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): July 2, 1999
Commission file number 001-12055
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 two asset
purchase agreements, dated March 15, 1999 and as amended April 14, 1999, for
the sale of substantially all of the assets of four skilled nursing
facilities (collectively, the "Convalescent Hospitals"), with 232-licensed beds
located in California, to Sunland Associates, Inc. ("Sunland"), a Tennessee
corporation. The transaction, which was effective on June 30, 1999, was
completed on July 2, 1999. The sales price of approximately $6.9 million
resulted from an arms-length negotiation and excluded the sale of net working
capital. The sales price was paid by a combination of $3.0 million in cash and
a $3.9 million second lien promissory note. The note, bearing interest at 9%
per annum, matures on June 30, 2004, and is subject to prepayment discounts.
Additionally, Sunland also assumed an operating lease at one of the
facilities. In connection with the sale, the Company paid $1.0 million to
terminate a lease agreement at one of the facilities and used the remaining
$2.0 million of cash proceeds from the sale to reduce its outstanding
indebtedness under its senior credit agreement. The Company expects to record
a gain of approximately $1.3 million ($774,000 net of tax) on the sale of the
facilities.
On April 15, 1999, the Company completed the sale of the stock of Paracelsus
Bledsoe County General Hospital, Inc.("Bledsoe"), which operated a 32
licensed-bed Facility located in Pikeville, Tennessee, to Associates Capital
Group, LLC ("ACG"), a Georgia limited liability company. The sales price of
approximately $2.2 million resulted from an 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, which was paid in
May 1999. 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 sales of the Convalescent Hospitals and
Bledsoe, the pro forma financial information required by Item 7(b) 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 the
signature page):
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the quarter ended March 31, 1999
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the year ended December 31, 1998
Unaudited Pro Forma Condensed Combining Balance Sheet - March 31, 1999
Notes to Unaudited Pro Forma Condensed Combining Financial Statements
(c) Exhibits
10.20 Asset Purchase Agreement dated March 15, 1999, by and among
Paracelsus Convalescent Hospitals, Inc., Paracelsus Real Estate Corporation and
Sunland Associates, Inc.
10.21 Amendment One to Asset Purchase Agreement, dated April 14, 1999,
by and among Paracelsus Convalescent Hospitals, Inc., Paracelsus Real Estate
Corporation and Sunland Associates, Inc.
<PAGE> 3
10.22 Rheem Valley Asset Purchase Agreement, dated March 15, 1999, by
and among Paracelsus Convalescent Hospitals, Inc., Paracelsus Real Estate
Corporation and Sunland Associates, Inc.
10.23 Amendment One to Rheem Valley Asset Purchase Agreement, dated
April 14, 1999, by and among Paracelsus Convalescent Hospitals, Inc.,
Paracelsus Real Estate Corporation and Sunland Associates, Inc.
PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Paracelsus HealthcareCorporation
(Registrant)
Dated: July 16, 1999 By: /S/ JAMES G. VANDEVENDER
-----------------------------
James G. VanDevender
Chief Executive Officer
& Director
<PAGE> 5
ITEM 7(b)
PARACELSUS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following table presents the Unaudited Pro Forma Condensed Combining
Financial Statements as of and for the quarter ended March 31, 1999 and year
ended December 31, 1998 to illustrate the effect of the sales of the
Convalescent Hospitals effective June 30, 1999, 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 at
the beginning of each period presented. The Pro Forma Condensed Combining
Balance Sheet assumes the sale of the Convalescent Hospitals and Bledsoe
occurred on March 31, 1999.
On July 2, 1999 the Company completed the sale of substantially all of the
assets, excluding net working capital, of the Convalescent Hospitals for
approximately $6.9 million. The sales price was paid by a combination of $3.0
million in cash and a $3.9 million second lien promissory note. The note,
bearing interest at 9% per annum, matures on June 30, 2004, and is subject to
prepayment discounts. Additionally, Sunland also assumed an operating lease at
one of the facilities. In connection with the sale, the Company paid $1.0
million to terminate a lease agreement at one of the facilities and used the
remaining $2.0 million of cash proceeds from the sale to reduce its outstanding
indebtedness under its senior credit agreement. The Company expects to
record a gain of approximately $1.3 million ($774,000 net of tax) on the sale
of the facilities.
On April 15, 1999, the Company completed the sale of Bledsoe for 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 ACG 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, which was paid in
May 1999. 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 unaudited consolidated financial statements as of and for
the quarter ended March 31, 1999, included in the Company's Quarterly Report on
Form 10-Q and the audited consolidated financial statements for the year ended
December 31, 1998, included in the Company's Annual Report on Form 10-K.
<PAGE> 6
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Convalescent
Paracelsus Bledsoe Pro Forma Hospitals
Healthcare Pro Forma Bledsoe Pro Forma Pro Forma
Corporation Adjustments Rf Disposition Adjustments Rf Paracelsus
----------- ----------- -- ----------- ----------- -- ----------
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 150,944 $ (1,964) (2) $ 148,980 $ (2,252) (4) $146,728
Costs and expenses: (3)
Salaries and
benefits 58,965 (1,115) (2) 57,850 (1,537) (4) 56,313
Other operating
expense 58,085 (818) (2) 57,267 (702) (4) 56,565
Provision for
bad debts 12,398 (125) (2) 12,273 12,273
Interest 13,104 13,104 (42) (4) 13,062
Depreciation & (5)
amortization 9,815 (48) (2) 9,767 (49) (4) 9,718
Unusual items 1,123 1,123 1,123
--------- ------- --------- ------- -------
Total costs &
expenses 153,490 (2,106) 151,384 (2,330) 149,054
--------- ------- --------- ------- -------
Loss before
minority interest
and income taxes (2,546) 142 (2,404) 78 (2,326)
Minority interest 63 63 63
--------- ------- --------- -------- -------
Loss before
income taxes (2,483) 142 (2,341) 78 (2,263)
Provision for
income taxes (897) 58 (6) (839) 32 (6) (807)
--------- ------- --------- -------- -------
Loss from continuing
operations $ (1,586) $ 84 $ (1,502) $ 46 $(1,456)
========= ======== ========= ======== ========
Loss per share
- - basic and
assuming
dilution $ (0.03) $ (0.03) $ (0.03)
========= ========= =========
Weighted average
number of common
and common
equivalent
shares 55,118 55,118 55,118
========= ========= ==========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<PAGE> 7
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) (7) $645,185 $645,185
Costs and expenses:
Salaries and
benefits 276,200 (8,217) (7) 267,983 267,983
Other operating
expense 265,735 (6,475) (7) 259,260 259,260
Provision for
bad debts 42,659 (355) (7) 42,304 42,304
Interest 51,859 (1,257) (5) 50,602 $ 2,983 (5) 53,585
Depreciation &
amortization 38,330 (758) (7) 37,572 486 (8) 38,058
Impairment charges 1,417 1,417 1,417
Unusual items (6,637) (6,637) (6,637)
(Gain)loss on sale of
facilities (6,825) 7,100 (7) 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 (9) 961
--------- ------- --------- ------- -------
Loss before
income taxes (1,860) (8,911) (10,771) 672 (10,099)
Provision for
income taxes 693 (3,653) (6) (2,960) 275 (6) (2,685)
--------- ------- --------- ------- -------
Loss from continuing
operations $ (2,553) $(5,258) $ (7,811) $ 397 $ (7,414)
========= ======== ========= ======= =========
Loss per share
- - basic and
assuming
dilution $ (0.05) $ (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> 8
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>
Pro Forma
LA Metro Pro Forma Bledsoe Chico/DHHS/
Pro Froma Pro Forma Chico/DHHS/ Pro Forma LA Metro/
Chico/DHHS Adjustments Rf LA Metro Adjustments Rf Bledsoe
----------- ----------- ---- ----------- ----------- -- ---------
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $645,185 $(58,000) (10)(11) $587,185 $ (9,717) (2)(3)$577,468
Costs and expenses:
Salaries and
benefits 267,983 (25,672) (10) 242,311 (7,465) (2) 234,846
Other operating
expense 259,260 (31,333) (10) 227,927 (3,737) (2) 224,190
Provision for
bad debts 42,304 (1,915) (10) 40,389 (403) (2) 39,986
Interest 53,585 (733) (5)(10) 52,852 52,852
Depreciation &
amortization 38,058 38,058 (275) (2) 37,783
Impairment charges 1,417 1,417 (1,104) (2) 313
Unusual items (6,637) (233) (10) (6,870) (6,870)
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) (10)
--------- ------- --------- ------- -------
Loss before
income taxes (10,099) 925 (9,174) 3,267 (5,907)
Provision for
income taxes (2,685) 379 (6) (2,306) 1,340 (6) (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> 9
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>
Pro Forma Convalescent
Chico/DHHS/ Hospitals
LA Metro/ Pro Forma Pro Forma
Bledsoe Adjustments Rf Paracelsus
----------- ------------ ---- ----------
(1)
<S> <C> <C> <C> <C>
Net revenue $ 577,468 $ (8,914) (4) $ 568,554
Costs and expenses:
Salaries and
benefits 234,846 (6,025) (4) 228,821
Other operating
expense 224,190 (2,507) (4) 221,683
Provision for
bad debts 39,986 70 (4) 40,056
Interest 52,852 (242) (4)(5) 52,610
Depreciation &
amortization 37,783 (191) (4) 37,592
Impairment charges 313 313
Unusual items (6,870) (6,870)
Loss on sale
of facilities 275 275
---------- ----------- ----------
Total costs &
expenses 583,375 (8,895) 574,480
---------- ----------- ----------
Loss before minority
interest and
income taxes (5,907) (19) (5,926)
Minority interest
---------- ----------- ----------
Loss before
income taxes (5,907) (19) (5,926)
Provision for
income taxes (966) (8) (6) (974)
---------- ----------- ----------
Loss from continuing
operations $ (4,941) $ (11) $ (4,952)
========== =========== ==========
Loss per share
- - basic and
assuming
dilution $ (0.09) $ (0.09)
========== ==========
Weighted average
number of common
and common
equivalent
shares 55,108 55,108
========== ==========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<PAGE> 10
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
MARCH 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Convalescents
Paracelsus Hospitals
Healthcare Pro Forma Pro Forma
Corporation Adjustments Rf Paracelsus
----------- ------------ -- ----------
<S> <C> <C> <C> <C>
ASSETS: (1)
Current assets:
Cash and cash equivalents $ 5,645 $ (55) (12) $ 5,590
Restricted cash 6,736 6,736
Accounts receivable, net 54,561 54,561
Deferred income taxes 9,641 9,641
Other 48,137 48,137
-------- ------ --------
Total current assets 124,720 (55) 124,665
-------- ------ --------
Property and equipment, net 361,223 (3,213) (12) 358,010
Goodwill 135,699 135,699
Other assets 85,193 2,712 (12) 87,905
-------- ------ --------
Total assets $706,835 $ (556) $706,279
======== ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 45,484 $ 45,484
Accrued liabilities
and other 42,824 670 (12) 43,494
Current maturities
of long-term debt 5,451 5,451
-------- ------ --------
Total current liabilities 93,759 670 94,429
-------- ------ --------
Long term debt 541,246 (2,000) (5) 539,246
Other long-term liabilities 39,075 39,075
Stockholders' equity
Common stock 222,977 222,977
Additional paid-in capital 390 390
Accumulated deficit (190,612) 774 (12) (189,838)
-------- ------ --------
Total stockholders'
equity 32,755 774 33,529
-------- ------ -------
Total liabilities
& stockholders' equity $706,835 $ (556) $706,279
======== ====== ========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<PAGE> 11
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
(1) The statements of operations and balance sheet for Paracelsus
Healthcare Corporation as of and for the quarter ended March 31, 1999 are
summarized from its March 31, 1999 Quarterly Report on Form 10-Q. The statement
of operations for the year ended December 31, 1998 are summarized from its 1998
Annual Report on Form 10-K.
(2) 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.)
(3) To record pro forma interest income of $30,000 and $120,000 for the
quarter ended March 31, 1999 and the year ended December 31, 1998,
respectively, on $494,000 of Note A and $1.0 million of Note B issued by ACG in
conjunction with the Bledsoe sale. The thirty-day non interest bearing
promissory note of $642,000 was paid in May 1999. The terms of Notes A
and B were discussed in a previously filed current report on Form 8-K dated
April 15, 1999, which is incorporated herein by reference.
(4) To remove the Convalescent Hospitals' historical results of operations and
assets sold (excluding net working capital) in connection with the sale of the
facilities to Sunland. The Company expects to record a gain of $1.3 million
($774,000 net of tax) on the sale of the facilities (see note reference (12)).
(5) 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 the Convalescent
hospitals, Chico and LA Metro, and (ii) the pro forma decrease in amounts
outstanding under the Company's credit facility and 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 sale of the Convalescent Hospitals, the Unaudited Pro
Forma Condensed Combining Statements of Operations and Balance Sheet assume
$2.0 million in net sales proceeds were used to reduce amounts outstanding
under the credit facility. The average interest rate in effect under the Credit
Facility was 8.4% for the quarter ended March 31, 1999 and 9.0% for the year
ended December 31, 1998.
With respect to the Chico sale effective June 30, 1998, the Unaudited
Pro Forma Condensed Combining Statement of Operations assumes $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.
<PAGE> 12
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
- ----------- -------------------------------------------------------------------
With respect to sale of LA Metro effective September 30, 1998, the
Unaudited Pro Forma Condensed Combining Statement of Operations assumes $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
Statement of Operations assumes 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.
(6) To record the pro forma provision for income taxes after taking into
effect the sale of the Convalescent Hospitals, Bledsoe, 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%.
(7) To remove Chico's historical results of operations and the gain on sale
of the Chico facilities.
(8) 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.
(9) To remove minority interest in DHHS for the six months ended June 30,
1998.
(10) To remove LA Metro's historical results of operations (including an
unusual charge of $233,000).
(11) 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 principal amounts and terms of the
notes were discussed in a previously filed current report on Form 8-K dated
September 30, 1998, which is incorporated herein by reference.
<PAGE> 13
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
- ----------- -------------------------------------------------------------------
(12) To record estimated gain to the sale of the Convalescent Hospitals as
followed:
Cash Proceeds $3,000,000
Promissory note, net of prepayment
discount of $650,000 3,250,000 (a)
----------
Total Consideration 6,250,000
----------
Transaction costs:
Legal, severances, bonuses
and other closing costs 725,000 (c)
Lease termination 1,000,000
----------
1,725,000
----------
Assets sold:
Property & equipment 3,213,000
----------
Pre-tax gain on sale 1,312,000
Income tax provision 538,000 (b)
----------
Gain on sale, net of tax $ 774,000
==========
(a) The second lien promissory note is secured by the properties of three
of the Convalescent Hospitals. The note bears interest of 9% annually and
matures on June 30, 2004. Payments of interest only are due and payable on the
last day of each month beginning with July 31, 1999. Monthly payments of
principal and interest of $35,000 are payable beginning June 30, 2000, based on
a 20-year amortization period, with all outstanding principal balance payable on
June 30, 2004. The note is subject to prepayment discount of varying
decreasing amounts if paid within 12 to 30 months of issue.
(b) The tax effect of gain on sale is reflected as a reduction of deferred
tax assets in the Unaudited Pro Forma Condensed Combining Balance Sheet as of
March 31, 1999.
(c) Transaction costs include $55,000 of cash paid for miscellaneous
closing costs and $670,000 of severances, bonuses and others reflected as
accrued liabilities in the Unaudited Pro Forma Condensed Combining Balance
Sheet as of March 31, 1999.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of March 15,
1999 (the "Signing Date"), is entered into by and among PARACELSUS CONVALESCENT
HOSPITALS, INC., a California corporation ("PCHI"), PARACELSUS REAL ESTATE
CORPORATION, a California corporation ("PREC") (PCHI and PREC are also
sometimes referred to herein individually as, a "Seller" and, collectively as,
the "Sellers"), and SUNLAND ASSOCIATES, INC., a Tennessee corporation (the
"Buyer") or its assigns as herein permitted.
WITNESSETH:
WHEREAS, PCHI owns and operates the following three skilled nursing
facilities (collectively, the "Owned Facilities" and also sometimes referred to
herein individually as, a "Facility" and, collectively as, the "Facilities"):
1. University Convalescent Hospital, located at 2122 Santa Cruz
Avenue, Menlo Park, California 94025 ("University");
2. Lafayette Convalescent Hospital, located at 1010 First
Street, Lafayette, California 94549 ("Lafayette"); and
3. Oak Park Convalescent Hospital, located at 1625 Oak Park
Boulevard, Pleasant Hill, California 94523 ("Oak Park"); and
WHEREAS, PREC owns the real property on which the Owned Facilities are
located; and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to
purchase, all or substantially all of the assets and properties used by PCHI in
the skilled nursing and subacute care business conducted at the Facilities (the
"Business"), and certain real property of PREC on which the Owned Facilities
are located, and Buyer further desires to assume from Sellers certain
liabilities and obligations from conducting the Business, all upon the terms
and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated in this Agreement, and the
other good and valuable consideration exchanged between the parties, the
receipt and sufficiency of which is hereby acknowledged, the parties intending
to be legally bound agree as follows:
SECTION 1.
DEFINITIONS
1.1. DEFINITIONS. As used herein, the following terms have the meanings
specified or referred to in this section (unless specifically defined or the
context clearly requires otherwise):
"Affiliate" means any Person that, directly or indirectly, controls,
is controlled by, or under common control with, another Person. For purposes of
this definition, the terms "control" and "controlled by" and
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"under common control with", as used with respect to any Person, mean the power
to direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
Contract, or otherwise.
"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of California are
closed.
"Closing Period" means the period between the Signing Date and the
Closing Date.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contract" means any contract, agreement, obligation, promise,
purchase order, sales order, license, lease, commitment, arrangement, or
undertaking (whether written or oral, and whether express or implied) that is
legally binding.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any corresponding provisions of succeeding law, and the regulations
promulgated thereunder.
"Governmental Authorization" means any approval, consent, license,
certificate of need, franchise, provider number, permit, waiver, or other
authorization issued, granted, given, or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" means any (i) nation, state, county, city, town,
village, district, or other jurisdiction of any nature, (ii) federal, state,
local, municipal, foreign, or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal), (iv)
multi-national organization or body, or (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Indemnitee" means a party seeking indemnification.
"Indemnitor" means a party against whom a claim for indemnification is
made.
"Knowledge" with respect to:
(i) an individual, is deemed to exist of a particular fact or other
matter if, such individual is, or has at any time been, (y) actually
aware of such fact or other matter, or (z) a prudent individual could
be expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonable inquiry about
the existence of such fact or other matter; and
(ii) any Person (other than an individual), is deemed to exist of a
particular fact or other matter if, any individual who is serving, or
who at any time has served, as a director, officer, partner, executor,
or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge (as defined in the preceding clause (i) hereof) of
such fact or other matter.
"IRC" means the Internal Revenue Code of 1986, as amended and any
corresponding provisions of succeeding law, and the regulations promulgated
thereunder.
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"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, code, principle of common law, regulation,
statute, or treaty.
"Lender" means any Person that has loaned money or extended credit to
another Person.
"Liens" means all mortgages, deeds of trust, claims, liens, judgments,
security interests, pledges, leases, conditional sale contracts, rights of
first refusal, options, charges, liabilities, obligations, agreements, powers
of attorney, limitations, reservations, restrictions, and other encumbrances or
adverse claims of every kind and nature, including any restriction on use,
voting, transfer, receipt of income, or exercise of any attribute of ownership.
"Ordinary Course of Business" means an action taken by a Person that
is:
(i) consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such
Person;
(ii) not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent corporation, if any, of such Person; and
(iii) similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (of by any Person
or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are
in the same line of business as such Person.
"Person" includes any individual, partnership, joint venture, limited
partnership, limited liability company, trust, estate, corporation,
association, custodian, trustee, executor, administrator, or other entity or
Governmental Body.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Representatives" means the directors, trustees, officers, employees,
agents, financial advisers, accountants, legal counsel, and other
representatives of a Person.
"Subsidiary" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries.
"Tax" means any Governmental Body tax assessment, penalty, interest,
fee, or other charge.
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"Tax Return" means any return (including an information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Transaction" means the sale and purchase of the Acquired Assets,
assumption of the Assumed Liabilities, and performance of the other agreements
and covenants as described herein or required hereby.
"Transaction Documents" means this Agreement, the Bill of Sale, the
Assignment and Assumption Agreement; the Warranty Deed, the Consents, the
Construction Contract Escrow Agreement and the exhibits, schedules,
certificates, and lists related to each of the foregoing, as applicable to each
of Seller and Buyer.
"Union Contract" means the Collective Bargaining Agreement, effective
October 1, 1997, between University and Health Care Workers' Union Local 250,
affiliated with The Service Employees International Union, AFL-CIO and PCHI.
1.2. OTHER DEFINITIONS. Other terms may be defined elsewhere herein and have
the meanings so given to them.
SECTION 2.
SALE AND PURCHASE
2.1. ACQUIRED ASSETS. Upon the terms and subject to the conditions set forth
herein, at the Closing (as defined in Section 5.1. hereof), Sellers will sell,
transfer, convey, assign, and deliver to Buyer, and Buyer thereupon will
purchase, acquire, and assume from Sellers, all of the following assets and
properties of Sellers, other than the Excluded Assets (as defined in Section
2.4. hereof), owned, held, or used by PCHI in the operation of the Facilities
and conduct of the Business, as such exist on the Signing Date, less all such
assets and properties used, consumed, or disposed of, plus all such assets and
properties acquired by, Sellers in the Ordinary Course of Business during the
Closing Period (collectively, the "Acquired Assets"), which such Acquired
Assets comprise, with the exception of the Excluded Assets, all or
substantially all of the assets and properties owned, held, or used by PCHI in
operating the Facilities and conducting the Business:
a. REAL PROPERTY. The real property and real property interests
described in SCHEDULE 2.1.A. hereto, together with all leaseholds therein, all
buildings, improvements, construction-in-progress, fixtures, and fittings
located thereon, and all easements, rights-of-way, and other appurtenances
thereto (collectively, the "Real Property");
b. PERSONAL PROPERTY. All tangible personal property and interests
therein, including machinery, equipment, furniture, office equipment and
supplies, communications equipment, furnishings, vehicles, and similar tangible
personal property (collectively, the "Personal Property"), and including, not
limited to, the personal property listed in SCHEDULE 2.1.B. hereto, which shall
be completed by mutual agreement of the parties, initialed, and attached prior
to Closing (the "Scheduled Personal Property");
c. INTELLECTUAL PROPERTY. (i) All copyrights in both published works
and unpublished works (collectively, the "Copyrights"), (ii) all registered and
unregistered trademarks, trade names, service marks,
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and fictional business names, including, but not limited to, the exclusive
rights of PCHI, if any, in and to the names "University Convalescent Hospital",
"Lafayette Convalescent Hospital", and "Oak Park Convalescent Hospital",
(collectively, the "Marks"), and (iii) all know-how, trade secrets,
confidential information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints owned, used, or
intended to be used, or licensed by the PCHI, whether as licensee or licensor
(collectively, the "Trade Secrets"), including all applications for and all
Contracts granted to PCHI with respect to any of the foregoing, to the extent
transfer or assignment is permitted by the terms thereof, and including, but
not limited to, the items listed in SCHEDULE 2.1.C. hereto, which shall be
completed by mutual agreement of the parties, initialed, and attached prior to
Closing, but specifically excluding (x) all proprietary information contained
in the employee or operation manuals of any Seller that does not directly
pertain to the ongoing operation of the Facilities and conduct of the Business
in the Ordinary Course of Business after Closing; (y) all rights in and to all
owned and licensed computer hardware and software utilized, maintained, and
located at the data center of Paracelsus Healthcare Corporation ("Paracelsus"),
the parent corporation of Sellers, in Houston, Texas; and (z) all rights in and
to the PrideTM and ServiceAdvantage programs (collectively, the "Intellectual
Property");
d. ASSIGNED CONTRACTS. To the extent transfer or assignment is
permitted by the terms thereof, all of the right, title, and interest of PCHI
under all Contracts, including the Union Contract, relating to PCHI's operating
the Facilities and conducting the Business listed in SCHEDULE 2.1.D. hereto
(collectively, the "Assigned Contracts");
e. ASSIGNED LICENSES AND PERMITS. To the extent transfer or assignment
is permitted by applicable Legal Requirements, all right, title, and interest
of PCHI in all Governmental Authorizations of any Governmental Body held by
PCHI for operating the Facilities and conducting the Business and listed in
SCHEDULE 2.1.E. hereto (collectively, the "Assigned Licenses and Permits");
f. WARRANTY RIGHTS. To the extent transfer or assignment is permitted
by the terms thereof, the benefit of and right to enforce the covenants and
warranties that PCHI is entitled to enforce on the Closing Date relating to any
of the other Acquired Assets;
g. BUSINESS RECORDS. All documents, records, operating manuals and
files, and computer software of PCHI, including, without limitation, all
employment records, patient records, medical records, equipment records,
construction plans and specifications, and medical and administrative
libraries, but specifically excluding (x) all proprietary information contained
in the employee or operation manuals of any Seller that does not directly
pertain to the ongoing operation of the Facilities and conduct of the Business
in the Ordinary Course of Business after Closing; (y) all rights in and to all
owned and licensed computer hardware and software utilized, maintained, and
located at the data center of Paracelsus in Houston, Texas; and (z) all rights
in and to the PrideTM and ServiceAdvantage programs; and
h. GOODWILL. All the goodwill and going concern value of the other
Acquired Assets and the Business.
2.2. TRANSFER WITHOUT LIENS. Each of PCHI and PREC, as their interests appear,
will convey good, valuable, and marketable title to the Acquired Assets (other
than the Real Property) to Buyer free and clear of all Liens, and good and
indefeasible title to the Real Property to Buyer free and clear of all Liens,
except for as to both, (i) the Permitted Liens (as defined in Section 7.6.b.
hereof), (ii) the Liens expressly assumed by Buyer as part of the Assumed
Liabilities (as defined in Section 3.1. hereof, and (iii) the Liens otherwise
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disclosed under Section 7.6. hereof.
2.3. EFFECT OF PROHIBITED ASSIGNMENT. Nothing in this Agreement shall be
construed as an attempt or agreement to transfer or assign (i) any Contract,
Governmental Authorization, franchise, approval, variance, certification, or
authority which cannot be transferred or assigned without Consent, unless such
Consent shall have been given, or (ii) any Contract or claim as to which all
the rights and remedies for enforcement would not fully pass to Buyer incident
to the transfers or assignments required by this Agreement. However, in order
for Buyer to realize the full value of the items described in the foregoing
clauses (i) and (ii), Sellers shall, at the request of and under the direction
of Buyer, and in the name of Buyer or as Buyer may otherwise specify and as
permitted by applicable Legal Requirements, take all actions and do, or cause
to be done, all such things as shall in the opinion of Buyer reasonably be
necessary or proper (x) for the rights and obligations of any Seller thereunder
to be preserved, and (y) for, and to facilitate, the collection of any monies
due and payable thereunder, which Sellers shall hold for the benefit of and pay
and deliver promptly to Buyer.
2.4. ASSETS EXCLUDED. Buyer will not purchase from Sellers under this
Agreement, and the Acquired Assets shall not include, any of the following
assets or properties of Sellers, regardless of whether owned, held, or used in
the operation of the Facilities or conduct of the Business (collectively, the
"Excluded Assets"):
a. CURRENT ASSETS. All cash on hand or in banks (or similar
depositories) or in investments, and all account, trade, intercompany, and
other receivables, and all prepaid expenses, deposits, and other current
assets, provided however, Buyer shall receive a credit against the Purchase
Price for the prepaid amounts received by Sellers for patient care to be
delivered by Buyer after Closing;
b. ORDINARY COURSE OF BUSINESS. All assets and properties used,
consumed, or disposed of in the Ordinary Course of Business during the Closing
Period;
c. CORPORATE DOCUMENTS; CERTAIN BUSINESS RECORDS. The corporate minute
books, minutes, Tax records, and other documents and records either required to
be maintained by Sellers' applicable Legal Requirements (but not including
patient medical records at the Facilities) or not directly related to and
necessary for Buyer's operation of the Facilities and conduct of the Business
after the Closing;
d. EXCLUDED CONTRACTS. All rights and privileges under Contracts not
included in the Assigned Contracts, including, but not limited to, all
Contracts between any Seller and any of its Affiliates;
e. NAME RIGHTS. The names "Paracelsus", "Paracelsus Healthcare", and
"Paracelsus Convalescent" (and all derivatives and variations thereof);
f. PROPRIETARY INFORMATION. (i) All proprietary information contained
in the employee or operation manuals of any Seller that does not directly
pertain to the ongoing operation of the Facilities and conduct of the Business
in the Ordinary Course of Business after Closing; (ii) all rights in and to all
owned and licensed computer hardware and software utilized, maintained, and
located at the data center of Paracelsus in Houston, Texas; and (iii) all
rights in and to the PrideTM and ServiceAdvantage programs;
g. THIRD PARTY CLAIMS. Any claims or rights against third parties on
liabilities or obligations not included in the Assumed Liabilities;
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h. TAX REFUNDS. All claims for refunds of Taxes for periods ending on
or prior to the Closing Date;
i. INSURANCE REFUNDS. All rights under insurance policies, including
rights to any cancellation value on the Closing Date or such earlier date;
j. INSURANCE PROCEEDS. Except as otherwise provided herein, all
insurance proceeds and claims relating to any of the Acquired Assets or the
Business;
k. INTERCOMPANY ACCOUNTS. All intercompany accounts of any Seller and
any of its Affiliates;
l. OTHER ASSETS OF PREC. All assets and properties of PREC, other than
the Real Property;
m. ASSETS OF PARACELSUS. All assets and properties of Paracelsus; and
n. SCHEDULED EXCLUDED ASSETS. The property and assets listed in
SCHEDULE 2.4.N. hereto, which shall be completed by mutual agreement of the
parties, initialed, and attached prior to Closing.
