i) the parties mutually agree in writing to extend the
Tolling Period or (ii) the parties agree to submit to binding arbitration
the issue of whether Paracelsus ND has a reasonable likelihood of being
able to consummate the Closing within a reasonable period of time as
determined by the arbitrator. If the matter is submitted to arbitration,
the arbitrator's order shall specify the date upon which the Tolling Period
will expire. Upon expiration of the Tolling Period (whether extended by
arbitration or not), the Put Closing Period shall automatically expire and
each party shall be free to exercise all of its rights under the
Partnership Agreement.
B. FAILURE OF DAKOTA TO CLOSE. If Paracelsus ND delivers a
Tolling Notice to Dakota exercising the tolling right for the reasons
described in SECTION 13.01 (C), within three (3) Business Days after
receiving the Tolling Notice from Paracelsus ND, Dakota shall deliver to
Paracelsus ND a written statement (the "TOLLING NOTICE RESPONSE")
identifying in detail, (i) the specific cause of the Closing not occurring
by the Tolling Date, and (ii) the next earliest Business Day after which
such condition, obligation, or other matter, as the case may be, will be
satisfied or performed and the Closing can occur (the "PROPOSED CLOSING
DATE"). If Dakota fails to deliver the Tolling Notice Response, or in the
Tolling Notice Response fails to specify the cause of delay in Closing or a
Proposed Closing Date, Paracelsus ND shall, within three (3) Business Days
after the date by which Dakota was to have provided the Tolling Notice
Response, deliver to Dakota a written statement (the "TOLLING PERIOD
NOTICE") identifying a Business Day in the future on which the Closing will
occur (the "DEFAULT CLOSING DATE"). The Default Closing Date shall be set
by Paracelsus ND, in its sole discretion, provided that such date is no
earlier than the Proposed Closing Date ( if such a date is set) and no
later than thirty (30) calendar days thereafter. The period of time from
the date of Tolling Notice to either the Proposed Closing Date or the
Default Closing Date, as provided for in this SECTION 13.02.B, is referred
to as the "TOLLING PERIOD". If the Closing does not occur on the Proposed
Closing Date or, on or prior to the Default Closing Date as determined
above, Paracelsus may, at its discretion, extend the Tolling Period until
such time as the Closing is consummated or a court of competent
jurisdiction orders otherwise.
13.03. DISTRIBUTIONS DURING TOLLING. At all times during any Tolling
Period, Paracelsus ND shall distribute Available Cash to Dakota in
accordance with the terms of the Partnership Agreement.
<PAGE>
13.04. PARACELSUS ND'S RIGHTS UPON TOLLING. If the grounds for the
tolling under this SECTION 13 is SECTION 13.01(C), Paracelsus ND may, in
its sole discretion, at any time thereafter, pursue any and all other
rights and remedies it may have under this Agreement or otherwise.
13.05. EFFECT OF TOLLING. Except as otherwise specifically provided
herein, Paracelsus ND's exercise of its tolling right under this SECTION 13
shall not affect the enforceability of any other provisions of the Prior
Agreements. In the event the Tolling Period expires and the Transaction
was not consummated during the Tolling Period, each party shall have all
rights provided it under the Partnership Agreement.
SECTION 14.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
14.01. SURVIVAL OF REPRESENTATIONS.
A. SURVIVAL PERIOD. Notwithstanding any investigation made by
or on behalf of any party, all representations and warranties made by the
parties in this Agreement shall survive the Closing and remain effective
for a period of ten (10) years thereafter.
B. RIGHTS NOT AFFECTED BY KNOWLEDGE. Each party is entitled to
and is deemed to have reasonably relied upon the representations,
warranties, covenants, and agreements of the other party in this Agreement.
The right to indemnification and other remedies based upon such
representations, warranties, covenants, and agreements will not be lost,
waived, reduced, or otherwise affected by any investigation conducted with
respect to, or any Knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of any of the
Prior Agreements or any of the Transaction Documents or the Closing Date,
with respect to the accuracy or inaccuracy of or compliance or failure to
comply with, any such representation, warranty, covenant, or agreement.
Further, no such right to indemnification and other remedies shall be
affected by either party's belief that any such representation or warranty
of the other party is or has been false or inaccurate, or that any such
covenant or agreement is or has been breached. Further, the waiver of any
condition based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or agreement, will not
affect the right to indemnification or any other remedy based on such
representations, warranties, covenants, or agreements.
