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): September 30, 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 500, HOUSTON, TEXAS
(Address of principal executive offices)
77067 (281) 774-5100
(Zip Code) (Registrant's telephone number,
including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Paracelsus Healthcare Corporation ("the Company")entered into a stock
purchase agreement, dated September 14, 1999, for the sale of Paracelsus
Senatobia Community, Inc. ("Senatobia"), which owned and operated a 76 bed
acute care hospital located in Mississippi, to Associates Capital Group, LLC
("ACG"), a Georgia limited liability company. The transaction was completed on
September 30, 1999.
The sales price of approximately $4.7 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, $1.6 million of second lien
promissory notes, and the assumption by ACG of approximately $3.0 million in
capital lease obligations and of certain lease guaranty payments. The notes
included (i) a short-term working capital note of $380,000("Note A"), which
bears no interest and matures on November 29, 1999, and (ii) a working capital
note of $320,000 ("Note B") and a secured promissory note of $855,000 ("Note
C"), both of which bear interest of 8% per annum and mature on September 30,
2002 and 2004, respectively. Notes A and B are subject to final working capital
adjustments. Additionally, Notes B and C are subject to certain discounts
under certain circumstances. Notes B and C are secured by all the outstanding
shares of common stock and assets of Senatobia. The Company expects to record
a gain of approximately $2.3 million ($1.3 million net of tax) on the sale of
Senatobia.
As previously reported, the Company sold substantially all of the assets of
four skilled nursing facilities (collectively, the "Convalescent Hospitals"),
effective June 30, 1999. The sales price of approximately $6.9 million, which
excluded working capital, was paid by a combination of $3.0 million in cash and
a $3.9 million second lien promissory note. Additionally, the buyer 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 recorded a gain of approximately $1.3 million ($774,000 net of tax) on
the sale of the Convalescent Hospitals.
Effective March 31, 1999, the Company completed the sale of the stock of
Paracelsus Bledsoe County General Hospital, Inc.("Bledsoe")to ACG. The sales
price of approximately $2.2 million, which included the sale of net working
capital, was paid by a combination of $100,000 in cash and the issuance by ACG
of $1.5 million in secured promissory notes (the "Bledsoe Notes") and a
$642,000 thirty-day promissory note, which was paid in May 1999. The Bledsoe
Notes are secured by all outstanding common stock and assets of Bledsoe. The
Company recorded no material gain or loss on the sale.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
In addition to reflecting the sale of Senatobia, 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 of eight hospitals located in metropolitan Los Angeles ("LA Metro") on
September 30, 1998, and the Company's acquisition of the remaining 50 %
partnership interest in a general partnership operating as Dakota Heartland
Health System ("DHHS") on July 1, 1998.
(b) Unaudited Pro Forma Financial Information (attached following the
signature page):
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the six months ended June 30, 1999
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the year ended December 31, 1998
Unaudited Pro Forma Condensed Combining Balance Sheet - June 30, 1999
<PAGE> 3
Notes to Unaudited Pro Forma Condensed Combining Financial Statements
(c) Exhibits
10.24 Stock Purchase Agreement dated September 14, 1999, by and among
Paracelsus Healthcare Corporation, Paracelsus Senatobia Community Hospital,
Inc. and Associates Capital Group, LLC.
PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Paracelsus Healthcare Corporation
(Registrant)
Dated: October 15, 1999 By:/S/ LAWRENCE A. HUMPHREY
-------------------------------
Lawrence A. Humphrey
Executive Vice President
& Chief Financial Officer
<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 six months ended June 30, 1999 and the
year ended December 31, 1998 to illustrate the effect of the sale of Senatobia
effective September 30, 1999, 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 Senatobia occurred
on June 30, 1999.
Effective September 30, 1999, the Company entered into a stock purchase
agreement, dated September 14, 1999, for the sale of Senatobia for
approximately $4.7 million, which included the sale of net working capital.
The sales price was paid by a combination of $100,000 in cash, $1.6 million of
second lien promissory notes, and the assumption by ACG of approximately $3.0
million in capital lease obligations and of certain lease guaranty payments.
The notes included (i) a short-term working capital Note A of $380,000, which
bears no interest and matures on November 29, 1999, and (ii) a working capital
Note B of $320,000 and a secured promissory Note C of $855,000, both of which
bear interest of 8% per annum and mature on September 30, 2002 and 2004,
respectively. Notes A and B are subject to final working capital adjustments.
Additionally, Notes B and C are subject to certain discounts under certain
circumstances. Notes B and C are secured by all the outstanding shares of
common stock and assets of Senatobia. The Company expects to record a gain of
approximately $2.3 million ($1.3 million net of tax) on the sale of Senatobia.
Effective June 30, 1999, the Company sold substantially all of the assets of
the Convalescent Hospitals. The sales price of approximately $6.9 million,
which excluded working capital, was paid by a combination of $3.0 million in
cash and a $3.9 million second lien promissory note. Additionally, the buyer
also assumed an operating lease at one of the facilities. The note, bearing
interest at 9% per annum, matures on June 30, 2004, and is subject to
prepayment discounts. 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
recorded a gain of approximately $1.3 million ($774,000 net of tax) on the sale
of the Convalescent Hospitals.
Effective March 31, 1999, the Company completed the sale of the stock of
Bledsoe to ACG. The sales price of approximately $2.2 million, which included
the sale of net working capital, was paid by a combination of $100,000 in cash
and the issuance by ACG of $1.5 million in secured promissory notes and a
$642,000 thirty-day promissory note, which was paid in May 1999. The Bledsoe
Notes are secured by all outstanding common stock and assets of Bledsoe.
The Company recorded no material gain or loss on the sale.
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 six months ended June 30, 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 SIX MONTHS ENDED JUNE 30, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Convalescent
Hospitals/ Pro Forma
Paracelsus Bledsoe Pro Forma and Other Concalescent
Healthcare Pro Forma Bledsoe Pro Forma Hospitals/
Corporation Adjustments Rf Disposition Adjustments Rf Bledsoe
----------- ----------- -- ----------- ----------- -- ----------
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 294,211 $ (1,964) (2) $ 292,247 $ (4,673) (4) $287,574
Costs and expenses: (3)
Salaries and
benefits 117,100 (1,115) (2) 115,985 (3,196) (4) 112,789
Other operating
expense 115,024 (818) (2) 114,206 (1,397) (4) 112,809
Provision for
bad debts 21,485 (125) (2) 21,360 21,360
Interest 26,183 26,183 (84) (5) 26,099
Depreciation &
amortization 19,785 (48) (2) 19,737 (102) (4) 19,635
Unusual items 7,668 7,668 7,668
Loss on sale of
facilities 2,387 2,387 (2,387) (4)
--------- ------- --------- ------- (11) -------
Total costs &
expenses 309,632 (2,106) 307,526 (7,166) 300,360
--------- ------- --------- ------- -------
Loss before
minority interest
and income taxes (15,421) 142 (15,279) 2,493 (12,786)
Minority interest 121 121 121
--------- ------- --------- -------- -------
Loss before
income taxes (15,300) 142 (15,158) 2,493 (12,665)
Provision for
income taxes (6,105) 58 (6) (6,047) 1,023 (6) (5,024)
--------- ------- --------- -------- -------
Loss from continuing
operations $ (9,195) $ 84 $ (9,111) $ 1,470 $(7,641)
========= ======== ========= ======== ========
Loss per share
- - basic and
assuming
dilution $ (0.17) $ (0.17) $ (0.14)
========= ========= =========
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 SIX MONTHS ENDED JUNE 30, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Convalescent Senatobia
Hospitals/ Pro Forma Pro Forma
Bledsoe Adjustments Rf Paracelsus
------------ ----------- -- ----------
(1)
<S> <C> <C> <C> <C>
Net revenue $ 287,574 $ (3,731) (7) $ 283,843
Costs and expenses:
Salaries and
benefits 112,789 (1,662) (7) 111,127
Other operating
expense 112,809 (1,775) (7) 111,034
Provision for