SECTION 3.
ASSUMPTION OF LIABILITIES
3.1. ASSUMED LIABILITIES. At the Closing, Buyer will assume, become responsible
for, and obligated to pay, perform, and discharge, only the following
liabilities or obligations of Sellers and Paracelsus from operating the
Facilities and conducting the Business (collectively, the "Assumed
Liabilities"):
a. ASSIGNED CONTRACTS. The liabilities or obligations of Sellers and
Paracelsus under the Assigned Contracts, including the Union Contract, (as
listed in SCHEDULE 2.1.D.), to the extent such Assigned Contracts have not been
terminated and are not in default on the Closing Date;
b. ASSIGNED LICENSES AND PERMITS. The liabilities or obligations of
Sellers and Paracelsus under the Assigned Licenses and Permits (as listed in
SCHEDULE 2.1.E.), to the extent such Assigned Licenses and Permits have not
been terminated and are not in default on the Closing Date;
c. OTHER TRANSACTION DOCUMENTS. Any and all liabilities or obligations
specifically undertaken by Buyer under this Agreement or any of the other
Transaction Documents; and
d. OTHER ASSUMED LIABILITIES. The liabilities or obligations of
Sellers and Paracelsus, other than as listed on Schedule 2.1.d., as
specifically listed in SCHEDULE 3.1.D. hereto.
3.2. EXCLUDED LIABILITIES. Buyer shall not assume, become responsible for, or
otherwise obligated to pay, perform, or discharge, and the Assumed Liabilities
shall not include, any other liabilities or obligations of Sellers or
Paracelsus, whether accrued, absolute, contingent, or otherwise (collectively,
the "Excluded Liabilities").
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SECTION 4.
EARNEST MONEY DEPOSIT; PURCHASE PRICE
4.1. EARNEST MONEY DEPOSIT.
a. REQUIRED DEPOSITS. Buyer shall on or before the third day following
the Signing Date, deposit with Michener, Larimore, Swindle, Whitaker, Flowers,
Sawyer, Reynolds & Chalk, L.L.P., counsel to Sellers, the sum of $100,000.00
(the "Initial Earnest Money Deposit") pursuant to and to be governed by the
Earnest Money Deposit Agreement substantially in the form of APPENDIX 4.1
hereto (the "Earnest Money Deposit Agreement"). Subject to the terms of the
Earnest Money Deposit Agreement and this Agreement Buyer may extend the closing
of the purchase of the Acquired Assets for up to an additional 30 days past the
Scheduled Closing Date upon the payment of $50,000 as an additional earnest
money deposit, and thereafter extend the closing of the purchase of the
Acquired Assets for up to a further 30 day period upon the payment of $100,000
as an additional earnest money deposit (each, a "Supplemental Earnest Money
Deposit") (the Initial Earnest Money Deposit and Supplemental Earnest Money
Deposit, whether one or more, are referred to herein collectively as, the
"Earnest Money Deposit"). Each Supplemental Earnest Money Deposit shall be
governed by the Earnest Money Deposit Agreement.
b. CONDITIONS OF RELEASE. The Earnest Money Deposit shall be released
by Sellers, and paid and delivered to Buyer or retained by Sellers, as the case
may be, in accordance with the provisions in Section 13.3. hereof.
c. NO LIABILITY. Buyer agrees that Sellers shall have no liability,
and Buyer covenants not to sue Sellers, for any loss resulting from the
investment of the Earnest Money Deposit, or any loss of interest from the early
withdrawal of the Earnest Money Deposit.
4.2. PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to
Sellers for the Acquired Assets (the "Purchase Price") shall be FIVE MILLION
THREE HUNDRED FIFTY THOUSAND DOLLARS ($5,350,000.00.
4.3. METHOD OF PAYMENT. The Purchase Price, less the amount of the Note, and
any credits against such sum required by the provisions hereof, shall be paid
by Buyer to Sellers, at the Closing, by wire transfer or delivery of other
immediately available funds to the account or accounts designated by Sellers
prior to Closing and by the delivery of a secured promissory note in the
original principal amount of $850,000.00 and substantially in the form of
APPENDIX 4.3 (the "Note"), which shall be secured by a second lien on the Real
Property that is second to no more than a $5,000,000 first lien.
4.4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among
the Acquired Assets as set forth on SCHEDULE 4.4. hereto, which shall be
completed by mutual agreement of the parties, initialed, and attached prior to
Closing. The parties agree not to take any position on any Tax Return, upon
examination or audit of any Tax Return, in any claim for a Tax refund, or
otherwise that is inconsistent with such allocation of the Purchase Price, and
the parties further agree to duly prepare and timely file such federal income
Tax Returns necessary for reporting such allocation.
4.5. PRORATION AND PAYMENT OF TAXES. Each of Sellers and Buyer shall pay its
pro rata portion of 1998 real property and ad valorem or similar personal
property Taxes on any of the Acquired Assets. At the Closing, Sellers shall pay
to Buyer (in the form of a credit against the Purchase Price) estimated 1999
real property and ad valorem or similar personal property Taxes pro rated
through the Closing Date based on the 1998 Taxes due. Sellers shall make
available to Buyer the statements and assessments reflecting the 1998 real
property and ad valorem or similar personal property Taxes. Buyer shall pay (or
reasonably contest)
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such sum to the appropriate Governmental Body when due, prior to becoming
delinquent. Buyer further shall promptly forward to Sellers, after receipt
thereof, copies of all 1999 Tax statements and assessments on any of the
Acquired Assets. If the 1999 Taxes due are adjusted such that the Taxes due and
payable are greater than the 1998 Taxes, Sellers shall pay their pro rata
portion of any deficiency promptly after receiving notice that Buyer paid such
Taxes. However, if the 1999 Taxes due shall be adjusted such that the Taxes due
and payable are less than the 1998 Taxes, Buyer shall refund to Sellers their
pro rata portion of such reduction upon receiving a copy of the 1999 Tax
assessment. Promptly after the Closing, Buyer shall notify the appropriate
Governmental Bodies of the change in the ownership of the Acquired Assets and
its address for receiving any future Tax notices. Except as specifically
provided in this section, Sellers shall have no other liability for Taxes
payable by Buyer (including federal or state income Taxes) relating to the
ownership of the Acquired Assets, operation of the Facilities, conduct of the
Business, the Transaction, or otherwise.
SECTION 5.
CLOSING
5.1. CLOSING DATE. Subject to the provisions for termination of this Agreement
in Section 13. hereof, and the provisions for Buyer to extend the date for the
closing in Section 5.3. hereof, the closing for the consummation of the
Transaction contemplated by this Agreement (the "Closing") shall take place at
the offices of Chicago Title Company, 388 Market Street, Suite 1300, San
Francisco, California 94111 at 10:00 a.m., California time, on May 14, 1999 or
on such other date mutually agreed upon in writing by the parties (the
"Scheduled Closing Date"). The date and time on which the Closing actually
occurs, whether on the Scheduled Closing Date or as such may be extended as
permitted hereby, is referred to herein as the "Closing Date". Subject to the
provisions of Section 13. hereof, failure to consummate the Transaction on the
date determined pursuant to this section will not result in the termination of
this Agreement and will not relieve any party of any obligation hereunder.
5.2. EFFECTIVE TIME. The Transaction shall be effective for Tax, accounting,
and all other purposes as of 12:01 a.m. on the day immediately following the
Closing Date (the "Effective Time"), unless otherwise mutually agreed upon in
writing by the parties.
5.3. EXTENSION DATE. As provided by Section 4.1, Buyer may, in its sole
discretion, extend the date for the Closing past the Scheduled Closing Date to
a date not more than thirty (30) days later (the "First Extension Date') by
giving notice of such extension specifying the new Closing Date and delivering
a $50,000 Supplemental Earnest Money Deposit pursuant to the Earnest Money
Deposit Agreement at least five (5) Business Days prior to the Scheduled
Closing Date. Thereafter, Buyer may, in its sole discretion, extend the date
for the Closing past such First Extension Date to a date not more than thirty
(30) days later (the "Second Extension Date") by giving notice of such
extension specifying the new Closing Date and delivering a $100,000
Supplemental Earnest Money Deposit pursuant to the Earnest Money Deposit
Agreement at least five (5) Business Days prior to the First Extension Date.
Each new Closing Date set by Buyer pursuant to this section based on its giving
of an extension notice and delivering a Supplemental Earnest Money Deposit may
also be referred to herein as an "Extension Date".
SECTION 6.
ADDITIONAL COVENANTS AND AGREEMENTS
Buyer and Sellers covenant and agree as follows:
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6.1. CONSTRUCTION-IN-PROGRESS AT LAFAYETTE.
a. CONSTRUCTION PROJECT. During the Closing Period or as of Closing,
PCHI shall enter into a Contract (the "Construction Contract") with a qualified
contractor (the "Contractor"), for the purpose of making the repairs to
Lafayette generally described in SCHEDULE 6.1.A.(1) hereto as necessary to
comply with the requirements of the California Office of Statewide Health
Planning and Development relating such repairs (the "Construction Project");
provided, however, that if Contractor's firm bid for the Construction Project
(the "Bid") is greater than $200,000.00, PCHI shall not be obligated to enter
into the Construction Contract or undertake the Construction Project, but may,
in its sole discretion, elect to do so by giving affirmative notice thereof to
Buyer. PCHI shall deliver SCHEDULE 6.1.A.(1) to Buyer within five (5) business
days from the Signing Date. A true and accurate copy of the Construction
Contract shall be attached prior to Closing as SCHEDULE 6.1.A.(2) hereto once
it has been executed.
b. LIABILITY ON CONSTRUCTION CONTRACT. In the event PCHI enters into
the Construction Contract, the Construction Contract shall not be an Assigned
Contract and shall not be an Assumed Liability.
c. CONSTRUCTION PROJECT ESCROW. On or before the Closing Date Sellers
shall deposit pursuant to a Construction Project Escrow Agreement substantially
in the form of APPENDIX 6.1.C (the "Construction Project Escrow Agreement") the
aggregate remaining unpaid sums due under the Construction Contract, limited as
provided in Section 6.1.b (the "Construction Project Escrow").
6.2. DISCLAIMER OF WARRANTIES. SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES,
EITHER EXPRESS OR IMPLIED, CONCERNING THE ACQUIRED ASSETS, EXCEPT AS
SPECIFICALLY SET FORTH IN SECTION 7. HEREOF. THE ACQUIRED ASSETS SHALL BE SOLD
BY SELLERS AND PURCHASED BY BUYER IN THEIR CONDITION AT CLOSING "AS IS" AND
"WHERE IS", WITH NO WARRANTY OF MERCHANTABILITY OR HABITABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE, AND ALL SUCH WARRANTIES, WHETHER EXPRESS OR
IMPLIED, ARE HEREBY DISCLAIMED BY SELLERS.
SECTION 7.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer that, as applicable to
it, and except as disclosed on the disclosure schedule attached hereto, which
shall be arranged in paragraphs corresponding to the numbered and lettered
sections of this Section 7. (the "Sellers' Disclosure Schedule"), and which
such Sellers' Disclosure Schedule shall be completed by mutual agreement of the
parties, initialed, and attached prior to Closing, each of the following
statements is true and accurate on the Signing Date and will be true and
accurate in all respects on and as of the Closing Date:
7.1. CORPORATE CAPACITY. Each Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its respective
incorporation, with all requisite corporate power and authority to own,
operate, and lease its respective properties and to carry on its respective
business as now being conducted by it. Each Seller has delivered or made
available to Buyer complete and accurate copies of their respective Articles of
Incorporation and Bylaws, as amended and in effect on the Closing Date.
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7.2. CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
a. The execution and delivery by each Seller of this Agreement and the
other Transaction Documents to which it is a party:
i. Is within the respective corporate power of each Seller
and is not in contravention of the terms of their respective Articles of
Incorporation or Bylaws; and
ii. Will not: (A) result in any breach or acceleration of
maturity of any indenture or Contract to which any Seller is a party or by
which any Seller or any of the Acquired Assets is bound, (B) constitute a
violation of any judgment, decree, or order of any court of competent
jurisdiction applicable to any Seller, and (C) violate any Legal Requirement
applicable to any Seller, the Facilities, the Business, or any of the Acquired
Assets.
b. This Agreement has been duly and validly executed and delivered by
each Seller and, as of the Closing, the other Transaction Documents to be
executed and delivered by each Seller will have been duly and validly executed
and delivered by them. Upon approval of this Agreement by the Board of
Directors of each Seller and by Paracelsus, as the shareholder of each Seller,
this Agreement will constitute, and upon such approval and their execution and
delivery of the other Transaction Documents to be executed and delivered by
each Seller, the other Transaction Documents will constitute, the valid, legal,
and binding obligation of each Seller, as the case may be, enforceable against
each such party in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, reorganization, insolvency, or
other Legal Requirements affecting the enforcement of creditors' rights
generally or the availability of equitable remedies.
7.3. GOVERNMENTAL AUTHORIZATIONS. PCHI has all Governmental Authorizations
relating to the ownership of the Acquired Assets and operation of the Business
as are necessary and required for such ownership and operation, except where
the failure to obtain such Governmental Authorizations would not have a
material adverse effect on the ownership of the Acquired Assets or the
operation of the Business. Upon its completion, SCHEDULE 2.1.E. will contain a
complete description of all material Governmental Authorizations of any
Governmental Body and their respective dates of termination or renewal, held by
PCHI relating to the operation of the Facilities and conduct of the Business,
together with any formal and specific notices or directives received by Sellers
from the Governmental Body responsible for such items, for which noncompliance
with such notice or directive would likely cause the revocation, suspension or
diminution in term for such item, all of which are, to the best of Sellers'
Knowledge, in good standing.
7.4. SCHEDULED CONTRACTS. SCHEDULE 2.1.D. lists all Contracts to which PCHI is
a party involving obligations relating to the Business (the "Scheduled
Contracts"). Sellers have delivered or made available to Buyer true and correct
copies of all Scheduled Contracts. All of the Scheduled Contracts which Buyer
has agreed to assume pursuant to this Agreement are valid and binding
obligations of the parties thereto, are in full force and effect, and are
enforceable against the parties thereto in accordance with their respective
terms. To the best of Seller's Knowledge, neither PCHI nor any of the other
parties to those Scheduled Contracts which Buyer has agreed to assume pursuant
to the this Agreement (i) are in default under the terms of such Scheduled
Contracts, or (ii) consider PCHI to be in default thereunder. To the best of
Seller's Knowledge, no party to any of the Scheduled Contracts which Buyer has
agreed to assume pursuant to this Agreement intends to terminate or adversely
modify its agreement with respect thereto, or adversely change the volume of
business done thereunder.
7.5. SCHEDULED LEASES. SCHEDULE 2.1.D. lists all personal property leases to
which PCHI is a party
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relating to the Business and SCHEDULE 2.1.A. lists all leases to which PCHI is
a party relating to the Business involving rental of real property by PCHI as
lessor, lessee, sublessor, or sublessee (the leases disclosed in SCHEDULE
2.1.D. AND SCHEDULE 2.1.A. collectively the "Scheduled Leases"). Sellers have
delivered or made available to Buyer true and correct copies of all Scheduled
Leases. All of the Scheduled Leases which Buyer has agreed to assume pursuant
to this Agreement 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. To the best of Seller's Knowledge, no event has
occurred including, but not limited to, the execution, delivery and performance
of this Agreement and the consummation of the Transaction which (whether with
or without notice, lapse of time or both) would constitute a default
thereunder. To the best of Seller's Knowledge, neither PCHI nor any of the
other parties to any of those Scheduled Leases which Buyer has agreed to assume
pursuant to this Agreement (i) are in default under the terms of any such
Scheduled Lease, or (ii) considers PCHI to be in default thereunder. PCHI has
not, as lessor under any such Scheduled Lease, accepted prepaid rent more than
one month in advance or waived any material rights or obligations thereunder.
No consents or approvals are required for PCHI to assign to Buyer as
contemplated by this Agreement the Scheduled Leases to which it is a party,
except as disclosed in Section 7.5. of Sellers' Disclosure Schedule.
7.6. TITLE TO ACQUIRED ASSETS AND RELATED MATTERS.
a. On the Closing Date, each Seller, as their interests appear, will
hold and convey to Buyer good, valid, and marketable title to the Acquired
Assets (other than the Real Property), and good and indefeasible title to the
Real Property, free and clear of all Liens, except as otherwise provided in
Section 2.2. or this Section 7.6. hereof.
b. On the Closing Date, no Real Property owned by any Seller and
relating to the Acquired Assets or designated in SCHEDULE 2.1.A. as a Real
Property interest for which a Title Policy (as defined in Section 9.9.a.
hereof) shall be obtained, will be subject to any recorded mortgages, deeds of
trust, liens, encumbrances, easements, rights of way, claims, charges,
equities, covenants, conditions, restrictions, reservations, limitations or
other matters affecting such Real Property or Real Property interest, except
for: (i) those matters set forth in SECTION 7.6.B. OF SELLERS' DISCLOSURE
SCHEDULE; (ii) unrecorded leases as set forth in SCHEDULE 2.1.D.; (iii) Liens
for current Taxes; (iv) zoning and building laws, ordinances, resolutions, and
regulations; (v) those matters set forth in the standard Schedule B, Part 1,
Exceptions from Coverage shown on the Title Commitments (as defined in Section
9.9.a. hereof), as the same may be revised following receipt of the Survey (as
defined in Section 9.10.a. hereof), but only to the extent that Seller has not
created or caused any such matters, or has no Knowledge of any such matters, or
have otherwise disclosed them in this Agreement; (vi) rights-of-way, building
or use restrictions, exceptions, variances, reservations or other limitations
or matters affecting title to or use of the Real Property (excluding any
variance or nonconforming use known to Seller but not disclosed in this
Agreement) which do not materially impair the value of the Real Property or
materially interfere with or impair the current use of the Real Property or any
portion thereof or for which title insurance coverage is being provided to
Buyer; (vii) such easements, rights-of-way, covenants, conditions,
restrictions, reservations, limitations and other encumbrances as do not
materially interfere with or impair the current use of the Real Property or any
portion thereof or materially impair the value of the Real Property, but only
to the extent that Seller has not created or caused any such matters, or has no
Knowledge of any such matters, or have disclosed them in this Agreement, or to
the extent they are disclosed as special exceptions in the Title Commitments
provided to Buyer; and (viii) 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 the Real
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Property, are not caused by Seller after the date of this Agreement, and as do
not: (A) materially interfere with or impair the current use and operation or
any reasonably foreseeable future development or operation of the Real Property
or any part thereof; (B) materially impair Seller's title to the Real Property,
or the value of the Real Property, any portion thereof or Seller's interest
therein; (C) prevent Seller from having good and indefeasible title to the Real
Property; or (D) materially limit the scope or coverage of the Title Policies
to be issued to Buyer (collectively, the "Permitted Liens").
c. SCHEDULE 2.1.a. and SCHEDULE 2.1.d. include true and accurate
descriptions of all Real Property owned or leased by any Seller and all
tangible personal property (excluding cash, property with an aggregate value in
a non-material amount, and the other Excluded Assets) leased by Seller, in
either case relating to the Acquired Assets. No Seller is aware of or has
received any notice from any Governmental Body of any violation of any Legal
Requirements in respect of such property or structures or their use by such
Seller. The Acquired Assets consisting of owned personal property are subject
to no Liens, except the security interests of record set forth in SECTION
7.6.C. OF SELLERS' DISCLOSURE SCHEDULE, which schedule is a copy of Uniform
Commercial Code ("UCC") search reports duly obtained by Sellers in the last
thirty (30) days and which search reports show security interests of record
relating to such Acquired Assets in the State of California.
d. SECTION 7.6.d. OF SELLERS' DISCLOSURE SCHEDULE describes all
construction work, if any, which any Seller or its predecessors has contracted
for and which is presently in progress relating to any of the Facilities, and
also contains a good faith estimate, as of the date of this Agreement, of the
cost to complete each such project.
7.7. EMPLOYEE BENEFIT PLANS. SECTION 7.7. OF SELLERS' DISCLOSURE SCHEDULE lists
any "employee benefit plans" that are described in ERISA that cover one or more
employees of PCHI and that are sponsored or contributed to by PCHI (other than
any defined contribution "employee pension benefit plan" as defined in ERISA,
that does not require any contribution by PCHI, 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 PCHI).
7.8. LITIGATION AND RELATED MATTERS. There is no Proceeding before any
Governmental Body or before any private arbitration tribunal pending, or to the
best of Seller's Knowledge, threatened against any Seller which materially
affects the Acquired Assets or the Business. No Seller is subject to any
currently existing Proceeding by any Governmental Body which materially affects
the Acquired Assets or the Business.
7.9. PCHI EMPLOYEES.
a. SECTION 7.9.a. OF SELLERS' DISCLOSURE SCHEDULE contains a list of
all of PCHI employees as of February 28, 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, any severance arrangements with such
employees. Since February 28, 1998 there has not been any increase in the
compensation payable or to become payable by PCHI to any of their officers,
employees or agents, or any bonus payment or arrangement made to or with any
such person, nor has there been any change in PCHI's personnel policies, except
(in either case) in the Ordinary Course of Business by PCHI in accordance with
established personnel policies.
b. None of PCHI's employees are employed by PCHI pursuant to an
employment agreement. SECTION 7.9.b. OF SELLERS' DISCLOSURE SCHEDULE includes a
list of all employees of PCHI (other than "part-
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time employees" as such term is defined in the Worker Adjustment and Retraining
Notification Act, hereinafter referred to as the "WARN Act") who have been
terminated or laid-off or whose employment with PCHI otherwise has ceased since
December 31, 1998.
7.10. LABOR MATTERS. Except for the Union Contract, PCHI does not have any
collective bargaining agreements with any labor union and there are no current
negotiations with a labor union. PCHI is in compliance with all applicable
Legal Requirements 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 Acquired Assets. PCHI has not received
any notice of an unfair labor practice complaint against PCHI pending before
the National Labor Relations Board. There are no labor strikes, disputes,
arbitrations, slowdowns or stoppages actually pending against or affecting
PCHI, nor has PCHI received notice of any threatened labor strike, dispute,
arbitration, slowdown, or stoppage. No grievances which might have an adverse
effect on PCHI or any such arbitration proceeding arising out of or under
collective bargaining agreements is pending and PCHI has no Knowledge that any
claim therefor exists. PCHI has not experienced any employee strikes since the
date it acquired the Business. PCHI will advise Buyer of any such labor dispute
which shall arise before the Closing.
7.11. NO CONSENTS. No Consent, filing, or registration with or from any
Governmental Body or any other Person is or will be required in connection with
either Seller's execution, delivery, and performance under this Agreement or
the other Transaction Documents to which each is a party.
7.12. TAXES. Each Seller has filed all Tax Returns required by applicable Legal
Requirements to be filed by it and has paid all Taxes 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 Taxes not yet
due) upon any of the Acquired Assets.
7.13. BROKERAGE. Except as set forth in SECTION 7.13. OF SELLERS' DISCLOSURE
SCHEDULE, Sellers have not engaged any financial advisor, broker or similar
entity in respect of the Transaction which may be entitled to a fee or
commission in connection with such Transaction.
7.14. ENVIRONMENTAL. Except as disclosed in SECTION 7.14 OF SELLERS' DISCLOSURE
SCHEDULE, or the Environmental Study:
a. Sellers are currently, and at all times have been, in compliance
with all Environmental Laws (as hereinafter defined) except where failure to
comply with such Environmental Laws would not have a material adverse effect on
the Facilities;
b. Sellers have all permits, authorizations or other approvals
required under environmental laws to operate the Assets and the Real Property,
and are in compliance with all such permits, authorizations and approvals
except where failure to comply with such permits, authorizations or approvals,
individually or in the aggregate, would not have a material adverse effect on
the Facilities;
c. Sellers have not generated, handled, stored, disposed of or
released any Hazardous Substance (as hereinafter defined) on any of the Real
Property, except in compliance with applicable Environmental Laws except where
failure to comply with such Environmental Laws, individually or in the
aggregate, would not have a material adverse effect on the Facilities;
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d. There are no polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts or other equipment that contains dielectric fluid
containing PCBs at levels in excess of fifty parts per million (50 ppm)
present, constructed, placed, deposited, stored, disposed of or located on the
Real Property;
e. There are currently no aboveground or underground storage tanks for
the storage of Hazardous Substances located on the Real Property, and, to the
best knowledge of Sellers, there have never been any such aboveground or
underground storage tanks located on the Real Property;
f. Sellers have not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that Sellers are not in full compliance with Environmental Laws.
There is no Environmental Claim (as defined below) pending or threatened
against any of the Sellers or with respect to the Facilities.
g. There are no present or, to the best of Sellers' knowledge, past
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the generation, storage, release, emission, discharge,
presence or disposal of any Hazardous Substance, that could form the basis of
any Environmental Claim against Sellers under any Environmental Law in effect
at any time at or prior to the Closing.
h. The inclusion of any item disclosed in SECTION 7.17.OF SELLERS'
DISCLOSURE SCHEDULE and the inclusion of the reference to the Environmental
Study hereinabove do not constitute admissions by Sellers or Buyer that any
matters disclosed in such Schedule or Environmental Study constitutes a
violation of any Environmental Law.
The following terms shall have the following meanings as used herein:
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Substances at any location, whether or not owned
or operated by the Sellers or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means the federal, state (including specifically,
but not by way of limitation, the State of California), and local
environmental, health or safety laws, regulations, ordinances, rules and
policies and common law in effect on the date hereof and the Closing Date
relating to the generation, use, refinement, handling, treatment, removal,
storage, production, manufacture, transportation, disposal, arranging for
disposal, emissions, discharges, releases or threatened releases of Hazardous
Substances, or otherwise relating to protection of human health, worker safety
or the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), as the same may be amended or
modified to the date hereof and the Closing Date, including, without
limitation, the statutes and regulations listed below:
Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901, et seq.
Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42
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U.S.C. Section 9601, et seq.
Federal Clean Air Act, 42 U.S.C. Section 7401, et seq.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977,
33 U.S.C. Section 1251, et seq.
Federal Insecticide, Fungicide, and Rodenticide Act, Federal Pesticide
Act of 1978, 7 U.S.C. Section 136, et seq.
Federal Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq.
Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.
Federal Occupational Safety & Health Act of 1970, 29 U.S.C. Section
651, et seq.
Medical Waste Tracking Act of 1988, 42 U.S.C. Section 6992, et seq.
Marine Protection Research & Sanctuaries Act of 1972, 33 U.S.C.
Section 1401, et seq.
The Act to Prevent Pollution from Ships, 33 U.S.C. Section 1901, et
seq.
California Environmental Quality Act of 1970, (CEQA), California
Government Code, Section 65914.
California Hazardous Waste Control Law, California Health & Safety
Code, Section 25100 et seq.
Nuclear Regulatory Commission Regulations, 10 C.F.R. Part 20 and 10
C.F.R. Part 61.
Public Health Service Regulations, 42 C.F.R. Part 72.
Food & Drug Administration Regulations, 21 C.F.R. Parts 58 and 211.
U.S. Department of Transportation Regulations, 49 C.F.R. Parts
171-179.
U.S. Department of Agricultural Regulations, 9 C.F.R. Parts 50-56.
U.S. Postal Service Regulations, 39 Part III.
"Hazardous Substances" means any toxic or hazardous waste, pollutants
or substances, explosives, radioactive materials, or Medical Waste (as defined
below), including, without limitation, friable asbestos, asbestos-containing
material, PCBs, petroleum products and byproducts, substances defined or listed
as "hazardous substance", "toxic substance", "toxic pollutant", or similarly
identified substance or mixture, in or pursuant to any Environmental Law.
"Medical Waste" means any substance, pollutant, material, or
contaminant listed or regulated under the Medical Waste Tracking Act of 1988,
42 U.S.C. Section 6992, et seq., 49 C.F.R. Section 173, 186, and/or the
California Waste Management Act California Health & Safety Code, Section 117600
et seq.