14.02. SURVIVAL OF INDEMNIFICATION PROVISIONS IN PRIOR AGREEMENTS.
A. CONTRIBUTION AGREEMENT. Notwithstanding the provisions of
this Section 14, the parties hereby agree that the indemnification
provisions in Article XIII of the Contribution Agreement shall survive the
Closing and shall govern the indemnification of losses described therein
for a period of ten (10) years after the Closing, at which time such
provisions shall expire; provided however, that Section 13.3 of the
Contribution Agreement regarding thresholds for indemnification is hereby
<PAGE>
amended and shall be superceded in its entirety by SECTION 14.06 of this
Agreement.
B. OPERATING AGREEMENT. Notwithstanding the provisions of
this Section 14, the parties hereby agree that the indemnification
provisions in Section 8.2 of the Operating Agreement shall survive the
Closing and shall govern the indemnification of losses described therein
for a period of ten (10) years after the Closing, at which time such
provisions shall expire.
14.03. INDEMNIFICATION OF PARACELSUS ND.
A. Subject to the provisions of this SECTION 14, Dakota agrees
to indemnify, defend, and hold harmless Paracelsus ND, the Partnership and
(but excluding Dakota, as applicable) their respective predecessors,
successors, assigns, officers, directors, stockholders, employees,
Subsidiaries, parents, Affiliates, partners, agents, attorneys,
accountants, financial advisers and representatives (collectively, the
"PARACELSUS ND INDEMNIFIED PARTIES"), against and in respect of any losses,
damages (including incidental and consequential damages), deficiencies,
diminutions in value, liabilities, actions, suits, proceedings, demands,
assessments, judgments, fines, and reasonable costs and expenses
(including, but not limited to, attorney and expert witness fees)
(collectively, the "LOSSES"), arising or resulting, directly or indirectly,
from or in connection with:
i. Any material misrepresentation or other breach of any
representation or warranty made by Dakota in this Agreement or in any
of the other Transaction Documents (regardless of whether such has
been waived by Paracelsus ND);
ii. Any material failure to perform or other breach of any
covenant, agreement, or obligation of Dakota in this Agreement or in
any of the other Transaction Documents (regardless of whether such has
been waived by Paracelsus ND);
iii. Any grossly negligent act or omission or any act or
omission in bad faith of any of the nominees or appointees of Dakota
to the Governing Board of the Partnership or other offices or
positions of the Partnership, or of any of the other Dakota
Indemnified Parties (regardless of whether such has been waived by
Paracelsus ND); or
iv. Any matter disclosed in Section 4.05 of the Dakota
Disclosure Schedule (regardless of whether such has been waived by
Paracelsus ND);
B. Subject to the provisions of this SECTION 14 and
specifically the indemnification rights provided in SECTION 14.02 and
SECTION 14.03.A, Dakota agrees to indemnify, defend, and hold harmless the
Paracelsus ND Indemnified Parties against one-half ( 1/2 ) of any Losses to
<PAGE>
any of the Paracelsus ND Indemnified Parties arising or resulting, directly
or indirectly, from the operation of the Partnership since December 21,
1994 and on or prior to the Closing Date; provided that such Loss was:
i. Not caused by or within the Knowledge of PHC/CHC,
Paracelsus ND, its Affiliates, employees, agents, or independent
contractors under the Operating Agreement; or
ii. Disclosed to the Governing Board of the Partnership
during such period, and not caused as a result of Paracelsus ND's
gross negligence or bad faith.
The foregoing matters in this SECTION 14.03 giving rise to the rights
of the Paracelsus ND Indemnified Parties to indemnification hereunder are
referred to as the "PARACELSUS ND CLAIMS".