bad debts 21,360 (752) (7) 20,608
Interest 26,099 (110) (7) 25,989
Depreciation &
amortization 19,635 (37) (7) 19,598
Unusual items 7,668 7,668
--------- ---------- ---------
Total costs &
expenses 300,360 (4,336) 296,024
--------- ---------- ---------
Loss before
minority interest
and income taxes (12,786) 605 (12,181)
Minority interest 121 121
--------- ---------- ---------
Loss before
income taxes (12,665) 605 (12,060)
Provision for
income taxes (5,024) 248 (6) (4,776)
--------- ---------- ---------
Loss from continuing
operations $(7,641) 357 (7,284)
========= ========== =========
Loss per share
- - basic and
assuming
dilution $ (0.14) $ (0.13)
========= =========
Weighted average
number of common
and common
equivalent
shares 55,118 55,118
========= =========
</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>
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) (8) $645,185 $645,185
Costs and expenses:
Salaries and
benefits 276,200 (8,217) (8) 267,983 267,983
Other operating
expense 265,735 (6,475) (8) 259,260 259,260
Provision for
bad debts 42,659 (355) (8) 42,304 42,304
Interest 51,859 (1,257) (5) 50,602 $ 2,983 (5) 53,585
Depreciation &
amortization 38,330 (758) (8) 37,572 486 (9) 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 (8) 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 (10) 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> 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
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) (11) $587,185 $ (9,717) (2)(3)$577,468
Costs and expenses:
Salaries and
benefits 267,983 (25,672) (11) 242,311 (7,465) (2) 234,846
Other operating
expense 259,260 (31,333) (11) 227,927 (3,737) (2) 224,190
Provision for
bad debts 42,304 (1,915) (11) 40,389 (403) (2) 39,986
Interest 53,585 (733) (5)(11) 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) (11) (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) (11)
--------- ------- --------- ------- -------
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> 10
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
Pro Forma Convalescent Hospitals/
Chico/DHHS/ Hospitals Chico/DHHS Senatobia
LA Metro/ Pro Forma LA Metro/ Pro Forma ProForma
Bledsoe Adjustments Rf Bledsoe Adjustments Rf Paracelsus
----------- ------------ ---- ------------ ----------- --- -----------
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $577,468 $ (8,914) (4) $568,554 $ (7,209) (7) $561,345
Costs and expenses:
Salaries and
benefits 234,846 (6,025) (4) 228,821 (3,628) (7) 225,193
Other operating
expense 224,190 (2,507) (4) 221,683 (3,235) (7) 218,448
Provision for
bad debts 39,986 70 (4) 40,056 (1,325) (7) 38,731
Interest 52,852 (242) (4)(5) 52,610 (226) (7) 52,384
Depreciation &
amortization 37,783 (191) (4) 37,592 (84) (7) 37,508
Impairment charges 313 313 313
Unusual items (6,870) (6,870) (6,870)
Loss on sale
of facilities 275 275 275
---------- ----------- ---------- -------- --------
Total costs &
expenses 583,375 (8,895) 574,480 (8,498) 565,982
---------- ----------- ---------- -------- -------
Loss before minority
interest and
income taxes (5,907) (19) (5,926) 1,289 (4,637)
Minority interest
---------- ----------- ---------- -------- -------
Loss before
income taxes (5,907) (19) (5,926) 1,289 (4,637)
Provision for
income taxes (966) (8) (6) (974) 529 (6) (445)
---------- ----------- ---------- -------- -------
Loss from continuing
operations $ (4,941) $ (11) $ (4,952) 760 (4,192)
========== =========== ========== ======== ========
Loss per share
- - basic and
assuming
dilution $ (0.09) $ (0.09) $ (0.08)
========== ========== ========
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> 11
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
JUNE 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Paracelsus Senatobia
Healthcare Pro Forma Pro Forma
Corporation Adjustments Rf Paracelsus
----------- ----------- -- ----------
<S> <C> <C> <C> <C>
ASSETS: (1)
Current assets:
Cash and cash equivalents $ 12,364 $ (234) (7)(12) $ 12,130
Restricted cash 1,111 1,111
Accounts receivable, net 60,182 (1,803) (7)(12) 58,379
Deferred income taxes 10,757 10,757
Other 39,842 183 (7)(12) 40,025
-------- --------- --------
Total current assets 124,256 (1,854) 122,402
-------- --------- --------
Property and equipment, net 360,291 (324) (7)(12) 359,967
Goodwill 134,751 134,751
Other assets 84,444 (721) (7)(12) 83,723
-------- --------- --------
Total assets $703,742 (2,899) $700,843
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 47,124 (392) (7)(12) $ 46,732
Accrued liabilities
and other 52,392 (739) (7)(12) 51,653
Current maturities
of long-term debt 4,379 (145) (7)(12) 4,234
-------- --------- --------
Total current liabilities 103,895 (1,276) 102,619
-------- --------- --------
Long term debt 537,759 (2,964) (7)(12) 534,795
Other long-term liabilities 36,942 36,942
Stockholders' equity
Common stock 222,977 222,977
Additional paid-in capital 390 390
Accumulated deficit (198,221) 1,341 (12) (196,880)
-------- --------- --------
Total stockholders'
equity 25,146 1,341 26,487
-------- --------- --------
Total liabilities
& stockholders' equity $703,742 $ (2,899) $700,843
======== ========= ========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
<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
- ----------- -------------------------------------------------------------------
(1) The statements of operations and balance sheet for Paracelsus
Healthcare Corporation as of and for the six months ended June 30, 1999 are
summarized from its June 30, 1999 Quarterly Report on Form 10-Q. The statement
of operations for the year ended December 31, 1998 is summarized from the 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 $60,000 and $240,000 for the six
months ended June 30, 1999 and the year ended December 31, 1998,
respectively, on the Bledsoe Notes.
(4) To remove the Convalescent Hospitals' historical results of operations and
the $1.3 million gain on sale of these facilities. Pro forma adjustments to net
revenue included interest income of $176,000 and $351,000 on the promissory
note received in connection with the sale for the six months ended June 30,
1999 and the year ended December 31, 1998, respectively.
(5) To record interest expense on (i) the net pro forma increase in the
credit facility resulting from the Company's acquisition of the remaining
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 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 six months ended June 30, 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 Senatobia, 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 Senatobia's assets and liabilities as of June 30, 1999 and
historical results of operations for the six months ended June 30, 1999
and the year ended December 31, 1998. Pro forma adjustments to net revenue
included interest income on Notes B and C of $47,000 and $94,000 for the
six months ended June 30, 1999 and the year ended December 31, 1998,
respectively.
(8) To remove Chico's historical results of operations and the gain on sale
of the Chico facilities.
(9) 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.
(10) To remove minority interest in DHHS for the six months ended June 30,
1998.
(11) To remove LA Metro's historical results of operations (including an
unusual charge of $233,000) and to record pro forma interest income of
$1.4 million for the year ended December 31, 1998 on the promissory notes
received in connection with the LA Metro sale. Additionally, other pro forma
adjustments to historical results of operations for the six months ended
June 30, 1999 included the removal of a $3.7 million loss from the final
working capital settlement related to the LA Metro sale.
<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 Senatobia as follows:
Cash proceeds $ 100,000
Promissory notes, net of
discount 1,135,000 (a)
Capital lease obligation assumed
by ACG 2,952,000 (b)
----------
Total consideration 4,187,000
----------
Transaction costs:
Legal, severances, bonuses
and other closing costs 723,000 (c)
Assets sold:
Net working capital 323,000
Equipment & other 868,000 (d)
----------
1,914,000
----------
Pre-tax gain on sale 2,273,000
Income tax provision 932,000 (e)
----------
Gain on sale, net of tax $1,341,000
==========
(a) Notes A and B are subject to final working capital adjustments.
Additionally, Notes B and C are subject to discounts ranging from approximately
$100,000 to $420,000 under certain circumstances. Notes B and C are secured by
all the outstanding shares of common stock and assets of Senatobia.
(b) Reflects the hospital lease obligation with the City of Senatobia,
Mississippi assumed by ACG. The lease has first priority lien on all property
and equipment of Senatobia. The Company remains as a guarantor on the lease
obligation until otherwise relieved.