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7.15. FINANCIAL STATEMENTS. Attached as SECTION 7.15 . OF SELLERS' DISCLOSURE
SCHEDULE is a true, correct, and complete copy of the unaudited income
statement of each Facility for the twelve months ended December 31, 1998 (the
"Income Statements"), and the unaudited balance sheet of each Facility (the
"Balance Sheets") (the Income Statements and the Balance Sheets are referred to
herein collectively as the "Financial Statements"). To the best of Sellers'
knowledge the Financial Statements have been prepared from and are in
substantial accordance with the books and records of PCHI, and fairly present
in all material respects the operations of the Facilities 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
the Facilities.
7.16. CENSUS REPORT. Attached as SECTION 7.16 . OF SELLERS' DISCLOSURE SCHEDULE
is a true copy of the patient census report for the Facilities as of January
31, 1999.
SECTION 8.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that, except as disclosed on
the disclosure schedule attached hereto, which shall be arranged in paragraphs
corresponding to the numbered and lettered sections of this Section 8. (the
"Buyer's Disclosure Schedule"), and which such Buyer's Disclosure Schedule
shall be completed by mutual agreement of the parties, initialed, and attached
prior to Closing, each of the following statements is true and accurate on the
date of this Agreement and will be true and accurate in all respects on and as
of the Closing Date:
8.1. CORPORATE CAPACITY. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
with all requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business as now being conducted by it. Buyer has
delivered or made available to Sellers a complete and correct copy of its
Articles of Incorporation and Bylaws, as amended and in effect on the Closing
Date.
8.2. CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
a. The execution and delivery by Buyer of this Agreement and the other
Transaction Documents to which it is a party:
i. Is within the corporate power of Buyer and is not in
contravention of the terms of its Articles of Incorporation or Bylaws; and
ii. Will not: (A) result in any breach or acceleration of
maturity of any Contract or indenture to which Buyer is a party, (B) constitute
a violation of any judgment, decree, or order of any court of competent
jurisdiction applicable to Buyer, and (C) violate any Legal Requirement
applicable to Buyer.
b. This Agreement has been duly and validly executed and delivered by
Buyer and, as of the Closing, the other Transaction Documents to be executed
and delivered by Buyer will have been duly and validly executed and delivered
by it. Upon approval of this Agreement by the Board of Directors of Buyer, this
Agreement will constitute, and upon such approval and their execution and
delivery, of the other Transaction Documents to be executed and delivered by
Buyer the other Transaction Documents will
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constitute, the valid, legal, and binding obligation of Buyer, enforceable
against such party 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.
8.3. NO CONSENTS. No Consent, filing, or registration with or from any
Governmental Body or any other Person is or will be required in connection with
Buyer's execution, delivery, and performance under this Agreement or the other
Transaction Documents to which it is a party.
8.4. LITIGATION AND RELATED MATTERS. There is no Proceeding before any
Governmental Body or before any private arbitration tribunal pending, or to the
best of Buyer's Knowledge, threatened against Buyer which materially affects
its assets or properties. Buyer is not subject to any currently existing
Proceeding by any Governmental Body which materially affects its assets or
properties.
8.5. NO SALES TAX DUE. At Closing Buyer will possesses all sales tax permits
required for the resale of the inventory purchased hereunder. The inventory
purchased hereunder, if any, is not acquired for consumption or use and will be
resold in the Ordinary Course of Business of Buyer.
8.6. BROKERAGE. Buyer has not engaged any financial advisor, broker or similar
entity in respect of the Transaction which may be entitled to a fee or
commission in connection with such Transaction.
8.7. NO MISLEADING STATEMENTS. No representation or warranty by Buyer contained
in this Agreement, and no statement contained in any schedule (including any
supplement or amendment thereto) and the Transaction Documents to be delivered
at the Closing by or on behalf of Buyer to Sellers or any of its
Representatives in connection with the Transaction, contains or will contain
any untrue statement of a material fact, or, to the best Knowledge of Buyer,
omit 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
Sellers or, are hereafter furnished, provided or made available to Sellers, are
or shall be, to the best of Buyer's Knowledge, true, correct, and complete.
SECTION 9.
RIGHTS AND OBLIGATIONS PENDING CLOSING
9.1. CONFIDENTIAL INFORMATION.
a. Prior to consummation of the Transaction or termination of this
Agreement, the parties to will be providing one another with or have access to
information about each other and the Facilities, Acquired Assets, and the
Business which is protected, secret, non-public, or proprietary in nature (the
"Confidential Information"). Each party agrees to hold confidential, to
protect, and not to disclose, except on a "need-to-know" basis to its
Representatives, all Confidential Information provided to it by another party
to this Agreement; provided, however, that for purposes of this section,
Confidential Information shall not include information that, without violating
this Agreement, (i) was known to such party prior to the disclosure by another
party, (ii) is or becomes generally available to the public other than by
violating this Agreement, or (iii) otherwise becomes lawfully available to a
party to this Agreement on a nonconfidential basis from a third party who is
not, to the best of the Knowledge of such party to this Agreement, under an
obligation of confidence to the other party to this Agreement. If this
Agreement is terminated prior to
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consummation of the Transaction, then each party shall return all documents and
other material, whether or not confidential, provided to it pursuant to this
Agreement by or on behalf of the other party to this Agreement. The foregoing
obligations of confidentiality and nondisclosure shall be in effect for a
period of three (3) years beyond such termination. During such period, no party
shall use any of the Confidential Information received from a party to the
detriment of any other party.
b. In the event that a party, or anyone to whom it supplies the
Confidential Information, receives a request to disclose all or any part of the
Confidential Information under the terms of a subpoena or order issued by a
Governmental Body, the party agrees (i) to notify the other party immediately
of the existence, terms, and circumstances surrounding such request, (ii) to
consult with the other party on the advisability of taking legally available
steps to resist or narrow such request, and (iii) if disclosure of such
Confidential Information is required to prevent a party from being held in
contempt or subject to other penalty, to furnish only such portion of the
Confidential Information as the disclosing party is legally compelled to
disclose and to exercise its best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to the disclosed
Confidential Information.
9.2. ACCESS AND INVESTIGATION. During the Closing Period, Seller will afford
Buyer and its Representatives, at mutually agreeable times upon at least
forty-eight (48) hours notice, access to Seller's personnel, properties,
Contracts, books and records, and other documents and data relating to the
Facilities, Acquired Assets, and the Business, (ii) furnish Buyer and its
Representatives with copies of all such Contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (iii) furnish
Buyer and its Representatives with such additional related financial,
operating, and other data and information as Buyer or its Representatives may
reasonably request.
9.3. OPERATION OF FACILITIES; CONDUCT OF BUSINESS. During the Closing Period,
PCHI will, subject to the exercise of its reasonable business judgment:
a. Operate the Facilities and conduct the Business only in the
Ordinary Course of Business;
b. Use commercially reasonable efforts to preserve intact the current
business organization, keep available the services of the current employees,
and maintain the relations and goodwill with suppliers, customers, landlords,
creditors, employees, agents, and others currently having business
relationships relating to the Business with PCHI;
c. Perform in all material respects its obligations under the Assigned
Contracts and, except in the Ordinary Course of Business, not amend or cancel
any Assigned Contracts;
d. Keep in full force and effect current insurance policies or other
comparable insurance coverage; and
e. Within a reasonable period of time prior to Closing, permit Buyer
to make offers to any of the personnel who work at the Facilities or otherwise
in the Business for employment by Buyer subsequent to Closing, which personnel
shall be allowed by PCHI to accept or reject such offers without penalty (for
the purpose of this subsection, the term "penalty" shall not be interpreted to
refer to the availability, or lack of availability, of any severance benefit).
9.4. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, during the Closing
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Period, PCHI will not, without the prior Consent of Buyer, take any affirmative
action, or fail to take any commercially reasonable action within its control,
as a result of which any of the changes or events listed in Section 9.3. hereof
is likely to occur or fail to occur, as the case may be.
9.5. REQUIRED APPROVALS; GOVERNMENTAL AUTHORIZATIONS. Seller shall assist and
cooperate with Buyer and its Representatives in (i) making all filings that
Buyer elects to make or is required by Legal Requirements to be make in order
to consummate the Transaction, and (ii) obtaining all Governmental
Authorizations and Consents from any other Persons which are conditions
precedent to the consummation of the Transaction or otherwise necessary or
appropriate with respect to this Transaction. Buyer acknowledges that, except
as provided in this section, Sellers shall have no responsibility for obtaining
any Governmental Authorizations to or of the transfer of any of the Assigned
Licenses and Permits or for obtaining any necessary Consents to the assignment
of the Assigned Contracts. Notwithstanding, Buyer agrees to use its reasonable
best efforts to secure such Governmental Authorizations and Consents as soon as
practicable and prior to the Closing.
9.6. BEST EFFORTS. During the Closing Period, each of Sellers and Buyer will
use their respective best efforts to cause the conditions in Section 10. and
Section 11. hereof to be satisfied.
9.7. ENVIRONMENTAL STUDY.
a. OBLIGATION TO DELIVER. Seller has delivered (i) a Phase I
Environmental Site Assessment of University Convalescent Hospital, 2122 Santa
Cruz Avenue, Menlo Park, California 94025 (the "University Report"), (ii) a
Phase I Environmental Site Assessment of Oak Park Convalescent Hospital 1625
Oak Park Boulevard, Pleasant Hill, California 94523 (the "Oak Park Report"),
and (iii) a Phase I Environmental Site Assessment of Lafayette Convalescent
Hospital 1010 First Street, Lafayette, California 94549 (the "Lafayette
Report"), in each case prepared by Environmental Management Group, Inc.
("EMG"), EMG Corporate Center, 11011 McCormick Road, Baltimore, Maryland 21031
(the University Report, the Oak Park Report and the Lafayette Report
collectively the "Environmental Study") to Buyer.
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after the Signing Date to either
approve or reject the environmental condition of the Facilities, Acquired
Assets, and the Business. Buyer shall not reject the environmental condition of
any portion of the Facilities, Acquired Assets, or the Business, unless the
cost to cure any objections shall reasonably exceed in the aggregate
$50,000.00. Buyer shall give Sellers notice thereof within ten (10) days after
receiving the Environmental Study (the "Approval Period") and, if within
fifteen (15) days after receiving such notice ("Cure Period"), Sellers do not
cure, or commence to cure for items reasonably requiring more than 15 days to
cure, the objection to the environmental conditions that exceed in the
aggregate $50,000.00, then Buyer may, in its sole discretion, terminate this
Agreement under Section 13.1.a. hereof by giving notice thereof to Sellers
within two (2) Business Days after the end of the Cure Period. In the event the
timing of the cure procedure set forth in this subsection conflicts with the
Closing Date, in that Sellers cannot reasonably cure the objection to the
environmental condition within the Cure Period provided, but are making
diligent efforts toward that end, the Closing Date shall be automatically
extended by a reasonable number of days to permit Sellers to complete their
cure of Buyer's objection to the environmental condition. Any item relating to
the environmental condition of the Facilities, Acquired Assets, or the Business
to which Buyer does not object in writing within the Approval Period provided
herein for making
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such objections is deemed to be approved.
9.8. TITLE COMMITMENT; TITLE POLICY.
a. OBLIGATION TO DELIVER.
i. TITLE COMMITMENT. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, (i) for each parcel of Real Property that is designated in
SCHEDULE 2.1.A. as owned by PREC and for which a title policy will be delivered
(the "Owned Real Property"), and (ii) for each parcel of Real Property that is
designated in SCHEDULE 2.1.A. as leased by a Seller and for which a title
policy will be delivered (the "Leased Real Property"), one or more binding
commitments (collectively, the "Title Commitment") for the issuance of one or
more ALTA Owner or Leasehold, as the case may be, Policies of Title Insurance
(10-17-92) Form B with extended coverage, in an aggregate amount equal to
$5,350,000 (collectively, the "Title Policy"), showing in either PREC or PCHI,
as the case may be, good and indefeasible fee simple title to the Owned Real
Property, and good and indefeasible leasehold title to the Leased Real
Property, in each case subject only to the Permitted Liens (as defined in
Section 7.6.b. hereof). In the event more than one Title Policy is issued, each
Title Policy shall be in the amount requested by Buyer, subject to the
preceding limitation on the aggregate amount thereof.
ii. TITLE POLICY. The Title Policy shall be issued by Chicago
Title Company, 388 Market Street, Suite 1300, San Francisco, California 94111
(the "Title Company"), and shall insure good and indefeasible fee simple or
leasehold title, as the case may be, to the Real Property covered by the Title
Commitment in Buyer, subject only to the Permitted Liens. The Title Policy for
the Real Property for which an "as built" survey is required pursuant to
Section 9.10.a.i. hereof shall contain an endorsement insuring over all printed
or typed general exceptions for which insurance may be obtained by the delivery
of such surveys. The Title Policy shall contain a zoning endorsement and such
other endorsements as required hereby. Any additional endorsements to the Title
Policy, and any Mortgagee's Policy of Title Insurance for any Lender of Buyer,
shall be at Buyer's sole cost and expense.
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after receiving the Title Commitment
to either approve or reject the title to the Real Property. If Buyer rejects
title to any portion of the Real Property, it shall give Sellers notice thereof
within ten (10) days after receiving the Title Commitment and, if within
fifteen (15) days after receiving such notice, Sellers do not cure, or commence
to cure for items reasonably requiring more than 15 days to cure, the title
objection, then Buyer may, in its sole discretion, terminate this Agreement
under Section 13.1.a. hereof by giving notice thereof to Sellers within two (2)
Business Days after the end of such cure period. In the event the timing of the
cure procedure set forth in this subsection conflicts with the Closing Date, in
that Sellers cannot reasonably cure the title objection within the period
provided, but are making diligent efforts toward that end, the Closing Date
shall be automatically extended by a reasonable number of days to permit
Sellers to complete their cure of Buyer's title objection. Any title item set
forth on the Title Commitment which Buyer does not object to in writing within
the period provided herein for making such objections is deemed to be approved.
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9.9. SURVEY.
a. OBLIGATION TO DELIVER.
i. AS-BUILT SURVEY. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, an "as-built" survey for each parcel of Real Property that is
designated in Schedule 2.1.a. as Real Property for which an as-built survey
shall be obtained (the "As-Built Survey"). The As-Built Survey shall be
prepared by a surveyor licensed in the State of California and in accordance
with ALTA-ASCM standards for Class A urban-commercial surveys, and dated as of
a date within two hundred and forty (240) days prior to the Closing, and shall
be certified in favor of Buyer and the Title Company, and shall contain
sufficient detail to provide the Title Company the basis for issuing the Title
Policy without survey exceptions.
ii. BOUNDARY SURVEY. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, a "boundary" survey for each parcel of Real Property that is
designated in Schedule 2.1.a. as Real Property for which a boundary survey
shall be obtained (the "Boundary Survey"). The Boundary Survey shall be
prepared by a surveyor licensed in the State of California, and dated as of a
date within two hundred and forty (240) days prior to the Closing, and shall be
certified in favor of Buyer and the Title Company, and shall contain sufficient
detail to provide the Title Company the basis for issuing the Title Policy
without survey exceptions. The As-Built Survey and Boundary Survey are also
sometimes referred to herein collectively as, the "Survey".
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after receiving the Survey to approve
or reject the matters set forth thereon. If Buyer rejects the Survey, it shall
give Sellers notice thereof within ten (10) days after receiving the Survey,
and if within fifteen (15) days after receiving such notice, Sellers do not
cure to Buyer's reasonable satisfaction, or commence to cure for items
reasonably requiring more than 15 days to cure, the objection to the Survey,
then Buyer may, in its sole discretion, terminate this Agreement under Section
13.1.a. hereof by giving notice thereof to Sellers within two (2) Business Days
after the end of such cure period. In the event the timing of the cure
procedure set forth in this subsection conflicts with the Closing Date, in that
Sellers cannot reasonably cure the objection to the Survey within the period
provided, but are making diligent efforts toward that end, the Closing Date
shall be automatically extended by a reasonable number of days to permit
Sellers to complete their cure of Buyer's objection to the Survey. Buyer shall
be deemed to have accepted the matters set forth on the Survey to the extent
Buyer does not object thereto within the period provided herein for making such
objections.
9.10. CASUALTY. If, prior to the Closing, the Facilities or any other Acquired
Assets sustain damage or destruction by fire or other casualty that Sellers do
not repair prior to Closing, the following provisions shall apply:
a. If (i) such damage or destruction results in any of the Owned
Facilities being unusable for their current purpose, or (ii) the cost to repair
such damage or destruction, or to replace such damaged or destroyed Facilities
or other Acquired Assets (collectively, the "Cost to Repair"), is greater than
$250,000 and Seller does not have insurance coverage therefor, Buyer may elect
either to (1) terminate this Agreement by notice thereof to Sellers and all
obligations of the parties hereunder, or (2) consummate the Transaction and
receive as a credit against 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 the preceding Section 9.10.a. does not apply, then:
(i) If Sellers have insurance coverage for the Cost to Repair
any such damage or destruction, Buyer may elect either to (1) receive from
Sellers all of the proceeds of such insurance paid or payable and
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pay to Sellers the full amount of the Purchase Price, or (2) allow Sellers to
retain all such insurance proceeds subject to a reduction of the Purchase Price
in the amount thereof; and
(ii) If, and to the extent that, the Cost to Repair any such
damage or destruction is not covered by insurance, including, without
limitation costs that are subject to a deductible or self-insured retention,
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.
9.11. CONDEMNATION. If, prior to Closing, any part of the Acquired Assets are
condemned, or become subject to any pending or threatened condemnation by any
Governmental Body, Buyer, at its option, may:
a. Close the Transaction, in which event all of the condemnation
proceeds shall be payable to Buyer, and Sellers shall assign all claims
therefor and all right, title and interest therein to Buyer; or
b. Elect to terminate this Agreement under Section 13.1.a. hereof by
giving notice thereof to Sellers within three (3) Business Days after Buyer
receives notification of such condemnation.
9.12. BULK SALES COMPLIANCE. Buyer hereby waives compliance by Sellers with the
provisions of Bulk Sales, Bulk Transfer, Fraudulent Transfer or Conveyance, or
similar Legal Requirements, if any, applicable to this Transaction, and Sellers
agree to pay and discharge when due all claims of creditors which could be
asserted against Buyer by reason of such non-compliance to the extent any such
liabilities are not specifically assumed by Buyer hereunder. Notwithstanding
the preceding sentence, in its sole discretion, Sellers may elect to satisfy
any such Legal Requirements, in which case the satisfaction thereof shall be
added as a condition to Sellers' obligations to close under Section 10. hereof.
9.13. NOTIFICATION. During the Closing Period, Seller, on the one hand, and
Buyer, on the other hand, will promptly notify the other party in writing if
Seller, on the one hand, and Buyer, on the other hand, becomes aware of any
fact or condition that causes or constitutes a breach, (i) on the one hand, of
any of the Seller's representations and warranties as of the date of this
Agreement, or if the Seller becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition, or (ii) on the
other hand, of any of the Buyer's representations and warranties as of the date
of this Agreement, or if Buyer becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Sellers' Disclosure Schedule or the
Buyer's Disclosure Schedule, as the case may be, if such disclosure schedule
were dated the date of the occurrence or discovery of any such fact or
condition, Seller, on the one hand, and Buyer, on the other hand, will promptly
deliver to the other party a supplement to the applicable disclosure schedule
specifying such change, any of which such supplement is subject to the approval
of Seller in its sole discretion, on the one hand, or Buyer, in its sole
discretion, on the other hand. During the same period, (i) Seller will promptly
notify Buyer of the occurrence of any breach of any covenant of Seller in this
Section 9. or of the occurrence of any event that may make the satisfaction of
the conditions in Section 11. hereof impossible or unlikely, and (ii) Buyer
will promptly notify Seller of the occurrence of any breach of any covenant of
Buyer in this Section 9. or of the occurrence of any event that may make the
satisfaction of the conditions in Section 10. hereof impossible or unlikely.
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9.14. EMPLOYMENT OF PCHI'S EMPLOYEES; ADDITIONAL EMPLOYEE MATTERS.
a. (i) Prior to Closing, Buyer shall offer, effective as of the
Closing Date, employment to all employees of PCHI employed at University who
are subject to the Union Contract (including for this purpose, any employee of
PCHI who elects to be treated as a retiree of PCHI as of the Closing Date for
the purpose of qualifying for certain employee benefits). Each offer of
employment shall be for no less than the position, wage or salary, and other
benefits required by, and otherwise in accordance with, the Union Contract.
Buyer shall also offer employment to substantially all of the other current
employees of PCHI, on terms and conditions acceptable to Buyer. All employees
who accept Buyer's offer of employment shall be referred herein to collectively
as, the "Hired Employees".
(ii) Any individuals offered employment by Buyer shall be
considered "newly hired", and Buyer shall have no liability whatsoever with
respect to any matter relating to the employment of such persons by PCHI prior
to the Closing Date. The provisions of this section shall inure solely to the
benefit of the parties hereto and no third party (including, without
limitation, any employee of PCHI) shall be permitted to rely hereon as a third
party beneficiary or otherwise.
(iii) As to each Hired Employee, Buyer shall also provide
employee welfare benefits and paid time-off that are commensurate with those of
other employees of Buyer having similar positions and as otherwise required by
the Union Contract. Buyer agrees that, for the purpose of determining welfare
benefits coverage and other related matters (including eligibility and
participation, but not vesting or benefit accrual, under any Buyer pension
benefit plan), each Hired Employee will be considered to have commenced
employment with Buyer on the date such Hired Employee commenced uninterrupted
employment with PCHI. Notwithstanding the preceding sentence, Buyer shall not
be obligated to provide Hired Employees any accrued sick or vacation days upon
hiring them (except as provided otherwise in Section 9.14.d. below). For the
purpose of determining vesting and benefit accrual under all Buyer pension
benefit plans, each Hired Employee will be considered to have commenced
employment with Buyer on the Employment Commencement Date (as hereinafter
defined). Health benefits coverage provided by Buyer for Hired Employees (and
any dependents thereof) shall apply to covered expenses incurred on and after
the Employment Commencement Date, and Buyer agrees to waive any limitations for
pre-existing conditions with respect to any conditions affecting any Hired
Employees (and any dependents thereof); subject, however, to the following
limitations: (x) the pre-existing condition provisions of PCHI's health benefit
plans shall apply in lieu of the pre-existing condition provisions of Buyer's
plans to all Hired Employees (and their dependents) who are eligible for
benefits under PCHI's health benefits plans as of the Closing Date but who are
subject to pre-existing condition limitations as of the Closing Date, and (y)
the pre-existing conditions limitations under Buyer's medical benefits plans
shall apply to any Hired Employee (and his or her dependents) who is not
eligible for benefits under PCHI's health benefits plans as of the Closing
Date, and any such Hired Employee shall be treated as having been hired by
Buyer on the date such employee commenced employment with PCHI for purposes of
applying such pre-existing condition limitations to such Hired Employee (and
his or her dependents).
(iv) As used herein, the term "Employee Commencement Date"
shall mean the day immediately following the Closing Date; provided, however,
that with respect to any employee who is in paid or unpaid inactive status as
of the Closing Date and to whom Buyer offers employment pursuant to this
Section 9.14.a., the term "Employee Commencement Date" shall mean such
employee's first day of employment with Buyer.
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b. Subject to the accuracy of Seller's representations and warranties
in Section 7.9., (i) on and after the Closing Date, Buyer shall be responsible
for any and all notices required with respect to Buyer's termination of
employees, and (ii) any liabilities or obligations arising under the WARN Act
on or after the Closing Date shall be those of Buyer and not Seller.
c. After the Closing, Buyer will, upon reasonable request, give
assistance to human resources personnel of PCHI and Paracelsus in the
post-closing administration of the employee benefit plans of PCHI or Paracelsus
as they apply to Hired Employees. For this purpose, "assistance" includes
reasonable access to the pre-Closing personnel records of Hired Employees.
d. Seller agrees that it shall pay the accrued liability of PCHI for
accrued vacation, holiday, and sick day benefits and related taxes that relate
to the Hired Employees prior to the Employee Commencement Date.
9.15. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with
respect to this Agreement or the Transaction will be issued, if at all, at such
time and in such manner as Sellers determine, in their sole discretion. Unless
consented to by Sellers in advance, required by applicable Legal Requirements
prior to the Closing, or required under the terms of a subpoena or order issued
by a Governmental Body, Buyer shall keep this Agreement strictly confidential
and may not make any disclosure of this Agreement or the Transaction to any
Person. Sellers and Buyer will consult with each other concerning the means by
which PCHI's employees, customers, and suppliers and others having dealings
with PCHI will be informed, if at all, of the Transaction, and Sellers will
have the right to have a Representative present for any such communication.
9.16. CONSENTS TO ASSUMPTION OF LEASES.
a. Seller shall assist and cooperate with Buyer and its
representatives in obtaining, within thirty (30) days from the Signing Date,
(i) the consents by the lessor under a lease of University (the "University
Lease") to the assumption of such lease by Buyer on terms and conditions
reasonably acceptable to Seller and (ii) the release by the lessor of the
University Lease of such lessor's right to purchase the leased property.
b. If Buyer is unable after using all commercially reasonable means,
to obtain the consents required in Section 9.16.a. within the initial thirty
(30) period, then Buyer shall be deemed to have terminated this Agreement under
Section 13.1.a. If upon the expiration of such thirty (30) day period Buyer has
obtained the consent to the assumption of the lease by Buyer but not the
release of the lessor's option to purchase the leased property, then Buyer may
elect prior to the expiration of such initial thirty (30) day period to
terminate this agreement under Section 13.1.a. or upon the failure to make such
election the requirement for the release as a condition to Closing is waived.
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9.17. DELIVERY AND APPROVAL OF SCHEDULES.
a. Seller shall deliver the Schedules called for herein upon, or as
soon as reasonably possible after, execution of this Agreement. Except as
otherwise provided for herein, Buyer shall have five (5) days following receipt
of any Schedule, or any designated portion of Sellers' Disclosure Schedule, to
object to any disclosure thereon. Buyer shall notify Sellers in writing within
seven (7) days of receipt of any Schedule or any portion of Sellers' Disclosure
Schedule, if Buyer objects to any disclosure thereon and shall describe in
detail any such objection. Buyer shall not object to any Assigned Contract that
has commercially reasonable terms and is reasonably necessary to the operations
of any of the Facilities.
b. Seller shall have ten (10) days following receipt of Buyers
objection to any such disclosure, to cure such objection and resubmit such
Schedule or portion thereof. If such amended Schedule or portion thereof is not
reasonably acceptable to Buyer, then Buyer may within three(3) days following
receipt of any such amended Schedule or portion thereof, in its sole discretion
terminate this Agreement under Section 13.1.a.
SECTION 10.
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS TO CLOSE
The obligation of each Seller to close on the Closing Date under this
Agreement is subject to each of the following conditions (any of which may, in
Seller's discretion, be waived, in whole or part) existing on the Closing Date
or such other applicable date:
10.1. REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties made by Buyer in or pursuant to this Agreement or the other
Transaction Documents shall be true and accurate in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given on and as of such date. In determining
whether there has been a material misrepresentation or material adverse event,
all occurrences and adverse events shall be aggregated to determine the
applicability or breach of the provisions of this Agreement.
10.2. OBLIGATIONS OF BUYER. Buyer shall have performed and complied in all
material respects with all of its obligations under this Agreement and the
other Transaction Documents which are to be performed or complied with by it
prior to or on the Closing Date.
10.3. CLOSING CERTIFICATE. The President (or other authorized corporate
officer) of Buyer shall have executed and delivered to Sellers a certificate
dated as of the Closing Date, upon which Sellers and Parcels us may rely,
certifying that the conditions set forth in Section 10.1. and Section 10.2.
hereof have been satisfied as to it.
10.4. SECRETARY'S CERTIFICATE. Sellers shall have received a certificate of the
Secretary (or other authorized corporate officer) of Buyer certifying as true,
accurate, and complete, as of the Closing Date: (a) a copy of the resolutions
of Buyer's Board of Directors authorizing the execution, delivery, and
performance of this Agreement and the other Transaction Documents to which it
is a party and the consummation by Buyer of the Transaction; (b) a copy of the
resolutions of Buyer's shareholders authorizing the execution, delivery, and
performance of this Agreement and the other Transaction Documents to which it
is a party and the consummation by Buyer of the Transaction; (c) a certified
copy of the Articles of Incorporation of Buyer issued by the Tennessee
Secretary of State; (d) a copy of the Bylaws of Buyer; and (e) the incumbency
of
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the officer or officers authorized to execute on behalf of Buyer the Agreement
and the other Transaction Documents to which it is a party.
10.5. LEGAL MATTERS. There must not have been commenced or threatened against
any of Sellers or Buyer, or any their respective Affiliates, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, the Transaction, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with the Transaction.
10.6. NO PROHIBITION. Neither the consummation nor the performance of the
Transaction will, directly or indirectly (with or without the giving of notice
or the lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause Sellers or any of its Affiliates,
to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or judgment, order, writ, injunction, or decree, or (b) any Legal
Requirement or judgment, order, writ, injunction, or decree that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
10.7. NECESSARY CONSENTS. The Consent of all Persons necessary for the
consummation of the Transaction shall have been granted and be in full force
and effect, including, without limitation, the Consent of or required by or
pursuant to, as the case may be:
a. The Board of Directors of Sellers;
b. Paracelsus, as the shareholder of each Seller;
c. The consent of the lessor to the assignment of the University Lease
to Buyer required by Section 9.16;
d. Any Lender of Seller; and
e. Those Persons listed or referred to in Section 10.7.c of Sellers'
Disclosure Schedule.
