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): April 15, 1999
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
Paracelsus Healthcare Corporation ("the Company")entered into a stock
purchase agreement (the "Stock Purchase Agreement"), dated March 12, 1999 and
as amended on March 31, 1999, for the sale of Paracelsus Bledsoe County
General Hospital, Inc.("Bledsoe"), which operated a 32 licensed-bed facility
located in Pikeville, Tennessee, to Associates Capital Group, LLC, a Georgia
limited liability company (the "Buyer"). The transaction, which was effective
on March 31, 1999, was completed on April 15, 1999. The sales price of
approximately $2.2 million resulted on arms-length negotiation and included
the sale of net working capital. The sales price was paid by a combination of
$100,000 in cash and the issuance by the Buyer of a $494,000 secured
promissory note("Note A"), a $1.0 million secured promissory note ("Note B")
and a $642,000 thirty-day promissory note. The notes are secured by all
outstanding common stock and assets of Bledsoe. Note A may be adjusted for any
increase or decrease from a final adjustment of net working capital as of the
effective date. The Company recorded no material gain or loss on the sale.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
In addition to reflecting the sale of Bledsoe, the pro forma financial
information required by Item 7b also reflects the Company's sale of Chico
Community Hospital and Chico Community Rehabilitation Hospital
(collectively "Chico") 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 and the sale of eight hospitals located in metropolitan Los
Angeles ("LA Metro") on September 30, 1998.
(b) Unaudited Pro Forma Financial Information (attached following signature
page):
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the year ended December 31, 1998
Unaudited Pro Forma Condensed Combining Balance Sheet - December 31,
1998
Notes to Unaudited Pro Forma Condensed Combining Financial Statements
(c) Exhibits
10.12 Stock Purchase Agreement for Bledsoe County General Hospital,
dated March 12, 1999, among Paracelsus Healthcare Corporation, Paracelsus
Bledsoe County General Hospital, Inc., and Associates Capital Group, LLC.
10.13 First Amendment to Stock Purchase Agreement for Bledsoe County
General Hospital, dated March 31, 1999, among Paracelsus Healthcare
Corporation, Paracelsus Bledsoe County General Hospital, Inc., and Associates
Capital Group, LLC.
PAGE> 3
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 HealthcareCorporation
(Registrant)
Dated: April 28, 1999 By: /S/ JAMES G. VANDEVENDER
-----------------------------
James G. VanDevender
Senior Executive Vice President,
Chief Financial Officer
& Director
<PAGE> 4
ITEM 7(b)
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 year ended December 31, 1998 to illustrate
the effect of the sales of Bledsoe effective on March 31, 1999, LA Metro on
September 30, 1998 and Chico on June 30, 1998 and the acquisition of DHHS on
July 1, 1998. The Unaudited Pro Forma Condensed Combining Statements of
Operations assume the above transactions occurred on January 1, 1998. The Pro
Forma Condensed Combining Balance Sheet assumes the sale of Bledsoe occurred
on December 31, 1998.
On April 15, 1999, the Company completed the sale of Bledsoe for the sales
price of approximately $2.2 million, which included the purchase of net
working capital and was paid by a combination of $100,000 in cash and the
issuance by the Buyer of a $494,000 secured promissory note("Note A"), a $1.0
million secured promissory note ("Note B") and a $642,000 thirty-day promissory
note. The notes are secured by all outstanding common stock and assets of
Bledsoe. Note A may be adjusted for any increase or decrease of net working
capital and certain other adjustments.
These Unaudited Pro Forma Condensed Combining 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, 1998, included in the Company's Annual Report on
Form 10-K.
<PAGE> 5
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Paracelsus Chico Pro Forma DHHS Pro Forma
Healthcare Pro Forma Chico Pro Forma Chico/
Corporation Adjustments Rf Disposition Adjustments Rf DHHS
----------- ----------- -- ----------- ----------- -- ----------
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 664,058 $(18,873) (2) $645,185 $645,185
Costs and expenses:
Salaries and
benefits 276,200 (8,217) (2) 267,983 267,983
Other operating
expense 265,735 (6,475) (2) 259,260 259,260
Provision for
bad debts 42,659 (355) (2) 42,304 42,304
Interest 51,859 (1,257) (3) 50,602 $ 2,983 (3) 53,585
Depreciation &
amortization 38,330 (758) (2) 37,572 486 (5) 38,058
Impairment charges 1,417 1,417 1,417
Unusual items (6,637) (6,637) (6,637)
(Gain)losson sale of
facilities (6,825) 7,100 (2) 275 275
--------- ------- --------- ------- -------
Total costs &
expenses 662,738 (9,962) 652,776 3,469 656,245
--------- ------- --------- ------- -------
Income (loss) before
minority interest
and income taxes 1,320 (8,911) (7,591) (3,469) (11,060)
Minority interest (3,180) (3,180) 4,141 (6) 961
--------- ------- --------- ------- -------
Loss before
income taxes (1,860) (8,911) (10,771) 672 (10,099)
Provision for
income taxes 693 (3,653) (4) (2,960) 275 (4) (2,685)
--------- ------- --------- ------- -------
Loss from continuing
operations (2,553) (5,258) (7,811) 397 (7,414)
========= ======== ========= ======= =========
Net loss per share
- - basic and
assuming
dilution $ (0.5) $ (0.14) $ (0.13)
========== ========= =========
Weighted average
number of common
and common
equivalent
shares 55,108 55,108 55,108
========= ========= ==========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements
<PAGE> 6
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
LA Metro Pro Forma Bledsoe
Pro Froma Pro Forma Chico/DHHS/ Pro Forma Pro Forma
Chico/DHHS Adjustments RF LA Metro Adjustments Rf Paracelsus
----------- ----------- ---- ----------- ----------- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $645,185 $(58,000) (7)(8) $587,185 $ (9,717) (9)(10) $577,468
Costs and expenses:
Salaries and
benefits 267,983 (25,672) (7) 242,311 (7,465) (9) 234,846
Other operating
expense 259,260 (31,333) (7) 227,927 (3,737) (9) 224,190
Provision for
bad debts 42,304 (1,915) (7) 40,389 (403) (9) 39,986
Interest 53,585 (733) (3)(7) 52,852 52,852
Depreciation &
amortization 38,058 38,058 (275) (9) 37,783
Impairment charges 1,417 1,417 (1,104) (9) 313
Unusual items (6,637) (233) (7) (6,870) (6,870)
(Gain) loss on sale
of facilities 275 275 275
--------- ------- --------- ------- -------
Total costs &
expenses 656,245 (59,886) 596,359 (12,984) 583,375
--------- ------- --------- ------- -------
Loss before minority
interest and
income taxes (11,060) 1,886 (9,174) 3,267 (5,907)
Minority interest 961 (961) (7)
--------- ------- --------- ------- -------
Loss before
income taxes (10,099) 925 (9,174) 3,267 (5,907)
Provision for
income taxes (2,685) 379 (4) (2,306) 1,340 (4) (966)
-------- ------- --------- ------- -------
Loss from continuing
operations (7,414) 546 (6,868) 1,927 (4,941)
======== ======== ========= ======= =========
Loss per share
- - basic and
assuming
dilution $ (0.13) $ (0.12) $ (0.09)
========= ======== =========
Weighted average
number of common
and common
equivalent
shares 55,108 55,108 55,108
========= ========= =========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<PAGE> 7
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
DECEMBER 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Paracelsus Bledsoe
Healthcare Pro Forma Pro Forma
Corporation Adjustments Rf Paracelsus
----------- ----------- -- ----------
<S> <C> <C> <C> <C>
ASSETS: (1)
Current assets:
Cash and cash equivalents $ 11,944 $ 70 (9)(11) $ 12,014
Restricted cash 1,029 1,029
Accounts receivable, net 67,332 (1,630) (9) 65,702
Deferred income taxes 9,641 9,641
Other 38,923 450 (9)(12) 39,373
-------- --------- ---------
Total current assets 128,869 (1,110) 127,759
-------- --------- ---------
Property and equipment, net 363,899 (991) (9) 362,908
Goodwill 136,994 136,994
Other assets 86,340 1,485 (9)(12) 87,825
-------- --------- ---------
Total assets $716,102 $ (616) $ 715,486
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 41,301 $ (399) (9) $ 40,902
Accrued liabilities
and other 58,758 (217) (9) 58,541
Current maturities
of long-term debt 6,284 6,284
-------- --------- ---------
Total current liabilities 106,343 (616) 105,727
-------- --------- ---------
Long term debt 533,048 533,048
Other long-term liabilities 42,370 42,370
Stockholders' equity
Common stock 222,977 222,977
Additional paid-in capital 390 390
Accumulated deficit (189,026) (189,026)
-------- --------- ---------
Total stockholders'
equity 34,341 34,341
-------- --------- ---------
Total liabilities
& shareholders' equity $716,102 $ (616) $ 715,486
======== ========= =========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<PAGE> 8
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.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
(1) The statements of operations and balance sheet for Paracelsus
Healthcare Corporation are summarized from its 1998 Annual Report on Form 10-K.