(c) Transaction costs are reflected as reduction of cash and as accrued
liabilities in the Unaudited Pro Forma Condensed Combining Balance Sheet as of
June 30, 1999.
(d) Includes $544,000 of an escrow deposit maintained for the purposes of
the hospital lease obligation.
(e) 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
June 30, 1999.
STOCK PURCHASE AGREEMENT
FOR
SENATOBIA COMMUNITY HOSPITAL, INC.
THIS STOCK PURCHASE AGREEMENT FOR SENATOBIA COMMUNITY
HOSPITAL (this "AGREEMENT"), dated as of September ____,
1999, among Paracelsus Healthcare Corporation ("SELLER"),
a California corporation, Paracelsus Senatobia Community
Hospital, Inc. ("SCH"), a California corporation and
Associates Capital Group, L.L.C., a Georgia limited
liability company ("BUYER").
WITNESSETH:
WHEREAS, Seller owns all of the capital stock of SCH;
WHEREAS, SCH operates and does business as Senatobia
Community Hospital, a seventy-six (76) bed general acute
care hospital located at 401 Getwell Drive, Senatobia,
Mississippi 38668 ("SENATOBIA HOSPITAL" and the
"HOSPITAL") pursuant to a Lease Agreement dated as of
December 1, 1979 by and between the City of Senatobia,
Mississippi, as Lessor, and Southern Health Services of
Kentucky, Inc., as initial Lessee with respect to the
Senatobia Hospital (the "HOSPITAL LEASE");
WHEREAS, Seller desires to sell to Buyer and Buyer desires
to purchase all of the issued and outstanding capital
stock of SCH which will transfer to Buyer ownership of
substantially all of the assets, real and personal,
tangible and intangible, owned by Seller in the operation
of the Hospital (collectively the "BUSINESS");
NOW, THEREFORE, for and in consideration of the foregoing
premises and the agreements, covenants, representations
and warranties hereinafter set forth and other good and
valuable consideration, the receipt and adequacy of all of
which are acknowledged and agreed, the parties hereto
agree as follows:
1.SALE OF STOCK AND CERTAIN RELATED MATTERS.
1.1 SALE OF STOCK. Subject to the terms and conditions of
this Agreement, at the Closing (as hereinafter defined),
Seller shall sell, transfer, convey, assign and deliver to
the Buyer, and Buyer shall purchase from Seller, all of
the issued and outstanding capital stock of SCH, that
being one hundred (100) shares of Common Stock, no stated
par value of SCH (the "STOCK"). The Stock shall be
transferred to Buyer free and clear of all liabilities,
liens, pledges and encumbrances.
1.2 REPRESENTATIONS OF SELLER AS TO THE ASSETS OF SCH.
Subject to the terms and conditions of this Agreement, at
the Closing (as hereinafter defined), Seller represents
and warrants to Buyer that SCH shall own, or have a valid
leasehold interest in, the following assets and
properties:
(a)all real property and other real property interests
used in connection with the operation of the Business,
including, without limitation, the operations of the
Hospital together with all buildings, improvements and
fixtures located thereupon and all construction in
progress (such real property is referred to herein as the
"REAL PROPERTY"), such Real Property being more
specifically described in SCHEDULE 1.2(A);
(b)all tangible personal property (excluding cash and cash
equivalents) owned by SCH and used in connection with the
Business, to the extent included on the Closing Balance
Sheet (collectively the "PERSONAL PROPERTY"), but
excluding the personal property described in SECTION
1.3(F) hereof.
(c)all licenses, certificates of need, certificates of
exemption, franchises, accreditations and registrations
and other licenses or permits required for the operation
of the Business in accordance with applicable law (the
"LICENSES"), including, without limitation, the Licenses
described in SCHEDULE 1.2(C);
(d)those real property and personal property leases
relating to the Business described in SCHEDULE 1.2(D) (all
of such leases being referred to collectively as the
"LEASES");
(e)those contracts and agreements relating to the Business
set forth in SCHEDULE 1.2(E) (the "CONTRACTS");
(f)any deposits, escrows, prepaid taxes or other advance
payments relating to any expenses of the Business, as
contained on the Closing Balance Sheet as prepaid expenses
(the "PREPAID EXPENSES"), but excluding the prepaid
expenses of Seller described in SCHEDULE 1.2(F) hereof as
prepaid expenses to be retained by Seller ("EXCLUDED
PREPAID EXPENSES");
(g)all inventories of supplies, drugs, food, janitorial
and office supplies and other disposables and consumables
owned by SCH on the Closing Date (as hereinafter defined)
and either located at the premises of the Hospital or if
not yet delivered to the Hospital premises, purchased by
Seller for use in connection with the Business (the
"OPERATING INVENTORY");
(h)all accounts receivable with respect to the Business,
including all accounts receivable arising from the
rendering of services to inpatients and outpatients at the
Hospital, billed and unbilled, recorded or unrecorded,
accrued and existing in respect of services through and
including the effective date of the Closing, including
those from any source; excluding, however, the Excluded
Receivables, as defined below (the "ACCOUNTS RECEIVABLE");
(i)all documents, records, non-proprietary operating
manuals and files, and computer software owned by or
licensed to SCH, pertaining to or used in connection with
the Business, including, without limitation, all patient
records, medical records, financial records, equipment
records, construction plans and specifications, and
medical and administrative libraries;
(j)all unexpired warranties (other than those vendor
warranties described in Section 1.2(b) above) and
covenants not to compete relating to the Business for
which SCH is the beneficiary;
(k)all joint ventures, partnerships, corporations and
other entities listed on SCHEDULE 1.2(K); and
(l)except as expressly excluded herein, all other property
owned by SCH, whether tangible or intangible, located at
the premises of the Hospital or otherwise, whether or not
used in connection with the Business and whether or not
reflected on the balance sheet of SCH, and specifically
including the right to use the name "Senatobia Community
Hospital."
The foregoing, which (except for the Excluded Assets, as
defined in Section 1.3) are hereafter referred to,
collectively, as the "ASSETS", comprise substantially all
of the property and assets used in the conduct and
operation of the Business as of July 31, 1999, including
without limitation, those assets reflected on the
unaudited balance sheet of SCH dated July 31, 1999 (the
"BALANCE SHEET"), and all assets acquired by Seller
between July 31, 1999 and the Closing.
1.3 EXCLUDED ASSETS. The following items which are
related to the Assets are not intended by the parties to
be a part of the assets of SCH, are excluded from the
Assets and will be conveyed by SCH to Seller or its
designee, at or prior to Closing (collectively, the
"EXCLUDED ASSETS"):
(a)the accounts receivable set forth on SCHEDULE 1.3(A)
hereto, (the "EXCLUDED RECEIVABLES");
(b)the name "Paracelsus" and all variations thereof
(subject to the provisions of Section 9.4), and the terms
"Paracelsus Pride" and "ServiceAdvantage";
(c)all intercompany accounts of SCH and Seller and their
affiliates;
(d)any corporate proprietary information of Seller not
necessary for the operation of the Business;
(e)all commitments, contracts, leases, capital leases,
notes, and agreements between SCH, Seller and their
affiliates;
(f)the property described in SCHEDULE 1.3(F) hereto;
(g)any and all rights to the operation of software
provided by Seller or its affiliates for the use of SCH,
and specifically, including certain licensed software and
other products and services pursuant to an agreement with
(1) the Health Services Division of Keane, Inc., dated
April 13, 1998,
(2) CompuLab Healthcare Systems Corporation, dated April
30, 19998, and
(3) Lawson Associates, Inc. d\b\a Lawson Software, dated
May 30,1997; and
(h)all cash and cash equivalents and temporary
investments.
1.4 ASSUMPTION OF LIABILITIES
(a)As of the Closing, and in conjunction with the transfer
of the Stock, Buyer shall assume and/or agree to pay,
perform and discharge the liabilities of SCH ("the ASSUMED
LIABILITIES"), except that Seller shall pay and indemnify
Buyer for those liabilities described below as Excluded
Liabilities. Specifically , and without limitation, Buyer
agrees to assume Seller's obligations under the Hospital
Lease. Buyer shall assume the guaranty obligations
associated with the Hospital Lease, provided however,
Seller shall make the guaranty fee payments through August
31, 2001.