10.8. COMPLETION OF SCHEDULES. The schedules to this Agreement identified as to
be completed by mutual agreement of the parties, initialed, and attached prior
to Closing shall have been completed, initialed, and attached.
10.9. DELIVERY OF TRANSACTION DOCUMENTS. Buyer shall have delivered, or caused
to be delivered, all Purchase Price consideration, documents, instruments,
exhibits, schedules, certificates, and lists required by Section 12.3. hereof
to be delivered at or prior to Closing.
10.10. CLOSING OF THE RHEEM TRANSACTION. Buyer and Sellers shall have closed,
or close simultaneous with the Closing under this Agreement, the transaction
whereby Sellers assign and sell and Buyer assume and purchase the lease and
property named Rheem Valley Convalescent Hospital, located at 348 Rheem
Boulevard, Moraga, California 94556 ("Rheem Valley") pursuant to the Rheem
Valley Asset Purchase Agreement dated the date of this Agreement and among
Sellers and Buyer.
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SECTION 11.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligation of Buyer to close on the Closing Date under this
Agreement is subject to each of the following conditions (any of which may, in
the Buyer's discretion, be waived, in whole or part) existing on the Closing
Date or such other applicable date:
11.1. REPRESENTATIONS AND WARRANTIES OF SELLERS. The representations and
warranties made by Sellers in or pursuant to this Agreement or the other
Transaction Documents shall be true and accurate in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given on and as of such date. In determining
whether there has been a material misrepresentation or material adverse event,
all occurrences and adverse events shall be aggregated to determine the
applicability or breach of the provisions of this Agreement.
11.2. OBLIGATIONS OF SELLERS. Sellers shall have performed and complied in all
material respects with all of their obligations under this Agreement and the
other Transaction Documents which are to be performed or complied with by them
prior to or on the Closing Date.
11.3. CLOSING CERTIFICATE. The President (or other authorized corporate
officer) of each Seller shall have executed and delivered to Buyer a
certificate dated as of the Closing Date, upon which Buyer may rely, certifying
that the conditions set forth in Section 11.1. and Section 11.2. hereof have
been satisfied.
11.4. SECRETARY'S CERTIFICATE OF SELLERS. Buyer shall have received a
certificate of the Secretary (or other authorized corporate officer) of each
Seller certifying as true, accurate, and complete, as of the Closing Date: (a)
a copy of the resolutions of Seller's Board of Directors authorizing the
execution, delivery, and performance of this Agreement and the other
Transaction Documents to which it is a party and the consummation by Seller of
the Transaction; (b) a copy of the resolutions of Seller's shareholder
authorizing the execution, delivery, and performance of this Agreement and the
other Transaction Documents to which it is a party and the consummation by
Seller of the Transaction; (c) a certified copy of the Articles of
Incorporation of Seller issued by the California Secretary of State; (d) a copy
of the Bylaws of Seller; and (e) the incumbency of the officer or officers
authorized to execute on behalf of Seller the Agreement and the other
Transaction Documents to which it is a party.
11.5. SELLERS' INVENTORY. Sellers' shall have at the Facilities an inventory of
food products, medical and drug supplies in a quantity and of a quality as may
be required by the California Department of Health for the continued operation
of the Facilities.
11.6. LEGAL MATTERS. There must not have been commenced or threatened against
any of Sellers or Buyer, or any their respective Affiliates, any Proceeding (a)
involving any material challenge to, or seeking material damages in connection
with, the Transaction, or (b) that may have the effect of preventing or making
illegal the Transaction.
11.7. NO PROHIBITION. Neither the consummation nor the performance of the
Transaction will, directly or indirectly (with or without the giving of notice
or the lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer, or any of its Affiliates, to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or judgment, order, writ, injunction, or decree, or (b) any Legal
Requirement or judgment, order, writ, injunction, or decree that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
11.8. NECESSARY CONSENTS. The Consent of all Persons necessary for the
consummation of the Transaction
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shall have been granted and be in full force and effect, including, without
limitation, the Consent of or required by or pursuant to, as the case may be:
a. The (i) Board of Directors of Sellers and, (ii) the shareholder of
each Seller, as to the approval of this Agreement, no later than five (5)
Business Days after the Signing Date;
b. The consent of the lessor to the assignment of the University Lease
to Buyer and the release by the lessor of the University Lease of an option to
purchase the leased property, as required by Section 9.16.a; and
11.9. TITLE COMMITMENT. Buyer shall have received, and be satisfied, in good
faith, with the Title Commitment, as contemplated by, and within the scope of,
Section 9.8. hereof.
11.10. SURVEY. Buyer shall have received, and be satisfied, in good faith, with
the Survey, as contemplated by, and within the scope of, Section 9.9. hereof.
11.11. TITLE POLICY. Buyer shall have received, and be satisfied, in good
faith, with the Title Policy, as contemplated by, and within the scope of,
Section 9.8. hereof.
11.12. COMPLETION OF SCHEDULES. The schedules shall have been completed.
11.13. DELIVERY OF TRANSACTION DOCUMENTS. Seller shall have delivered, or
caused to be delivered, all documents, instruments, exhibits, schedules,
certificates, and lists required by Section 12.1. hereof to be delivered at or
prior to Closing.
SECTION 12.
DELIVERIES AT CLOSING; POST-CLOSING FURTHER ASSURANCES
12.1. DELIVERIES BY SELLERS. Sellers shall deliver, or cause to be delivered,
to Buyer or such other Person as required hereby, at the Closing:
a. GOVERNMENTAL CERTIFICATES. A Certificate of Good Standing and/or
Certificate of Existence for Sellers issued by the appropriate Governmental
Body of the State of California, dated within thirty (30) days prior to the
Closing Date;
b. UCC, JUDGMENT, AND TAX LIEN SEARCH REPORT. A Uniform Commercial
Code, judgment, and tax lien search report for PCHI for the California
Secretary of State and Contra Costa, San Mateo Counties, California, dated
within thirty (30) days prior to the Closing Date;
c. CLOSING CERTIFICATE. The Closing Certificates of Sellers, as
required by Section 11.3. hereof;
d. SECRETARY'S CERTIFICATE. The Secretary's Certificates of Sellers,
as required by Section 11.4. and Section 11.5. hereof;
e. BILL OF SALE. A bill of sale conveying good, valuable, and
marketable title to the Acquired Assets (other than the Real Property) (the
"Bill of Sale") in the substantially the form of APPENDIX 12.1.E.
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f. ASSIGNMENT AND ASSUMPTION AGREEMENT. An assignment and assumption
agreement evidencing Sellers' assignment and transfer of the Assigned
Contracts, and Buyer's assumption of the Assumed Liabilities (the "Assignment
and Assumption Agreement") in substantially the form of APPENDIX 12.1.F.
g. WARRANTY DEED. A special warranty deed, conveying good and
indefeasible title to the Real Property to Buyer, subject only to the Permitted
Liens (the "Warranty Deed") substantially in the form of APPENDIX 12.1.G.;
h. CONSENTS. Copies or other satisfactory evidence of any required
Consents to the Transaction;
i. TITLE COMPANY DOCUMENTS. Any instruments or documents required by
the Title Company to be delivered in order for the Title Company to issue and
deliver the Title Policy;
j. TITLE POLICIES. The Title Policies, as required by Section 9.8
hereof, provided however the actual Title Policies may be delivered post
Closing directly to Buyer by the Title Company according to the preparation and
issuance requirements of the Title Company;
k. POSSESSION. Possession, or constructive possession, of the Acquired
Assets, as required by Section 2.1. hereof; and
l. CONSTRUCTION CONTRACT ESCROW AGREEMENT. The Construction Contract
Escrow Agreement.
m. OTHER DOCUMENTS. Such other documents necessary for the
consummation of the Transaction as Buyer may reasonably request.
12.2. FURTHER ASSURANCES BY SELLERS. From time to time after the Closing, upon
Buyer's request, Sellers agree to execute and deliver such additional
instruments of conveyance and transfer and take such further actions as may be
required in conformity with this Agreement and the other Transaction Documents
for the complete sale and transfer to Buyer of the Acquired Assets.
12.3. DELIVERIES BY BUYER. Buyer shall deliver, or cause to be delivered, to
Sellers or such other Person as required hereby, at the Closing:
a. GOVERNMENTAL CERTIFICATES. A Certificate of Good Standing and/or
Certificate of Existence for Buyer issued by the appropriate Governmental Body
of the State of California, dated within thirty (30) days prior to the Closing
Date;
b. CLOSING CERTIFICATE. The Closing Certificate of Buyer, as required
by Section 10.3. hereof;
c. SECRETARY'S CERTIFICATE. The Secretary's Certificate of Seller, as
required by Section 10.4. hereof;
d. ASSIGNMENT AND ASSUMPTION AGREEMENT. The Assignment and Assumption
Agreement.
e. NON-FOREIGN CERTIFICATION. A Non-Foreign Certification for Buyer
setting forth the
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matters required to comply with applicable Legal Requirements (the "Non-Foreign
Certification");
f. CONSENTS. Copies or other satisfactory evidence of any required
Consents to the Transaction, including the consents to the assumption by Buyer
of the University Lease;
g. PURCHASE PRICE. (i) The portion of the Purchase Price to be paid in
cash at the Closing, as required by Section 2.3. hereof and (ii) the Note;
h. CONSTRUCTION CONTRACT ESCROW AGREEMENT. The Construction Contract
Escrow Agreement.
i. OTHER DOCUMENTS. Such other documents necessary for the
consummation of the Transaction as Buyer may reasonably request.
12.4. FURTHER ASSURANCES BY BUYER. From time to time after the Closing, upon
any Seller's request, Buyer agrees to execute and deliver such additional
instruments of assumption and take such further actions as may be required in
conformity with this Agreement and the other Transaction Documents for the
complete assumption by Buyer of the Assumed Liabilities.
SECTION 13.
TERMINATION
13.1. TERMINATION EVENTS. This Agreement may, by notice given prior to or at
the Closing, be terminated:
a. By Buyer for any or all of the reasons specified in, and as
permitted by, Section 9.7.b. for an uncured objection to the environmental
condition, Section 9.8.b. for an uncured objection to title, Section 9.9.b. for
an uncured objection to the Survey, Section 9.10. for a condemnation by a
Governmental Body, Section 9.16.b. for the failure to obtain the required
consents to the assumption of the University Lease, or Section 9.17.b. based
upon an objection to a Schedule.
b. By Buyer if Seller does not enter into the Construction Contract;
c. By Sellers, acting together, on the one hand, or Buyer, on the
other hand, if a material breach of any provision of this Agreement has been
committed by the other party and such breach has not been waived;
d. (i) By Sellers, acting together, if any of the conditions in
Section 10. hereof have not been satisfied as of the Closing Date or if
satisfaction of such conditions is or becomes impossible (other than through
the failure of Sellers to comply with any of their respective obligations
hereunder) and Sellers have not waived such conditions on or before the Closing
Date; or
(ii) By Buyer if any of the conditions in Section 11. hereof
have not been satisfied as of the Closing Date or if satisfaction of such
conditions is or becomes impossible (other than through the failure of Buyer to
comply with its obligations hereunder) and Buyer has not waived such conditions
on or before the Closing Date;
e. By the consent of Sellers, acting together, on the one hand, and
Buyer, on the other hand;
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f. By Sellers, acting together, if the Closing has not occurred (other
than through the failure of Sellers to comply fully with their respective
obligations under this Agreement) at any time after the Scheduled Closing Date
(if Buyer has failed to make any required Supplemental Earnest Money Deposit to
extend the Closing) or the Extension Date (if Buyer has made any required
Supplemental Earnest Money Deposit to extend the Closing); or
g. By Sellers, acting together, on the one hand, or Buyer, on the
other hand, if the Closing has not occurred (other than through the failure of
any party seeking to terminate to comply fully with its respective obligations
under this Agreement) within sixty (60) days after the Scheduled Closing Date,
or such later date as the parties may in writing agree upon.
13.2. EFFECT OF TERMINATION. Except as otherwise provided herein, each party's
right of termination under Section 13.1. hereof is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 13.1. hereof, all further obligations of the
parties will terminate, except that the obligations in Section 9.1., Section
16.2., and Section 13.3.b. hereof will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by
another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination.
13.3. CONSEQUENCES OF TERMINATION.
a. IN GENERAL. In the event of the termination of this Agreement as
provided in this Section 13.1.a. hereof, this Agreement shall become null and
void, and there shall be no liability or restrictions on the future activities
on the part of any party hereto, except in the event of termination by a party
caused by the willful acts or omissions of the other party, and except as
provided in Section 9.1., Section 16.2., and Section 13.3.b. hereof.
b. EARNEST MONEY DEPOSIT. With respect to the Earnest Money Deposit:
i. If Buyer terminates this Agreement pursuant to Section
13.1.a. hereof prior to the Scheduled Closing Date (which such date shall be
automatically extended during the period of, and through the end of the second
Business Day after, the end of any cure period granted Sellers under Section
9.7.b., Section 9.8.b., Section 9.9.b., Section 9.16.b., or Section 9.17.b.
hereof) the Earnest Money Deposit shall be paid and delivered to Buyer within
five (5) Business Days after the effective date of such termination;
ii. If Buyer terminates this Agreement pursuant to Section
13.1.b. or Section 13.1.d.(ii) hereof, the Earnest Money Deposit shall be paid
and delivered to Buyer within five (5) Business Days after the effective date
of such termination;
iii. If Buyer terminates this Agreement at any time after the
Scheduled Closing Date or if the Closing otherwise fails to occur, for any
reason other than as provided in Section 13.1.a, Section 13.1.b, or Section
13.1.d.(ii), the Earnest Money Deposit shall be paid to and retained by Sellers
on the effective date of termination; and
iv. If not earlier required to be paid and delivered to Buyer
or retained by Sellers, as
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the case may be, the Earnest Money Deposit shall be paid to and retained by
Sellers at the Closing and credited against the Purchase Price.
Once the Earnest Money Deposit is released, whether to Buyer or
Sellers, all obligations of Sellers with respect thereto will immediately
terminate.
c. LIQUIDATED DAMAGES. Any payment of the Earnest Money Deposit to
Sellers, other than as a credit against the Purchase Price at the Closing, is
not intended as a forfeiture or penalty, but instead is intended to compensate
Sellers for the damages they will suffer as a result of the act or omission
which gives rise to such payment. In agreeing to such liquidated damages, Buyer
acknowledges that the amount of Sellers' actual damages by reason of such act
or omission will be substantial, but would be extremely difficult to ascertain,
and the amount of the Earnest Money Deposit is a reasonable estimate of such
damages. In addition, Buyer desires to have a limitation put on its potential
liability to Sellers in such events. Accordingly, the parties have agreed to
the concept of liquidated damages as set forth herein, with the amount thereof
having been subject of specific agreement between the parties. Buyer and
Sellers represent and warrant to each other that the provisions for liquidated
damages are fair and reasonable under the circumstances existing on the date
hereof. Notwithstanding the foregoing, if, contrary to the agreement of the
parties as set forth in this section, any party shall contest these provisions
and any court of competent jurisdiction shall rule in a Proceeding between the
parties that the subject provisions are not enforceable, then Sellers shall be
entitled to seek all relief normally permitted at law or equity to an aggrieved
seller.
THE PARTIES HEREBY EXPRESSLY AGREE THAT, BECAUSE THE PRECISE AMOUNT OF SELLERS'
DAMAGES CAUSED BUYER'S DEFAULT WOULD BE EXTREMELY DIFFICULT TO CALCULATE
ACCURATELY, THE AMOUNT OF THE EARNEST MONEY DEPOSIT IS NOT UNREASONABLE UNDER
THE CIRCUMSTANCES EXISTING AT THE TIME THIS AGREEMENT IS ENTERED INTO. SELLERS
AND BUYER ACKNOWLEDGE THAT THEY HAVE MADE A REASONABLE ENDEAVOR TO ESTIMATE THE
ACTUAL DAMAGES SELLERS WOULD SUSTAIN AS A RESULT OF BUYER'S DEFAULT. HOWEVER,
THE PROSPECTIVE IMPRACTICABILITY AND EXTREME DIFFICULTY OF FIXING SELLERS'
ACTUAL DAMAGES HAS REQUIRED THE PARTIES TO ATTEMPT TO LIQUIDATE SUCH DAMAGES IN
THE EVENT BUYER DEFAULTS. THEREFORE, THE PARTIES AGREE THAT THE LIQUIDATED
DAMAGES SET FORTH IN THIS SECTION ARE JUST AND REASONABLE UNDER THE
CIRCUMSTANCES.
Initials:
------- ---------- ----------
PCHI PREC Buyer
13.4. BUYERS RIGHTS. Nothing herein shall prevent Buyer from specifically
enforcing its rights hereunder or seeking damages for any breach of this
Agreement by Sellers, except as may be governed by Section 15.
SECTION 14.
POST-CLOSING COVENANTS AND AGREEMENTS
14.1. CHANGE OF NAME. Buyer agrees that it will cause all signs, if any,
incorporating the names "Paracelsus", "Paracelsus Healthcare", or "Paracelsus
Convalescent" (and all derivatives and variations thereof) which are located at
any of the Real Property to be removed or modified as soon as reasonably
practicable after the Closing Date and in any event within thirty (30) days
after the Closing Date, so that such names are no longer used at such Real
Property.
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14.2. 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
Business for so long as Buyer is required by applicable Legal Requirements to
maintain such records (but in no event less that seven (7) 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 Legal Requirements concerning confidentiality.
Buyer agrees to abide by any such Legal Requirements relating to the
confidential information it acquires. Buyer agrees after Closing to maintain
the patient records at the Business in accordance with applicable Legal
Requirements (including, if applicable, Section 1861(v)(i)(I) of the Social
Security Act (42 U.S.C. Section 1395x(v)(1)(I)) and requirements of relevant
insurance carriers. In addition, Seller shall be entitled to remove from the
Facilities 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, Seller shall if reasonably possible use copies
of patient records, where appropriate. Any original patient records so removed
from the Facilities 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 Facilities 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 operation of the Facilities of conduct of the Business
prior to the Closing Date.
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
Sellers for a period of seven (7) years or such longer period (if any) as such
records are required to be kept and preserved by any Legal Requirements. 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 14.2.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 this Section 14.2., Buyer shall
advise Seller in writing of such intention and Seller shall have not less than
sixty (60) days after receipt of such notice to elect in writing to have Buyer
deliver such records to Seller.
14.3. COVENANT NOT TO COMPETE. During the period beginning on the Closing Date
and continuing for a period of three (3) years thereafter (the "Restricted
Period"), Sellers each agree that it will not, directly or indirectly, for
itself, its subsidiaries, partnerships or joint ventures or on behalf of any
other person, either as an employee, employer, independent contractor,
consultant, agent, principal, owner, partner, shareholder, investor, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any manner whatsoever in any nursing home, retirement
home or assisted living facility (the "Restricted Activity") in the geographic
area that is within a fifty (50) mile radius of each of the Facilities as they
exist on the Closing Date (the "Restricted Territory"), without obtaining the
prior written consent of Buyer; provided, however, that Seller (a) may invest
in the securities of any entity (without otherwise participating in the
activities of such entity) if (i) such securities are listed on any national or
regional securities
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exchange or have been registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended, and (ii) Seller does not beneficially own (as defined
by Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) in excess of five percent (5%) of the outstanding equity securities of
such entity, and (b) may, upon notice to Buyer, provide in the Restricted
Territory health care services not offered by Sellers on the Closing Date.
Notwithstanding any other provision hereof, this section shall not apply to
restrict any successor or assign of Seller, whether through a merger, sale of
substantially all of its assets, or other similar transaction. Upon the
consummation of any such transaction, this section shall automatically
terminate without any further notice or action by any party.
14.4. OBLIGATION TO REMIT FUNDS. Each party hereto agrees to remit to the other
party any funds that it receives which under the terms of this Agreement
belongs to the other party within three (3) business days of receipt of such
funds.
SECTION 15.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
15.1. SURVIVAL OF REPRESENTATIONS. Notwithstanding any investigation made by or
on behalf of any party, all representations and warranties made by the parties
in this Agreement or pursuant hereto shall survive the Closing and remain
effective for a period of twelve (12) months thereafter, except that the
representations and warranties made by Seller in Section 7.6. hereof shall
survive the Closing and remain effective for the period of the applicable
statute of limitations or similar Legal Requirement. Each party is entitled to
and is hereby deemed to have reasonably relied upon the representations and
warranties of the other party.
15.2. INDEMNIFICATION OF SELLERS. Subject to the provisions of this Section 15.
and only in the event the Closing occurs (Seller otherwise being entitled only
to payment of the Earnest Money Deposit as liquidated damages if the Closing
does not occur), Buyer agrees to indemnify, defend, and hold harmless Sellers,
and their respective predecessors, successors, assigns, officers, directors,
stockholders, employees, Subsidiaries, parents, Affiliates, partners, agents,
attorneys, accountants, financial advisers, Representatives, and insurers
(collectively, the "Seller Indemnified Parties"), against and in respect of any
losses, damages (including incidental and consequential damages), deficiencies,
diminutions in value, liabilities, actions, suits, proceedings, demands,
assessments, judgments, fines, and reasonable costs and expenses (including,
but not limited to, attorney and expert witness fees) (collectively, the
"Losses"), arising or resulting, directly or indirectly, from or in connection
with:
a. Any misrepresentation or other breach of any representation or
warranty made by Buyer in this Agreement or in any of the other Transaction
Documents;
b. Any failure to perform or other breach of any covenant, agreement,
or obligation of Buyer in this Agreement or in any of the other Transaction
Documents;
c. Any of the Assumed Liabilities; or
d. Any and all liabilities or obligations of the Business incurred,
and any and all liabilities or obligations relating to the Acquired Assets
incurred, after the Closing Date.
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The foregoing matters giving rise to the rights of the Seller
Indemnified Parties to indemnification hereunder are referred to as the "Seller
Claims".
15.3. INDEMNIFICATION OF BUYER. Subject to the provisions of this Section 15.
and only in the event the Closing occurs (Buyer otherwise being entitled only
to payment of the Earnest Money Deposit if the Closing does not occur), Sellers
agree to indemnify, defend, and hold harmless Buyer, and its predecessors,
successors, assigns, officers, directors, stockholders, employees,
Subsidiaries, parents, Affiliates, partners, agents, attorneys, accountants,
financial advisers, Representatives, and insurers (collectively, the "Buyer
Indemnified Parties"), against and in respect of any Losses, arising or
resulting, directly or indirectly, from or in connection with:
a. Any misrepresentation or other breach of any representation or
warranty made by Sellers in this Agreement or in any of the other Transaction
Documents;
b. Any failure to perform or other breach by Sellers of any covenant,
agreement, or obligation in this Agreement or in any of the other Transaction
Documents; or
c. All liabilities or obligations of PCHI in conducting the Business
prior to the Closing, even if the claim therefor is not made until after the
Closing, other than the Assumed Liabilities.
The foregoing matters giving rise to the rights of the Buyer
Indemnified Parties to indemnification hereunder are referred to as the "Buyer
Claims".
15.4. LIMITATIONS ON SELLERS' LIABILITY. Notwithstanding any other provision
hereof, Sellers shall not be liable for any Losses under this Section 15. in
excess of the aggregate amount of the Purchase Price received by Sellers at the
time the claim for indemnification is made. Further, the indemnification
provided for against Sellers in favor of the Buyer Indemnified Parties shall
be, notwithstanding any other provision hereof, the exclusive remedy of the
Buyer Indemnified Parties for claims against Sellers under or arising from this
Agreement.
15.5. THRESHOLDS. The Seller Indemnified Parties shall have the right to
indemnification under this Section 15. only after and to the extent the Seller
Claims exceed, in the aggregate, the sum of $20,000, provided that this section
shall not apply to payment of any other portion of the Purchase Price. The
Buyer Indemnified Parties shall have the right to indemnification under this
Section 15. only after and to the extent the Buyer Claims exceed, in the
aggregate, the sum of $20,000. Once the thresholds in the preceding sentences
are satisfied, as applicable to each party, Buyer shall be liable for any
Losses of the Seller Indemnified Parties in excess thereof, and the Sellers
shall be liable for any Losses of the Buyer Indemnified Parties in excess
thereof.
15.6. EFFECT OF TAXES AND INSURANCE. The liability of an Indemnitor under this
Section 15. shall be reduced by the Tax benefit actually realized and any
insurance proceeds received by the Indemnitee as a result of any Losses upon
which the claim for indemnification is based, and shall include any Tax
detriment actually incurred by the Indemnitee as a result of such Losses. The
amount of any such Tax benefit or detriment shall be determined by taking into
account the effect, if any and to the extent then determinable, of timing
differences resulting from the acceleration or deferral of items of gain or
loss resulting from such Losses and shall otherwise be determined so that
payment by the Indemnitor, as so adjusted, will make the
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Indemnitee as economically whole as reasonably possible.
15.7. PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
a. After receipt by an Indemnitee under this Section 15. of notice of
the commencement of any Proceeding against it, such Indemnitee shall, if a
claim is to be made against an Indemnitor hereunder, promptly give notice to
the Indemnitor of the commencement of such claim (including all documents and
other information which the Indemnitee has with respect thereto), but the
failure to notify the Indemnitor shall not relieve the Indemnitor of any
liability that it may have to any Indemnitee, except to the extent that the
Indemnitor demonstrates that the defense of such action is prejudiced by the
Indemnitee's failure to give such notice.
b. If any Proceeding referred to in the preceding subsection is
brought against an Indemnitee and it gives notice to the Indemnitor of the
commencement of such Proceeding, the Indemnitor will be entitled to participate
in such Proceeding and, to the extent that it wants (unless (i) the Indemnitor
is also a party to such Proceeding and the Indemnitee determines in good faith
that joint representation would be inappropriate, or (ii) the Indemnitor fails
to provide reasonable assurance to the Indemnitee of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding) to assume the defense of such Proceeding with counsel satisfactory
to the Indemnitee and, after notice from the Indemnitor to the Indemnitee of
its election to assume the defense of such Proceeding, the Indemnitor will not,
as long as it diligently conducts such defense, be liable to the Indemnitee
under this Section 15. for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred
by the Indemnitee in connection with the defense of such Proceeding, other than
reasonable and necessary costs of investigation. If the Indemnitor assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within the scope
of and subject to indemnification under this Section 15.; (ii) no compromise or
settlement of such claims may be effected by the Indemnitor without the
Indemnitee's consent unless (y) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person
and no effect on any other claims that may be made against the Indemnitee, and
(z) the sole relief provided is monetary damages that are paid in full by the
Indemnitor; and (iii) the Indemnitee will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an Indemnitor of the commencement of any Proceeding and the
Indemnitor does not, within ten (10) calendar days after the Indemnitee's
notice is given, give notice to the Indemnitee of its election to assume the
defense of such Proceeding, the Indemnitor will be bound by any determination
made in such Proceeding or any compromise or settlement effected by the
Indemnitee.
c. Notwithstanding the foregoing, if an Indemnitee determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its Affiliates, other than as a result of monetary damages for
which it would be entitled to indemnification under this Agreement, the
Indemnitee may, by notice to the Indemnitor, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the Indemnitor will not be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
15.8. PROCEDURE FOR INDEMNIFICATION; OTHER CLAIMS. A claim for indemnification
for any matter not involving a third-party claim covered by Section 15.7.
hereof may be asserted by the Indemnitee promptly giving notice to the
Indemnitor requesting indemnification and stating in reasonable detail the
nature of such matter and the amount of Losses claimed therefor. The Indemnitor
shall have fifteen (15) calendar days after
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receiving such notice to respond. If the Indemnitor accepts responsibility or
does not respond within such 15 day period, the Indemnitor shall pay the
Indemnitee the full amount of the claim within ten (10) Business Days after
responsibility therefor is so determined. If the Indemnitor rejects the claim
for indemnification, and the dispute is not resolved by the Indemnitor and
Indemnitee within fifteen (15) calendar days, the parties may pursue any legal
or equitable remedy available to them to resolve the same. If it is determined
that the Indemnitor is liable for the claim, it shall pay the Indemnitee the
full amount of the claim within ten (10) Business Days after responsibility
therefor is so determined.
SECTION 16.
MISCELLANEOUS
16.1. NOTICES. Any notice or Consent from any party required or permitted by
this Agreement shall be in writing and shall be sufficiently given if
personally delivered, mailed by certified or registered mail, return receipt
requested, sent by Federal Express (or other guaranteed and receipted delivery
service), or sent by facsimile transmission to the following addresses (or such
other addresses as specified by written notice timely given to the other
parties).
To Sellers
Paracelsus Healthcare Corporation
Attn: President
515 West Greens Road, Suite 800
Houston, Texas 77067
Telephone: (281) 774-5115
Facsimile: (281) 774-5110
With a copy (which
shall not constitute
notice) to: Michener, Larimore, Swindle, Whitaker,
Flowers, Sawyer, Reynolds & Chalk, L.L.P.