(2) To remove Chico's historical results of operations and the gain on sale
of the Chico facilities.
(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 LA Metro,
and (ii) the pro forma decrease in amounts outstanding under the Company's off
balance sheet receivable financing program as a result of the sale of Chico and
LA Metro accounts receivable, certain accounts of which served as collateral
under the program.
With respect to the Chico sale, the Unaudited Pro Forma Condensed
Combining Statements of Operations assume $24.6 million in net sales proceeds
were used to reduce amounts outstanding under the Credit Facility and $3.1
million in net sales proceeds were used to reduce amounts outstanding under the
Company's off balance sheet receivable financing program. The average interest
rate in effect under the Credit Facility was 9.2% for the six months ended June
30, 1998. The average interest rate in effect under the commercial paper
program was 6.7% for the six months ended June 30, 1998.
With respect to sale of LA Metro, the Unaudited Pro Forma Condensed
Combining Statements of Operations assume $4.2 million in net sales proceeds
were used to reduce amounts outstanding under the Credit Facility and a $9.3
million in net sales proceeds were used to reduce amounts outstanding under the
Company's off balance sheet receivable financing program. The average interest
rate in effect under the Credit Facility was 9.1% for the nine months ended
September 30, 1998. The average interest rate in effect under the commercial
paper program was 6.7% for the nine months ended September 30, 1998.
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. The interest rate in
effect under the Credit Facility was 9.2% for the six months ended June 30,
1998.
(4) To record the pro forma provision for income taxes after taking into
effect the sale of LA Metro and Chico and the consolidation of DHHS pursuant to
the Company's acquisition of DHHS. The income tax provision on the pro forma
adjustments was calculated using the statutory tax rate of 41.0%. The
effective tax rate on historical income from continuing operations
was 37.3% for the year ended December 31, 1998.
<PAGE> 9
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.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
- -
(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. The acquired assets have an average
remaining useful life of approximately 20 years based on the Company's
depreciation policy (35 years, 20 years and 10 years for buildings,
improvements and equipment, respectively). Goodwill, which represents cost in
excess of fair market value of net assets acquired, of $24.7 million is
amortized on a straight line basis over a 20-year period.
(6) To remove minority interest in DHHS for the six months ended June 30,
1998.
(7) To remove LA Metro's historical results of operations (including an
unusual charge of $233,000). The Company did not record any gain or loss on the
sale of LA Metro.
(8) To record pro forma interest income of $1.4 million for the year ended
December 31, 1998 on $9.9 million of secured promissory notes and a secured
second lien subordinated note of $3.8 million issued by the purchaser in
conjunction with the LA Metro sale. The $3.8 million note is subject to
adjustment based on a final working capital settlement. The principal amounts
and terms of the notes are discussed in a previously filed current report on
Form 8-K dated September 30, 1998, which is incorporated herein by reference.
(9) To remove Bledsoe's historical results of operations (including an
impairment charge of $1.1 million relating to the write-down of certain assets
in the fourth quarter of 1998), assets sold, liabilities assumed by the Buyer
in connection with the sale of Bledsoe. Working capital balances are as of
December 31, 1998. Actual working capital proceeds are to be based on balances
as of March 31, 1999, which are subject to adjustments and final settlement.
The Company recorded no material gain or loss on the sale of Bledsoe.
(10) To record pro forma interest income of $120,000 for the year ended
December 31, 1998 on $494,000 of Note A and $1.0 million of Note B issued by
the Buyer in conjunction with the Bledsoe sale. The thirty-day promissory note
of $642,000 is payable on May 15, 1999 and bears no interest rate. The terms
of Notes A and B are as followed:
(a) Secured Promissory Note A in the principal sum of $494,000,
which is subject to further adjustment for final settlement of working capital,
bears interest at a per annum rate of 8.0%. Interest payments are payable
annually beginning April 15, 2000 through maturity date, April 15, 2002.
Principal payments are payable monthly commencing on May 1, 2001 through
maturity date. Note A is secured by all assets of Bledsoe.
<PAGE> 10
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.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
- -
(b) Secured Promissory Note B in the principal sum of $1.0 million
bears interest at a per annum rate of 8.0%. Interest is due and payable
annually beginning April 15, 2000 through maturity date, April 15, 2004.
Principal payments are payable monthly beginning on May 1, 2002 through
maturity date. Note B is secured by all outstanding common stock of Bledsoe.
(11) To reflect cash received from the sale of Bledsoe net of estimated
transaction costs.
(12) To record notes receivable issued by the Buyer of Bledsoe as summarized
below:
Current portion $ 642,000
Long term portion 1,494,000
----------
$2,136,000
=========
STOCK PURCHASE AGREEMENT
FOR
BLEDSOE COUNTY GENERAL HOSPITAL
THIS STOCK PURCHASE AGREEMENT FOR BLEDSOE COUNTY GENERAL HOSPITAL (this
"AGREEMENT"), dated as of March 12, 1999, among Paracelsus Healthcare
Corporation ("SELLER"), a California corporation, Paracelsus Bledsoe County
General Hospital, Inc.("BCG"), a California corporation and Associates Capital
Group, LLC, a Georgia limited liability company ("BUYER").
WITNESSETH:
WHEREAS, Seller owns all of the capital stock of BCG;
WHEREAS, BCG operates a thirty-two (32) bed licensed general acute
care hospital known as Bledsoe County General Hospital located at Tennessee
(the "HOSPITAL"); pursuant to a long-term lease (the "HOSPITAL LEASE") from
Bledsoe County, Tennessee (the "COUNTY");
WHEREAS, Seller desires to sell to Buyer and Buyer desires to
purchase all of the issued and outstanding capital stock of BCG which will
transfer to Buyer ownership of substantially all of the assets, real and
personal, tangible and intangible, owned by Seller in the operation of the
Hospital (collectively the "BUSINESS"); and
WHEREAS, the Business also includes the departments operating in
Knoxville and McMinnville Tennessee areas as "Care Plus Home Health Services,"
both of which are home health agencies licensed by the State of Tennessee;
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 STOCK AND CERTAIN RELATED MATTERS.
1.1 SALE OF STOCK. 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, all of the issued and outstanding capital stock of BCG, that
being one hundred (100) shares of $2,000 par value common stock (the "STOCK").
The Stock shall be transferred to Buyer free and clear of all liabilities,
liens, pledges and encumbrances.
1.2 REPRESENTATIONS OF SELLER AS TO THE ASSETS OF BCG. Subject to the
terms and conditions of this Agreement, at the Closing (as hereinafter
defined), Seller represents and warrants to Buyer that BCG shall own, or have a
valid leasehold interest in, the following assets and properties:
(a) all real property and other real property interests used in
connection with the operation of the Business, including, without limitation,
the operations of 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 1.2(A);
(b) all tangible personal property (excluding cash and cash
equivalents) owned by BCG and used in connection with the Business, to the
extent included on the Closing Balance Sheet (collectively the "PERSONAL
PROPERTY"), but excluding the personal property described in SECTION 1.3(F)
hereof.