(b)Buyer shall not be liable for (1) performance by SCH
under, and defaults by SCH in performance of, the
Contracts for periods prior to the Effective Time (as
hereafter defined), and (2) any liability of SCH not
included on the Closing Balance Sheet or otherwise
included in Working Capital (collectively, the "EXCLUDED
LIABILITIES")
1.5 PURCHASE PRICE; PRORATIONS; ALLOCATION; COST REPORT
ADJUSTMENTS.
(a) Subject to the terms and conditions hereof, in
reliance upon the representations, warranties and
covenants of Seller herein set forth, and as consideration
for the sale of the Stock as herein contemplated, Buyer
shall tender to Seller at Closing, as the purchase price
hereunder (collectively, the "PURCHASE PRICE"), and in the
manner hereinafter provided, the following:
(i)$100,000 in cash; plus
(ii)an amount equal to Working Capital less $100,000; plus
(iii)a promissory note in the amount of $861,200
substantially in the form of APPENDIX C ("NOTE C").
(b)At Closing the payment for Working Capital shall
initially be made in the manner and based upon the
determination of Initial Working Capital (as hereinafter
defined) and thereafter an adjustment payment shall be
made as provided in Section 1.9.
(c)Buyer and Seller shall include in Working Capital
prorations of Real Property and Personal Property lease
payments, payments under any construction contracts,
interest, Real Property and Personal Property taxes, Real
Property lease deposits and escrows, other assessments,
plus all other revenues and expenses with respect to the
Business which are normally prorated upon the sale of
assets of a going concern; provided, however, that the
parties will not prorate any Prepaid Expenses. In making
such prorations Seller shall order final readings of all
power and other utility charges to be made as of the
Effective Time. All prorations contemplated by this
Section 1.5(c) shall be made as of the Effective Time.
(d)Seller shall pay to Buyer any amount that Buyer
actually pays (which shall include offsets) in excess of
the amounts contained in the Closing Balance Sheet in
respect of the Medicare and Medicaid programs. Any such
payment required by Seller shall first be made as a credit
to Buyer's Short Term Note A, then any remaining amount of
such payment shall be applied as a credit to Note B, then
any remaining amount of such payment shall be applied as a
credit to Note C (in each case first to accrued and unpaid
interest and then to outstanding principal), and
thereafter in cash. Buyer shall pay Seller any amount
that Buyer realizes as a benefit due to the final
reconciliation of the amounts contained in the Closing
Balance Sheet in respect of the Medicare and Medicaid
programs. Payments to Seller shall be in cash.
1.6. INITIAL WORKING CAPITAL. (a) The "INITIAL WORKING
CAPITAL" shall be an amount equal to the value of SCH's
Initial Net Working Capital (as hereinafter defined) as of
the date of, and based upon SCH's latest regularly
prepared balance sheet in respect of the Business (the
"INTERIM BALANCE SHEET") available prior to Closing which
shall be not more than 61 days old. The Interim Balance
Sheet shall be prepared using the same methodologies and
assumptions used in connection with the preparation of
Financial Statements (as hereinafter defined), and in
accordance with generally accepted accounting principles
("GAAP") applicable to interim financial statements.
For the purpose of the Initial Working Capital, "SCH'S
INITIAL NET WORKING CAPITAL" shall be equal to THE SUM OF
(A) the amounts set forth on SCHEDULE 1.6(A); PLUS (B) the
amount of any capital expenditures made by SCH from and
after July 31, 1999 until the Effective Time; MINUS (C)
the amount of SCH's capital lease obligations assumed by
Buyer, BUT SPECIFICALLY EXCLUDING the Hospital Lease.
(b)No increase to Seller's Initial Net Working Capital
shall be effected with respect to (i) any single item
involving a capital expenditure in excess of $25,000, or
(ii) within any 30 day period, any two or more items
involving capital expenditures in excess of $50,000, in
either case unless Seller shall have obtained Buyer's
prior written consent to such expenditure. Buyer hereby
acknowledges that it has consented to the capital
expenditures described in SCHEDULE 1.6(B), but such
consent is limited as to scope and dollar amount as
described in SCHEDULE 1.6(B).
(c)In order that Buyer may know the methodology used to
determine SCH's Initial Net Working Capital, attached
hereto as SCHEDULE 1.6(C) is a determination of SCH's Net
Working Capital based upon the July 31, 1999 unaudited
balance sheet of SCH and Seller hereby agrees to use the
same methodology (as may be supplemented by the working
papers thereto) to prepare SCHEDULE 1.6(A).
1.7 WORKING CAPITAL DETERMINATION. (a) Not more than 60
days after the Closing Date (i) Seller shall deliver to
Buyer the balance sheet for SCH with respect to the
Business as of the Effective Time for accounting purposes
(the "CLOSING BALANCE SHEET"). The Closing Balance Sheet
shall be prepared using the same methodologies and
assumptions used in connection with the preparation of the
Interim Balance Sheet, except as modified herein.
(b)The "WORKING CAPITAL" shall be an amount equal to the
value of SCH's Net Working Capital (as hereinafter
defined) as of the date of, and based upon the Closing
Balance Sheet.
(c)For the Working Capital, "SCH'S NET WORKING CAPITAL"
shall be determined using the same methodologies used to
determine SCH's Initial Net Working Capital, but using the
Closing Balance Sheet.
(d)No more than three days prior to the Closing Date,
Seller and Buyer shall conduct a physical inventory of the
Operating Inventory on hand at the Hospital. Based on
such inventory Seller shall prepare a schedule of the
supplies using the same methodology as Seller used in
SCHEDULE 1.6(C). In calculating the Working Capital, the
amount of the Operating Inventory shall be increased or
decreased, as appropriate, to reflect the value of the
additions to, and deletions from, the Operating Inventory
between the inventory date and the Effective Time.
1.8 PAYMENT OF WORKING CAPITAL AT CLOSING. In payment of
the amount of Working Capital due Seller at Closing, Buyer
shall deliver to Seller (i) a sixty (60) day promissory
note substantially in the form of APPENDIX A ("SHORT TERM
NOTE A") in the amount equal to the lesser of (A) sixty
percent (60%) of SCH's Initial Net Working Capital less
$100,000 and (B) Four Hundred Thousand Dollars ($400,000),
and (ii) a promissory note substantially in the form of
APPENDIX B ("NOTE B") in the original principal amount
equal to the amount of SCH's Initial Net Working Capital
less the amount of SHORT TERM NOTE A and less the amount
of $100,000.
1.9 PAYMENT OF POST-CLOSING WORKING CAPITAL ADJUSTMENT;
DISPUTE RESOLUTION. (a) Working Capital shall be paid in
(i) a promissory note substantially in the form of SHORT
TERM NOTE A in the amount equal to the lesser of (A) sixty
percent (60%) of SCH's Net Working Capital less $100,000
and (B) Four Hundred Thousand Dollars ($400,000) cash, and
(ii) a promissory note in the form of NOTE B in the
original principal amount equal to the amount of SCH's Net
Working Capital less the amount of SHORT TERM NOTE A in
(i) above. Not more than 90 days after the Closing Date,
Buyer and Seller WILL COMPARE SCH's Initial Net Working
Capital paid in the form of SHORT TERM NOTE A and NOTE B
at Closing, TO SCH's final Net Working Capital to be paid
in the form of SHORT TERM NOTE A and NOTE B AND ANY
DIFFERENCES in such note balances SHALL thereupon BE MADE
AS AN ADJUSTMENT, positively or negatively as the case may
be, TO the principal balances of SHORT TERM NOTE A and
NOTE B, respectively; so that through such adjustments in
the principal balance of SHORT TERM NOTE A and NOTE B,
Buyer will only be obligated to pay to Seller the amount
of Net Working Capital determined as of Closing, less
$100,000. If at the time of such comparison of Initial
Net Working Capital to Net Working Capital, SHORT TERM
NOTE A has been paid, any increase or decrease that would
otherwise be made thereto as a result of such comparison
shall be taken as an adjustment to NOTE B.