Attn: Wayne M. Whitaker, Esq.
3500 City Center Tower II
301 Commerce Street
Fort Worth, Texas 76102
Telephone: (817) 878-0530
Telecopier: (817) 335-6935
To Buyer: Sunland Associates, Inc.
Attn: Byron DeFoor
5706 Main Street
Ooltewah, Tennessee, 37363
Telephone: (423) 238-4237
Telecopier: (423) 238-4575
With a copy (which
shall not constitute
notice) to: Baker, Donelson, Bearman & Caldwell, P.C.
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<PAGE> 39
Attn: John Mooney
1800 Republic Centre
Chattanooga, Tennessee 37450-1800
Telephone: (423) 209-4107
Telecopier: (423) 756-3447
Any notice given in accordance with this section is effective three
(3) Business Days after the date on which the same was delivered, deposited, or
sent and confirmation of delivery received, as applicable for the notice
procedure used.
16.2. TRANSACTION COSTS AND EXPENSES. Except as otherwise provided herein, each
party hereunder shall be responsible for and pay its, his, or her, as the case
may be, own costs and expenses, including fees of accountants, attorneys, and
other advisors, incurred by it, him, or her, as the case may be, in connection
with the Transaction; provided, however, that if the transactions contemplated
by this Agreement are not consummated as a result of a breach of this Agreement
by any party, such party shall be liable for expenses and costs incurred by the
other parties, together with all reasonable expenses and costs (including
attorneys' fees) incurred by the other parties in connection with enforcing
their rights under this Agreement, notwithstanding the provisions of Section
13.3. of this Agreement. Buyer shall pay all recording fees for recording any
deeds, assignments, or other instruments in connection with the Transaction.
Seller shall pay all documentary stamp Taxes, discretionary surtaxes and
intangible Taxes for recording any deeds, assignments, or other instruments in
connection with the Transaction.
16.3. ASSIGNABILITY; BINDING EFFECT; THIRD PARTIES.
a. The rights and obligations of any party under this Agreement may
not be assigned or delegated by any party without the prior written consent of
the other party, which shall not be unreasonably withheld, except (i) that
Sellers may assign and delegate any of their rights and obligations to any
Subsidiary or Affiliate or any successor in a merger, sale of substantially all
of its assets, or other similar transaction and (ii) Buyer may assign its
rights to any wholly owned subsidiary of Buyer or an entity the majority of
whose equity interest is owned by Byron DeFoor, provided Buyer shall guarantee
the obligations of any assignee or transferee under this Agreement and the
Note. Subject to the preceding sentence, this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
b. Nothing in this Agreement, whether express or implied, is intended
to confer any rights or remedies arising from this Agreement on any person
other than the parties and their respective successors or assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third party to a party, nor shall any provision of this
Agreement give any third party a right of subrogation or action against any
party, except as otherwise set forth in this Agreement.
16.4. WAIVER. There can be no waiver of any term, provision, or condition of
this Agreement which is not in writing signed by the party against whom the
waiver is sought to be enforced. Waiver by any party of the default or breach
of any provision of this Agreement by another shall not operate or be construed
as a waiver of any subsequent default or breach.
16.5. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by a court of final jurisdiction, it is the parties' intent that
all other provisions of this Agreement shall remain fully valid,
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<PAGE> 40
enforceable, and binding on the parties.
16.6. FURTHER ASSURANCES. The parties agree to take such further actions,
including the execution and delivery of any documents, as may be required,
necessary, or desirable for the performance of this Agreement.
16.7. ENTIRE AGREEMENT; HEADINGS; INCORPORATION BY REFERENCE. This Agreement,
together with the other Transaction Documents, exhibits, schedules, documents,
and instruments referred to herein, constitutes the entire agreement between
the parties relating to the subject matter hereof, and supersedes all previous
agreements, written or oral. Except as provided otherwise in this Agreement,
this Agreement shall not be amended or modified except by an instrument in
writing signed by all parties. Headings are for convenience of reference only
and shall not affect the interpretation or construction of this Agreement. All
exhibits, schedules, documents, and instruments referred to in this Agreement
are incorporated by reference for all purposes.
16.8. GOVERNING LAW; VENUE; ATTORNEY'S FEES.
a. Any dispute between the parties relating to this Agreement shall be
construed under and in accordance with the laws of the State of California
applicable to contracts between residents of California that are to be wholly
performed within such state.
b. The parties agree that the courts within Contra Costa County,
California shall have exclusive venue and jurisdiction of same.
c. The prevailing party in any litigation shall be entitled to recover
from the other party reasonable attorney's fees and court costs incurred in the
same, in addition to any other relief that may be awarded.
16.9. TIME OF ESSENCE. Time shall be of the essence in interpreting this
Agreement.
16.10. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original and all of which shall
constitute one document; and furthermore, a facsimile signature shall be deemed
an original.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused same to be duly delivered on their behalf on the day and year first
written above.
[signatures on following page]
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<PAGE> 41
Buyer: Sellers:
SUNLAND ASSOCIATES, INC. PARACELSUS CONVALESCENT
HOSPITALS, INC.
By:
--------------------------- By:
Name: ---------------------------
------------------------- Name:
Title: -------------------------
------------------------ Title:
------------------------
PARACELSUS REAL ESTATE
CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
-41-
AMENDMENT ONE
TO
ASSET PURCHASE AGREEMENT
This Amendment Number One to Asset Purchase Agreement (the
"Amendment"), is dated as of April 14, 1999, and entered into by and among
PARACELSUS CONVALESCENT HOSPITALS, INC., a California corporation ("PCHI"),
PARACELSUS REAL ESTATE CORPORATION, a California corporation ("PREC") (PCHI and
PREC are also sometimes referred to herein individually as, a "Seller" and,
collectively as, the "Sellers"), and SUNLAND ASSOCIATES, INC., a Tennessee
corporation (the "Buyer") or its assigns as herein permitted.
WITNESSETH:
WHEREAS, PCHI, PREC and Buyer entered into that one certain Asset
Purchase Agreement dated as of March 15, 1999 (the "Purchase
Agreement") providing for among other things the sale by PCHI and PREC and the
purchase by Buyer of three skilled nursing facilities in California; and
WHEREAS, PCHI, PREC and Buyer desire to amend certain of the terms of
the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated in this Agreement, and the
other good and valuable consideration exchanged between the parties, the receipt
and sufficiency of which is hereby acknowledged, the parties intending to be
legally bound agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms used herein as
defined terms shall have the meaning given them in the Purchase Agreement.
2. SECTION 1.1. "DEFINITIONS." Section 1.1. is amended to provide that the
definition of Transaction Documents shall mean:
"TRANSACTION DOCUMENTS means this Agreement, the Bill of Sale, the
Assignment and Assumption Agreement; the Warranty Deed, the Consents,
the Second Lien Deed of Trust and Security Agreement, Note, and the
exhibits, schedules, certificates, and lists related to each of the
foregoing, as applicable to each of Seller and Buyer."
3. SECTION 4.1.a. "EARNEST MONEY DEPOSIT-REQUIRED DEPOSITS." Section 4.1.a. is
hereby amended to read as follows:
"REQUIRED DEPOSITS. Buyer shall on or before March 16, 1999 deposit
with Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds
& Chalk, L.L.P., counsel to Sellers, the sum of $100,000.00 (the
"Initial Earnest Money Deposit") pursuant to and to be governed by the
Earnest Money Deposit Agreement and Amendment One to Earnest Money
Deposit Agreement substantially in the form of APPENDIX 4.1 hereto
(the "Earnest Money Deposit Agreement"). Subject to the terms of the
Earnest Money Deposit Agreement and this Agreement Buyer may extend
the closing of the purchase of the Acquired Assets for up to an
additional 15 days past the Scheduled Closing Date upon the
<PAGE> 43
payment of $50,000 as an additional earnest money deposit, and
thereafter extend the closing of the purchase of the Acquired Assets
for up to a further 30 day period upon the payment of $125,000 as an
additional earnest money deposit (each, a "Supplemental Earnest Money
Deposit") (the Initial Earnest Money Deposit and Supplemental Earnest
Money Deposit, whether one or more, are referred to herein
collectively as, the "Earnest Money Deposit"). Each Supplemental
Earnest Money Deposit shall be governed by the Earnest Money Deposit
Agreement."
4. SECTION 4.2. "PURCHASE PRICE." Section 4.2. is hereby amended to read as
follows:
"PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to
Sellers for the Acquired Assets (the "Purchase Price") shall be SIX
MILLION FOUR HUNDRED THOUSAND DOLLARS ($6,400,000.00)."
5. SECTION 4.3. "METHOD OF PAYMENT." Section 4.3. is hereby amended to read as
follows:
"METHOD OF PAYMENT. The Purchase Price, less the amount of the Note,
and any credits against such sum required by the provisions hereof,
shall be paid by Buyer to Sellers, at the Closing, by wire transfer or
delivery of other immediately available funds to the account or
accounts designated by Sellers prior to Closing and by the delivery of
a promissory note in the original principal amount of $3,900,000 and
substantially in the form of APPENDIX 4.3 (the "Note"), which, if the
maker is not Buyer, shall be secured by the guarantee of Buyer and
which shall be secured by a second lien on the Real Property and
equipment, working capital and the stock of Buyer and shall be second
to no more than a $3,750,000 first lien. The Note shall be a five year
balloon note, amortized based upon 240 months beginning on the
thirteenth month, accrue interest at 9% per annum, with interest only
payable monthly for the first year, and shall receive a prepayment
discount of $650,000 if paid in full within the first twelve months, a
$600,000 discount if paid in full after twelve months and before
eighteen months, a $400,000 discount if paid in full after eighteen
months and before twenty-four months, and a $300,000 discount if paid
in full after twenty-four months and before thirty months. The
provisions of the Note as executed shall govern and control over any
inconsistent provision hereof."
6. SECTION 5.1. "CLOSING DATE." Section 5.1. is hereby amended to provide that
the "Scheduled Closing Date" shall be June 15, 1999, or such other date
mutually agreed upon in writing by the parties.
7. SECTION 5.3. "EXTENSION DATE." Section 5.3. is hereby amended to read as
follows:
"EXTENSION DATE. As provided by Section 4.1, Buyer may, in its sole
discretion, extend the date for the Closing past the Scheduled Closing
Date to a date not later than June 30, 1999 (the "First Extension
Date") by giving notice to Seller of such extension specifying the new
Closing Date and delivering an additional $50,000 Supplemental Earnest
Money Deposit pursuant to the Earnest Money Deposit Agreement at least
one (1) Business Days prior to the Scheduled Closing Date. Thereafter,
Buyer may, in its sole discretion, extend the date for the Closing
past such First Extension Date to a date not later than July 30, 1999
(the
<PAGE> 44
"Second Extension Date") by giving notice of such extension specifying
the new Closing Date and delivering an additional $125,000
Supplemental Earnest Money Deposit pursuant to the Earnest Money
Deposit Agreement at least five (5) Business Days prior to the First
Extension Date. Each new Closing Date set by Buyer pursuant to this
section based on its giving of an extension notice and delivering a
Supplemental Earnest Money Deposit may also be referred to herein as
an "Extension Date"."
8. SECTION 6.1. "CONSTRUCTION-IN-PROGRESS AT LAFAYETTE." Section 6.1. is
hereby deleted.
9. SECTION 9.16. "CONSENTS TO ASSUMPTION OF LEASES." Section 9.16 is hereby
amended to read as follows:
"a. Buyer shall assist and cooperate with Seller and its
representatives in obtaining, by the Closing Date the termination of
all rights of lessor under a lease of University (the "University
Lease") and the release by the lessor of the University Lease of any
right lessor may have to purchase the leased property.
b. If Seller is unable after using all commercially reasonable means,
to obtain the termination and release required in Section 9.16.a. by
the Closing Date, then Buyer shall be deemed to have terminated this
Agreement under Section 13.1.a."
10. SECTION 11.8.b. "NECESSARY CONSENTS." Section 11.8.b is hereby deleted.
11. SECTION 11.14. "TERMINATION OF UNIVERSITY LEASE." There shall be added a
new Section 11.14. "Termination of University Lease" as follows:
"SECTION 11.14. TERMINATION OF UNIVERSITY LEASE. Seller shall have
delivered to Buyer a termination of the University Lease by lessor and
a release of any and all rights lessor may have to purchase the leased
property."
12. SECTION 12.1.l. "DELIVERIES BY SELLERS-CONSTRUCTION CONTRACT ESCROW
AGREEMENT." Section 12.1.l. is hereby deleted and there shall be added a
new Section 12.1.l. as follows:
"SECTION 12.1.l. UNIVERSITY TERMINATION. A termination of the
University Lease by lessor and a release of any and all rights lessor
may have to purchase the leased property."
13. SECTION 12.3.h. "DELIVERIES BY BUYER-CONSTRUCTION CONTRACT ESCROW
AGREEMENT." Section 12.3.h. is hereby deleted.
14. SECTION 13.1.b. "TERMINATION EVENTS." Section 13.1.b. is hereby deleted.
15. SECTION 13.3.b. "CONSEQUENCES OF TERMINATION-EARNEST MONEY DEPOSIT."
Section 13.3.b is hereby amended to read as follows:
<PAGE> 45
"EARNEST MONEY DEPOSIT. With respect to the Earnest Money Deposit:
i. If Buyer terminates this Agreement pursuant to Section 13.1.a.
hereof prior to or on the Closing Date and the basis for such
termination is the right to terminate provided by Section 9.16.b., the
Earnest Money Deposit shall be paid and delivered to Buyer within five
(5) Business Days after the effective date of such termination;
ii. If Buyer terminates this Agreement for any reason provided
for herein or otherwise, other than as provided in sub-section
13.3.b.i above the Earnest Money Deposit shall be paid and delivered
to Seller within five (5) Business Days after the effective date of
such termination; and
iii. If not earlier required to be paid and delivered to Buyer or
retained by Sellers, as the case may be, the Earnest Money Deposit
shall be paid to and retained by Sellers at the Closing and credited
against the Purchase Price.
Once the Earnest Money Deposit is released, whether to Buyer or
Sellers, all obligations of Sellers with respect thereto will
immediately terminate."
16. MISCELLANEOUS.
a. ENTIRE AGREEMENT. This Amendment, constitutes the entire agreement
between the parties relating to the subject matter hereof, and supersedes
all previous agreements, written or oral. If there shall be any conflict
between the terms or interpretation of this Amendment and the terms of the
Purchase Agreement, the terms of this Amendment shall govern. Headings are
for convenience of reference only and shall not affect the interpretation
or construction of this Amendment. All exhibits, schedules, documents, and
instruments referred to in this Amendment are incorporated by reference for
all purposes.
b. GOVERNING LAW; VENUE; ATTORNEY'S FEES.
i. Any dispute between the parties relating to this Amendment shall be
construed under and in accordance with the laws of the State of California
applicable to contracts between residents of California that are to be
wholly performed within such state.
ii. The parties agree that the courts within Contra Costa County,
California shall have exclusive venue and jurisdiction of same.
iii. The prevailing party in any litigation shall be entitled to
recover from the other party reasonable attorney's fees and court costs
incurred in the same, in addition to any other relief that may be awarded.
c. MULTIPLE COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall constitute an original and all of which
shall constitute one document; and furthermore, a facsimile signature shall
be deemed an original.
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
same to be duly delivered on their behalf as of the day and year first written
above.
Buyer:
SUNLAND ASSOCIATES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Sellers:
PARACELSUS CONVALESCENT
HOSPITALS, INC.
By:
--------------------------------
Name: R. T. Pinchback
------------------------------
Title: Vice President
-----------------------------
PARACELSUS REAL ESTATE
CORPORATION
By:
--------------------------------
Name: R. T. Pinchback
------------------------------
Title: Vice President
-----------------------------
RHEEM VALLEY ASSET PURCHASE AGREEMENT
This Rheem Valley Asset Purchase Agreement (the "Agreement"), dated as
of March 15, 1999 (the "Signing Date"), is entered into by and among PARACELSUS
CONVALESCENT HOSPITALS, INC., a California corporation ("PCHI"), PARACELSUS REAL
ESTATE CORPORATION, a California corporation ("PREC") (PCHI and PREC are also
sometimes referred to herein individually as, a "Seller" and, collectively as,
the "Sellers"), and SUNLAND ASSOCIATES, INC., a Tennessee corporation (the
"Buyer")or its assigns as herein permitted.
WITNESSETH:
WHEREAS, PREC leases, pursuant to that certain Indenture, dated August
1, 1964, as amended by that certain Modification of Lease, dated April 8, 1985,
and Second Modification of Lease, dated October 7, 1997 (the "Rheem Valley
Lease"), with Karl J. Niederer and Gertrude E. Niederer (the "Rheem Valley
Lessor"), and PCHI operates a skilled nursing facility named Rheem Valley
Convalescent Hospital, located at 348 Rheem Boulevard, Moraga, California 94556
("Rheem Valley") ( Rheem Valley is also sometimes referred to herein as, a
"Facility");
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to
purchase, all or substantially all of the assets and properties used by PCHI in
the skilled nursing and subacute care business conducted at the Facility (the
"Business"), and Buyer further desires to assume from Sellers the Rheem Valley
Lease and certain other liabilities and obligations from conducting the
Business, all upon the terms and subject to the conditions set forth herein;
WHEREAS, Buyer and Sellers have simultaneous with the execution of this
Agreement executed an asset purchase agreement (the "ULO Purchase Agreement")
providing, according to the terms therein stated, for Sellers to sell and Buyer
to purchase the following three skilled nursing facilities :
1. University Convalescent Hospital, located at 2122 Santa Cruz
Avenue, Menlo Park, California 94025 ("University");
2. Lafayette Convalescent Hospital, located at 1010 First Street,
Lafayette, California 94549 ("Lafayette"); and
3. Oak Park Convalescent Hospital, located at 1625 Oak Park
Boulevard, Pleasant Hill, California 94523 ("Oak Park"); and
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated in this Agreement, and the
other good and valuable consideration exchanged between the parties, the receipt
and sufficiency of which is hereby acknowledged, the parties intending to be
legally bound agree as follows:
SECTION 1.
DEFINITIONS
1.1. DEFINITIONS. As used herein, the following terms have the meanings
specified or referred to in this section (unless specifically defined or the
context clearly requires otherwise):
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<PAGE> 48
"Affiliate" means any Person that, directly or indirectly, controls, is
controlled by, or under common control with, another Person. For purposes of
this definition, the terms "control" and "controlled by" and "under common
control with", as used with respect to any Person, mean the power to direct or
cause the direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by Contract, or
otherwise.
"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of California are
closed.
"Closing Period" means the period between the Signing Date and the
Closing Date.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contract" means any contract, agreement, obligation, promise, purchase
order, sales order, license, lease, commitment, arrangement, or undertaking
(whether written or oral, and whether express or implied) that is legally
binding.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any corresponding provisions of succeeding law, and the regulations
promulgated thereunder.
"Governmental Authorization" means any approval, consent, license,
certificate of need, franchise, provider number, permit, waiver, or other
authorization issued, granted, given, or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" means any (i) nation, state, county, city, town,
village, district, or other jurisdiction of any nature, (ii) federal, state,
local, municipal, foreign, or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal), (iv)
multi-national organization or body, or (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Indemnitee" means a party seeking indemnification.
"Indemnitor" means a party against whom a claim for indemnification is
made.
"Knowledge" with respect to:
(i) an individual, is deemed to exist of a particular fact or other
matter if, such individual is, or has at any time been, (y) actually
aware of such fact or other matter, or (z) a prudent individual could
be expected to discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonable inquiry about the
existence of such fact or other matter; and
(ii) any Person (other than an individual), is deemed to exist of a
particular fact or other matter if, any individual who is serving, or
who at any time has served, as a director, officer, partner, executor,
or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge (as defined in the preceding clause (i) hereof) of
such fact or other matter.
- 2 -
<PAGE> 49
"IRC" means the Internal Revenue Code of 1986, as amended and any
corresponding provisions of succeeding law, and the regulations promulgated
thereunder.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, code, principle of common law, regulation,
statute, or treaty.
"Lender" means any Person that has loaned money or extended credit to
another Person.
"Liens" means all mortgages, deeds of trust, claims, liens, judgments,
security interests, pledges, leases, conditional sale contracts, rights of first
refusal, options, charges, liabilities, obligations, agreements, powers of
attorney, limitations, reservations, restrictions, and other encumbrances or
adverse claims of every kind and nature, including any restriction on use,
voting, transfer, receipt of income, or exercise of any attribute of ownership.
"Ordinary Course of Business" means an action taken by a Person that
is:
(i) consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person;
(ii) not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent corporation, if any, of such Person; and
(iii) similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (of by any Person
or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"Person" includes any individual, partnership, joint venture, limited
partnership, limited liability company, trust, estate, corporation, association,
custodian, trustee, executor, administrator, or other entity or Governmental
Body.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Representatives" means the directors, trustees, officers, employees,
agents, financial advisers, accountants, legal counsel, and other
representatives of a Person.
"Subsidiary" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
- 3 -
<PAGE> 50
"Tax" means any Governmental Body tax assessment, penalty, interest,
fee, or other charge.
"Tax Return" means any return (including an information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Transaction" means the sale and purchase of the Acquired Assets,
assumption of the Assumed Liabilities, and performance of the other agreements
and covenants as described herein or required hereby.
"Transaction Documents" means this Agreement, the Bill of Sale, the
Assignment and Assumption Agreement; the Rheem Valley Lease Assumption
Agreement, the Consents and the exhibits, schedules, certificates, and lists
related to each of the foregoing, as applicable to each of Seller and Buyer.
1.2. OTHER DEFINITIONS. Other terms may be defined elsewhere herein and have the
meanings so given to them.
SECTION 2.
SALE AND PURCHASE
2.1. ACQUIRED ASSETS. Upon the terms and subject to the conditions set forth
herein, at the Closing (as defined in Section 5.1. hereof), Sellers will sell,
transfer, convey, assign, and deliver to Buyer, and Buyer thereupon will
purchase, acquire, and assume from Sellers, all of the following assets and
properties of Sellers, other than the Excluded Assets (as defined in Section
2.4. hereof), owned, held, or used by PCHI in the operation of the Facility and
conduct of the Business, as such exist on the Signing Date, less all such assets
and properties used, consumed, or disposed of, plus all such assets and
properties acquired by, Sellers in the Ordinary Course of Business during the
Closing Period (collectively, the "Acquired Assets"), which such Acquired Assets
comprise, with the exception of the Excluded Assets, all or substantially all of
the assets and properties owned, held, or used by PCHI in operating the Facility
and conducting the Business:
a. REAL PROPERTY. The real property and real property interests
described in SCHEDULE 2.1.a. hereto, together with all leaseholds therein, all
buildings, improvements, construction-in-progress, fixtures, and fittings
located thereon, and all easements, rights-of-way, and other appurtenances
thereto (collectively, the "Real Property");
b. PERSONAL PROPERTY. All tangible personal property and interests
therein, including machinery, equipment, furniture, office equipment and
supplies, communications equipment, furnishings, vehicles, and similar tangible
personal property (collectively, the "Personal Property"), and including, not
limited to, the personal property listed in SCHEDULE 2.1.b. hereto, which shall
be completed by mutual agreement of the parties, initialed, and attached prior
to Closing (the "Scheduled Personal Property");
c. INTELLECTUAL PROPERTY. (i) All copyrights in both published works
and unpublished works (collectively, the "Copyrights"), (ii) all registered and
unregistered trademarks, trade names, service marks, and fictional business
names, including, but not limited to, the exclusive rights of PCHI, if any, in
and to the
- 4 -
<PAGE> 51
name " Rheem Valley Convalescent Hospital", (collectively, the "Marks"), and
(iii) all know-how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints owned, used, or intended to be used, or licensed by the PCHI,
whether as licensee or licensor (collectively, the "Trade Secrets"), including
all applications for and all Contracts granted to PCHI with respect to any of
the foregoing, to the extent transfer or assignment is permitted by the terms
thereof, and including, but not limited to, the items listed in SCHEDULE 2.1.c.
hereto, which shall be completed by mutual agreement of the parties, initialed,
and attached prior to Closing, but specifically excluding (x) all proprietary
information contained in the employee or operation manuals of any Seller that
does not directly pertain to the ongoing operation of the Facility and conduct
of the Business in the Ordinary Course of Business after Closing; (y) all rights
in and to all owned and licensed computer hardware and software utilized,
maintained, and located at the data center of Paracelsus Healthcare Corporation
("Paracelsus"), the parent corporation of Sellers, in Houston, Texas; and (z)
all rights in and to the PrideTM and ServiceAdvantage programs (collectively,
the "Intellectual Property");
d. ASSIGNED CONTRACTS. To the extent transfer or assignment is
permitted by the terms thereof, all of the right, title, and interest of PCHI
under all Contracts, including the Union Contract, relating to PCHI's operating
the Facility and conducting the Business listed in SCHEDULE 2.1.d. hereto
(collectively, the "Assigned Contracts");
e. ASSIGNED LICENSES AND PERMITS. To the extent transfer or assignment
is permitted by applicable Legal Requirements, all right, title, and interest of
PCHI in all Governmental Authorizations of any Governmental Body held by PCHI
for operating the Facility and conducting the Business and listed in SCHEDULE
2.1.f. hereto (collectively, the "Assigned Licenses and Permits");
f. WARRANTY RIGHTS. To the extent transfer or assignment is permitted
by the terms thereof, the benefit of and right to enforce the covenants and
warranties that PCHI is entitled to enforce on the Closing Date relating to any
of the other Acquired Assets;
g. BUSINESS RECORDS. All documents, records, operating manuals and
files, and computer software of PCHI, including, without limitation, all
employment records, patient records, medical records, equipment records,
construction plans and specifications, and medical and administrative libraries,
but specifically excluding (x) all proprietary information contained in the
employee or operation manuals of any Seller that does not directly pertain to
the ongoing operation of the Facility and conduct of the Business in the
Ordinary Course of Business after Closing; (y) all rights in and to all owned
and licensed computer hardware and software utilized, maintained, and located at
the data center of Paracelsus in Houston, Texas; and (z) all rights in and to
the PrideTM and ServiceAdvantage programs; and
h. GOODWILL. All the goodwill and going concern value of the other
Acquired Assets and the Business.
2.2. TRANSFER WITHOUT LIENS. Each of PCHI and PREC, as their interests appear,
will convey good, valuable, and marketable title to the Acquired Assets (other
than the Real Property) to Buyer free and clear of all Liens, and good and
indefeasible title to the Real Property to Buyer free and clear of all Liens,
except for as to both, (i) the Permitted Liens (as defined in Section 7.6.b.
hereof), (ii) the Liens expressly assumed by Buyer as part of the Assumed
Liabilities (as defined in Section 3.1. hereof, and (iii) the Liens otherwise
disclosed under Section 7.6. hereof.
2.3. EFFECT OF PROHIBITED ASSIGNMENT. Nothing in this Agreement shall be
construed as an attempt or
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agreement to transfer or assign (i) any Contract, Governmental Authorization,
franchise, approval, variance, certification, or authority which cannot be
transferred or assigned without Consent, unless such Consent shall have been
given, or (ii) any Contract or claim as to which all the rights and remedies for
enforcement would not fully pass to Buyer incident to the transfers or
assignments required by this Agreement. However, in order for Buyer to realize
the full value of the items described in the foregoing clauses (i) and (ii),
Sellers shall, at the request of and under the direction of Buyer, and in the
name of Buyer or as Buyer may otherwise specify and as permitted by applicable
Legal Requirements, take all actions and do, or cause to be done, all such
things as shall in the opinion of Buyer reasonably be necessary or proper (x)
for the rights and obligations of any Seller thereunder to be preserved, and (y)
for, and to facilitate, the collection of any monies due and payable thereunder,
which Sellers shall hold for the benefit of and pay and deliver promptly to
Buyer.