14.04. INDEMNIFICATION OF DAKOTA. Subject to the provisions of this
SECTION 14, Paracelsus ND agrees to indemnify, defend, and hold harmless
Dakota and (but excluding the Partnership) its predecessors, successors,
assigns, officers, directors, stockholders, employees, Subsidiaries,
parents, Affiliates (such term in this SECTION 14.04 shall exclude Dakota
Clinic Ltd., its owners and employees), partners, agents, attorneys,
accountants, financial advisers, and representatives (collectively, the
"DAKOTA INDEMNIFIED PARTIES"), against and in respect of any Losses,
arising or resulting, directly or indirectly, from or in connection with:
A. Any material misrepresentation or other breach of any
representation or
warranty made by Paracelsus ND in this Agreement or in any of the other
Transaction Documents (regardless of whether such has been waived by
Dakota);
B. Any material failure to perform or other breach by
Paracelsus ND of any covenant, agreement, or obligation in this Agreement
or in any of the other Transaction Documents (regardless of whether such
has been waived by Dakota);
C. Any action, inaction, or liability incurred after Closing
(including any action, inaction, or liability related to winding up the
Partnership by Paracelsus ND, regardless of whether such has been waived by
Dakota); or
D. Any grossly negligent act or omission or any act or omission
in bad faith of any of the nominees or appointees of Paracelsus ND to the
Governing Board of the Partnership or other offices or positions of the
Partnership or of any of the other Paracelsus ND Indemnified Parties,
excluding the Partnership (regardless of whether such has been waived by
Dakota).
The foregoing matters giving rise to the rights of the Dakota
Indemnified Parties to indemnification hereunder are referred to as the
"DAKOTA CLAIMS".
14.05. LIMITATIONS ON LIABILITY. Notwithstanding any other
provision hereof, neither party shall be liable for any Losses under this
<PAGE>
SECTION 14 in excess of the Purchase Price. The obligations of both
parties under this SECTION 14 shall terminate, except as to claims
previously asserted, ten (10) years after the Closing.
14.06. THRESHOLDS. Neither the Paracelsus ND Indemnified Parties
nor the Dakota Indemnified Parties shall have the right to indemnification
under this SECTION 14 until their respective claims (without regard to the
De minimis Threshold) in the aggregate exceed the sum of $650,000 (the
"Indemnity Threshold"). Once the Indemnity Threshold has been reached as
to a party such party shall have the right to indemnification, PROVIDED
HOWEVER, neither the Paracelsus ND Indemnified Parties nor the Dakota
Indemnified Parties shall have the right to indemnification under this
SECTION 14 for any claim that does not exceed $25,000 (the "De minimis
Threshold"). Notwithstanding the foregoing, the De minimis Threshold shall
not apply to any claim resulting from a claim or other legal action brought
by any Governmental Body or the appropriate fiscal intermediary of the
Health Care Financing Administration either (i) alleging violations of the
Medicare or Medicaid programs or (ii) relating to a false, inaccurate, or
incomplete claim for reimbursement submitted to either such program.
14.07. EFFECT OF TAXES AND INSURANCE. The liability of an Indemnitor
under this SECTION 14 shall be reduced by the Tax benefit actually realized
and any insurance proceeds received by the Indemnitee as a result of any
Losses upon which the claim for indemnification is based, and shall include
any Tax detriment actually incurred by the Indemnitee as a result of such
Losses. The amount of any such Tax benefit or detriment shall be
determined by taking into account the effect, if any and to the extent then
determinable, of timing differences resulting from the acceleration or
deferral of items of gain or loss resulting from such Losses and shall
otherwise be determined so that payment by the Indemnitor, as so adjusted,
will make the Indemnitee as economically whole as reasonably possible.
14.08. ESCROW FUND SETOFF RIGHT; NOTICE. Upon notice to Dakota
stating the basis therefor, any of the Paracelsus ND Indemnified Parties
may, in their sole discretion, deduct, set off, and make a claim only for
amounts resulting from a claim brought by any Governmental Body or the
appropriate fiscal intermediary of the Health Care Financing Administration
either (i) alleging violations of the Medicare or Medicaid programs, or
(ii) relating to a false, inaccurate, or incomplete claim for reimbursement
submitted to either such program to which they may be entitled under this
SECTION 14 against and from the Escrow Fund or any other amounts owed to
Dakota under this or any of the other Transaction Documents. Paracelsus ND
shall give notice to Dakota (a) as promptly as reasonably possible of
Paracelsus ND's becoming aware of the likelihood of its incurring Losses
for which indemnification is provided for under this SECTION 14, and (b)
within ten (10) business days following receipt by Paracelsus ND of any
written notice from any governmental regulatory or examining body of the
commencing of, or existence of, an investigation, audit or examination, the
result of which could reasonably result in Paracelsus ND incurring Losses
for which indemnification is provided for under this SECTION 14; provided
however the failure to give such notice shall not restrict, diminish or
limit Paracelsus ND's rights hereunder. The exercise of such right by any
of the Paracelsus ND Indemnified Parties in good faith, whether or not
ultimately determined to be justified, will not constitute a breach or
default hereunder or thereunder, as the case may be. In the event the
exercise of such right is ultimately determined not to be justified, then
<PAGE>
Paracelsus ND shall pay interest on such amount at the "Prime Rate" (as
published in THE WALL STREET JOURNAL, as such Prime Rate may change from
time to time) plus two percent (2%), during the period Paracelsus ND
retained such amount. Neither the exercise of nor the failure to exercise
such right will constitute an election of remedies or limit any of the
Paracelsus ND Indemnified Parties in any manner in the enforcement of any
other remedies that may be available to them.