(c) all licenses, certificates of need, certificates of exemption,
franchises, accreditations and registrations and other licenses or permits
required for the operation of the Business in accordance with applicable law
(the "LICENSES"), including, without limitation, the Licenses described in
SCHEDULE 1.2(C);
(d) those real property and personal property leases relating to the
Business described in SCHEDULE 1.2(D) (all of such leases being referred to
collectively as the "LEASES");
(e) those contracts and agreements relating to the Business set forth
in SCHEDULE 1.2(E) (the "CONTRACTS");
(f) any deposits, escrows, prepaid taxes or other advance payments
relating to any expenses of the Business, as contained on the Closing Balance
Sheet as prepaid expenses (the "PREPAID EXPENSES"), but excluding the prepaid
expenses of Seller described in SCHEDULE 1.2(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 BCG on the Closing Date
(as hereinafter defined) and either located at the premises of the Hospital or
if not yet delivered to the Hospital premises, 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 through and including 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 or licensed to BCG, 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;
(j) all unexpired warranties (other than those vendor warranties
described in Section 1.2(b) above) and covenants not to compete relating to the
Business for which BCG is the beneficiary;
(k) all joint ventures, partnerships, corporations and other entities
listed on SCHEDULE 1.2(K); and
(l) except as expressly excluded herein, all other property owned by
BCG, whether tangible or intangible, located at the premises of the Hospital or
otherwise, whether or not used in connection with the Business and whether or
not reflected on the balance sheet of BCG, and specifically including the right
to use the name "Bledsoe County General Hospital."
The foregoing, which (except for the Excluded Assets, as defined in
Section 1.3) 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 December 31, 1998, including without limitation, those
assets reflected on the unaudited balance sheet of BCG dated December 31, 1998
(the "BALANCE SHEET"), and all assets acquired by Seller between December 31,
1998 and the Closing.
1.3 EXCLUDED ASSETS. The following items which are related to the
Assets are not intended by the parties to be a part of the assets of BCG, are
excluded from the Assets and will be conveyed by BCG to Seller or its designee,
at or prior to Closing (collectively, the "EXCLUDED ASSETS"):
(a) the accounts receivable set forth on SCHEDULE 1.3(A) hereto, (the
"EXCLUDED RECEIVABLES");
(b) the name "Paracelsus" and all variations thereof (subject to the
provisions of Section 9.4);
(c) all intercompany accounts of BCG and Seller and their affiliates;
(d) any corporate proprietary information of Seller not necessary for
the operation of the Business;
(e) all commitments, contracts, leases, capital leases, notes, and
agreements between BCG, Seller and their affiliates;
(f) the property described in SCHEDULE 1.3(F) hereto; and
(g) any and all rights to the operation of software provided by Seller
for the use of BCG, and specifically, including certain licensed software and
other products and services pursuant to an agreement with the Health Services
Division of Keane, Inc., dated April 13, 1998.
1.4 ASSUMPTION OF LIABILITIES
(a) As of the Closing, and in conjunction with the transfer of the
Stock, Buyer shall assume and/or agree to pay, perform and discharge the
liabilities of BCG ("the ASSUMED LIABILITIES"), except that Seller shall pay
and indemnify Buyer for those liabilities described below as Excluded
Liabilities. Specifically , and without limitation, Buyer agrees to assume
Seller's obligations under the Hospital Lease and the Management Agreement
dated October 5, 1986 for the Bledsoe County Nursing Home.
(b) Buyer shall not be liable for (1) performance by BCG under, and
defaults by BCG in performance of, the BCG Contracts for periods prior to the
Effective Time (as hereafter defined), and (2) any liability of BCG not
included on the Closing Balance Sheet or otherwise included in Working Capital
(collectively, the "EXCLUDED LIABILITIES")
1.5 PURCHASE PRICE; PRORATIONS; ALLOCATION; COST REPORT ADJUSTMENTS.
(a) Subject to the terms and conditions hereof, in reliance upon the
representations, warranties and covenants of Seller herein set forth, and as
consideration for the sale of the Stock as herein contemplated, Buyer shall
tender to Seller at Closing, as the purchase price hereunder (collectively, the
"PURCHASE PRICE"), and in the manner hereinafter provided, the following:
(i) an amount equal to Working Capital; plus
(ii) a promissory note in the amount of $1,000,000 substantially
in the form of Appendix B ("NOTE B").
(b) At Closing the payment for Working Capital shall initially be made
in the manner and based upon the determination of Initial Working Capital (as
hereinafter defined) and thereafter an adjustment payment shall be made as
provided in Section 1.9.
(c) Buyer and Seller shall include in Working Capital, prorations of
Real Property and Personal Property lease payments, payments under any
construction contracts, interest, Real Property and Personal Property taxes.
Real Property 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. In making such prorations Seller shall
order final readings of all power and other utility charges to be made as of
the Effective Time. All prorations contemplated by this Section 1.5(c) shall be
made as of the Effective Time.
(d) Seller shall pay to Buyer any amount that Buyer actually pays
(which shall include offsets) in excess of the amounts contained in the Closing
Balance Sheet in respect of the Medicare and Medicaid programs that are in
excess of a cumulative amount of $25,000 of such payments. Any such payment
required by Seller shall first be applied as a credit to Buyer's Note A, then
to Note B (in each case first to accrued and unpaid interest and then to any
outstanding principal), and thereafter in cash. Buyer shall pay to Seller any
amount that Buyer realizes as a benefit due to a difference in the final
realization of the amounts contained in the Closing Balance Sheet in respect of
the Medicare and Medicaid programs, which benefit is in excess of a cumulative
amount of $25,000 of all such benefits. Payment to Seller shall be in cash.
1.6. INITIAL WORKING CAPITAL. (a) The "INITIAL WORKING CAPITAL" shall
be an amount equal to the value of BCG's Initial Net Working Capital (as
hereinafter defined) as of the date of, and based upon BCG'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.
For the purpose of the Initial Working Capital, "BCG'S INITIAL NET
WORKING CAPITAL" shall be equal to THE SUM OF (A) the amounts set forth on
SCHEDULE 1.6(A); PLUS (B) the amount of any capital expenditures made by BCG
from and after December 31, 1998 until the Effective Time; MINUS (C) the amount
of BCG's capital leases obligations assumed by Buyer, BUT SPECIFICALLY
EXCLUDING the Hospital 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 1.6(B), but such consent is limited as to scope and
dollar amount as described in SCHEDULE 1.6(B).
(c) In order that Buyer may know the methodology used to determine
BCG's Initial Net Working Capital, attached hereto as SCHEDULE 1.6(C) is a
determination of BCG's Net Working Capital based upon the December 31, 1998
unaudited balance sheet of BCG and Seller hereby agrees to use the same
methodology (as may be supplemented by the working papers thereto) to prepare
SCHEDULE 1.6(A).
1.7 WORKING CAPITAL DETERMINATION. (a) Not more than 60 days after the
Closing Date (i) Seller shall deliver to Buyer the balance sheet for BCG with
respect to the Business as of the Effective Time (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.
(b) The "WORKING CAPITAL" shall be an amount equal to the value of
BCG's Net Working Capital (as hereinafter defined) as of the date of, and based
upon the Closing Balance Sheet.
(c) For the Working Capital, "BCG'S NET WORKING CAPITAL" shall be
determined using the same methodologies used to determine BCG'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 Operating Inventory on hand at
the Hospital. Based on such inventory, and Seller shall value the supplies
using the same methodology as Seller used in SCHEDULE 1.6(C) and Seller shall
prepare a schedule thereof. In calculating the Working Capital, the amount of
the Operating Inventory shall be increased or decreased, as appropriate, to
reflect the value of the additions to, and deletions from, the Operating
Inventory between the inventory date and the Effective Time.
1.8 PAYMENT OF WORKING CAPITAL AT CLOSING. (a) At Closing Buyer shall
deliver to Seller (i) cash in the amount equal to the lesser of (A) sixty
percent (60%) of BCG's Initial Net Working Capital and (B) One Million Dollars
($1,000,000), and (ii) a promissory note substantially in the form of Appendix
A ("NOTE A.") in the original principal amount equal to the amount of BCG's
Initial Net Working Capital less the amount of cash paid in (i) above.