2.4. ASSETS EXCLUDED. Buyer will not purchase from Sellers under this Agreement,
and the Acquired Assets shall not include, any of the following assets or
properties of Sellers, regardless of whether owned, held, or used in the
operation of the Facility or conduct of the Business (collectively, the
"Excluded Assets"):
a. CURRENT ASSETS. All cash on hand or in banks (or similar
depositories) or in investments, and all account, trade, intercompany, and other
receivables, and all prepaid expenses, deposits, and other current assets,
provided however, Buyer shall receive a credit against the Purchase Price for
the prepaid amounts received by Sellers for patient care to be delivered by
Buyer after Closing;
b. ORDINARY COURSE OF BUSINESS. All assets and properties used,
consumed, or disposed of in the Ordinary Course of Business during the Closing
Period;
c. CORPORATE DOCUMENTS; CERTAIN BUSINESS RECORDS. The corporate minute
books, minutes, Tax records, and other documents and records either required to
be maintained by Sellers' applicable Legal Requirements (but not including
patient medical records at the Facility) or not directly related to and
necessary for Buyer's operation of the Facility and conduct of the Business
after the Closing;
d. EXCLUDED CONTRACTS. All rights and privileges under Contracts not
included in the Assigned Contracts, including, but not limited to, all Contracts
between any Seller and any of its Affiliates;
e. NAME RIGHTS. The names "Paracelsus", "Paracelsus Healthcare", and
"Paracelsus Convalescent" (and all derivatives and variations thereof);
f. PROPRIETARY INFORMATION. (i) All proprietary information contained
in the employee or operation manuals of any Seller that does not directly
pertain to the ongoing operation of the Facility and conduct of the Business in
the Ordinary Course of Business after Closing; (ii) all rights in and to all
owned and licensed computer hardware and software utilized, maintained, and
located at the data center of Paracelsus in Houston, Texas; and (iii) all rights
in and to the PrideTM and ServiceAdvantage programs;
g. THIRD PARTY CLAIMS. Any claims or rights against third parties on
liabilities or obligations not included in the Assumed Liabilities;
h. TAX REFUNDS. All claims for refunds of Taxes for periods ending on
or prior to the Closing Date;
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i. INSURANCE REFUNDS. All rights under insurance policies, including
rights to any cancellation value on the Closing Date or such earlier date;
j. INSURANCE PROCEEDS. Except as otherwise provided herein, all
insurance proceeds and claims relating to any of the Acquired Assets or the
Business;
k. INTERCOMPANY ACCOUNTS. All intercompany accounts of any Seller and
any of its Affiliates;
l. OTHER ASSETS OF PREC. All assets and properties of PREC, other than
the Real Property;
m. ASSETS OF PARACELSUS. All assets and properties of Paracelsus; and
n. SCHEDULED EXCLUDED ASSETS. The property and assets listed in
SCHEDULE 2.4.n. hereto, which shall be completed by mutual agreement of the
parties, initialed, and attached prior to Closing.
SECTION 3.
ASSUMPTION OF LIABILITIES
3.1. ASSUMED LIABILITIES. At the Closing, Buyer will assume, become responsible
for, and obligated to pay, perform, and discharge, only the following
liabilities or obligations of Sellers and Paracelsus from operating the Facility
and conducting the Business (collectively, the "Assumed Liabilities"):
a. ASSIGNED CONTRACTS. The liabilities or obligations of Sellers and
Paracelsus under the Assigned Contracts to the extent such Assigned Contracts
have not been terminated and are not in default on the Closing Date;
b. ASSIGNED LICENSES AND PERMITS. The liabilities or obligations of
Sellers and Paracelsus under the Assigned Licenses and Permits (as listed in
SCHEDULE 2.1.e.), to the extent such Assigned Licenses and Permits have not been
terminated and are not in default on the Closing Date;
c. OTHER TRANSACTION DOCUMENTS. Any and all liabilities or obligations
specifically undertaken by Buyer under this Agreement or any of the other
Transaction Documents; and
d. OTHER ASSUMED LIABILITIES. The liabilities or obligations of Sellers
and Paracelsus, other than as listed on Schedule 2.1.d., as specifically listed
in SCHEDULE 3.1.d. hereto.
3.2. EXCLUDED LIABILITIES. Buyer shall not assume, become responsible for, or
otherwise obligated to pay, perform, or discharge, and the Assumed Liabilities
shall not include, any other liabilities or obligations of Sellers or
Paracelsus, whether accrued, absolute, contingent, or otherwise (collectively,
the "Excluded Liabilities").
SECTION 4.
EARNEST MONEY DEPOSIT; PURCHASE PRICE
4.1. PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to Sellers
for the Acquired Assets (the "Purchase Price") shall be FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00).
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4.2. METHOD OF PAYMENT. The Purchase Price, less any credits against such sum
required by the provisions hereof, shall be paid by Buyer to Sellers, at the
Closing, by wire transfer or delivery of other immediately available funds to
the account or accounts designated by Sellers prior to Closing.
4.3. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among
the Acquired Assets as set forth on SCHEDULE 4.4. hereto, which shall be
completed by mutual agreement of the parties, initialed, and attached prior to
Closing. The parties agree not to take any position on any Tax Return, upon
examination or audit of any Tax Return, in any claim for a Tax refund, or
otherwise that is inconsistent with such allocation of the Purchase Price, and
the parties further agree to duly prepare and timely file such federal income
Tax Returns necessary for reporting such allocation.
4.4. PRORATION AND PAYMENT OF TAXES. Each of Sellers and Buyer shall pay its pro
rata portion of 1998 real property and ad valorem or similar personal property
Taxes on any of the Acquired Assets. At the Closing, Sellers shall pay to Buyer
(in the form of a credit against the Purchase Price) estimated 1999 real
property and ad valorem or similar personal property Taxes pro rated through the
Closing Date based on the 1998 Taxes due. Sellers shall make available to Buyer
the statements and assessments reflecting the 1998 real property and ad valorem
or similar personal property Taxes. Buyer shall pay (or reasonably contest) such
sum to the appropriate Governmental Body when due, prior to becoming delinquent.
Buyer further shall promptly forward to Sellers, after receipt thereof, copies
of all 1999 Tax statements and assessments on any of the Acquired Assets. If the
1999 Taxes due are adjusted such that the Taxes due and payable are greater than
the 1998 Taxes, Sellers shall pay their pro rata portion of any deficiency
promptly after receiving notice that Buyer paid such Taxes. However, if the 1999
Taxes due shall be adjusted such that the Taxes due and payable are less than
the 1998 Taxes, Buyer shall refund to Sellers their pro rata portion of such
reduction upon receiving a copy of the 1999 Tax assessment. Promptly after the
Closing, Buyer shall notify the appropriate Governmental Bodies of the change in
the ownership of the Acquired Assets and its address for receiving any future
Tax notices. Except as specifically provided in this section, Sellers shall have
no other liability for Taxes payable by Buyer (including federal or state income
Taxes) relating to the ownership of the Acquired Assets, operation of the
Facility, conduct of the Business, the Transaction, or otherwise.
SECTION 5.
CLOSING
5.1. CLOSING DATE. Subject to the provisions for termination of this Agreement
in Section 13. hereof, and the provisions for Buyer to extend the date for the
closing in Section 5.3. hereof, the closing for the consummation of the
Transaction contemplated by this Agreement (the "Closing") shall take place at
the offices of Chicago Title Company, 388 Market Street, Suite 1300, San
Francisco, California 94111 at 10:00 a.m., California time, on May 14, 1999 or
on such other date mutually agreed upon in writing by the parties (the
"Scheduled Closing Date"). The date and time on which the Closing actually
occurs, whether on the Scheduled Closing Date or as such may be extended as
permitted hereby, is referred to herein as the "Closing Date". Subject to the
provisions of Section 13. hereof, failure to consummate the Transaction on the
date determined pursuant to this section will not result in the termination of
this Agreement and will not relieve any party of any obligation hereunder.
5.2. EFFECTIVE TIME. The Transaction shall be effective for Tax, accounting, and
all other purposes as of 12:01 a.m. on the day immediately following the Closing
Date (the "Effective Time"), unless otherwise mutually agreed upon in writing by
the parties.
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5.3. EXTENSION DATE. Buyer may, upon extending the date for Closing under the
ULO Purchase Agreement, extend the date for the Closing hereunder to a date or
dates coincident with the closing date or dates established by Buyer under the
ULO Purchase Agreement. Each new Closing Date set by Buyer pursuant to this
section may also be referred to herein as an "Extension Date".
SECTION 6.
ADDITIONAL COVENANTS AND AGREEMENTS
Buyer and Sellers covenant and agree as follows:
6.1. DISCLAIMER OF WARRANTIES. SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES,
EITHER EXPRESS OR IMPLIED, CONCERNING THE ACQUIRED ASSETS, EXCEPT AS
SPECIFICALLY SET FORTH IN SECTION 7. HEREOF. THE ACQUIRED ASSETS SHALL BE SOLD
BY SELLERS AND PURCHASED BY BUYER IN THEIR CONDITION AT CLOSING "AS IS" AND
"WHERE IS", WITH NO WARRANTY OF MERCHANTABILITY OR HABITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE, AND ALL SUCH WARRANTIES, WHETHER EXPRESS OR IMPLIED,
ARE HEREBY DISCLAIMED BY SELLERS.
SECTION 7.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer that, as applicable to it,
and except as disclosed on the disclosure schedule attached hereto, which shall
be arranged in paragraphs corresponding to the numbered and lettered sections of
this Section 7. (the "Sellers' Disclosure Schedule"), and which such Sellers'
Disclosure Schedule shall be completed by mutual agreement of the parties,
initialed, and attached prior to Closing, each of the following statements is
true and accurate on the Signing Date and will be true and accurate in all
respects on and as of the Closing Date:
7.1. CORPORATE CAPACITY. Each Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its respective
incorporation, with all requisite corporate power and authority to own, operate,
and lease its respective properties and to carry on its respective business as
now being conducted by it. Each Seller has delivered or made available to Buyer
complete and accurate copies of their respective Articles of Incorporation and
Bylaws, as amended and in effect on the Closing Date.
7.2. CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
a. The execution and delivery by each Seller of this Agreement and the
other Transaction Documents to which it is a party:
i. Is within the respective corporate power of each Seller and
is not in contravention of the terms of their respective Articles of
Incorporation or Bylaws; and
ii. Will not: (A) result in any breach or acceleration of
maturity of any indenture or Contract to which any Seller is a party or by which
any Seller or any of the Acquired Assets is bound, (B) constitute a violation of
any judgment, decree, or order of any court of competent jurisdiction applicable
to any Seller, and (C) violate any Legal Requirement applicable to any Seller,
the Facility, the Business, or any of the Acquired Assets.
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b. This Agreement has been duly and validly executed and delivered by
each Seller and, as of the Closing, the other Transaction Documents to be
executed and delivered by each Seller will have been duly and validly executed
and delivered by them. Upon approval of this Agreement by the Board of Directors
of each Seller and by Paracelsus, as the shareholder of each Seller, this
Agreement will constitute, and upon such approval and their execution and
delivery of the other Transaction Documents to be executed and delivered by each
Seller, the other Transaction Documents will constitute, the valid, legal, and
binding obligation of each Seller, as the case may be, enforceable against each
such party in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, reorganization, insolvency, or
other Legal Requirements affecting the enforcement of creditors' rights
generally or the availability of equitable remedies.
7.3. GOVERNMENTAL AUTHORIZATIONS. PCHI has all Governmental Authorizations
relating to the ownership of the Acquired Assets and operation of the Business
as are necessary and required for such ownership and operation, except where the
failure to obtain such Governmental Authorizations would not have a material
adverse effect on the ownership of the Acquired Assets or the operation of the
Business. Upon its completion, SCHEDULE 2.1.f. will contain a complete
description of all material Governmental Authorizations of any Governmental Body
and their respective dates of termination or renewal, held by PCHI relating to
the operation of the Facility and conduct of the Business, together with any
formal and specific notices or directives received by Sellers from the
Governmental Body responsible for such items, for which noncompliance with such
notice or directive would likely cause the revocation, suspension or diminution
in term for such item, all of which are, to the best of Sellers' Knowledge, in
good standing.
7.4. SCHEDULED CONTRACTS. SCHEDULE 2.1.d. lists all Contracts to which PCHI is a
party involving obligations relating to the Business (the "Scheduled
Contracts"). Sellers have delivered or made available to Buyer true and correct
copies of all Scheduled Contracts. All of the Scheduled Contracts which Buyer
has agreed to assume pursuant to this Agreement are valid and binding
obligations of the parties thereto, are in full force and effect, and are
enforceable against the parties thereto in accordance with their respective
terms. To the best of Seller's Knowledge, neither PCHI nor any of the other
parties to those Scheduled Contracts which Buyer has agreed to assume pursuant
to the this Agreement (i) are in default under the terms of such Scheduled
Contracts, or (ii) consider PCHI to be in default thereunder. To the best of
Seller's Knowledge, no party to any of the Scheduled Contracts which Buyer has
agreed to assume pursuant to this Agreement intends to terminate or adversely
modify its agreement with respect thereto, or adversely change the volume of
business done thereunder.
7.5. SCHEDULED LEASES. SCHEDULE 2.1.d. lists all personal property leases to
which PCHI is a party relating to the Business and SCHEDULE 2.1.a. lists all
leases to which PCHI is a party relating to the Business involving rental of
real property by PCHI as lessor, lessee, sublessor, or sublessee (the leases
disclosed in SCHEDULE 2.1.d. AND SCHEDULE 2.1.a. collectively the "Scheduled
Leases"). Sellers have delivered or made available to Buyer true and correct
copies of all Scheduled Leases. All of the Scheduled Leases which Buyer has
agreed to assume pursuant to this Agreement 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. To the best of Seller's
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Knowledge, no event has occurred including, but not limited to, the execution,
delivery and performance of this Agreement and the consummation of the
Transaction which (whether with or without notice, lapse of time or both) would
constitute a default thereunder. To the best of Seller's Knowledge, neither PCHI
nor any of the other parties to any of those Scheduled Leases which Buyer has
agreed to assume pursuant to this Agreement (i) are in default under the terms
of any such Scheduled Lease, or (ii) considers PCHI to be in default thereunder.
PCHI has not, as lessor under any such Scheduled Lease, accepted prepaid rent
more than one month in advance or waived any material rights or obligations
thereunder. No consents or approvals are required for PCHI to assign to Buyer as
contemplated by this Agreement the Scheduled Leases to which it is a party,
except as disclosed in Section 7.5. of Sellers' Disclosure Schedule.
7.6. TITLE TO ACQUIRED ASSETS AND RELATED MATTERS.
a. On the Closing Date, each Seller, as their interests appear, will
hold and convey to Buyer good, valid, and marketable title to the Acquired
Assets (other than the Real Property), a good and valid leasehold estate and
right of possession in the Real Property, free and clear of all Liens, except as
otherwise provided in Section 2.2. or this Section 7.6. hereof.
b. On the Closing Date, no Real Property designated in SCHEDULE 2.1.a.
as a Real Property interest for which a Title Policy (as defined in Section
9.9.a. hereof) shall be obtained, will be subject to any recorded leases,
mortgages, deeds of trust, liens, encumbrances, easements, rights of way,
claims, charges, equities, covenants, conditions, restrictions, reservations,
limitations or other matters affecting such Real Property or Real Property
interest, except for: (i) those matters set forth in SECTION 7.6.b. OF SELLERS'
DISCLOSURE SCHEDULE; (ii) unrecorded leases as set forth in SCHEDULE 2.1.d.;
(iii) Liens for current Taxes; (iv) zoning and building laws, ordinances,
resolutions, and regulations;(v) those matters set forth in the standard
Schedule B, Part 1, Exceptions from Coverage shown on the Title Commitments (as
defined in Section 9.9.a. hereof), as the same may be revised following receipt
of the Survey (as defined in Section 9.10.a. hereof), but only to the extent
that Seller has not created or caused any such matters, or has no Knowledge of
any such matters, or have otherwise disclosed them in this Agreement; (vi)
rights-of-way, building or use restrictions, exceptions, variances, reservations
or other limitations or matters affecting title to or use of the Real Property
(excluding any variance or nonconforming use known to Seller but not disclosed
in this Agreement) which do not materially impair the value of the Real Property
or materially interfere with or impair the current use of the Real Property or
any portion thereof or for which title insurance coverage is being provided to
Buyer; (vii) such easements, rights-of-way, covenants, conditions, restrictions,
reservations, limitations and other encumbrances as do not materially interfere
with or impair the current use of the Real Property or any portion thereof or
materially impair the value of the Real Property, but only to the extent that
Seller has not created or caused any such matters, or has no Knowledge of any
such matters, or have disclosed them in this Agreement, or to the extent they
are disclosed as special exceptions in the Title Commitments provided to Buyer;
and (viii) 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 the Real Property, are not caused
by Seller after the date of this Agreement, and as do not: (A) materially
interfere with or impair the current use and operation or any reasonably
foreseeable future development or operation of the Real Property or any part
thereof; (B) materially impair Seller's interest therein; or (C) materially
limit the scope or coverage of the Title Policies to be issued to Buyer
(collectively, the "Permitted Liens").
c. SCHEDULE 2.1.a. and SCHEDULE 2.1.d. include true and accurate
descriptions of all Real Property owned or leased by any Seller and all tangible
personal property (excluding cash, property with an aggregate value in a
non-material amount, and the other Excluded Assets) leased by Seller, in either
case relating to the Acquired Assets. No Seller is aware of or has received any
notice from any Governmental
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Body of any violation of any Legal Requirements in respect of such property or
structures or their use by such Seller. The Acquired Assets consisting of owned
personal property are subject to no Liens, except the security interests of
record set forth in SECTION 7.6.c. OF SELLERS' DISCLOSURE SCHEDULE, which
schedule is a copy of Uniform Commercial Code ("UCC") search reports duly
obtained by Sellers in the last thirty (30) days and which search reports show
security interests of record relating to such Acquired Assets in the State of
California.
d. SECTION 7.6.d. OF SELLERS' DISCLOSURE SCHEDULE describes all
construction work, if any, which any Seller or its predecessors has contracted
for and which is presently in progress relating to the Facility, and also
contains a good faith estimate, as of the date of this Agreement, of the cost to
complete each such project.
7.7. EMPLOYEE BENEFIT PLANS. SECTION 7.7. OF SELLERS' DISCLOSURE SCHEDULE lists
any "employee benefit plans" that are described in ERISA that cover one or more
employees of PCHI employed at the Facility and that are sponsored or contributed
to by PCHI (other than any defined contribution "employee pension benefit plan"
as defined in ERISA, that does not require any contribution by PCHI, 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 PCHI).
7.8. LITIGATION AND RELATED MATTERS. There is no Proceeding before any
Governmental Body or before any private arbitration tribunal pending, or to the
best of Seller's Knowledge, threatened against any Seller which materially
affects the Acquired Assets or the Business. No Seller is subject to any
currently existing Proceeding by any Governmental Body which materially affects
the Acquired Assets or the Business.
7.9. PCHI EMPLOYEES.
a. SECTION 7.9.a. OF SELLERS' DISCLOSURE SCHEDULE contains a list of
all of PCHI employees at the Facility as of February 28, 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, any severance arrangements
with such employees. Since February 28, 1998 there has not been any increase in
the compensation payable or to become payable by PCHI to any such employees, or
any bonus payment or arrangement made to or with any such person, nor has there
been any change in PCHI's personnel policies, except (in either case) in the
Ordinary Course of Business by PCHI in accordance with established personnel
policies.
b. None of PCHI's employees at the Facility are employed by PCHI
pursuant to an employment agreement. SECTION 7.9.b. OF SELLERS' DISCLOSURE
SCHEDULE includes a list of all employees of PCHI at the Facility (other than
"part-time employees" as such term is defined in the Worker Adjustment and
Retraining Notification Act, hereinafter referred to as the "WARN Act") who have
been terminated or laid-off or whose employment with PCHI at the Facility
otherwise has ceased since December 31, 1998.
7.10. LABOR MATTERS. With respect to the Facility, PCHI does not have any
collective bargaining agreements with any labor union and there are no current
negotiations with a labor union. With respect to the Facility, PCHI is in
compliance with all applicable Legal Requirements 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
Acquired Assets. With respect to the Facility PCHI has not received any notice
of an unfair
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labor practice complaint against PCHI pending before the National Labor
Relations Board. With respect to the Facility, there are no labor strikes,
disputes, arbitrations, slowdowns or stoppages actually pending against or
affecting PCHI, nor has PCHI received notice of any threatened labor strike,
dispute, arbitration, slowdown, or stoppage. With respect to the Facility, no
grievances which might have an adverse effect on PCHI or any such arbitration
proceeding arising out of or under collective bargaining agreements is pending
and PCHI has no Knowledge that any claim therefor exists. With respect to the
Facility, PCHI has not experienced any employee strikes since the date it
acquired the Business. PCHI will advise Buyer of any such labor dispute which
shall arise before the Closing.
7.11. NO CONSENTS. No Consent, filing, or registration with or from any
Governmental Body or any other Person is or will be required in connection with
either Seller's execution, delivery, and performance under this Agreement or the
other Transaction Documents to which each is a party.
7.12. TAXES. Each Seller has filed all Tax Returns required by applicable Legal
Requirements to be filed by it and has paid all Taxes 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 Taxes not yet due) upon any
of the Acquired Assets.
7.13. BROKERAGE. Except as set forth in SECTION 7.13. OF SELLERS' DISCLOSURE
SCHEDULE, Sellers have not engaged any financial advisor, broker or similar
entity in respect of the Transaction which may be entitled to a fee or
commission in connection with such Transaction.
7.14. ENVIRONMENTAL. Except as disclosed in SECTION 7.14 OF SELLERS' DISCLOSURE
SCHEDULE, or the Environmental Study:
a. Sellers are currently, and at all times have been, in compliance
with all Environmental Laws (as hereinafter defined) except where failure to
comply with such Environmental Laws would not have a material adverse effect on
the Facility;
b. Sellers have all permits, authorizations or other approvals required
under environmental laws to operate the Assets and the Real Property, and are in
compliance with all such permits, authorizations and approvals except where
failure to comply with such permits, authorizations or approvals, individually
or in the aggregate, would not have a material adverse effect on the Facility;
c. Sellers have not generated, handled, stored, disposed of or released
any Hazardous Substance (as hereinafter defined) on any of the Real Property,
except in compliance with applicable Environmental Laws except where failure to
comply with such Environmental Laws, individually or in the aggregate, would not
have a material adverse effect on the Facility;
d. There are no polychlorinated biphenyls (PCBs) or transformers,
capacitors, ballasts or other equipment that contains dielectric fluid
containing PCBs at levels in excess of fifty parts per million (50 ppm) present,
constructed, placed, deposited, stored, disposed of or located on the Real
Property;
e. There are currently no aboveground or underground storage tanks for
the storage of Hazardous Substances located on the Real Property, and, to the
best knowledge of Sellers, there have never been any such aboveground or
underground storage tanks located on the Real Property;
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f. Sellers have not received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that Sellers are not in full compliance with Environmental Laws.
There is no Environmental Claim (as defined below) pending or threatened against
any of the Sellers or with respect to the Facility.
g. There are no present or, to the best of Sellers' knowledge, past
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the generation, storage, release, emission, discharge,
presence or disposal of any Hazardous Substance, that could form the basis of
any Environmental Claim against Sellers under any Environmental Law in effect at
any time at or prior to the Closing.
h. The inclusion of any item disclosed in SECTION 7.17.OF SELLERS'
DISCLOSURE SCHEDULE and the inclusion of the reference to the Environmental
Study hereinabove do not constitute admissions by Sellers or Buyer that any
matters disclosed in such Schedule or Environmental Study constitutes a
violation of any Environmental Law.
The following terms shall have the following meanings as used herein:
"Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Substances at any location, whether or not owned
or operated by the Sellers or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means the federal, state (including specifically,
but not by way of limitation, the State of California), and local environmental,
health or safety laws, regulations, ordinances, rules and policies and common
law in effect on the date hereof and the Closing Date relating to the
generation, use, refinement, handling, treatment, removal, storage, production,
manufacture, transportation, disposal, arranging for disposal, emissions,
discharges, releases or threatened releases of Hazardous Substances, or
otherwise relating to protection of human health, worker safety or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), as the same may be amended or
modified to the date hereof and the Closing Date, including, without limitation,
the statutes and regulations listed below:
Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901, et seq.
Federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq.
Federal Clean Air Act, 42 U.S.C. Section 7401, et seq.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977,
33 U.S.C. Section 1251, et seq. Federal Insecticide, Fungicide, and Rodenticide
Act, Federal Pesticide Act of 1978, 7 U.S.C. Section 136, et seq.
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Federal Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.
Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq.
Federal Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.
Federal Occupational Safety & Health Act of 1970, 29 U.S.C. Section
651, et seq.
Medical Waste Tracking Act of 1988, 42 U.S.C. Section 6992, et seq.
Marine Protection Research & Sanctuaries Act of 1972, 33 U.S.C. Section
1401, et seq.
The Act to Prevent Pollution from Ships, 33 U.S.C. Section 1901, et
seq.
California Environmental Quality Act of 1970, (CEQA), California
Government Code, Section 65914.
California Hazardous Waste Control Law, California Health & Safety
Code, Section 25100 et seq.
Nuclear Regulatory Commission Regulations, 10 C.F.R. Part 20 and 10
C.F.R. Part 61.
Public Health Service Regulations, 42 C.F.R. Part 72.
Food & Drug Administration Regulations, 21 C.F.R. Parts 58 and 211.
U.S. Department of Transportation Regulations, 49 C.F.R. Parts 171-179.
U.S. Department of Agricultural Regulations, 9 C.F.R. Parts 50-56.
U.S. Postal Service Regulations, 39 Part III.
"Hazardous Substances" means any toxic or hazardous waste, pollutants
or substances, explosives, radioactive materials, or Medical Waste (as defined
below), including, without limitation, friable asbestos, asbestos-containing
material, PCBs, petroleum products and byproducts, substances defined or listed
as "hazardous substance", "toxic substance", "toxic pollutant", or similarly
identified substance or mixture, in or pursuant to any Environmental Law.
"Medical Waste" means any substance, pollutant, material, or
contaminant listed or regulated under the Medical Waste Tracking Act of 1988, 42
U.S.C. Section 6992, et seq., 49 C.F.R. Section 173, 186, and/or the California
Waste Management Act California Health & Safety Code, Section 117600 et seq.
7.15. FINANCIAL STATEMENTS. Attached as SECTION 7.15. OF SELLERS' DISCLOSURE
SCHEDULE is a true, correct, and complete copy of the unaudited income statement
of the Facility for the twelve months ended December 31, 1998 (the "Income
Statement"), and the unaudited balance sheet of the Facility (the "Balance
Sheet") (the Income Statement and the Balance Sheet are referred to herein
collectively as the "Financial Statements"). To the best of Sellers' knowledge
the Financial Statements have been prepared from and are in substantial
accordance with the books and records of PCHI, and fairly present in all
material respects the operations of the Facility for the period indicated,
except (a) as indicated by the notes thereto, and (b) with respect to any
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changes which would result from year-end audit adjustments which in the
aggregate are not materially adverse to the business or financial condition of
the Facility.
7.16. CENSUS REPORT. Attached as SECTION 7.16. OF SELLERS' DISCLOSURE
SCHEDULE is a true copy of the patient census report for the Facility as of
January 31, 1999.
SECTION 8.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that, except as disclosed on
the disclosure schedule attached hereto, which shall be arranged in paragraphs
corresponding to the numbered and lettered sections of this Section 8. (the
"Buyer's Disclosure Schedule"), and which such Buyer's Disclosure Schedule shall
be completed by mutual agreement of the parties, initialed, and attached prior
to Closing, each of the following statements is true and accurate on the date of
this Agreement and will be true and accurate in all respects on and as of the
Closing Date:
8.1. CORPORATE CAPACITY. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, with all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business as now being conducted by it. Buyer has
delivered or made available to Sellers a complete and correct copy of its
Articles of Incorporation and Bylaws, as amended and in effect on the Closing
Date.
8.2. CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
a. The execution and delivery by Buyer of this Agreement and the other
Transaction Documents to which it is a party:
i. Is within the corporate power of Buyer and is not in
contravention of the terms of its Articles of Incorporation or Bylaws; and
ii. Will not: (A) result in any breach or acceleration of
maturity of any Contract or indenture to which Buyer is a party, (B) constitute
a violation of any judgment, decree, or order of any court of competent
jurisdiction applicable to Buyer, and (C) violate any Legal Requirement
applicable to Buyer.
b. This Agreement has been duly and validly executed and delivered by
Buyer and, as of the Closing, the other Transaction Documents to be executed and
delivered by Buyer will have been duly and validly executed and delivered by it.
Upon approval of this Agreement by the Board of Directors of Buyer, this
Agreement will constitute, and upon such approval and their execution and
delivery, of the other Transaction Documents to be executed and delivered by
Buyer the other Transaction Documents will constitute, the valid, legal, and
binding obligation of Buyer, enforceable against such party 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.
8.3. NO CONSENTS. No Consent, filing, or registration with or from any
Governmental Body or any other Person is or will be required in connection with
Buyer's execution, delivery, and performance under this Agreement or the other
Transaction Documents to which it is a party.
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8.4. LITIGATION AND RELATED MATTERS. There is no Proceeding before any
Governmental Body or before any private arbitration tribunal pending, or to the
best of Buyer's Knowledge, threatened against Buyer which materially affects its
assets or properties. Buyer is not subject to any currently existing Proceeding
by any Governmental Body which materially affects its assets or properties.
8.5. NO SALES TAX DUE. At Closing Buyer will possesses all sales tax permits
required for the resale of the inventory purchased hereunder. The inventory
purchased hereunder, if any, is not acquired for consumption or use and will be
resold in the Ordinary Course of Business of Buyer.
8.6. BROKERAGE. Buyer has not engaged any financial advisor, broker or similar
entity in respect of the Transaction which may be entitled to a fee or
commission in connection with such Transaction.