14.09. PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
A. After receipt by an Indemnitee under this SECTION 14 of
notice of the commencement of any Proceeding against it, such Indemnitee
shall, if a claim is to be made against an Indemnitor hereunder, promptly
give notice to the Indemnitor of the commencement of such claim (including
all documents and other information which the Indemnitee has with respect
thereto), but the failure to notify the Indemnitor shall not relieve the
Indemnitor of any liability that it may have to any Indemnitee, except to
the extent that the Indemnitor demonstrates that the defense of such action
is prejudiced by the Indemnitee's failure to give such notice.
B. If any Proceeding referred to in the preceding subsection is
brought against an Indemnitee and it gives notice to the Indemnitor of the
commencement of such Proceeding, the Indemnitor will, be entitled to
participate in such Proceeding and, to the extent that it wants (unless (i)
the Indemnitor is also a party to such Proceeding and the Indemnitee
determines in good faith that joint representation would be inappropriate,
or (ii) the Indemnitor fails to provide reasonable assurance to the
Indemnitee of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding) to assume the defense of
such Proceeding with counsel satisfactory to the Indemnitee and, after
notice from the Indemnitor to the Indemnitee of its election to assume the
defense of such Proceeding, the Indemnitor will not, as long as it
diligently conducts such defense, be liable to the Indemnitee under this
SECTION 14 for any fees of other counsel or any other expenses with respect
to the defense of such Proceeding, in each case subsequently incurred by
the Indemnitee in connection with the defense of such Proceeding, other
than reasonable and necessary costs of investigation. If the Indemnitor
assumes the defense of a Proceeding, (i) it will be conclusively
established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification under
this SECTION 14; (ii) no compromise or settlement of such claims may be
effected by the Indemnitor without the Indemnitee's consent unless (y)
there is no finding or admission of any violation of Legal Requirements or
any violation of the rights of any Person and no effect on any other claims
that may be made against the Indemnitee, and (z) the sole relief provided
is monetary damages that are paid in full by the Indemnitor, and (iii) the
Indemnitee will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given
to an Indemnitor of the commencement of any Proceeding and the Indemnitor
does not, within ten (10) calendar days after the Indemnitee's notice is
given, give notice to the Indemnitee of its election to assume the defense
<PAGE>
of such Proceeding, the Indemnitor will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the
Indemnitee.
C. Notwithstanding the foregoing, if an Indemnitee determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its Affiliates (such term in this SECTION 14.09.C
shall exclude Dakota Clinic Ltd, its owners and employees) , other than as
a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnitee may, by notice to the
Indemnitor, assume the exclusive right to defend, compromise, or settle
such Proceeding, but the Indemnitor will not be bound by any determination
of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
14.10. PROCEDURE FOR INDEMNIFICATION; OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim covered by
SECTION 14.09 may be asserted by the Indemnitee promptly giving notice to
the Indemnitor requesting indemnification and stating in reasonable detail
the nature of such matter and the amount of Losses claimed therefor. The
Indemnitor shall have fifteen (15) calendar days after receiving such
notice to respond. If the Indemnitor accepts responsibility or does not
respond within such 15 day period, the Indemnitor shall pay the Indemnitee
the full amount of the claim within ten (10) Business Days after
responsibility therefor is so determined. If the Indemnitor rejects the
claim for indemnification, and the dispute is not resolved by the
Indemnitor and Indemnitee within fifteen (15) calendar days, either party
may pursue any available remedy, in law or equity. If it is determined
after any such Proceeding that the Indemnitor is liable for the claim, it
shall pay the Indemnitee the full amount of the claim within ten (10)
Business Days after responsibility therefor is so determined or as
otherwise ruled in any such Proceeding.