1.9 PAYMENT OF POST-CLOSING WORKING CAPITAL ADJUSTMENT; DISPUTE
RESOLUTION. (a) Working Capital shall be paid in (i) cash in the amount equal
to the lesser of (A) sixty percent (60%) of BCG's Net Working Capital and (B)
One Million Dollars ($1,000,000), and (ii) a promissory note in the form of
Note A in the original principal amount equal to the amount of BCG's Net
Working Capital less the amount of cash paid in (i) above. Not more than 90
days after the Closing Date, Buyer and Seller will compare BCG's Initial Net
Working Capital paid in the form of Note A and the cash payment made at Closing
to BCG's final Net Working Capital to be paid in the form of Note A and a cash
payment and any difference in such note balances and such cash payments shall
thereupon be made as an adjustment to the principal balance of Note A and an
adjusting payment of cash, respectively; so that through such adjustments in
the principal balance of Note A and a cash payment, Buyer will pay to Seller
the amount by which Working Capital exceeds Initial BCG's Working Capital, or
Seller will pay to Buyer the amount by which BCG's Working Capital is less than
BCG's Initial Working Capital.
(b) 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 the effect
of such adjustments on the principal balance of Note A and the cash payment.
(c) 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 PriceWaterhouseCoopers 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.
1.10 RECEIVABLES. Seller shall promptly remit to Buyer any payments it
may receive which constitute payments of accounts receivable of Buyer. Buyer
shall promptly remit to Seller any payments it may receive that constitute
payments of the Excluded Receivables.
2. CLOSING.
2.1 CLOSING AND EFFECTIVE TIME. Subject to the conditions set forth in
Articles 7 and 8 hereof, the consummation of the sale and purchase of the Stock
contemplated by and described in this Agreement (the "Closing") shall take
place in Fort Worth, Texas, at the offices of Michener, Larimore, Swindle,
Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P. or other agreed upon
location, at 10:00 A.M. local time (a) on March 31, 1999, or (b) such date as
may be agreed by the parties. 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. (Central Standard 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 "EFFECTIVE TIME."
2.2 ACTION OF SELLER AT CLOSING. At the Closing, Seller shall deliver
or shall cause to be delivered to Buyer the following:
(a) certificates representing the Stock, duly endorsed to Buyer,
or with duly executed stock powers conveying the right of Buyer to have
the Stock transferred in to Buyer's name;
(b) copies of corporate resolutions duly adopted by the respective
Board of Directors of Seller and BCG, authorizing and approving each
such corporation's performance of the transactions contemplated hereby
and the execution and delivery of the documents described herein to
which each is a party, certified as true and of full force as of Closing
by appropriate officers of each such corporation;
(c) certificates, dated as of the Closing Date, of appropriate
officers of each of Seller and BCG 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 and BCG as
appropriate, contained in this Agreement are true and correct and all
respective covenants and agreements of Seller and BCG to be performed
prior to or as of Closing pursuant to this Agreement have been
performed;
(d) certificates of incumbency, dated as of the Closing Date, for
the officers of each of Seller and BCG making certifications for
Closing, or executing documents delivered for Closing;
(e) certificates of corporate existence or good standing
certificates and qualifications to do business of each of Seller and
BCG from their states of incorporation and in which BCG does business,
dated the most recent practical date prior to Closing;
(f) subject to Section 1.3 hereof, the Assets, and simultaneously
with such delivery Seller will take all such steps as may reasonably be
required to put Buyer in actual possession and operating control of the
Assets;
(g) the Information Systems Agreement;
2.3 ACTION OF BUYER AT CLOSING. At the Closing, Buyer shall deliver to
Seller the following:
(a) the Purchase Price, including :
(i) the cash,
(ii) Note A,
(iii) Note B
(iv) Security Agreement and Stock Pledge (Note A)
(v) Security Agreement (Note B)
(b) copies of the Operating Agreement of Buyer showing the
authority of Buyer's managing member to execute and deliver the
documents described herein;
(c) 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;
(d) a certificate of existence of Buyer from the State of Georgia,
dated the most recent practical date prior to Closing; and
(e) 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 BCG are corporations duly organized, validly existing
and in good standing under the laws of the State 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 BCG.
3.2 CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
(a) The execution and delivery by Seller and BCG 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 BCG:
(i) are within Seller's and BCG's respective corporate powers, are
not in contravention of the terms of Seller's or BCG's 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 BCG is a
party or by which Seller or BCG 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 BCG, (C) will
not violate any law, rule or regulation of any governmental authority
applicable to the Seller, BCG, 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 BCG, and, as of the Closing, the other agreements and instruments
contemplated hereby to be executed and delivered by Seller and/or BCG will have
been duly and validly executed and delivered by Seller and, where applicable,
BCG. Upon approval of this Agreement and the other agreements and instruments
contemplated hereby by the Board of Directors of Seller and BCG, 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 BCG will constitute, the valid, legal and binding
obligation of each of Seller and, where applicable, BCG, 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 BCG with
respect to the Business for the twelve months ended December 31, 1998 (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 Financial Statements have been prepared from and
are in accordance with the books and records of BCG, and fairly present the
operations of BCG 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 either Seller or BCG.
3.4 POST-BALANCE SHEET RESULTS. Since December 31, 1998, 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 or BCG of the
Assets except sales of inventories, supplies or accounts receivable in the
ordinary course of business and except for sales, leases, transfers or
dispositions of non-material portions of the Assets in the ordinary course of
Seller's and BCG'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,
outside the reasonable control of both Seller and BCG and either; (i) generally
affecting the hospital service area in which the Hospital is located; (ii)
generally affecting the healthcare industry, or (iii) resulting from the
announcement of the transactions contemplated hereby.
3.5 LICENSES. BCG has all licenses and permits relating to the
ownership or operation 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 or operation of the Assets or the operation of the
Business. SCHEDULE 3.5 hereto contains a complete list 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 BCG relating to the ownership, development or
operation of the Assets or the Business, together with any formal and specific
notices or directives received by BCG 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 in good standing. Neither Seller nor BCG have received any
notice that any item listed on SCHEDULE 3.5 is likely to be revoked, suspended,
limited, terminated, or otherwise affected in any way.
3.6 CERTAIN CONTRACTS. SCHEDULE 3.6 lists all contracts to which BCG
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 BCG 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 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 BCG's knowledge, neither BCG nor any of the other parties
to those Contracts which Buyer has agreed to assume (i) are in default under
such contracts or (ii) to the best of BCG's or Seller's knowledge consider BCG
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 intends to terminate or adversely modify its agreement(s) with
respect thereto, or adversely change the volume of business done thereunder. No
such Scheduled Contract is in excess of the normal, ordinary, usual, and
current requirements of the Business and was at the time at which it was
entered into, for the reasonable market price of the goods and/or services
relating thereto.
3.7 CERTAIN LEASES. SCHEDULE 3.7 lists all leases to which BCG is a
party in respect of the Business involving annual obligations on the part of
BCG for the payment of rent in excess of $5,000 or involving rental of real
property by BCG 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
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 BCG'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 BCG's knowledge, neither BCG nor any of the
other parties to any of those Scheduled Leases which Buyer has agreed to assume
(i) is in default under any such Scheduled Lease or (ii) to the best of BCG's
or Seller's knowledge considers BCG to be in default thereunder. BCG 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 BCG's assignments of the Scheduled Leases to be assigned
except as disclosed in SCHEDULE 3.7. No Scheduled Lease leases property in
excess of the normal, ordinary, usual, and current requirements of the Business
and was at the time at which it was entered into, for the reasonable market
price of the goods and/or property relating thereto.
3.8 TITLE TO PROPERTIES AND RELATED MATTERS. On the Closing Date BCG
will hold good, valid and marketable title to, or leasehold interest in, 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 provided for in the Hospital Lease
and except (i) those matters set forth in SCHEDULE 3.8(A); (ii) unrecorded
leases as set forth in SCHEDULE 1.2(D); (iii) liens for current taxes and
assessments; (iv) zoning and building laws, ordinances, resolutions and
regulations; (v) such inchoate unfiled mechanics', carriers', workers',
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 issued by the Title Company (defined below) and attached hereto
as SCHEDULE 3.8(B), as the same may be revised following receipt of a survey of
each property but only to the extent that neither Seller nor BCG has 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 either Seller or BCG 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 neither Seller nor BCG 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 or BCG
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 BCG's title to such Real Property, or the value of the Real
Property, any portion thereof or BCG's interest therein, or (C) prevent BCG
from having good valid and marketable title to, or leasehold interest in, the
Real Property, or (D) materially limits the scope or coverage of the Title
Policy to be issued to Buyer (collectively "PERMITTED ENCUMBRANCES").