(b)Simultaneously with Seller's delivery of the Closing
Balance Sheet to Buyer, Seller shall deliver a schedule to
Buyer detailing any adjustments between the amount of the
Purchase Price paid at Closing and any required
adjustments resulting from the determination of Working
Capital and the effect of such adjustments on the
principal balances of SHORT TERM NOTE A and NOTE B.
(c)In the event that Seller and/or Buyer shall dispute the
Working Capital determination to be effected hereunder and
such dispute is not resolved to the mutual satisfaction of
Seller and Buyer within 90 days after the Closing Date,
Seller and Buyer shall each have the right to require that
such disputed determinations be submitted to
PriceWaterhouseCoopers LLP acting as experts and not as
arbitrators, or to such other certified public accounting
firm as Seller and Buyer may then mutually agree upon in
writing, for computation or verification in accordance
with the provisions of this Agreement and interpretation,
where applicable, in accordance with GAAP. The certified
public accounting firm so selected shall use its best
efforts to make the computations or verifications within
60 days of their engagement. Both Seller and Buyer shall
provide such access to the books and records of Seller as
may be requested by such certified public accounting firm.
The foregoing provisions for certified public accounting
firm review shall be specifically enforceable by the
parties; the decision of such accounting firm shall be
final and binding upon Seller and Buyer; there shall be no
right of appeal from such decision; and such accounting
firm's fees and expenses for each such disputed
determination shall be borne by the party whose
determination has been modified by such accounting firm's
report or by both parties in proportion to the relative
amount each party's determination has been modified.
1.10 COLLECTION OF RECEIVABLES. Seller shall by the
fifteenth (15th) of each month remit to Buyer any payments
it has received during the preceding month which
constitute payments of accounts receivable of Buyer. Buyer
shall by the fifteenth (15th) of each month remit to
Seller any payments it has received during the preceding
month that constitute payments of the Excluded
Receivables.
2.CLOSING.
2.1 CLOSING AND EFFECTIVE TIME. Subject to the
conditions set forth in Articles 7 and 8 hereof, the
consummation of the sale and purchase of the Stock
contemplated by and described in this Agreement (the
"Closing") shall take place in Fort Worth, Texas, at the
offices of Michener, Larimore, Swindle, Whitaker, Flowers,
Sawyer, Reynolds & Chalk, L.L.P. or other agreed upon
location, at 10:00 A.M. local time (a) on September 30,
1999, or (b) such date as may be agreed by the parties.
The date on which the Closing occurs is referred to herein
as the "CLOSING DATE." The Closing of the transactions
shall be deemed to be effective for accounting purposes as
of 11:59 P.M. (Central Time) on September 30, 1999 or such
other time which the parties may mutually designate in
writing. For all purposes other than accounting, unless
specifically provided otherwise herein, the closing shall
be deemed to be effective as of 11:59 P.M. (Central Time)
on the Closing Date. In each case, the time at which the
Closing shall be deemed to be effective is referred to
herein as the "EFFECTIVE TIME" for such purpose.
2.2 ACTION OF SELLER AT CLOSING. At the Closing, Seller
shall deliver or shall cause to be delivered to Buyer the
following:
(a)certificates representing the Stock, duly endorsed to
Buyer, or with duly executed stock powers conveying the
right of Buyer to have the Stock transferred in to Buyer's
name;
(b)copies of corporate resolutions duly adopted by the
respective Board of Directors of Seller and SCH,
authorizing and approving each such corporation's
performance of the transactions contemplated hereby and
the execution and delivery of the documents described
herein to which each is a party, certified as true and of
full force as of Closing by appropriate officers of each
such corporation;
(c)certificates, dated as of the Closing Date, of
appropriate officers of each of Seller and SCH certifying
that, to the best of such officer's knowledge and belief,
as of Closing all of the respective representations and
warranties by or on behalf of Seller and SCH as
appropriate, contained in this Agreement are true and
correct and all respective covenants and agreements of
Seller and SCH to be performed prior to or as of Closing
pursuant to this Agreement have been performed;
(d)certificates of incumbency, dated as of the Closing
Date, for the officers of each of Seller and SCH making
certifications for Closing, or executing documents
delivered for Closing;
(e)certificates of corporate existence or good standing
certificates and qualifications to do business of each of
Seller and SCH from their states of incorporation and in
which SCH does business, dated the most recent practical
date prior to Closing;
(f)subject to Section 1.3 hereof, the Assets, and
simultaneously with such delivery Seller will take all
such steps as may reasonably be required to put Buyer in
actual possession and operating control of the Assets;
(g)the Information Systems Agreement (as hereinafter
defined);
(h)The resignations of all officers and directors of SCH
effective the Effective Time.
2.3 ACTION OF BUYER AT CLOSING.
A.At the Closing, Buyer shall deliver to Seller the
following:
(a)the Purchase Price, including :
(i)$100,000 cash,
(ii)Short Term Note A,
(iii)Note B,
(iv)Note C,
(v)Security Agreement (Short Term Note A),
(vi)Security Agreement and Stock Pledge (Note B),
(vii)Security Agreement (Note C), and
(viii)a certificate of existence of Buyer from the State
of Georgia, dated the most recent practical date prior to
closing;
(b)copies of the Operating Agreement of Buyer showing the
authority of Buyer's managing member to execute and
deliver the documents described herein;
(c)certificates, dated as of the Closing Date, of
appropriate officers of Buyer certifying that, to the best
of such officers' knowledge and belief, as of Closing all
of the respective representations and warranties by or on
behalf of the Buyer contained in this Agreement are true
and correct and all respective covenants and agreements of
Buyer to be performed prior to or as of Closing pursuant
to this Agreement have been performed;
(d)a certificate of existence of Buyer from the State of
Georgia, dated the most recent practical date prior to
Closing; and
(e)the Information Systems Agreement (as hereinafter
defined).
B.Buyer hereby covenants to deliver to Seller by November
30, 1999 the unpaid principal balance and accrued interest
of Short Term Note A in accordance with its terms.
3.REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller represents and warrants to
Buyer that:
3.1 CORPORATE CAPACITY.
(a) Seller and SCH are corporations duly organized,
validly existing and in good standing under the laws of
the State of California, with all requisite corporate
power and authority to own, operate and lease their
respective properties and to carry on their businesses as
now being conducted.
(b)SCHEDULE 3.1(B) contains a complete and correct copy of
the Articles of Incorporation and all amendments thereto
to the date hereof and the Bylaws as presently in effect
of Seller and SCH.
3.2 CORPORATE POWERS; ABSENCE OF CONFLICTS WITH OTHER
AGREEMENTS, ETC.
(a) The execution and delivery by Seller and SCH of this
Agreement and the performance of this Agreement and the
other agreements and transactions contemplated hereby to
be executed and performed by Seller and SCH:
(i)are within Seller's and SCH's respective corporate
powers, are not in contravention of the terms of Seller's
or SCH's Articles of Incorporation, Bylaws or any
amendments thereto;
(ii) except as set forth on SCHEDULE 3.2, upon the
Closing, (A) will not result in any breach or acceleration
of maturity of any indenture, agreement, lease or
instrument, to which Seller or SCH is a party or by which
Seller or SCH or any of the Assets is bound, (B) will not
constitute a violation of any judgment, decree, or order
of any court of competent jurisdiction applicable to
Seller or SCH, (C) will not violate any law, rule or
regulation of any governmental authority applicable to the
Seller, SCH, the Business or any of the Assets and (D)
will not require any consent, approval or authorization
of, or notice to, or declaration, filing or registration
with, any governmental or regulatory authority.
(b)This Agreement has been duly and validly executed and
delivered by Seller and SCH, and, as of the Closing, the
other agreements and instruments contemplated hereby to be
executed and delivered by Seller and/or SCH will have been
duly and validly executed and delivered by Seller and,
where applicable, SCH. Upon approval of this Agreement
and the other agreements and instruments contemplated
hereby by the Board of Directors of Seller and SCH, this
Agreement will constitute, and upon such approval and
their execution and delivery, the other agreements and
instruments contemplated hereby to be executed and
delivered by Seller and/or SCH will constitute, the valid,
legal and binding obligation of each of Seller and, where
applicable, SCH, enforceable against each of them in
accordance with their respective terms except as such
enforceability may be limited by bankruptcy,
reorganization, insolvency, or other laws affecting the
enforcement of creditors' rights generally or the
availability of equitable remedies.