SECTION 15.
NOTICE
15.01. NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be sufficiently given if personally
delivered, mailed by certified or registered mail, return receipt
requested, sent by Federal Express (or other guaranteed and receipted
delivery service), or sent by facsimile transmission to the following
addresses (or such other addresses as specified by written notice timely
given to the other parties).
TO PARACELSUS ND: Paracelsus Healthcare Corporation
Attn: James G. VanDevender
515 West Greens Road, Suite 800
Houston, Texas 77067
Telephone: (281) 774-5115
Facsimile: (281) 774-5110
<PAGE>
WITH A COPY (WHICH
SHALL NOT CONSTITUTE
NOTICE) TO: Michener, Larimore, Swindle, Whitaker,
Flowers, Sawyer, Reynolds & Chalk, L.L.P.
Attn: Wayne M. Whitaker
3500 City Center Tower II
301 Commerce Street
Fort Worth, Texas 76102
Telephone: (817) 335-4417
Facsimile: (817) 335-6935
TO DAKOTA: Dakota Medical Foundation
Attn: John L. Hicks, D.D.S.
1711 South University Drive
Fargo, North Dakota 58109-7067
Telephone: (701) 280-4150
Facsimile: (701) 280-4552
WITH A COPY (WHICH
SHALL NOT CONSTITUTE
NOTICE) TO: Dorsey & Whitney LLP
Attn: Forrest G. Burke
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Telephone: (612) 340-6321
Facsimile: (612) 340-8827
Any notice given in accordance with this section is effective three
(3) Business Days after the date on which the same was delivered,
deposited, or confirmed, as applicable for the notice procedure used.
SECTION 16.
MISCELLANEOUS
16.01. TRANSACTION COSTS AND EXPENSES. Except as specifically
provided otherwise herein, each party hereunder shall be responsible for
and pay its own costs and expenses, including fees of accountants,
attorneys, and other advisors, incurred by it in connection with the
Transaction; PROVIDED, HOWEVER, that if the Transaction is not consummated
as a result of a breach of this Agreement by any party, such party shall be
liable for expenses and costs incurred by the other party, together with
all reasonable expenses and costs (including, but not limited to, attorney
and expert witness fees) incurred by the other party in connection with
enforcing its rights under this Agreement, notwithstanding the provisions
of SECTION 12 hereof. Paracelsus ND shall pay all recording fees,
<PAGE>
documentary stamp Taxes, discretionary surtaxes and intangible Taxes for
recording any deeds, assignments, or other instruments in connection with
the Transaction. Each of Dakota and Paracelsus ND shall pay one-half
( 1/2 ) of the HSR Act filing fee, provided however in no event shall
Dakota be required to pay more than $22,500 of the HSR Act filing fee.
16.02. ASSIGNABILITY; BINDING EFFECT; THIRD PARTIES.
A. The rights and obligations of any party under this Agreement
may not be assigned or delegated by any party without the prior written
consent of the other party, which shall not be unreasonably withheld,
except that Paracelsus ND may assign and delegate any of its rights and
obligations to any Subsidiary or Affiliate or any successor in a merger,
sale of substantially all of its assets, or other similar transaction.
Subject to the preceding sentence, this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
B. Nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies arising from this Agreement on
any Person other than the parties and their respective successors or
assigns, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third party to a party, nor shall any
provision of this Agreement give any third party a right of subrogation or
action against any party, except as otherwise set forth in this Agreement.
16.03. WAIVER. There can be no waiver of any term, provision, or
condition of this Agreement which is not in writing signed by the party
against whom the waiver is sought to be enforced. Waiver by any party of
the default or breach of any provision of this Agreement by another shall
not operate or be construed as a waiver of any subsequent default or
breach.
16.04. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable in any Proceeding, it is the parties' intent that
all other provisions of this Agreement shall remain fully valid,
enforceable, and binding on the parties.