SCHEDULES 1.2(A) AND 1.2(D) include true and accurate descriptions of all Real
Property owned or leased by BCG and all tangible personal property (excluding
cash, property with an aggregate value in a non-material amount and the other
Excluded Assets) leased by BCG and reflected on BCG's financial statements.
Set forth on SCHEDULE 3.8(C) is a list of the most current title insurance
policies, commitments or binders issued to either Seller or BCG with respect to
any of the Real Property or any portion thereof, and true and accurate copies
thereof have been supplied to Buyer. BCG 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 BCG. To the best knowledge of BCG 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(D), which
Schedule is a copy of a Uniform Commercial Code ("UCC") search duly obtained by
BCG in the last 30 days and which search shows security interests of record
relating to such Assets in the State of Tennessee and the State of California.
BCG agrees to remove all security interests relating to property interests of
BCG included in the Assets reflected on such UCC search, if any, prior to the
Closing (except those resulting from the Hospital Lease and 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(E) describes all construction work, if any, which BCG 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 BCG and that are sponsored or
contributed to by BCG (other than any defined contribution "employee pension
benefit plan" as defined in ERISA, that does not require any contribution by
BCG, 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 BCG).
Neither BCG nor, to the best knowledge of Seller and BCG, 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. BCG has not
incurred , and has no knowledge of any fact or circumstance which would cause
BCG reasonably to expect 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 BCG is a party and which arose out of
or in connection with the Business or, to Seller's and BCG's knowledge, which
has been threatened against BCG in connection with the Business. Except as
disclosed on SCHEDULE 3.10(B), BCG has not received notice of any formal or
informal investigations or proceedings of the Tennessee Department of Health
and Environment, 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 BCG has received
written notice pending or, to the best knowledge of BCG or Seller, threatened
challenging the validity or propriety of the transactions contemplated by this
Agreement. Except as disclosed in SCHEDULE 3.10(B), neither BCG nor Seller is
now, or has ever 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;
neither BCG nor Seller has 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 and BCG's
knowledge, no such claim is or has been threatened; and there have been no
developments materially adverse to Seller or BCG with respect to any pending or
threatened claim, action or proceeding of an administrative or judicial nature
and relating to the Business, 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 or BCG was entitled to receive pursuant to government or
third party reimbursement programs such as (but not limited to) Medicare and
Medicaid, or (ii) any allegation by any governmental authority of fraud or
abuse by any current or former officers or employees of BCG or 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 either Seller
or BCG.
3.11 INSURANCE. SCHEDULE 3.11 lists the professional and general
liability insurance policies covering the Business, the property insurance
policies covering the Assets, and all other insurance pertaining to BCG or the
operation of the Business. All such policies are currently in effect and to
the best knowledge of Seller there are no defaults or alleged defaults
thereunder.
3.12 BCG'S EMPLOYEES. (a) SCHEDULE 3.12 contains a list of all of
BCG's employees as of December 31, 1998, 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. Since December 31, 1998 there has not been
any increase in the compensation payable or to become payable by BCG 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 BCG's personnel
policies, except (in either case) in the ordinary course of BCG'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 BCG's employees are
employed by BCG pursuant to an employment agreement and/or severance agreement.
3.13 LABOR MATTERS. BCG does not have any collective bargaining
agreements with any labor union and there are no current negotiations with a
labor union. BCG 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. BCG has not received any notice of an unfair labor practice
complaint against BCG pending before the National Labor Relations Board. There
is no labor strike, dispute, slowdown or stoppage actually pending against or
affecting BCG, nor has BCG received notice of any threatened labor strike,
dispute, slowdown or stoppage. No grievance which might have an adverse effect
on BCG or any such arbitration proceeding arising out of or under collective
bargaining agreements is pending and BCG has no knowledge that any claim
therefor exists. BCG 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 BCG 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 Medicaid
("TENNCARE") program. A complete and accurate copy of BCG's existing Medicaid
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/TriCare 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 BCG's
possession or, to the best of BCG's knowledge, available to BCG with respect to
the Hospital after January 1, 1997, have been, or will be prior to Closing,
furnished to Buyer.
(g) BCG 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 the Bylaws of the medical staffs of the Hospital,
together with copies of minutes of meetings thereof since January 1, 1997, that
are in BCG's possession have been supplied or will prior to Closing be made
available to Buyer. No proceedings are pending or, to the best of BCG'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.
(i) 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.
(j) To the best of its knowledge, BCG is in material compliance with
all applicable laws and regulations that relate to the Assets and Business,
including, but not limited to, the following:
18 U.S.C.<section> 201 (bribery of government officials); 18 U.S.C.
<section> 286 (conspiracy to defraud the government with respect to claims); 18
U.S.C. <section> 287 (false, fictitious, or fraudulent claims): 18 U.S.C.
<section> 371 (conspiracy to commit offense or to defraud the government); 18
U.S.C.<section> 666 (theft or bribery concerning programs receiving federal
funds); 42 U.S.C.<section>1320a-5 (disclosure of ownership and related
information); 42 U.S.C. <section> 1320a-7a (civil monetary penalties); 42
U.S.C. <section>1320a-7b (criminal penalties); 42 U.S.C. <section>1395u(b)(6)
(prohibition against factoring Medicare payments); 42 U.S.C. <section>1395nn(a)
(making false statements or representations in application for Medicare
payment); 42 U.S.C. <section>1395nn(b)(illegal remuneration); 42
U.S.C.<section>1395nn(d)5 (violation of assignment terms); 42 U.S.C.
<section>1396a(32) (prohibition against factoring Medicaid payment); 42
U.S.C.<section>1396h(d)(illegal patient admission and retention practices).
(k) BCG 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, BCG's relationship with any payor,
physician, medical group (including IPAS), its medical staffs or suppliers.
3.15 REIMBURSEMENT MATTERS. BCG 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, and
represents and warrants that such cost reports are true and correct in all
material respects. BCG has not received any written notices that either
Medicare or Medicaid 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. BCG has not been indicted,
convicted or, to the best of BCG'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 Medicaid 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 BCG's
knowledge, BCG has not committed a violation of any of such provisions. BCG
does not currently contract with or employ any person or entity who has been
excluded from participation in either the Medicare or Medicaid programs.
Neither BCG nor any of its current directors, employees, or agents has,
directly or indirectly, made, caused to be made, received, or solicited any
bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, too any person or entity, whether public, private or
governmental, regardless of form, whether in money, property, services, or any
other thing of value, to obtain favorable treatment, for business secured, or
for special concessions already obtained, including payments made or to be made
in whole or in part by the Medicare or Medicaid programs. To the extent that a
final cost report is required as a result of this transaction, Seller will file
such report within 150 days of the Effective Date. All information in such
final cost report shall be true, accurate, and correct in all material
respects.
3.16 TAXES. BCG 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.
3.17 ENVIRONMENTAL. Except as disclosed in the Phase I Site Assessment
of the Hospital obtained by Buyer relating to the Assets (the "Environmental
Report") included herein as SCHEDULE 3.17 BCG 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.
"ENVIRONMENTAL LAWS" means the federal, state (including specifically,
but not by way of limitation, the State of Tennessee, 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:
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 and
BCG's knowledge, BCG 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 BCG 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.
3.20 NO MISLEADING STATEMENTS. No representation or warranty by Seller
or BCG 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 BCG, 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 and BCG's
knowledge, true, correct and complete.
3.21 DISCLAIMER OF WARRANTIES. THE ASSETS BEING ACQUIRED BY BUYER UPON
RECEIPT OF THE STOCK AND BEING THEREBY TRANSFERRED BY SELLER ARE IN THEIR
CONDITION AT CLOSING, "AS IS", 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.
As of the date hereof, Buyer represents and warrants to Seller and BCG
the following:
4.1 BUYER CAPACITY.
(a) Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Georgia, with all
corporate power and authority to own, operate and lease its properties.
(b) SCHEDULE 4.1 contains complete and correct copies of the Articles
of Organization and all amendments thereto to the date hereof and the Operating
Agreement as presently in effect of Buyer.