3.3 FINANCIAL STATEMENTS. SCHEDULE 3.3 hereto consists
of true, correct and complete copies of the unaudited
income statement of SCH with respect to the Business for
the seven (7) months ended July 31, 1999 (the "INCOME
STATEMENT"), and the Balance Sheet as of the end of such
period (the Income Statement and the Balance Sheet are
referred to collectively as the "FINANCIAL STATEMENTS").
The Financial Statements have been prepared from and are
in accordance with the books and records of SCH, and
fairly present the operations of SCH for the period
indicated, except (a) as indicated by the notes thereto
and (b) with respect to any changes which would result
from year-end audit adjustments which in the aggregate are
not materially adverse to the business or financial
condition of either Seller or SCH.
3.4 POST-BALANCE SHEET RESULTS. Since July 31, 1999,
with respect to the Assets there has not been:
(a) any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting the
Assets, taken as a whole;
(b) any sale, lease, transfer or disposition by Seller or
SCH of the Assets except sales of inventories, supplies or
accounts receivable in the ordinary course of business and
except for sales, leases, transfers or dispositions of
non-material portions of the Assets in the ordinary course
of Seller's and SCH's business; or
(c) any change or the occurrence of any fact or condition
which may be reasonably expected to have a Material
Adverse Effect on the Business or the value of the Assets,
other than such changes, facts and conditions, if any,
outside the reasonable control of both Seller and SCH and
either; (i) generally affecting the hospital service area
in which the Hospital is located; (ii) generally
affecting the healthcare industry, or (iii) resulting from
the announcement of the transactions contemplated hereby.
"Material Adverse Effect" shall mean either (A) a net
decrease greater than $25,000 in the net worth of SCH
resulting from a single fact, event or circumstance or
$50,000 for a series of related facts, events or
circumstances, as determined in accordance with GAAP,
exclusive of EBITDA losses, or (B) EBITDA losses in excess
of $125,000 per month as reflected by SCH's financial
statements (exclusive of the effects of intercompany
transfers of cash, but including the effects of increases
or decreases to intercompany obligations). "EBITDA
losses" means losses determined from SCH's income
statement before charges for interest, taxes,
depreciation, amortization and management fees.
3.5 LICENSES. SCH has all licenses and permits relating
to the ownership or operation of the Assets and operation
of the Business as are necessary and required for such
ownership and operation except where the failure to obtain
such licenses or permits would not have a material adverse
effect on the ownership or operation of the Assets or the
operation of the Business. SCHEDULE 3.5 hereto contains a
complete list of all material licenses, permits,
franchises, certificates of need, certificate of need
applications, and PRO memos, if any, and their respective
dates of termination or renewal, owned or held by SCH
relating to the ownership, development or operation of the
Assets or the Business, together with any formal and
specific notices or directives received by SCH from the
agency responsible for such SCHEDULE 3.5 item, for which
noncompliance with such notice or directive would likely
cause the revocation, suspension or diminution in term for
such item, all of which are in good standing. Neither
Seller nor SCH have received any notice that any item
listed on SCHEDULE 3.5 is likely to be revoked, suspended,
limited, terminated, or otherwise affected in any way.
3.6 CERTAIN CONTRACTS. SCHEDULE 3.6 lists all contracts
to which SCH is a party involving obligations in respect
of the Business for payment, performance of services or
delivery of goods in excess of $5,000 or which require SCH
to continue to perform for a period of longer than 12
months ("SCHEDULED CONTRACTS"). Seller has delivered or
made available to Buyer true and correct copies of all
Scheduled Contracts. Except as set forth in SCHEDULE 3.6,
all of the Scheduled Contracts which Buyer has agreed to
assume are valid and binding obligations of the parties
thereto, are in full force and effect, and are enforceable
against the parties thereto in accordance with their
respective terms. To the best of SCH's knowledge, neither
SCH nor any of the other parties to those Scheduled
Contracts which Buyer has agreed to assume (i) are in
default under such contracts or (ii) to the best of SCH's
or Seller's knowledge consider SCH to be in default
thereunder. Except as expressly noted in SCHEDULE 3.6, to
the best of Seller's knowledge, no party to any of those
Scheduled Contracts which Buyer has agreed to assume
intends to terminate or adversely modify its agreement(s)
with respect thereto, or adversely change the volume of
business done thereunder. No such Scheduled Contract is in
excess of the normal, ordinary, usual, and current
requirements of the Business and was at the time at which
it was entered into, for the reasonable market price of
the goods and/or services relating thereto.
3.7 CERTAIN LEASES. SCHEDULE 3.7 lists all leases to
which SCH is a party in respect of the Business involving
annual obligations on the part of SCH for the payment of
rent in excess of $5,000 or involving rental of real
property by SCH as lessor, lessee, sublessor or sublessee
("SCHEDULED LEASES"). Seller has delivered or made
available to Buyer true and correct copies of all
Scheduled Leases. All of the Scheduled Leases which Buyer
has agreed to assume are valid and binding obligations of
the parties thereto, are in full force and effect, and are
enforceable against the parties thereto in accordance with
their terms; and to the best of SCH's knowledge, no event
has occurred including, but not limited to, the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby which
(whether with or without notice, lapse of time or both)
would constitute a default thereunder. To the best of
SCH's knowledge, neither SCH nor any of the other parties
to any of those Scheduled Leases which Buyer has agreed to
assume (i) is in default under any such Scheduled Lease or
(ii) to the best of SCH's or Seller's knowledge considers
SCH to be in default thereunder. SCH has not, as lessor
under any such Scheduled Lease, accepted prepaid rent more
than one month in advance or waived any rights or
obligations thereunder. No consents are required for
SCH's assignments of the Scheduled Leases to be assigned
except as disclosed in SCHEDULE 3.7. No Scheduled Lease
leases property in excess of the normal, ordinary, usual,
and current requirements of the Business and was at the
time at which it was entered into, for the reasonable
market price of the goods and/or property relating
thereto.
3.8 TITLE TO PROPERTIES AND RELATED MATTERS. On the
Closing Date SCH will hold good, valid and marketable
title to, or leasehold interest in, all of the Assets free
and clear of all title defects, liens, pledges, claims,
charges, rights of first refusal (or other claims of
interest), security interests or other encumbrances except
as provided for in the Hospital Lease and except (i)
those matters set forth in SCHEDULE 3.8(A);
(ii) unrecorded leases as set forth in SCHEDULE 1.2(D);
(iii) liens for current taxes and assessments; (iv) zoning
and building laws, ordinances, resolutions and
regulations; (v) such inchoate unfiled mechanics',
carriers', workers', repairman's and other statutory
liens, if any, which liens do not in the aggregate exceed
$25,000 in amount; (vi) those matters set forth in
Schedule B, Part 1, Exceptions from Coverage shown on the
title insurance commitment for Real Property attached
hereto as SCHEDULE 3.8(B), as the same may be revised
following receipt of a survey of each property but only to
the extent that neither Seller nor SCH has created or
caused any such matters, or has no knowledge of any such
matters, or has disclosed them in this Agreement; (vii)
rights-of-way, building or use restrictions, exceptions,
variances, reservations or other limitations or matters
affecting title to or use of the Real Property (excluding
any variance or nonconforming use known to either Seller
or SCH but not disclosed in this Agreement) which do not
materially impair the value of the Real Property or
materially interfere with or impair the current use of the
Real Property or any portion thereof or for which title
insurance coverage is being provided to Buyer; (viii) such
easements, rights-of-way, covenants, conditions,
restrictions, reservations, limitations and other
encumbrances as do not materially interfere with or impair
the current use of the Real Property or any portion
thereof or materially impair the value of the Real
Property, but only to the extent that neither Seller nor
SCH has not created or caused any such matters, or has no
knowledge of any such matters, or has disclosed them in
this Agreement, or to the extent they are disclosed as
special exceptions in the title commitments provided to
Buyer; and (ix) such minor defects, irregularities,
encumbrances, easements, rights-of-way, encroachments and
clouds on title as typically exist with respect to
properties similar in character to such Real Property, are
not caused by or through Seller or SCH after the date of
this Agreement, and as do not (A) materially interfere
with or impair the current use and operation or any
reasonably foreseeable future development or operation of
the Real Property or any part thereof, or (B) materially
impair SCH's title to such Real Property, or the value of
the Real Property, any portion thereof or SCH's interest
therein, or (C) prevent SCH from having good valid and
marketable title to, or leasehold interest in, the Real
Property, or (D) materially limits the scope or coverage
of the Title Policy to be issued to Buyer (collectively
"PERMITTED ENCUMBRANCES"). SCHEDULES 1.2(A) AND 1.2(D)
include true and accurate descriptions of all Real
Property owned or leased by SCH and all tangible personal
property (excluding cash, property with an aggregate value
in a non-material amount and the other Excluded Assets)
leased by SCH and reflected on SCH's financial statements.