16.05. FURTHER ASSURANCES. The parties agree to take such further
actions, including the execution and delivery of any documents, as may be
required, necessary, or desirable for the performance of this Agreement.
16.06. ENTIRE AGREEMENT; HEADINGS; INCORPORATION BY REFERENCE. Except
as otherwise provided herein with respect to the Prior Agreements, this
Agreement together with the other Transaction Documents constitutes the
entire agreement between the parties relating to the subject matter hereof,
and supersedes all previous agreements, written or oral. This Agreement
shall not be amended or modified except by an instrument in writing signed
by all parties. Headings are for convenience of reference only and shall
not affect the interpretation or construction of this Agreement. All
<PAGE>
documents, instruments, exhibits, and schedules referred to in this
Agreement are incorporated by reference for all purposes.
16.07. GOVERNING LAW; VENUE; ATTORNEY'S FEES.
A. Any dispute between the parties relating to this Agreement
shall be construed under and in accordance with the laws of the State of
North Dakota applicable to contracts between residents of North Dakota that
are to be wholly performed within such state.
B. The parties agree that the United States District Court for
the District of North Dakota, Southeastern Division, and the state courts
within Cass County, North Dakota shall have exclusive venue and
jurisdiction of the same.
C. The prevailing party in any litigation shall be entitled to
recover from the other party reasonable attorney and expert witness fees,
and court costs incurred in the same, in addition to any other relief that
may be awarded.
16.08. MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original and all
of which shall constitute one document; and furthermore, a facsimile
signature hereon shall be deemed an original.
[signatures on following page]
- 1 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused same to be duly delivered on their behalf on the day and year first
written above.
Paracelsus ND: Dakota:
PARACELSUS HEALTHCARE DAKOTA MEDICAL FOUNDATION
CORPORATION OF NORTH DAKOTA,
INC.
By:
By: Name:
Name: Title:
Title:
- 2 -
<PAGE>
Schedule 3.12.b
RESTRICTED TERRITORY
[to come]
- 3 -
<PAGE>
DAKOTA DISCLOSURE SCHEDULE
4.01. AUTHORIZATION OF TRANSACTION.
4.02. ORGANIZATION; GOOD STANDING.
4.03. CAPITALIZATION.
4.04. NO SUBSIDIARIES OR AFFILIATES.
4.05. LITIGATION AND RELATED MATTERS.
4.06. INSURANCE COVERAGES.
4.07. FINANCIAL STATEMENTS.
4.08. NO UNDISCLOSED LIABILITIES.
4.09. JOINT PARTNER LIABILITIES.
4.10. COMPLIANCE WITH PRIOR AGREEMENTS.
4.11. COMPLIANCE WITH LEGAL REQUIREMENTS.
4.12. GOOD TITLE TO DAKOTA PARTNERSHIP INTEREST.
4.13. NO CONFLICT; EFFECT OF AGREEMENT.
4.14. TAXES.
4.15. SOLVENCY.
4.16. NO OTHER AGREEMENTS.
4.17. NO BROKER'S FEE.
4.18 NO CONSENTS REQUIRED.
4.19. STATEMENTS TRUE AND CORRECT.
Initials:
- 4 -
<PAGE>
Partnership Disclosure Schedule
5.01. ORGANIZATION; GOOD STANDING.
5.02. CAPITALIZATION.
5.03. FULL AND COMPLETE INFORMATION.
5.04. COMPLIANCE WITH PRIOR AGREEMENTS.
5.05. STATEMENTS TRUE AND CORRECT.
Initials:
- 5 -
<PAGE>
Paracelsus ND Disclosure Schedule
6.01. AUTHORIZATION OF TRANSACTION.
6.02. ORGANIZATION; GOOD STANDING.
6.03. NO CONSENTS REQUIRED.
6.04. STATEMENTS TRUE AND CORRECT.
Initials:
- 6 -
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
pertaining to the Paracelsus Healthcare Corporation 1996 Stock Incentive Plan,
as amended (Form S-8 No. 33-10299) and pertaining to various stock option plans
of Paracelsus Healthcare Corporation (Form S-8 No. 33-12331) of our report
dated February 16, 1996, with respect to the consolidated financial statements
of Dakota Heartland Health System for the year ended December 31, 1995.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Houston, Texas
July 10, 1998