4.2 CORPORATE AUTHORIZATION/CONTRACT BINDING. (a) The execution,
delivery and performance by Buyer of this Agreement and the other agreements
and transactions contemplated hereby to be executed and performed by Buyer:
(i) are within Buyer's powers, are not in contravention of the
terms of Buyer's Articles of Organization, Operating Agreement, or any
amendments thereto and have been duly authorized by the Managing Member
of Buyer; 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 is a party or by which Buyer is bound, (B)
will not constitute a violation of any judgment, decree or order of any
court of competent jurisdiction applicable to Buyer, (C) will not
violate any law, rule or regulation of any governmental authority
applicable to Buyer 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, as of the Closing, the other agreements and instruments
contemplated hereby will have been duly and validly executed and delivered by
Buyer. 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, enforceable against it 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.
4.4 SECURITIES REPRESENTATION. Buyer is acquiring the Stock for
investment and not with a view to distribution thereof. Buyer understands that
the Stock is not registered, has no market, will bear a restrictive legend
thereon, and may not be resold except in compliance with applicable Federal and
state securities laws. Buyer is sophisticated in financial matters, is
economically able to bear the risks of owing the Stock for an indefinite time,
and understands the risks of acquiring and holding the Stock. Buyer has had
access to such books, records and personnel of Seller and BCG as it deems
necessary and has had opportunity to make such inquiries of and receive answers
from Seller and BCG as it deems necessary to make the investment decision to
acquire the Stock. Buyer does not consider the purchase of the Stock as an
securities transaction, but rather the purchase of the Business, that, but for
various reasons unique to this transaction, would otherwise been accomplished
by means of a direct purchase of the Assets.
5. COVENANTS OF SELLER PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date:
5.1 INFORMATION. Seller and BCG shall afford, to the officers and
authorized representatives of Buyer access to the Hospital 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 and BCG agree 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 and BCG 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. BCG 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 and BCG will each:
(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 BCG'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 its present employees
and maintain its current relationships with suppliers, customers,
patients, and others having business relations with BCG;
(f) without the consent of Buyer, which will not be unreasonably
withheld, BCG will not incur or commit to any obligation with respect to
any single capital expenditure in excess of $25,000; and
(g) except in the ordinary course of business, BCG 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, BCG 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 BCG has not repaired prior to
Closing, then the following provisions shall apply:
(a) If --
(i) such damage or destruction results in any 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 $1,000,000
and Seller or BCG 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 or BCG has insurance coverage for the Cost to Repair
any damage or destruction, then Buyer may elect either (1) to
receive from Seller or BCG all of the proceeds of such insurance
paid or payable and pay to Seller the full Purchase Price
hereunder or (2) to allow Seller or BCG to retain all such
insurance proceeds subject to a reduction of the Purchase Price in
the amount of such insurance proceeds; 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 BEST EFFORTS TO CLOSE. Seller and BCG 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 BCG shall notify Buyer as soon as practicable of any event or
matter which comes to Seller's or BCG's attention which may reasonably be
expected to prevent the conditions to Seller's obligation being met.
5.6 INSURANCE RATINGS. Seller and BCG shall take that 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 BCG and other ratings for insurance or other
purposes established by Seller; provided, however, that the covenants contained
in this sentence shall not require Seller or BCG to expend its own funds to
satisfy such obligations, nor shall such covenants permit Buyer to acquire
Seller's or BCG'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.
5.7 COOPERATION WITH BUYER. Seller and BCG shall cooperate in all
reasonable respects with Buyer in connection with any required actions of Buyer
to obtain regulatory consents to and approvals of the transfer of any of the
Licenses described in SCHEDULE 3.5 hereof.
6. INDEMNIFICATION.
6.1 INDEMNITY BY BUYER . From and after Closing, Buyer shall
indemnify, defend and hold harmless Seller and BCG 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
this Agreement and any agreement required herein;
(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 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 Medicaid programs, tax liabilities or
professional malpractice or general liability claims, arising out of the
operation of the Business after the Effective Time 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 this Agreement and
any agreement required herein; and
(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.
6.2 INDEMNITY BY SELLER AND BCG. From and after the Closing, Seller
and BCG, 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
BCG in this Agreement or the other agreements contemplated hereby;
(ii) any liability, obligation or indebtedness of Seller or BCG or
any alleged liability, obligation or indebtedness of Seller or BCG,
including without limitation those relating to contractual obligations,
liabilities (including recapture of depreciation) to the Medicare or
Medicaid programs, tax liabilities or professional malpractice or
general liability claims, arising out of the operation of the Business
prior to the Effective Time 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 this
Agreement and any agreement required herein;
(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
BCG 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 BCG 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.
(c) A Performing Party shall take actions required in this Section 6
(including the payment of a claim) promptly following receipt of notice of such
claim.
(d) With respect to any Damages due a Buyer Indemnified Party, the
amount of any such Damages shall be credited by Seller first to interest due
and thereafter to the outstanding principal balance of Note A, and thereafter
any remaining unpaid Damages credited in a similar manner to Note B, and any
further remaining unpaid Damages paid in cash. With respect to any Damages due
a Seller Indemnified Party, the amount of any such Damages shall work as an
increase to the outstanding principal of Note A, or if Note A has been paid
then an increase to Note B; and, if Note B has been paid, then in cash.
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 $100,000.
(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 1.4(b)(2), 3.6,
3.7, 3.9, 3.14(c), 3.14(d), 3.14(e), 3.14(j), 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 terms
hereof and any agreement required herein, (D) any breach by Buyer to pay
the Purchase Price hereunder, or (E) a breach by Buyer or Seller of its
obligation under Section 1.9 to pay any post-Closing adjustment to the Purchase
Price required by such Section.
(c) Buyer shall not be under any liability and no claim under Section
6.1 of this Agreement shall be made to the extent that BCG or Seller discovered
such breach prior to the Closing Date and failed to disclose such breach to
Buyer as provided in Section 11.2 hereof, except that Buyer shall be liable to
the extent Buyer had knowledge of such breach or to the extent BCG or Seller
would have nonetheless suffered damages had such breach been disclosed to Buyer
prior to the Closing Date.
(d) Neither Seller nor BCG 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 BCG and Seller as provided in Section 11.2 hereof, except that BCG
and Seller shall be liable to the extent either BCG or Seller had knowledge of
such breach or to the extent Buyer would have nonetheless suffered damages had
such breach been disclosed to BCG or Seller prior to the Closing Date.
(e) 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.
(f) 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.
(g) 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.
(h) 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. 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 Tennessee or in the United States District Courts which are located in the
city of Knoxville, Tennessee, 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 Tennessee and of the United States District Courts
located in the city of Knoxville, Tennessee 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.
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 and BCG 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 BCG 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 BCG, dated as of the Closing Date, substantially
in the form of APPENDIX 7.2.
7.3 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 Stock and may
reasonably be expected to prohibit the sale of the Stock 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 Tennessee of such agency's
current intent to seek injunctive relief in anticipation of the sale of the
Stock to prohibit the sale of the Stock to Buyer.
7.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the Seller shall
have executed and/or delivered to Buyer all documents, agreements and
instruments contemplated by Section 2.2.
7.5 INFORMATION SYSTEMS AGREEMENT. Seller and Buyer shall have
executed and delivered an Information Systems Agreement (the "INFORMATION
SYSTEMS AGREEMENT"), in substantially the form attached hereto as APPENDIX 7.5.
7.6 PURCHASE FINANCING. Buyer shall have received financing sufficient
to close and pay the cash portion of the Purchase Price specified in Section
1.8(a)(i) hereof.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND BCG.
The obligations of Seller and BCG hereunder are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Seller and BCG:
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 Nelson
Mullins Riley & Scarborough, L.L.P., counsel to Buyer , an opinion dated as of
the Closing Date and addressed to Seller, 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 Stock and may
reasonably be expected to prohibit the sale of the Stock 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 Tennessee of such agency's
current intent to seek injunctive relief in anticipation of the sale of the
Stock to prohibit the sale of the Stock to Buyer or the parties' execution
hereof.
8.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the Buyer shall
have executed and/or delivered to Seller all documents, agreements and
instruments contemplated by Section 2.3.