Set forth on SCHEDULE 3.8(C) is a list of the most current
title insurance policies, commitments or binders issued to
either Seller or SCH with respect to any of the Real
Property or any portion thereof, and true and accurate
copies thereof have been supplied to Buyer. SCH is not
aware of and has not received any notice from any
governmental agency of any violation of any building,
zoning or other law, ordinance or regulation in respect of
such property or structures or their use by SCH. To the
best knowledge of SCH and other than as set forth on
SCHEDULE 3.8(A), no portion of the Assets is subject to
street or utility easements or a condemnation or similar
proceeding. The Assets consisting of owned personal
property are subject to no liens or encumbrances except
the security interests of record set forth on SCHEDULE
3.8(D), which Schedule is a copy of a Uniform Commercial
Code ("UCC") search duly obtained by SCH in the last 30
days and which search shows security interests of record
relating to such Assets in the State of Mississippi and
the State of California. SCH agrees to remove all
security interests relating to property interests of SCH
included in the Assets reflected on such UCC search, if
any, prior to the Closing (except those resulting from the
Hospital Lease and those approved by Buyer in writing)
and to remove any other security interests filed with
respect to such Assets between the date of such UCC search
and the date of Closing. SCHEDULE 3.8(E) describes all
construction work, if any, which SCH or its predecessors
have contracted for and which is presently in progress in
respect of the Business, and also contains a good faith
estimate, as of the date of this Agreement, of the cost to
complete each such project.
3.9 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.9 lists any
"employee benefit plans" that are described in the
Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated
thereunder ("ERISA"), that cover one or more employees of
SCH and that are sponsored or contributed to by SCH (other
than any defined contribution "employee pension benefit
plan" as defined in ERISA, that does not require any
contribution by SCH, 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 SCH). Neither SCH nor, to the best knowledge
of Seller and SCH, any other person has engaged in a
transaction with respect to any employee benefit plan
listed or required to be listed on SCHEDULE 3.9 which
could subject Buyer to a penalty under ERISA or a tax
under the Internal Revenue Code of 1986, as amended (the
"CODE"). Each of the employee benefit plans listed or
required to be listed on SCHEDULE 3.9 has been operated
and administered in accordance with applicable law,
including without limitation ERISA, except for any such
failure which would not subject Buyer to any penalty or
other liability. SCH has not incurred , and has no
knowledge of any fact or circumstance which would cause
SCH reasonably to expect to incur, any liability under
Title IV of ERISA that could result in liability to Buyer.
Each employee benefit plan listed or required to be listed
on SCHEDULE 3.9 that is a group health plan within the
meaning of Section 5000(b)(1) of the Code is in compliance
with the provisions of Section 4980B(f) of the Code,
except for any such non-compliance which would not subject
Buyer to any penalty or liability.
3.10 LITIGATION OR PROCEEDINGS. SCHEDULE 3.10(A)
contains a list of each lawsuit or legal proceeding to
which SCH is a party and which arose out of or in
connection with the Business or, to Seller's and SCH's
knowledge, which has been threatened against SCH in
connection with the Business. Except as disclosed on
SCHEDULE 3.10(B), SCH has not received notice of any
formal or informal investigations or proceedings of the
Mississippi State Department of Health, the United States
General Accounting Office, the Health Care Financing
Administration, the Department of Justice, the Federal
Trade Commission or other similar governmental agencies
(except for any investigations being conducted in the
ordinary course of business and applicable to all
hospitals) with respect to the Business. There are no
such claims, actions, proceedings or investigations of
which SCH has received written notice pending or, to the
best knowledge of SCH or Seller, threatened challenging
the validity or propriety of the transactions contemplated
by this Agreement. Except as disclosed in SCHEDULE
3.10(B), neither SCH nor Seller is now, or has ever
been, a party to any injunction, order, or decree
restricting the method of the conduct of the Business or
the marketing of any of the Business' services, nor,
except as disclosed on SCHEDULE 3.10(B), has any
governmental agency investigated or requested (other than
on a routine basis) information with respect to such
methods of business or marketing of services; neither SCH
nor Seller has received any notice that Seller currently
violates any federal, state, or local law, ordinance, rule
or regulation, which could have an adverse effect on the
Business and, to the best of Seller's and SCH's
knowledge, no such claim is or has been threatened; and
there have been no developments materially adverse to
Seller or SCH with respect to any pending or threatened
claim, action or proceeding of an administrative or
judicial nature and relating to the Business, including
but not limited to those referred to in SCHEDULES 3.10(A)
AND (B), and including without limitation any such pending
or threatened claim, action or proceeding arising from or
relating to (i) the assertion by any governmental
authority of any retroactive adjustment of the sums which
Seller or SCH was entitled to receive pursuant to
government or third party reimbursement programs such as
(but not limited to) Medicare and Medicaid, or (ii) any
allegation by any governmental authority of fraud or abuse
by any current or former officers or employees of SCH or
Seller in connection with the making of any application
for reimbursement pursuant to the government or third
party reimbursement programs referred to in the preceding
clause (i) while such individuals were officers or
employees of either Seller or SCH.
3.11 INSURANCE. SCHEDULE 3.11 lists the professional and
general liability insurance policies covering the
Business, the property insurance policies covering the
Assets, and all other insurance pertaining to SCH or the
operation of the Business. All such policies are
currently in effect and to the best knowledge of Seller
there are no defaults or alleged defaults thereunder.
3.12 SCH'S EMPLOYEES. (a) SCHEDULE 3.12 contains a list
of all of SCH's employees as of July 31, 1999, which list
includes the then current estimated annualized salaries
based on then current hourly wage rates and scheduled
hours worked, department and job title or other summary of
the responsibilities of such employees. Since July 31,
1999 there has not been any increase in the compensation
payable or to become payable by SCH to any of its
officers, employees or agents, or any bonus payment or
arrangement made to or with any such person, nor has there
been any change in SCH's personnel policies, except (in
either case) in the ordinary course of SCH's business in
accordance with established personnel policies or except
as described in SCHEDULE 3.12.
(b) Except as set forth on SCHEDULE 3.12, none of SCH's
employees are employed by SCH pursuant to an employment
agreement and/or severance agreement.
3.13 LABOR MATTERS. SCH does not have any collective
bargaining agreements with any labor union and there are
no current negotiations with a labor union. SCH is in
compliance with all applicable laws respecting employment
and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any
unfair labor practice except where such non-compliance
would not have a material adverse effect on the Business
or the Assets. Except as disclosed in SCHEDULE 3.13, SCH
has not received any notice of an unfair labor practice
complaint against SCH pending before the National Labor
Relations Board. There is no labor strike, dispute,
slowdown or stoppage actually pending against or affecting
SCH, nor has SCH received notice of any threatened labor
strike, dispute, slowdown or stoppage. No grievance which
might have an adverse effect on SCH or any such
arbitration proceeding arising out of or under collective
bargaining agreements is pending and SCH has no knowledge
that any claim therefor exists. SCH will advise Buyer of
any such labor dispute which shall arise before the
Closing.