8.7. NO MISLEADING STATEMENTS. No representation or warranty by Buyer contained
in this Agreement, and no statement contained in any schedule (including any
supplement or amendment thereto) and the Transaction Documents to be delivered
at the Closing by or on behalf of Buyer to Sellers or any of its Representatives
in connection with the Transaction, contains or will contain any untrue
statement of a material fact, or, to the best Knowledge of Buyer, omit 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 Sellers or, are hereafter
furnished, provided or made available to Sellers, are or shall be, to the best
of Buyer's Knowledge, true, correct, and complete.
SECTION 9.
RIGHTS AND OBLIGATIONS PENDING CLOSING
9.1. CONFIDENTIAL INFORMATION.
a. Prior to consummation of the Transaction or termination of this
Agreement, the parties to will be providing one another with or have access to
information about each other and the Facility, Acquired Assets, and the Business
which is protected, secret, non-public, or proprietary in nature (the
"Confidential Information"). Each party agrees to hold confidential, to protect,
and not to disclose, except on a "need-to-know" basis to its Representatives,
all Confidential Information provided to it by another party to this Agreement;
provided, however, that for purposes of this section, Confidential Information
shall not include information that, without violating this Agreement, (i) was
known to such party prior to the disclosure by another party, (ii) is or becomes
generally available to the public other than by violating this Agreement, or
(iii) otherwise becomes lawfully available to a party to this Agreement on a
nonconfidential basis from a third party who is not, to the best of the
Knowledge of such party to this Agreement, under an obligation of confidence to
the other party to this Agreement. If this Agreement is terminated prior to
consummation of the Transaction, then each party shall return all documents and
other material, whether or not confidential, provided to it pursuant to this
Agreement by or on behalf of the other party to this Agreement. The foregoing
obligations of confidentiality and nondisclosure shall be in effect for a period
of three (3) years beyond such termination. During such period, no party shall
use any of the Confidential Information received from a party to the detriment
of any other party.
b. In the event that a party, or anyone to whom it supplies the
Confidential Information, receives a request to disclose all or any part of the
Confidential Information under the terms of a subpoena or order issued by a
Governmental Body, the party agrees (i) to notify the other party immediately of
the existence, terms, and circumstances surrounding such request, (ii) to
consult with the other party on the
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advisability of taking legally available steps to resist or narrow such request,
and (iii) if disclosure of such Confidential Information is required to prevent
a party from being held in contempt or subject to other penalty, to furnish only
such portion of the Confidential Information as the disclosing party is legally
compelled to disclose and to exercise its best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to the
disclosed Confidential Information.
9.2. ACCESS AND INVESTIGATION. During the Closing Period, Seller will afford
Buyer and its Representatives, at mutually agreeable times upon at least
forty-eight (48) hours notice, access to Seller's personnel, properties,
Contracts, books and records, and other documents and data relating to the
Facility, Acquired Assets, and the Business, (ii) furnish Buyer and its
Representatives with copies of all such Contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (iii) furnish
Buyer and its Representatives with such additional related financial, operating,
and other data and information as Buyer or its Representatives may reasonably
request.
9.3. OPERATION OF FACILITY; CONDUCT OF BUSINESS. During the Closing Period, PCHI
will, subject to the exercise of its reasonable business judgment:
a. Operate the Facility and conduct the Business only in the Ordinary
Course of Business;
b. Use commercially reasonable efforts to preserve intact the current
business organization, keep available the services of the current employees, and
maintain the relations and goodwill with suppliers, customers, landlords,
creditors, employees, agents, and others currently having business relationships
relating to the Business with PCHI;
c. Perform in all material respects its obligations under the Assigned
Contracts and, except in the Ordinary Course of Business, not amend or cancel
any Assigned Contracts;
d. Keep in full force and effect current insurance policies or other
comparable insurance coverage; and
e. Within a reasonable period of time prior to Closing, permit Buyer to
make offers to any of the personnel who work at the Facility or otherwise in the
Business for employment by Buyer subsequent to Closing, which personnel shall be
allowed by PCHI to accept or reject such offers without penalty (for the purpose
of this subsection, the term "penalty" shall not be interpreted to refer to the
availability, or lack of availability, of any severance benefit).
9.4. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, during the Closing Period, PCHI will not, without the prior Consent
of Buyer, take any affirmative action, or fail to take any commercially
reasonable action within its control, as a result of which any of the changes or
events listed in Section 9.3. hereof is likely to occur or fail to occur, as the
case may be.
9.5. REQUIRED APPROVALS; GOVERNMENTAL AUTHORIZATIONS. Seller shall assist and
cooperate with Buyer and its Representatives in (i) making all filings that
Buyer elects to make or is required by Legal Requirements to be make in order to
consummate the Transaction, and (ii) obtaining all Governmental Authorizations
and Consents from any other Persons which are conditions precedent to the
consummation of the Transaction or otherwise necessary or appropriate with
respect to this Transaction. Buyer acknowledges that, except as provided in this
section, Sellers shall have no responsibility for obtaining any
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Governmental Authorizations to or of the transfer of any of the Assigned
Licenses and Permits or for obtaining any necessary Consents to the assignment
of the Assigned Contracts. Notwithstanding, Buyer agrees to use its reasonable
best efforts to secure such Governmental Authorizations and Consents as soon as
practicable and prior to the Closing.
9.6. BEST EFFORTS. During the Closing Period, each of Sellers and Buyer will use
their respective best efforts to cause the conditions in Section 10. and Section
11. hereof to be satisfied.
9.7. ENVIRONMENTAL STUDY.
a. OBLIGATION TO DELIVER. Seller has delivered a Phase I Environmental
Site Assessment of Rheem Valley Convalescent Hospital 348 Rheem Boulevard,
Moraga, California 94556, prepared Environmental Management Group, Inc. ("EMG"),
EMG Corporate Center, 11011 McCormick Road, Baltimore, Maryland 21031 (the
"Environmental Study") to Buyer.
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after the Signing Date to either
approve or reject the environmental condition of the Facility, Acquired Assets,
and the Business. Buyer shall not reject the environmental condition of any
portion of the Facility, Acquired Assets, or the Business, unless the cost to
cure any objections shall reasonably exceed in the aggregate $50,000.00. Buyer
shall give Sellers notice thereof within ten (10) days after receiving the
Environmental Study (the "Approval Period") and, if within fifteen (15) days
after receiving such notice ("Cure Period"), Sellers do not cure, or commence to
cure for items reasonably requiring more than 15 days to cure, the objection to
the environmental conditions that exceed in the aggregate $50,000.00, then Buyer
may, in its sole discretion, terminate this Agreement under Section 13.1.a.
hereof by giving notice thereof to Sellers within two (2) Business Days after
the end of the Cure Period. In the event the timing of the cure procedure set
forth in this subsection conflicts with the Closing Date, in that Sellers cannot
reasonably cure the objection to the environmental condition within the Cure
Period provided, but are making diligent efforts toward that end, the Closing
Date shall be automatically extended by a reasonable number of days to permit
Sellers to complete their cure of Buyer's objection to the environmental
condition. Any item relating to the environmental condition of the Facility,
Acquired Assets, or the Business to which Buyer does not object in writing
within the Approval Period provided herein for making such objections is deemed
to be approved.
9.8. TITLE COMMITMENT; TITLE POLICY.
a. OBLIGATION TO DELIVER.
i. TITLE COMMITMENT. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, (i) for each parcel of Real Property that is designated in
SCHEDULE 2.1.A. as leased by a Seller and for which a title policy will be
delivered (the "Leased Real Property"), one or more binding commitments
(collectively, the "Title Commitment") for the issuance of one or more ALTA
Leasehold Owners Policy of Title Insurance (10-17-92) Form B with extended
coverage, in an aggregate amount equal to $500,000 (collectively, the "Title
Policy"), showing in either PREC or PCHI, as the case may be, good leasehold
title to the Leased Real Property, subject only to the Permitted Liens (as
defined in Section 7.6.b. hereof).
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ii. TITLE POLICY. The Title Policy shall be issued by Chicago
Title Company, 388 Market Street, Suite 1300, San Francisco, California 94111
(the "Title Company"), and shall insure good leasehold title to the Real
Property covered by the Title Commitment in Buyer, subject only to the Permitted
Liens. The Title Policy for the Real Property for which an "as built" survey is
required pursuant to Section 9.10.a.i. hereof shall contain an endorsement
insuring over all printed or typed general exceptions for which insurance may be
obtained by the delivery of such surveys. The Title Policy shall contain a
zoning endorsement and such other endorsements as required hereby. Any
additional endorsements to the Title Policy, and any Mortgagee's Policy of Title
Insurance for any Lender of Buyer, shall be at Buyer's sole cost and expense.
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after receiving the Title Commitment to
either approve or reject the title to the Real Property. If Buyer rejects title
to any portion of the Real Property, it shall give Sellers notice thereof within
ten (10) days after receiving the Title Commitment and, if within fifteen (15)
days after receiving such notice, Sellers do not cure, or commence to cure for
items reasonably requiring more than 15 days to cure, the title objection, then
Buyer may, in its sole discretion, terminate this Agreement under Section
13.1.a. hereof by giving notice thereof to Sellers within two (2) Business Days
after the end of such cure period. In the event the timing of the cure procedure
set forth in this subsection conflicts with the Closing Date, in that Sellers
cannot reasonably cure the title objection within the period provided, but are
making diligent efforts toward that end, the Closing Date shall be automatically
extended by a reasonable number of days to permit Sellers to complete their cure
of Buyer's title objection. Any title item set forth on the Title Commitment
which Buyer does not object to in writing within the period provided herein for
making such objections is deemed to be approved.
9.9. SURVEY.
a. OBLIGATION TO DELIVER.
i. AS-BUILT SURVEY. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, an "as-built" survey for each parcel of Real Property that is
designated in Schedule 2.1.a. as Real Property for which an as-built survey
shall be obtained (the "As-Built Survey"). The As-Built Survey shall be prepared
by a surveyor licensed in the State of California and in accordance with
ALTA-ASCM standards for Class A urban-commercial surveys, and dated as of a date
within two hundred and forty (240) days prior to the Closing, and shall be
certified in favor of Buyer and the Title Company, and shall contain sufficient
detail to provide the Title Company the basis for issuing the Title Policy
without survey exceptions.
ii. BOUNDARY SURVEY. Sellers, at their sole cost and expense,
shall order and deliver to Buyer at least ten (10) Business Days prior to the
Closing Date, a "boundary" survey for each parcel of Real Property that is
designated in Schedule 2.1.a. as Real Property for which a boundary survey shall
be obtained (the "Boundary Survey"). The Boundary Survey shall be prepared by a
surveyor licensed in the State of California, and dated as of a date within two
hundred and forty (240) days prior to the Closing, and shall be certified in
favor of Buyer and the Title Company, and shall contain sufficient detail to
provide the Title Company the basis for issuing the Title Policy without survey
exceptions. The As-Built Survey and Boundary Survey are also sometimes referred
to herein collectively as, the "Survey".
b. OBJECTION; RIGHT TO CURE. Buyer shall have until the earlier of (i)
the Closing Date, and (ii) ten (10) days after receiving the Survey to approve
or reject the matters set forth thereon. If Buyer
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rejects the Survey, it shall give Sellers notice thereof within ten (10) days
after receiving the Survey, and if within fifteen (15) days after receiving such
notice, Sellers do not cure to Buyer's reasonable satisfaction, or commence to
cure for items reasonably requiring more than 15 days to cure, the objection to
the Survey, then Buyer may, in its sole discretion, terminate this Agreement
under Section 13.1.a. hereof by giving notice thereof to Sellers within two (2)
Business Days after the end of such cure period. In the event the timing of the
cure procedure set forth in this subsection conflicts with the Closing Date, in
that Sellers cannot reasonably cure the objection to the Survey within the
period provided, but are making diligent efforts toward that end, the Closing
Date shall be automatically extended by a reasonable number of days to permit
Sellers to complete their cure of Buyer's objection to the Survey. Buyer shall
be deemed to have accepted the matters set forth on the Survey to the extent
Buyer does not object thereto within the period provided herein for making such
objections.
9.10. CASUALTY. If, prior to the Closing, the Facility or any other Acquired
Assets sustain damage or destruction by fire or other casualty that Sellers do
not repair prior to Closing, the following provisions shall apply:
a. If (i) such damage or destruction results in any of the Owned
Facility being unusable for their current purpose, or (ii) the cost to repair
such damage or destruction, or to replace such damaged or destroyed Facility or
other Acquired Assets (collectively, the "Cost to Repair"), is greater than
$250,000 and Seller does not have insurance coverage therefor, Buyer may elect
either to (1) terminate this Agreement by notice thereof to Sellers and all
obligations of the parties hereunder, or (2) consummate the Transaction and
receive as a credit against 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 the preceding Section 9.10.a. does not apply, then:
(i) If Sellers have insurance coverage for the Cost to Repair
any such damage or destruction, Buyer may elect either to (1) receive from
Sellers all of the proceeds of such insurance paid or payable and pay to Sellers
the full amount of the Purchase Price, or (2) allow Sellers to retain all such
insurance proceeds subject to a reduction of the Purchase Price in the amount
thereof; and
(ii) If, and to the extent that, the Cost to Repair any such
damage or destruction is not covered by insurance, including, without limitation
costs that are subject to a deductible or self-insured retention, 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.
9.11. CONDEMNATION. If, prior to Closing, any part of the Acquired Assets are
condemned, or become subject to any pending or threatened condemnation by any
Governmental Body, Buyer, at its option, may:
a. Close the Transaction, in which event all of the condemnation
proceeds shall be payable to Buyer, and Sellers shall assign all claims therefor
and all right, title and interest therein to Buyer; or
b. Elect to terminate this Agreement under Section 13.1.a. hereof by
giving notice thereof to Sellers within three (3) Business Days after Buyer
receives notification of such condemnation.
9.12. BULK SALES COMPLIANCE. Buyer hereby waives compliance by Sellers with the
provisions of Bulk Sales, Bulk Transfer, Fraudulent Transfer or Conveyance, or
similar Legal Requirements, if any, applicable
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to this Transaction, and Sellers agree to pay and discharge when due all claims
of creditors which could be asserted against Buyer by reason of such
non-compliance to the extent any such liabilities are not specifically assumed
by Buyer hereunder. Notwithstanding the preceding sentence, in its sole
discretion, Sellers may elect to satisfy any such Legal Requirements, in which
case the satisfaction thereof shall be added as a condition to Sellers'
obligations to close under Section 10. hereof.
9.13. NOTIFICATION. During the Closing Period, Seller, on the one hand, and
Buyer, on the other hand, will promptly notify the other party in writing if
Seller, on the one hand, and Buyer, on the other hand, becomes aware of any fact
or condition that causes or constitutes a breach, (i) on the one hand, of any of
the Seller's representations and warranties as of the date of this Agreement, or
if the Seller becomes aware of the occurrence after the date of this Agreement
of any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition, or (ii) on the other hand, of any of the
Buyer's representations and warranties as of the date of this Agreement, or if
Buyer becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Sellers' Disclosure Schedule or the Buyer's Disclosure
Schedule, as the case may be, if such disclosure schedule were dated the date of
the occurrence or discovery of any such fact or condition, Seller, on the one
hand, and Buyer, on the other hand, will promptly deliver to the other party a
supplement to the applicable disclosure schedule specifying such change, any of
which such supplement is subject to the approval of Seller in its sole
discretion, on the one hand, or Buyer, in its sole discretion, on the other
hand. During the same period, (i) Seller will promptly notify Buyer of the
occurrence of any breach of any covenant of Seller in this Section 9. or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 11. hereof impossible or unlikely, and (ii) Buyer will promptly notify
Seller of the occurrence of any breach of any covenant of Buyer in this Section
9. or of the occurrence of any event that may make the satisfaction of the
conditions in Section 10. hereof impossible or unlikely.
9.14. EMPLOYMENT OF PCHI'S EMPLOYEES; ADDITIONAL EMPLOYEE MATTERS.
a. (i) Prior to Closing, Buyer shall offer, effective as of the
Closing Date, employment to all employees of PCHI employed at the Facility
(including for this purpose, any such employee who elects to be treated as a
retiree of PCHI as of the Closing Date for the purpose of qualifying for certain
employee benefits). Each offer of employment shall be for no less than the
position, wage or salary as such employee currently has. All employees who
accept Buyer's offer of employment shall be referred herein to collectively as,
the "Hired Employees".
(ii) Any individuals offered employment by Buyer shall be
considered "newly hired", and Buyer shall have no liability whatsoever with
respect to any matter relating to the employment of such persons by PCHI prior
to the Closing Date. The provisions of this section shall inure solely to the
benefit of the parties hereto and no third party (including, without limitation,
any employee of PCHI) shall be permitted to rely hereon as a third party
beneficiary or otherwise.
(iii) As to each Hired Employee, Buyer shall also provide
employee welfare benefits and paid time-off that are commensurate with those of
other employees of Buyer having similar positions. Buyer agrees that, for the
purpose of determining welfare benefits coverage and other related matters
(including
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eligibility and participation, but not vesting or benefit accrual, under any
Buyer pension benefit plan), each Hired Employee will be considered to have
commenced employment with Buyer on the date such Hired Employee commenced
uninterrupted employment with PCHI. Notwithstanding the preceding sentence,
Buyer shall not be obligated to provide Hired Employees any accrued sick or
vacation days upon hiring them (except as provided otherwise in Section 9.14.d.
below). For the purpose of determining vesting and benefit accrual under all
Buyer pension benefit plans, each Hired Employee will be considered to have
commenced employment with Buyer on the Employment Commencement Date (as
hereinafter defined). Health benefits coverage provided by Buyer for Hired
Employees (and any dependents thereof) shall apply to covered expenses incurred
on and after the Employment Commencement Date, and Buyer agrees to waive any
limitations for pre-existing conditions with respect to any conditions affecting
any Hired Employees (and any dependents thereof); subject, however, to the
following limitations: (x) the pre-existing condition provisions of PCHI's
health benefit plans shall apply in lieu of the pre-existing condition
provisions of Buyer's plans to all Hired Employees (and their dependents) who
are eligible for benefits under PCHI's health benefits plans as of the Closing
Date but who are subject to pre-existing condition limitations as of the Closing
Date, and (y) the pre-existing conditions limitations under Buyer's medical
benefits plans shall apply to any Hired Employee (and his or her dependents) who
is not eligible for benefits under PCHI's health benefits plans as of the
Closing Date, and any such Hired Employee shall be treated as having been hired
by Buyer on the date such employee commenced employment with PCHI for purposes
of applying such pre-existing condition limitations to such Hired Employee (and
his or her dependents).
(iii) As used herein, the term "Employee Commencement Date"
shall mean the day immediately following the Closing Date; provided, however,
that with respect to any employee who is in paid or unpaid inactive status as of
the Closing Date and to whom Buyer offers employment pursuant to this Section
9.14.a., the term "Employee Commencement Date" shall mean such employee's first
day of employment with Buyer.
b. Subject to the accuracy of Seller's representations and warranties
in Section 7.9., (i) on and after the Closing Date, Buyer shall be responsible
for any and all notices required with respect to Buyer's termination of
employees, and (ii) any liabilities or obligations arising under the WARN Act on
or after the Closing Date shall be those of Buyer and not Seller.
c. After the Closing, Buyer will, upon reasonable request, give
assistance to human resources personnel of PCHI and Paracelsus in the
post-closing administration of the employee benefit plans of PCHI or Paracelsus
as they apply to Hired Employees. For this purpose, "assistance" includes
reasonable access to the pre-Closing personnel records of Hired Employees.
d. Seller agrees that it shall pay the accrued liability of PCHI for
accrued vacation, holiday, and sick day benefits and related taxes that relate
to the Hired Employees prior to the Employee Commencement Date.
9.15. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with
respect to this Agreement or the Transaction will be issued, if at all, at such
time and in such manner as Sellers determine, in their sole discretion. Unless
consented to by Sellers in advance, required by applicable Legal Requirements
prior to the Closing, or required under the terms of a subpoena or order issued
by a Governmental Body, Buyer shall keep this Agreement strictly confidential
and may not make any disclosure of this Agreement or the Transaction to any
Person. Sellers and Buyer will consult with each other concerning the means by
which PCHI's employees, customers, and suppliers and others having dealings with
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PCHI will be informed, if at all, of the Transaction, and Sellers will have the
right to have a Representative present for any such communication.
9.16. CONSENTS TO ASSUMPTION OF LEASES.
a. Seller shall assist and cooperate with Buyer and its representatives
in obtaining, within thirty (30) days from the Signing Date, the consents by the
lessor under the Rheem Valley Lease to the assumption of such lease by Buyer.
Any extension of the Closing Date as provided in Section 5.3 shall extend the
period within which Buyer shall obtain such consents to the extended Closing
Date.
b. If Buyer is unable after using all commercially reasonable means, to
obtain the consents required in Section 9.16.a. within the initial thirty (30)
period, or such extended period as therein provided, then Buyer may in its sole
discretion terminate this Agreement under Section 13.1.a.
9.17. DELIVERY AND APPROVAL OF SCHEDULES.
a. Seller shall deliver the Schedules called for herein upon, or as
soon as reasonably possible after, execution of this Agreement. Except as
otherwise provided for herein, Buyer shall have five (5) days following receipt
of any Schedule, or any designated portion of Sellers' Disclosure Schedule, to
object to any disclosure thereon. Buyer shall notify Sellers in writing within
seven (7) days of receipt of any Schedule or any portion of Sellers' Disclosure
Schedule, if Buyer objects to any disclosure thereon and shall describe in
detail any such objection. Buyer shall not object to any Assigned Contract that
has commercially reasonable terms and is reasonably necessary to the operations
of the Facility.
b. Seller shall have ten (10) days following receipt of Buyers
objection to any such disclosure, to cure such objection and resubmit such
Schedule or portion thereof. If such amended Schedule or portion thereof is not
reasonably acceptable to Buyer, then Buyer may within three(3) days following
receipt of any such amended Schedule or portion thereof, in its sole discretion
terminate this Agreement under Section 13.1.a.
SECTION 10.
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS TO CLOSE
The obligation of each Seller to close on the Closing Date under this
Agreement is subject to each of the following conditions (any of which may, in
Seller's discretion, be waived, in whole or part) existing on the Closing Date
or such other applicable date:
10.1. REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties made by Buyer in or pursuant to this Agreement or the other
Transaction Documents shall be true and accurate in all material respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of such date. In determining whether
there has been a material misrepresentation or material adverse event, all
occurrences and adverse events shall be aggregated to determine the
applicability or breach of the provisions of this Agreement.
10.2. OBLIGATIONS OF BUYER. Buyer shall have performed and complied in all
material respects with all of its obligations under this Agreement and the other
Transaction Documents which are to be performed or complied with by it prior to
or on the Closing Date.
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10.3. CLOSING CERTIFICATE. The President (or other authorized corporate officer)
of Buyer shall have executed and delivered to Sellers a certificate dated as of
the Closing Date, upon which Sellers and Parcels us may rely, certifying that
the conditions set forth in Section 10.1. and Section 10.2. hereof have been
satisfied as to it.
10.4. SECRETARY'S CERTIFICATE. Sellers shall have received a certificate of the
Secretary (or other authorized corporate officer) of Buyer certifying as true,
accurate, and complete, as of the Closing Date: (a) a copy of the resolutions of
Buyer's Board of Directors authorizing the execution, delivery, and performance
of this Agreement and the other Transaction Documents to which it is a party and
the consummation by Buyer of the Transaction; (b) a copy of the resolutions of
Buyer's shareholders authorizing the execution, delivery, and performance of
this Agreement and the other Transaction Documents to which it is a party and
the consummation by Buyer of the Transaction; (c) a certified copy of the
Articles of Incorporation of Buyer issued by the Tennessee Secretary of State;
(d) a copy of the Bylaws of Buyer; and (e) the incumbency of the officer or
officers authorized to execute on behalf of Buyer the Agreement and the other
Transaction Documents to which it is a party.
10.5. LEGAL MATTERS. There must not have been commenced or threatened against
any of Sellers or Buyer, or any their respective Affiliates, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, the Transaction, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with the Transaction.
10.6. NO PROHIBITION. Neither the consummation nor the performance of the
Transaction will, directly or indirectly (with or without the giving of notice
or the lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause Sellers or any of its Affiliates, to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or judgment, order, writ, injunction, or decree, or (b) any Legal
Requirement or judgment, order, writ, injunction, or decree that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
10.7. NECESSARY CONSENTS. The Consent of all Persons necessary for the
consummation of the Transaction shall have been granted and be in full force and
effect, including, without limitation, the Consent of or required by or pursuant
to, as the case may be:
a. The Board of Directors of Sellers;
b. Paracelsus, as the shareholder of each Seller;
c. The consent of the lessor to the assignment of the Rheem Valley
Lease to Buyer required by Section 9.16;
d. Any Lender of Seller; and
e. Those Persons listed or referred to in Section 10.7.c of Sellers'
Disclosure Schedule.
10.8. COMPLETION OF SCHEDULES. The schedules to this Agreement identified as to
be completed by mutual agreement of the parties, initialed, and attached prior
to Closing shall have been completed, initialed, and attached.
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10.9. DELIVERY OF TRANSACTION DOCUMENTS. Buyer shall have delivered, or caused
to be delivered, all Purchase Price consideration, documents, instruments,
exhibits, schedules, certificates, and lists required by Section 12.3. hereof to
be delivered at or prior to Closing.
10.10. CLOSING OF THE ULO PURCHASE AGREEMENT. Buyer and Sellers shall have
closed, or close simultaneous with the Closing under this Agreement, the
transactions contemplated by the ULO Purchase Agreement dated the date of this
Agreement and among Sellers and Buyer.
SECTION 11.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligation of Buyer to close on the Closing Date under this
Agreement is subject to each of the following conditions (any of which may, in
the Buyer's discretion, be waived, in whole or part) existing on the Closing
Date or such other applicable date:
11.1. REPRESENTATIONS AND WARRANTIES OF SELLERS. The representations and
warranties made by Sellers in or pursuant to this Agreement or the other
Transaction Documents shall be true and accurate in all material respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of such date. In determining whether
there has been a material misrepresentation or material adverse event, all
occurrences and adverse events shall be aggregated to determine the
applicability or breach of the provisions of this Agreement.
11.2. OBLIGATIONS OF SELLERS. Sellers shall have performed and complied in all
material respects with all of their obligations under this Agreement and the
other Transaction Documents which are to be performed or complied with by them
prior to or on the Closing Date.
11.3. CLOSING CERTIFICATE. The President (or other authorized corporate officer)
of each Seller shall have executed and delivered to Buyer a certificate dated as
of the Closing Date, upon which Buyer may rely, certifying that the conditions
set forth in Section 11.1. and Section 11.2. hereof have been satisfied.
11.4. SECRETARY'S CERTIFICATE OF SELLERS. Buyer shall have received a
certificate of the Secretary (or other authorized corporate officer) of each
Seller certifying as true, accurate, and complete, as of the Closing Date: (a) a
copy of the resolutions of Seller's Board of Directors authorizing the
execution, delivery, and performance of this Agreement and the other Transaction
Documents to which it is a party and the consummation by Seller of the
Transaction; (b) a copy of the resolutions of Seller's shareholder authorizing
the execution, delivery, and performance of this Agreement and the other
Transaction Documents to which it is a party and the consummation by Seller of
the Transaction; (c) a certified copy of the Articles of Incorporation of Seller
issued by the California Secretary of State; (d) a copy of the Bylaws of Seller;
and (e) the incumbency of the officer or officers authorized to execute on
behalf of Seller the Agreement and the other Transaction Documents to which it
is a party.
11.5. SELLERS' INVENTORY. Sellers' shall have at the Facility an inventory of
food products, medical and drug supplies in a quantity and of a quality as may
be required by the California Department of Health for the continued operation
of the Facility.
11.6. LEGAL MATTERS. There must not have been commenced or threatened against
any of Sellers or Buyer, or any their respective Affiliates, any Proceeding (a)
involving any material challenge to, or seeking material
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damages in connection with, the Transaction, or (b) that may have the effect of
preventing or making illegal the Transaction.
11.7. NO PROHIBITION. Neither the consummation nor the performance of the
Transaction will, directly or indirectly (with or without the giving of notice
or the lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer, or any of its Affiliates, to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or judgment, order, writ, injunction, or decree, or (b) any Legal
Requirement or judgment, order, writ, injunction, or decree that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
11.8. NECESSARY CONSENTS. The Consent of all Persons necessary for the
consummation of the Transaction shall have been granted and be in full force and
effect, including, without limitation, the Consent of or required by or pursuant
to, as the case may be:
a. The (i) Board of Directors of Sellers and, (ii) the shareholder of
each Seller, as to the approval of this Agreement, no later than five (5)
Business Days after the Signing Date;
b. The consent of the lessor to the assignment of the Rheem Valley
Lease to Buyer required by Section 9.16; and
11.9. TITLE COMMITMENT. Buyer shall have received, and be satisfied, in good
faith, with the Title Commitment, as contemplated by, and within the scope of,
Section 9.8. hereof.
11.10. SURVEY. Buyer shall have received, and be satisfied, in good faith, with
the Survey, as contemplated by, and within the scope of, Section 9.9. hereof.