8.5 SELLER AND BCG BOARD APPROVAL. The Board of Directors of Seller
and BCG shall have approved this Agreement and the transactions contemplated
hereby.
9. PARTICULAR COVENANTS OF BUYER.
9.1 BEST EFFORTS TO CLOSE. Buyer 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 EMPLOYEE MATTERS. Effective as of the Effective Time Buyer will
provide employee welfare benefits and paid time-off benefits to employees of
BCG that are of commensurate with those of the employees of BCG prior to the
Effective Time. Buyer understands and agrees that as of the Effective Time,
the employees of BCG will no longer be permitted to participate in the
benefits provided and/or sponsored by Seller. Notwithstanding the foregoing,
nothing in this Section 9.2 constitutes a guarantee of employment or a contract
of employment for any such employees, and Seller understands and agrees that
all such employees will be employees "at will" of BCG unless Buyer has
expressly agreed to assume a written contract of employment existing prior to
the Closing Date.
9.3 CONSENTS AND REGULATORY APPROVALS. Buyer acknowledges that except
as provided in Section 5.9 hereof, neither Seller nor BCG shall have any
responsibility for obtaining any regulatory consents to and approvals of the
transfer of the Licenses described in SCHEDULE 3.5 hereof.
9.4 CHANGE OF NAME. Buyer agrees that it will cause all signs and
usage, if any, incorporating the name "Paracelsus"(and all variations thereof)
which are located at any of the Hospitals or used in the Business 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.
9.5 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).
9.6 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)(1)
of the Social Security Act (42 U.S.C. <section> 1395x(v)(1)(1)) and
requirements of relevant insurance carriers. In addition, Seller 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 in
connection with such litigation; provided, however, that to the extent Seller
is not required by subpoena or court order to use originals of the patient
records for such purposes, Seller shall 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. Notwithstanding the foregoing
provisions, Seller 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 Effective Time.
(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.
10. PARTICULAR COVENANTS OF SELLER AND BCG.
10.1 GOVERNMENTAL APPROVALS. Seller and BCG 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.
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 BCG, on one hand, or Buyer on
the other hand, commits a 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 cause or commit 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
April 30, 1999 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 BCG 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; EFFORTS TO REMEDY. Seller and BCG on the one hand and
Buyer on the other will notify the other party promptly in writing of, and
contemporaneously will provide the other party with true and complete copies of
any and all information and documents relating to, and will use their
reasonable best efforts to cure within thirty (30) days (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 under this
Agreement made by the notifying party to be breached, or that renders or would
render untrue any representation or warranty of the notifying party contained
in this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Each party will also use their reasonable best
efforts to cure within thirty (30) days (or by any subsequent date agreed upon
by the parties), any violation or breach of any representation, warranty,
covenant or agreement made by such violating or breaching party in this
Agreement. The party not in such violation or breach, as the case may be, may
terminate this Agreement (to the extent such remedy is available to such party
pursuant to Section 11.1(d) hereof); provided, however, that after the date
established by the parties for Closing, such non-violating or non-breaching
party may terminate this Agreement (to the extent such remedy is available to
the non-violating or non-breaching party pursuant to Section 11.1(d) hereof)
unless the breach or misrepresentation has been cured to the reasonable
satisfaction of such non-breaching or non-misrepresenting party. Furthermore,
each party shall notify the other party promptly in writing of any event,
transaction or circumstance occurring that causes or would cause any covenant
or agreement of such other party under this Agreement to be breached, or that
renders or would render untrue any representation or warranty of such other
party contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Such other party shall have thirty
(30) days in which to effect a cure of such breach or misrepresentation before
the non-breaching or non-misrepresenting party may terminate this Agreement (to
the extent such remedy is available to the non-breaching or non-misrepresenting
party pursuant to Section 11.1(d) hereof); provided, however, that after the
date established by the parties for Closing, such non-breaching or non-
misrepresenting party may terminate this Agreement (to the extent such remedy
is available to the non-breaching or non-misrepresenting party pursuant to
Section 11.1(d) hereof) unless the breach or misrepresentation has been cured
to the reasonable satisfaction of such non-breaching or non-misrepresenting
party. The failure of the discovering party to notify the other party of any
such discovered event, transaction or circumstance shall not release the other
party from any liability to the discovering party resulting from the breach
attendant to such discovered event, transaction or circumstance; provided,
however, that, unless the other party had independent knowledge of such event,
circumstance or condition, such other party's liability shall be limited to the
damages that would have nonetheless resulted to the discovering party had the
discovering party disclosed such discovered event, transaction or circumstance
to the other party prior to Closing.
11.3 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).
11.4 EFFECT OF TERMINATION. Except for the obligations contained in
Sections 6.1(v), 6.2(v), 12.7, 12.8 and 12.20 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
$2,000,000. The parties hereto specifically agree to and acknowledge the
preceding: _______________[Seller representative initials], _______________[BCG
representative initials], _______________[Buyer representative 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 5 days following receipt of any Schedule not
provided on the date of execution of this Agreement to approve, or to
disapprove in writing with the specific reason for any disapproval, 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 it 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 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.
12.4 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.
12.5 CHOICE OF LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE
OF TENNESSEE WITHOUT REGARD TO ITS PRINCIPALS OF CONFLICTS OF LAWS AND VENUE
SHALL BE BLEDSOE COUNTY.
12.6 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.
12.7 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 BCG will pay the
fees, expenses, and disbursements of Seller and BCG 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.
12.8 CONFIDENTIALITY. With respect to Confidential Information
provided by BCG 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
BCG in the event for any reason the sale of the Stock 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 Seller's
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, BCG 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 BCG and that therefore either Seller
or BCG 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 BCG or Seller obtained,
directly or indirectly, from BCG 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.
12.9 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.
12.10 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 1.5. 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.
12.11 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 BCG, 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 BCG, as the case may be, or any administrator,
assistant administrator or controller at the Hospital.
12.12 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: Associates Capital Group, LLC
P.O. Box 380995
Birmingham, Alabama 35238
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.
12.13 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.
12.14 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.
12.15 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.
12.16 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 or BCG'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.
12.17 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, 4.3 and 4.4 (and the
indemnities with respect thereto), which shall survive for the applicable
statute of limitations periods (collectively, the "SURVIVAL PERIOD").
12.18 ENTIRE AGREEMENT/AMENDMENT. Except for the confidentiality
provision contained in paragraph VI of the letter of intent between Paracelsus
and Buyer, dated February 2, 1999, as extended, (the "LOI") (which
confidentiality provision (the "Confidentiality Provision") 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 Provision) not specifically included
herein shall be of any force and effect; and the parties specifically
acknowledge that in entering into and executing this Agreement, the parties
relied solely upon the representations and agreements contained in this
Agreement and no others, except as to those materials referenced in Section 4.4
hereof. No terms, conditions, warranties, or representations, other than those
contained herein (or in the Confidentiality Provision) and no amendments or
modifications hereto, shall be binding unless made in writing and signed by the
party to be charged.
12.19 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.
12.20 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.
12.21 PUBLIC ANNOUNCEMENT. BCG 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, BCG 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]
<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:
PARACELSUS BLEDSOE COUNTY
GENERAL HOSPITAL, INC.
By:
Title:
ASSOCIATES CAPITAL GROUP, LLC
By:
Title: Managing Member
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
FOR
BLEDSOE COUNTY GENERAL HOSPITAL
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT FOR BLEDSOE COUNTY
GENERAL HOSPITAL (this "FIRST AMENDMENT"), is dated as of March 31, 1999, among
Paracelsus Healthcare Corporation ("SELLER"), a California corporation,
Paracelsus Bledsoe County General Hospital, Inc.("BCG"), a California
corporation and Associates Capital Group, LLC, a Georgia limited liability
company ("BUYER").
WITNESSETH:
WHEREAS, Seller, BCG and Buyer entered into that one certain Stock
Purchase Agreement For Bledsoe County General Hospital dated as of March 12,
1999 (the "STOCK PURCHASE AGREEMENT"); and
WHEREAS, the parties wish to amend certain sections of the Stock
Purchase Agreement to permit the Closing under such agreement to occur
effective March 31, 1999;
NOW, THEREFORE, for and in consideration of the foregoing premises and
the agreements and covenants 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:
I. Section 1.8 of the Stock Purchase Agreement is amended to read as
follows:
"1.8 PAYMENT OF WORKING CAPITAL AT CLOSING. (a) At Closing Buyer shall
deliver to Seller (i) $100,000 cash, (ii) a thirty (30) day promissory note in
the amount equal to the lesser of (A) sixty percent (60%) of BCG's Initial Net
Working Capital less $100,000 and (B) One Million Dollars ($1,000,000) less
$100,000 substantially in the form of APPENDIX 1.8 ("SHORT TERM NOTE"), and
(iii) a promissory note substantially in the form of Appendix A ("NOTE A") in
the original principal amount equal to the amount of BCG's Initial Net Working
Capital less the amount of cash paid in (i) above and the amount of the note in
(ii) above."
I. Section 1 of the Stock Purchase Agreement is amended to add SECTION 1.11
to read as follows:
"1.11 ADDITIONAL NOTE A ADJUSTMENT
(a) The parties acknowledge and agree that the effective date for
all transactions under this Agreement is the Effective Time pursuant to
Section 2.1 below. However, the parties have agreed to adjust the
balance of Note A as provided herein to reflect the economic benefits
and/or costs to the parties measured from 11.59 p.m., March 31, 1999
(the "Calculation Date") through the Closing Date ("Calculation
Period") arising from and with respect to the Assets and Assumed
Liabilities.
(b) No later than twenty (20) business days after the Closing
Date, Seller shall provide to Buyer a report (the "Calculation Report")
showing and reconciling all activity during the Calculation Period
involving and/or effecting the Assets and Assumed Liabilities. The
Calculation Report shall include, without limitation, the following
specific information:
(i) Cash collected by BCG during the Calculation Period from the
collection of accounts receivable or otherwise from the business
operations of BCG ("Cash Collected");
(ii) Detail of expenditures of cash during the Calculation Period
for trade payables, payroll and other obligations ("Expended
Cash");
(iii) The Calculation Report shall show the basis for Seller's
calculation of the adjustment to the balance of Note A and shall
constitute a request for or notice of payment due on account of
said adjustment. If the amount of Cash Collected is greater than
the sum of Expended Cash, then the principal balance of Note A
shall be decreased by said amount. If the amount of Cash Collected
is less than the sum of Expended Cash, then the principal balance
of Note A shall be increased by said amount.
(c) Buyer shall have ten (10) business days to audit the
Calculation Report to determine its accuracy and validity. After such
ten-day period, Buyer shall either accept the Calculation Report from
Seller or reject the Calculation Report. If Buyer rejects the
Calculation Report, the parties shall submit the matter to one of the
big five national certified public accounting firms jointly selected by
Buyer and Seller (the "Independent CPA Firm"). The Independent CPA Firm
shall make its determination based on the terms and conditions of this
Section 1.11, which determination shall be binding on the parties. The
costs of such Independent CPA Firm shall be shared equally between
Buyer, on the one hand, and Seller, on the other hand."
I. Section 2.2 of the Stock Purchase Agreement is amended to add the
following additional item:
"(h) The resignations of all officers and directors of BCG effective the
Effective Time."
I. Section 2.3 of the Stock Purchase Agreement is amended to read as
follows:
"2.3 ACTION OF BUYER AT CLOSING.
A. At the Closing, Buyer shall deliver to Seller the following:
(a) the Purchase Price, including :
(i) $100,000 cash,
(ii) Short Term Note,
(ii) Note A,
(iii) Note B,
(iv) Security Agreement (Short Term Note),
(v) Stock Pledge Agreement (Note A),
(vi) Security Agreement (Note B), and
(vii) a certificate of existence of Buyer from the State
of Georgia, dated the most recent practical date
prior to Closing
B. Buyer hereby covenants to deliver to Seller by May 15, 1999 the
following:
(a) the payment of the Short Term Note;
I. Section 3 of the Stock Purchase Agreement is amended to add SECTION 3.22
to read as follows:
"3.22 NO CONFLICT. The execution, delivery, and performance of this
Agreement and the other agreements contemplated hereby to which Seller
and BCG, or either of them, is a party and the consummation by Seller
and BCG of the transactions contemplated hereby and thereby does not and
will not (with or without the giving of notice or the lapse of time or
both) contravene, conflict with, or result in the violation of any
provision of the Scheduled Contracts or the Scheduled Leases, except as
may be described in Schedule 3.6 and Schedule 3.7."
I. Section 6.2 is hereby amended to add a clause "(v)" to read as follows:
"(v) any liability for violations of any Environmental Laws resulting
from underground storage tanks as disclosed in Schedule 3.17."
I. Section 6.4 LIMITATION ON CLAIMS clause (b) is hereby amended to read
as follows"
"(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 1.4(b)(2),
3.6, 3.7, 3.9, 3.14(c), 3.14(d), 3.14(e), 3.14(j), 3.15, 3.16, 3.17,
3.18, 3.19, 3.22 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 terms hereof and any agreement required herein,
(D) any breach by Buyer to pay the Purchase Price hereunder, (E) a
breach by Buyer or Seller of its obligation under Section 1.9 to pay any
post-Closing adjustment to the Purchase Price required by such Section,
or (F) solely with respect to all claims for indemnification arising
under Section 6.2 relating to underground storage tanks as disclosed in
Schedule 3.17, Seller shall have no liability to Buyer in excess of
$50,000 in the aggregate, the first $25,000 of which shall be payable to
Buyer in accordance with the procedures set forth in this Section 6, and
with respect to the remaining $25,000 of Seller's indemnification
obligation hereunder, Seller shall pay to Buyer one dollar for every
dollar Buyer is required to pay in damages up to a maximum of $25,000."
I. Section 7.6 of the Stock Purchase Agreement is deleted in its entirety.
I. There shall be added a new "SECTION 11.5 UNWINDING."to read as follows:
"SECTION 11.5 UNWINDING.
(a) Buyer and Seller shall cancel all obligations to the other
party and the transactions contemplated by the Stock Purchase
Agreement, as amended hereby, shall be rescinded as of the
Effective Time if:
(i) as to Seller, Buyer fails to perform its obligations
under Section 2.3.B of the amended Stock Purchase
Agreement; or
(ii) as to Buyer, Seller fails to perform its obligation
under Section 2.2 of the amended Stock Purchase Agreement.
(b) In the event Buyer elects to cancel as provided in (a) above,
(i) Seller shall return to Buyer $100,000 and the originally
executed Short Term Note, Note A and Note B, and (ii) Buyer shall
return to Seller possession of the Assets, and Buyer and Seller
Shall execute such other and further documents and take such acts
as are necessary to return the parties to the status quo prior to
the Closing, except for the retention by Seller of the $100,000 of
Buyer, whereupon this Agreement shall be terminated and of no
further force and effect.
(c) In the event Seller elects to cancel as provided in (a) above,
Buyer shall return to Seller possession of the Assets, the
irrevocable proxy and the Bill of Sale and Agreement, and Buyer
and Seller Shall execute such other and further documents and take
such acts as are necessary to return the parties to the status quo
prior to the Closing, whereupon this Agreement shall be terminated
and of no further force and effect."
I. The parties hereto agree the Effective Time shall be 11:59 P.M.
(Central Time) March 31, 1999.
I. Defined terms used herein that are not otherwise defined herein shall
have the meaning given them in the Stock Purchase Agreement.
I. This First Amendment may be executed in multiple counterparts, each of
which shall be deemed an original and all shall be considered one and the same
agreement.
I. All terms and provisions of the Stock Purchase Agreement not modified by
this First Amendment are and shall remain in full force and effect.
The next page of this First Amendment is the Signature Page
First Amendment to Stock Purchase Agreement Page 1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
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: MICHAEL M. BROOKS
Title: SENIOR VICE PRESIDENT
PARACELSUS BLEDSOE COUNTY
GENERAL HOSPITAL, INC.
By: R.T.PINCHBACK
Title: VICE PRESIDENT
ASSOCIATES CAPITAL GROUP, L.L.C.
By: LEONARD P. BRYANT
Title: MANAGING MEMBER