11.11. TITLE POLICY. Buyer shall have received, and be satisfied, in good faith,
with the Title Policy, as contemplated by, and within the scope of, Section 9.8.
hereof; provided however the actual Title Policy may be delivered post Closing
directly to Buyer by the Title Company according to the preparation and issuance
requirements of the Title Company
11.12. COMPLETION OF SCHEDULES. The schedules shall have been completed.
11.13. DELIVERY OF TRANSACTION DOCUMENTS. Seller shall have delivered, or caused
to be delivered, all documents, instruments, exhibits, schedules, certificates,
and lists required by Section 12.1. hereof to be delivered at or prior to
Closing.
SECTION 12.
DELIVERIES AT CLOSING; POST-CLOSING FURTHER ASSURANCES
12.1. DELIVERIES BY SELLERS. Sellers shall deliver, or cause to be delivered, to
Buyer or such other Person as required hereby, at the Closing:
a. GOVERNMENTAL CERTIFICATES. A Certificate of Good Standing and/or
Certificate of Existence for Sellers issued by the appropriate Governmental Body
of the State of California, dated within thirty (30) days prior to the Closing
Date;
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b. UCC, JUDGMENT, AND TAX LIEN SEARCH REPORT. A Uniform Commercial
Code, judgment, and tax lien search report for PCHI for the California Secretary
of State and Contra Costa County, California, dated within thirty (30) days
prior to the Closing Date;
c. CLOSING CERTIFICATE. The Closing Certificates of Sellers, as
required by Section 11.3. hereof;
d. SECRETARY'S CERTIFICATE. The Secretary's Certificates of Sellers, as
required by Section 11.4. and Section 11.5. hereof;
e. BILL OF SALE. A bill of sale conveying good, valuable, and
marketable title to the Acquired Assets (other than the Real Property) (the
"Bill of Sale") in the substantially the form of APPENDIX 12.1.e.
f. ASSIGNMENT AND ASSUMPTION AGREEMENT. An assignment and assumption
agreement evidencing Sellers' assignment and transfer of the Assigned Contracts,
and Buyer's assumption of the Assumed Liabilities (the "Assignment and
Assumption Agreement") in substantially the form of APPENDIX 12.1.f.
g. RHEEM VALLEY LEASE ASSUMPTION AGREEMENT. A lease assumption
agreement assigning to Buyer the Rheem Valley Lease (the "Rheem Valley Lease
Assumption Agreement") substantially in the form of APPENDIX 12.1.g.;
h. CONSENTS. Copies or other satisfactory evidence of any required
Consents to the Transaction;
i. TITLE COMPANY DOCUMENTS. Any instruments or documents required by
the Title Company to be delivered in order for the Title Company to issue and
deliver the Title Policy;
j. TITLE POLICY. The Title Policy, as required by Section 9.8 hereof,
provided however the actual Title Policy may be delivered post Closing directly
to Buyer by the Title Company according to the preparation and issuance
requirements of the Title Company;
k. POSSESSION. Possession, or constructive possession, of the Acquired
Assets, as required by Section 2.1. hereof; and
l. OTHER DOCUMENTS. Such other documents necessary for the consummation
of the Transaction as Buyer may reasonably request.
12.2. FURTHER ASSURANCES BY SELLERS. From time to time after the Closing, upon
Buyer's request, Sellers agree to execute and deliver such additional
instruments of conveyance and transfer and take such further actions as may be
required in conformity with this Agreement and the other Transaction Documents
for the complete sale and transfer to Buyer of the Acquired Assets.
12.3. DELIVERIES BY BUYER. Buyer shall deliver, or cause to be delivered, to
Sellers or such other Person as required hereby, at the Closing:
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a. GOVERNMENTAL CERTIFICATES. A Certificate of Good Standing and/or
Certificate of Existence for Buyer issued by the appropriate Governmental Body
of the State of California, dated within thirty (30) days prior to the Closing
Date;
b. CLOSING CERTIFICATE. The Closing Certificate of Buyer, as required
by Section 10.3. hereof;
c. SECRETARY'S CERTIFICATE. The Secretary's Certificate of Seller, as
required by Section 10.4. hereof;
d. ASSIGNMENT AND ASSUMPTION AGREEMENT. The Assignment and Assumption
Agreement.
e. NON-FOREIGN CERTIFICATION. A Non-Foreign Certification for Buyer
setting forth the matters required to comply with applicable Legal Requirements
(the "Non-Foreign Certification");
f. RHEEM VALLEY LEASE ASSUMPTION AGREEMENT. The Rheem Valley Lease
Assumption Agreement;
g. CONSENTS. Copies or other satisfactory evidence of any required
Consents to the Transaction.
h. PURCHASE PRICE. (i)The portion of the Purchase Price to be paid in
cash at the Closing, as required by Section 2.3. hereof and (ii) the Note;;
i. OTHER DOCUMENTS. Such other documents necessary for the consummation
of the Transaction as Buyer may reasonably request.
12.4. FURTHER ASSURANCES BY BUYER. From time to time after the Closing, upon any
Seller's request, Buyer agrees to execute and deliver such additional
instruments of assumption and take such further actions as may be required in
conformity with this Agreement and the other Transaction Documents for the
complete assumption by Buyer of the Assumed Liabilities.
SECTION 13.
TERMINATION
13.1. TERMINATION EVENTS. This Agreement may, by notice given prior to or at the
Closing, be terminated:
a. By Buyer for any or all of the reasons specified in, and as
permitted by, Section 9.7.b. for an uncured objection to the environmental
condition, Section 9.8.b. for an uncured objection to title, Section 9.9.b. for
an uncured objection to the Survey, Section 9.10. for a condemnation by a
Governmental Body, Section 9.16.b. for the failure to obtain the required
consents to the assumption of the Rheem Valley Lease, or Section 9.17.b. based
upon an objection to a Schedule.
b. By Sellers, acting together, on the one hand, or Buyer, on the other
hand, if a material breach of any provision of this Agreement has been committed
by the other party and such breach has not been waived;
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c. (i) By Sellers, acting together, if any of the conditions in
Section 10. hereof have not been satisfied as of the Closing Date or if
satisfaction of such conditions is or becomes impossible (other than through the
failure of Sellers to comply with any of their respective obligations hereunder)
and Sellers have not waived such conditions on or before the Closing Date; or
(ii) By Buyer if any of the conditions in Section 11. hereof
have not been satisfied as of the Closing Date or if satisfaction of such
conditions is or becomes impossible (other than through the failure of Buyer to
comply with its obligations hereunder) and Buyer has not waived such conditions
on or before the Closing Date;
d. By the consent of Sellers, acting together, on the one hand, and
Buyer, on the other hand;
e. By Sellers, acting together, if the Closing has not occurred (other
than through the failure of Sellers to comply fully with their respective
obligations under this Agreement) at any time after the Scheduled Closing Date
or any extension of the Closing as permitted by Section 5.1; or
f. By Sellers, acting together, on the one hand, or Buyer, on the other
hand, if the Closing has not occurred (other than through the failure of any
party seeking to terminate to comply fully with its respective obligations under
this Agreement) within sixty (60) days after the Scheduled Closing Date, or such
later date as the parties may in writing agree upon.
13.2. EFFECT OF TERMINATION. Except as otherwise provided herein, each party's
right of termination under Section 13.1. hereof is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 13.1. hereof, all further obligations of the
parties will terminate, except that the obligations in Section 9.1., Section
16.2., and Section 13.3.b. hereof will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by
another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination.
13.3. CONSEQUENCES OF TERMINATION.
a. IN GENERAL. In the event of the termination of this Agreement, this
Agreement shall become null and void, and there shall be no liability or
restrictions on the future activities on the part of any party hereto, except in
the event of termination by a party caused by the willful acts or omissions of
the other party, and except as provided in Section 9.1. and Section 16.2.
hereof.
13.4. BUYERS RIGHTS. Nothing herein shall prevent Buyer from specifically
enforcing its rights hereunder or seeking damages for any breach of this
Agreement by Sellers, except as may be governed by Section 15.
SECTION 14.
POST-CLOSING COVENANTS AND AGREEMENTS
14.1. CHANGE OF NAME. Buyer agrees that it will cause all signs, if any,
incorporating the names "Paracelsus", "Paracelsus Healthcare", or "Paracelsus
Convalescent" (and all derivatives and variations thereof) which are located at
any of the Real Property to be removed or modified as soon as reasonably
practicable after the Closing Date and in any event within thirty (30) days
after the Closing Date, so that such names are no longer used at such Real
Property.
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14.2. 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 Business for so
long as Buyer is required by applicable Legal Requirements to maintain such
records (but in no event less that seven (7) 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 Legal Requirements concerning confidentiality. Buyer agrees
to abide by any such Legal Requirements relating to the confidential information
it acquires. Buyer agrees after Closing to maintain the patient records at the
Business in accordance with applicable Legal Requirements (including, if
applicable, Section 1861(v)(i)(I) of the Social Security Act (42 U.S.C. Section
1395x(v)(1)(I)) and requirements of relevant insurance carriers. In addition,
Seller shall be entitled to remove from the Facility 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, Seller shall if
reasonably possible use copies of patient records, where appropriate. Any
original patient records so removed from the Facility 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 Facility 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 operation of the Facility of
conduct of the Business prior to the Closing Date.
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
Sellers for a period of seven (7) years or such longer period (if any) as such
records are required to be kept and preserved by any Legal Requirements. 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 14.2.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 this Section 14.2., Buyer shall
advise Seller in writing of such intention and Seller shall have not less than
sixty (60) days after receipt of such notice to elect in writing to have Buyer
deliver such records to Seller.
14.3. COVENANT NOT TO COMPETE. During the period beginning on the Closing Date
and continuing for a period of three (3) years thereafter (the "Restricted
Period"), Sellers each agree that it will not, directly or indirectly, for
itself, its subsidiaries, partnerships or joint ventures or on behalf of any
other person, either as an employee, employer, independent contractor,
consultant, agent, principal, owner, partner, shareholder, investor, corporate
officer, director, or in any other individual or representative capacity, engage
or participate in any manner whatsoever in any nursing home, retirement home or
assisted living facility (the "Restricted Activity") in the geographic area that
is within a fifty (50) mile radius of the Facility as it exists on the Closing
Date (the "Restricted Territory"), without obtaining the prior written consent
of Buyer; provided, however, that Seller (a) may invest in the securities of any
entity (without otherwise participating in the activities of such entity) if (i)
such securities are listed on any national or regional securities exchange or
have been
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registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended, and (ii) Seller does not beneficially own (as defined by Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) in excess of
five percent (5%) of the outstanding equity securities of such entity, and (b)
may, upon notice to Buyer, provide in the Restricted Territory health care
services not offered by Sellers on the Closing Date. Notwithstanding any other
provision hereof, this section shall not apply to restrict any successor or
assign of Seller, whether through a merger, sale of substantially all of its
assets, or other similar transaction. Upon the consummation of any such
transaction, this section shall automatically terminate without any further
notice or action by any party.
14.4. OBLIGATION TO REMIT FUNDS. Each party hereto agrees to remit to the other
party any funds that it receives which under the terms of this Agreement belongs
to the other party within three (3) business days of receipt of such funds.
SECTION 15.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
15.1. SURVIVAL OF REPRESENTATIONS. Notwithstanding any investigation made by or
on behalf of any party, all representations and warranties made by the parties
in this Agreement or pursuant hereto shall survive the Closing and remain
effective for a period of twelve (12) months thereafter, except that the
representations and warranties made by Seller in Section 7.6. hereof shall
survive the Closing and remain effective for the period of the applicable
statute of limitations or similar Legal Requirement. Each party is entitled to
and is hereby deemed to have reasonably relied upon the representations and
warranties of the other party.
15.2. INDEMNIFICATION OF SELLERS. Subject to the provisions of this Section 15.
and only in the event the Closing occurs (Seller otherwise being entitled only
to payment of the Earnest Money Deposit as liquidated damages if the Closing
does not occur), Buyer agrees to indemnify, defend, and hold harmless Sellers,
and their respective predecessors, successors, assigns, officers, directors,
stockholders, employees, Subsidiaries, parents, Affiliates, partners, agents,
attorneys, accountants, financial advisers, Representatives, and insurers
(collectively, the "Seller Indemnified Parties"), against and in respect of any
losses, damages (including incidental and consequential damages), deficiencies,
diminutions in value, liabilities, actions, suits, proceedings, demands,
assessments, judgments, fines, and reasonable costs and expenses (including, but
not limited to, attorney and expert witness fees) (collectively, the "Losses"),
arising or resulting, directly or indirectly, from or in connection with:
a. Any misrepresentation or other breach of any representation or
warranty made by Buyer in this Agreement or in any of the other Transaction
Documents;
b. Any failure to perform or other breach of any covenant, agreement,
or obligation of Buyer in this Agreement or in any of the other Transaction
Documents;
c. Any of the Assumed Liabilities; or
d. Any and all liabilities or obligations of the Business incurred, and
any and all liabilities or obligations relating to the Acquired Assets incurred,
after the Closing Date.
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The foregoing matters giving rise to the rights of the Seller
Indemnified Parties to indemnification hereunder are referred to as the "Seller
Claims".
15.3. INDEMNIFICATION OF BUYER. Subject to the provisions of this Section 15.
and only in the event the Closing occurs (Buyer otherwise being entitled only to
payment of the Earnest Money Deposit if the Closing does not occur), Sellers
agree to indemnify, defend, and hold harmless Buyer, and its predecessors,
successors, assigns, officers, directors, stockholders, employees, Subsidiaries,
parents, Affiliates, partners, agents, attorneys, accountants, financial
advisers, Representatives, and insurers (collectively, the "Buyer Indemnified
Parties"), against and in respect of any Losses, arising or resulting, directly
or indirectly, from or in connection with:
a. Any misrepresentation or other breach of any representation or
warranty made by Sellers in this Agreement or in any of the other Transaction
Documents;
b. Any failure to perform or other breach by Sellers of any covenant,
agreement, or obligation in this Agreement or in any of the other Transaction
Documents; or
c. All liabilities or obligations of PCHI in conducting the Business
prior to the Closing, even if the claim therefor is not made until after the
Closing, other than the Assumed Liabilities.
The foregoing matters giving rise to the rights of the Buyer
Indemnified Parties to indemnification hereunder are referred to as the "Buyer
Claims".
15.4. LIMITATIONS ON SELLERS' LIABILITY. Notwithstanding any other provision
hereof, Sellers shall not be liable for any Losses under this Section 15. in
excess of the aggregate amount of the Purchase Price received by Sellers at the
time the claim for indemnification is made. Further, the indemnification
provided for against Sellers in favor of the Buyer Indemnified Parties shall be,
notwithstanding any other provision hereof, the exclusive remedy of the Buyer
Indemnified Parties for claims against Sellers under or arising from this
Agreement.
15.5. THRESHOLDS. The Seller Indemnified Parties shall have the right to
indemnification under this Section 15. only after and to the extent the Seller
Claims exceed, in the aggregate, the sum of $5,000, provided that this section
shall not apply to payment of any other portion of the Purchase Price. The Buyer
Indemnified Parties shall have the right to indemnification under this Section
15. only after and to the extent the Buyer Claims exceed, in the aggregate, the
sum of $5,000. Once the thresholds in the preceding sentences are satisfied, as
applicable to each party, Buyer shall be liable for any Losses of the Seller
Indemnified Parties in excess thereof, and the Sellers shall be liable for any
Losses of the Buyer Indemnified Parties in excess thereof.
15.6. EFFECT OF TAXES AND INSURANCE. The liability of an Indemnitor under this
Section 15. shall be reduced by the Tax benefit actually realized and any
insurance proceeds received by the Indemnitee as a result of any Losses upon
which the claim for indemnification is based, and shall include any Tax
detriment actually incurred by the Indemnitee as a result of such Losses. The
amount of any such Tax benefit or detriment shall be determined by taking into
account the effect, if any and to the extent then determinable, of timing
differences resulting from the acceleration or deferral of items of gain or loss
resulting from such Losses and shall otherwise be determined so that payment by
the Indemnitor, as so adjusted, will make the Indemnitee as economically whole
as reasonably possible.
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<PAGE> 80
15.7. PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
a. After receipt by an Indemnitee under this Section 15. of notice of
the commencement of any Proceeding against it, such Indemnitee shall, if a claim
is to be made against an Indemnitor hereunder, promptly give notice to the
Indemnitor of the commencement of such claim (including all documents and other
information which the Indemnitee has with respect thereto), but the failure to
notify the Indemnitor shall not relieve the Indemnitor of any liability that it
may have to any Indemnitee, except to the extent that the Indemnitor
demonstrates that the defense of such action is prejudiced by the Indemnitee's
failure to give such notice.
b. If any Proceeding referred to in the preceding subsection is brought
against an Indemnitee and it gives notice to the Indemnitor of the commencement
of such Proceeding, the Indemnitor will be entitled to participate in such
Proceeding and, to the extent that it wants (unless (i) the Indemnitor is also a
party to such Proceeding and the Indemnitee determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnitor fails to provide
reasonable assurance to the Indemnitee of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding) to
assume the defense of such Proceeding with counsel satisfactory to the
Indemnitee and, after notice from the Indemnitor to the Indemnitee of its
election to assume the defense of such Proceeding, the Indemnitor will not, as
long as it diligently conducts such defense, be liable to the Indemnitee under
this Section 15. for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred by
the Indemnitee in connection with the defense of such Proceeding, other than
reasonable and necessary costs of investigation. If the Indemnitor assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes of
this Agreement that the claims made in that Proceeding are within the scope of
and subject to indemnification under this Section 15.; (ii) no compromise or
settlement of such claims may be effected by the Indemnitor without the
Indemnitee's consent unless (y) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the Indemnitee, and (z)
the sole relief provided is monetary damages that are paid in full by the
Indemnitor; and (iii) the Indemnitee will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an Indemnitor of the commencement of any Proceeding and the
Indemnitor does not, within ten (10) calendar days after the Indemnitee's notice
is given, give notice to the Indemnitee of its election to assume the defense of
such Proceeding, the Indemnitor will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the Indemnitee.
c. Notwithstanding the foregoing, if an Indemnitee determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its Affiliates, other than as a result of monetary damages for
which it would be entitled to indemnification under this Agreement, the
Indemnitee may, by notice to the Indemnitor, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the Indemnitor will not be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
15.8. PROCEDURE FOR INDEMNIFICATION; OTHER CLAIMS. A claim for indemnification
for any matter not involving a third-party claim covered by Section 15.7. hereof
may be asserted by the Indemnitee promptly giving notice to the Indemnitor
requesting indemnification and stating in reasonable detail the nature of such
matter and the amount of Losses claimed therefor. The Indemnitor shall have
fifteen (15) calendar days after
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<PAGE> 81
receiving such notice to respond. If the Indemnitor accepts responsibility or
does not respond within such 15 day period, the Indemnitor shall pay the
Indemnitee the full amount of the claim within ten (10) Business Days after
responsibility therefor is so determined. If the Indemnitor rejects the claim
for indemnification, and the dispute is not resolved by the Indemnitor and
Indemnitee within fifteen (15) calendar days, the parties may pursue any legal
or equitable remedy available to them to resolve the same. If it is determined
that the Indemnitor is liable for the claim, it shall pay the Indemnitee the
full amount of the claim within ten (10) Business Days after responsibility
therefor is so determined.
SECTION 16.
MISCELLANEOUS
16.1. NOTICES. Any notice or Consent from any party required or permitted by
this Agreement shall be in writing and shall be sufficiently given if personally
delivered, mailed by certified or registered mail, return receipt requested,
sent by Federal Express (or other guaranteed and receipted delivery service), or
sent by facsimile transmission to the following addresses (or such other
addresses as specified by written notice timely given to the other parties).
To Sellers
Paracelsus Healthcare Corporation
Attn: President
515 West Greens Road, Suite 800
Houston, Texas 77067
Telephone: (281) 774-5115
Facsimile: (281) 774-5110
With a copy (which
shall not constitute
notice) to: Michener, Larimore, Swindle, Whitaker,
Flowers, Sawyer, Reynolds & Chalk, L.L.P.
Attn: Wayne M. Whitaker, Esq.
3500 City Center Tower II
301 Commerce Street
Fort Worth, Texas 76102
Telephone: (817) 878-0530
Telecopier: (817) 335-6935
To Buyer: Sunland Associates, Inc.
Attn: Byron DeFoor
5706 Main Street
Ooltewah, Tennessee, 37363
Telephone: (423) 238-4237
Telecopier: (423) 238-4575
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<PAGE> 82
With a copy (which
shall not constitute
notice) to: Baker, Donelson, Bearman & Caldwell, P.C.
Attn: John Mooney
1800 Republic Centre
Chattanooga, Tennessee 37450-1800
Telephone: (423) 209-4107
Telecopier: (423) 756-3447
Any notice given in accordance with this section is effective three (3)
Business Days after the date on which the same was delivered, deposited, or sent
and confirmation of delivery received, as applicable for the notice procedure
used.
16.2. TRANSACTION COSTS AND EXPENSES. Except as otherwise provided herein, each
party hereunder shall be responsible for and pay its, his, or her, as the case
may be, own costs and expenses, including fees of accountants, attorneys, and
other advisors, incurred by it, him, or her, as the case may be, in connection
with the Transaction; provided, however, that if the transactions contemplated
by this Agreement are not consummated as a result of a breach of this Agreement
by any party, such party shall be liable for expenses and costs incurred by the
other parties, together with all reasonable expenses and costs (including
attorneys' fees) incurred by the other parties in connection with enforcing
their rights under this Agreement of this Agreement. Buyer shall pay all
recording fees for recording any deeds, assignments, or other instruments in
connection with the Transaction. Seller shall pay all documentary stamp Taxes,
discretionary surtaxes and intangible Taxes for recording any deeds,
assignments, or other instruments in connection with the Transaction.
16.3. ASSIGNABILITY; BINDING EFFECT; THIRD PARTIES.
a. The rights and obligations of any party under this Agreement may not
be assigned or delegated by any party without the prior written consent of the
other party, which shall not be unreasonably withheld, except (i) that Sellers
may assign and delegate any of their rights and obligations to any Subsidiary or
Affiliate or any successor in a merger, sale of substantially all of its assets,
or other similar transaction and (ii) Buyer may assign its rights to any wholly
owned subsidiary of Buyer or an entity the majority of whose equity interest is
owned by Byron DeFoor, provided Buyer shall guarantee obligations of any
assignee or transferee under this Agreement. Subject to the preceding sentence,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns.
b. Nothing in this Agreement, whether express or implied, is intended
to confer any rights or remedies arising from this Agreement on any person other
than the parties and their respective successors or assigns, nor is anything in
this Agreement intended to relieve or discharge the obligation or liability of
any third party to a party, nor shall any provision of this Agreement give any
third party a right of subrogation or action against any party, except as
otherwise set forth in this Agreement.
16.4. WAIVER. There can be no waiver of any term, provision, or condition of
this Agreement which is not in writing signed by the party against whom the
waiver is sought to be enforced. Waiver by any party of the default or breach of
any provision of this Agreement by another shall not operate or be construed as
a waiver of any subsequent default or breach.
16.5. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by a court of final jurisdiction, it is the parties' intent that
all other provisions of this Agreement shall remain fully valid, enforceable,
and binding on the parties.
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<PAGE> 83
16.6. FURTHER ASSURANCES. The parties agree to take such further actions,
including the execution and delivery of any documents, as may be required,
necessary, or desirable for the performance of this Agreement.
16.7. ENTIRE AGREEMENT; HEADINGS; INCORPORATION BY REFERENCE. This Agreement,
together with the other Transaction Documents, exhibits, schedules, documents,
and instruments referred to herein, constitutes the entire agreement between the
parties relating to the subject matter hereof, and supersedes all previous
agreements, written or oral. Except as provided otherwise in this Agreement,
this Agreement shall not be amended or modified except by an instrument in
writing signed by all parties. Headings are for convenience of reference only
and shall not affect the interpretation or construction of this Agreement. All
exhibits, schedules, documents, and instruments referred to in this Agreement
are incorporated by reference for all purposes.
16.8. GOVERNING LAW; VENUE; ATTORNEY'S FEES.
a. Any dispute between the parties relating to this Agreement shall be
construed under and in accordance with the laws of the State of California
applicable to contracts between residents of California that are to be wholly
performed within such state.
b. The parties agree that the courts within Contra Costa County,
California shall have exclusive venue and jurisdiction of same.
c. The prevailing party in any litigation shall be entitled to recover
from the other party reasonable attorney's fees and court costs incurred in the
same, in addition to any other relief that may be awarded.
16.9. TIME OF ESSENCE. Time shall be of the essence in interpreting this
Agreement.
16.10. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original and all of which shall
constitute one document; and furthermore, a facsimile signature shall be deemed
an original.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
same to be duly delivered on their behalf on the day and year first written
above.
[signatures on following page]
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<PAGE> 84
Buyer: Sellers:
SUNLAND ASSOCIATES, INC. PARACELSUS CONVALESCENT
HOSPITALS, INC.
By: By:
------------------------------- ----------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
---------------------------- -------------------------------
PARACELSUS REAL ESTATE
CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
AMENDMENT ONE
TO
RHEEM VALLEY ASSET PURCHASE AGREEMENT
This Amendment Number One to Rheem Valley Asset Purchase Agreement (the
"Amendment"), is dated as of April 14, 1999, and entered into by and among
PARACELSUS CONVALESCENT HOSPITALS, INC., a California corporation ("PCHI"),
PARACELSUS REAL ESTATE CORPORATION, a California corporation ("PREC") (PCHI and
PREC are also sometimes referred to herein individually as, a "Seller" and,
collectively as, the "Sellers"), and SUNLAND ASSOCIATES, INC., a Tennessee
corporation (the "Buyer") or its assigns as herein permitted.
WITNESSETH:
WHEREAS, PCHI, PREC and Buyer entered into that one certain Asset
Purchase Agreement dated as of March 15, 1999 (the "Purchase
Agreement")providing for among other things the sale by PCHI and PREC and the
purchase by Buyer of Sellers' operations of the skilled nursing facility named
Rheem Valley Convalescent Hospital, located at 348 Rheem Boulevard, Moraga,
California 94556 ("Rheem Valley") ; and
WHEREAS, PCHI, PREC and Buyer desire to amend certain of the terms of
the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, and covenants stated in this Agreement, and the
other good and valuable consideration exchanged between the parties, the receipt
and sufficiency of which is hereby acknowledged, the parties intending to be
legally bound agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms used herein as
defined terms shall have the meaning given them in the Purchase
Agreement.
2. SECTION 5.1. CLOSING DATE." Section 5.1. is hereby amended to provide
that the "Scheduled Closing Date" shall be June 15, 1999, or such other
date mutually agreed upon in writing by the parties.
3. SECTION 9.16. "CONSENTS TO ASSUMPTION OF LEASES." Section 9.16 is
hereby amended to read as follows:
"a. Buyer shall assist and cooperate with Seller and its
representatives in obtaining, by the Closing Date the consents
by the lessor under the Rheem Valley Lease to the assumption
of such lease by Buyer.
b. If Seller is unable after using all commercially reasonable
means, to obtain the termination and release required in
Section 9.16.a. by the Closing Date, then Buyer shall be
deemed to have terminated this Agreement under Section
13.1.a."
4. MISCELLANEOUS.
a. ENTIRE AGREEMENT. This Amendment, constitutes the entire
agreement between the parties
<PAGE> 86
relating to the subject matter hereof, and supersedes all previous
agreements, written or oral. If there shall be any conflict between
the terms or interpretation of this Amendment and the terms of the
Purchase Agreement, the terms of this Amendment shall govern. Headings
are for convenience of reference only and shall not affect the
interpretation or construction of this Amendment. All exhibits,
schedules, documents, and instruments referred to in this Amendment
are incorporated by reference for all purposes.
b. GOVERNING LAW; VENUE; ATTORNEY'S FEES.
i. Any dispute between the parties relating to this
Amendment shall be construed under and in accordance with the laws of
the State of California applicable to contracts between residents of
California that are to be wholly performed within such state.
ii. The parties agree that the courts within Contra Costa
County, California shall have exclusive venue and jurisdiction of same.
iii. The prevailing party in any litigation shall be entitled
to recover from the other party reasonable attorney's fees and court
costs incurred in the same, in addition to any other relief that may be
awarded.
c. MULTIPLE COUNTERPARTS. This Amendment may be executed in
multiple counterparts, each of which shall constitute an original and
all of which shall constitute one document; and furthermore, a
facsimile signature shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
same to be duly delivered on their behalf as of the day and year first written
above.
Buyer:
SUNLAND ASSOCIATES, INC.
By:
-----------------------
Name:
---------------------
Title:
---------------------
Sellers:
PARACELSUS CONVALESCENT
HOSPITALS, INC.
By:
------------------------
Name: R. T. Pinchback
----------------------
Title: Vice President
---------------------
PARACELSUS REAL ESTATE
CORPORATION
By:
------------------------
Name: R. T. Pinchback
----------------------
Title: Vice President
---------------------