3.14 CERTAIN REPRESENTATIONS WITH RESPECT TO THE
BUSINESS.
(a)The Hospital has current contractual arrangements with
third party payors. A complete and accurate copy of the
existing third party payor contracts of the Hospital has
been furnished or made available to Buyer. The Hospital
is presently in compliance with all of the terms,
conditions and provisions of such contracts except where
failure to be in compliance would not have a material
adverse effect on the Business or the Assets. SCHEDULE
3.14(A) lists all third-party payor and managed care
agreements which are currently in effect and identifies
all risk pools to which SCH is a party.
(b)The Hospital is accredited as a general hospital by the
Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO") and complete and accurate copies
of its most recent survey reports, lists of deficiencies,
if any, and Certificates of Accreditation relating to the
Hospital have been furnished or made available to Buyer.
(c)The Hospital is qualified for participation in the
Medicare program. A complete and accurate copy of each
existing Medicare contract has been furnished or made
available to Buyer. The Hospital is presently in
compliance with all of the terms, conditions and
provisions of such contracts except where failure to be in
compliance would not have a material adverse effect on the
Business or the Assets.
(d)The Hospital is qualified for participation in the
Medicaid program for Mississippi. A complete and accurate
copy of SCH's existing Medicaid contracts have been
furnished or made available to Buyer. The Hospital is
presently in compliance with all of the terms, conditions
and provisions of such contracts except where failure to
be in compliance would not have a material adverse effect
on the Business or the Assets.
(e)The Hospital participates in the Champus/TriCare
program. The Hospital is presently in compliance in all
material respects with all of the terms and conditions of
such participation except where failure to be in
compliance would not have a material adverse effect on the
Business or the Assets.
(f)Complete and accurate copies of all fire marshal
reports in SCH's possession or, to the best of SCH's
knowledge, available to SCH with respect to the Hospital
after January 1, 1998, have been, or will be prior to
Closing, furnished to Buyer.
(g)SCH has not received any written notice from any
applicable governmental agency, nor does it have
knowledge, of any violation of local building codes,
ordinances or zoning laws applicable to the Hospital.
(h)Copies of the Bylaws of the medical staffs of the
Hospital, together with copies of minutes of meetings
thereof since January 1, 1998, that are in SCH's
possession have been supplied or will prior to Closing be
made available to Buyer. No proceedings are pending or,
to the best of SCH's knowledge, threatened, seeking to
remove or limit the privileges of any member of the
Hospital's medical staffs or appealing any such decision
of such medical staff.
(i)The Hospital currently has a memorandum of
understanding with the appropriate peer review
organization, and complete and accurate copies of all such
memoranda of understanding have been furnished or made
available to Buyer, or will prior to Closing be made
available to Buyer.
(j)To the best of its knowledge, SCH is in material
compliance with all applicable laws and regulations that
relate to the Assets and Business, including, but not
limited to, the following:
18 U.S.C.section 201 (bribery of government officials);
18 U.S.C. section 286 (conspiracy to defraud the
government with respect to claims); 18 U.S.C. section
287 (false, fictitious, or fraudulent claims): 18 U.S.C.
section 371 (conspiracy to commit offense or to defraud
the government); 18 U.S.C.section 666 (theft or bribery
concerning programs receiving federal funds); 42
U.S.C.section1320a-5 (disclosure of ownership and
related information); 42 U.S.C. section 1320a-7a (civil
monetary penalties); 42 U.S.C. section1320a-7b (criminal
penalties); 42 U.S.C. section1395u(b)(6) (prohibition
against factoring Medicare payments); 42 U.S.C.
section1395nn(a) (making false statements or
representations in application for Medicare payment); 42
U.S.C. section1395nn(b) (illegal remuneration); 42
U.S.C.section1395nn(d)5 (violation of assignment terms);
42 U.S.C. section1396a(32) (prohibition against
factoring Medicaid payment); and 42
U.S.C.section1396h(d) (illegal patient admission and
retention practices).
(k)Since July 31, 1999 SCH has not received any written
notice of, nor has knowledge of, any threatened
termination, cancellation or limitation, or other material
adverse modification or change in, SCH's relationship with
any payor, physician, medical group (including IPAs), its
medical staffs or suppliers.
3.15 REIMBURSEMENT MATTERS. SCH has delivered or made
available to Buyer complete copies of all Medicare cost
reports and related forms that have been filed during the
past three years with respect to the Business, and
represents and warrants that such cost reports are true
and correct in all material respects. SCH has not
received any written notices that either Medicare or
Medicaid has any claims against it which may reasonably be
expected to result in consolidated net offsets against
future reimbursement in excess of that provided for in
such Financial Statements. SCH has not been indicted,
convicted or, to the best of SCH's knowledge, subject to
an investigation of the Office of Inspector General of the
Department of Health and Human Services (the "OIG") or
other applicable government agency, or received a notice
from the OIG or other applicable government agency, with
respect to a violation or an alleged violation of the
Medicare and Medicaid fraud and abuse provisions of the
federal Social Security Act or the physician ownership and
referral provisions of the Ethics in Patient Referral Act,
and to the best of SCH's knowledge, SCH has not committed
a violation of any of such provisions. SCH does not
currently contract with or employ any person or entity who
has been excluded from participation in either the
Medicare or Medicaid programs. Neither SCH nor any of its
current directors, employees, or agents has, directly or
indirectly, made, caused to be made, received, or
solicited any bribe, kickback, or other payment of a
similar or comparable nature, whether lawful or not, too
any person or entity, whether public, private or
governmental, regardless of form, whether in money,
property, services, or any other thing of value, to obtain
favorable treatment, for business secured, or for special
concessions already obtained, including payments made or
to be made in whole or in part by the Medicare or Medicaid
programs. To the extent that a final cost report is
required as a result of this transaction, Seller will file
such report within 150 days of the Effective Date. All
information in such final cost report shall be true,
accurate, and correct in all material respects.
3.16 TAXES. SCH has filed all tax returns required by
law to be filed by it and has paid all taxes, assessments
and other governmental charges shown thereon as due and
payable, other than those presently payable without
penalty or interest or those being contested in good faith
by appropriate procedures. There are no liens with
respect to taxes (except for liens with respect to real
property taxes not yet due) upon any of the Assets.
3.17ENVIRONMENTAL. Except as disclosed in the Phase I
Site Assessment of the Hospital obtained by Buyer relating
to the Assets (the "Environmental Report") included herein
as SCHEDULE 3.17 SCH is currently, and at all times has
been, in compliance with all Environmental Laws (as
defined below) except where failure to comply with such
Environmental Laws would not have a material adverse
effect on the Business.
"ENVIRONMENTAL LAWS" means the federal, state (including
specifically, but not by way of limitation, the State of
Mississippi), and local environmental, health or safety
laws, regulations, ordinances, rules and policies and
common law in effect on the date hereof and the Closing
Date relating to the generation, use, refinement,
handling, treatment, removal, storage, production,
manufacture, transportation, disposal, arranging for
disposal, emissions, discharges, releases or threatened
releases of Hazardous Substances, or otherwise relating to
protection of human health, worker safety or the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata), as the same may be amended or modified to the
date hereof and the Closing Date, including, without
limitation, the statutes and regulations listed below:
3.18 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and
to the extent reflected or specifically reserved against
(which reserves are believed adequate in amount) in the
Financial Statements, to the best of Seller's and SCH's
knowledge, SCH did not have, at the date of such Financial
Statements, any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise and
whether due or to become due) required to be reflected
thereon or included therein, except for any liabilities
which have been incurred since the dates of such Financial
Statements in the ordinary course of business consistent
with past practice or which have been discharged or paid
in full prior to the date hereof.
3.19 BROKERAGE. Neither Seller nor SCH has engaged any
financial advisor, broker or similar entity in respect of
the transactions contemplated hereby which may be entitled
to a fee or commission in connection with such
transactions.
3.20 NO MISLEADING STATEMENTS. No representation or
warranty by Seller or SCH contained in this Agreement, and
no statement contained in any Schedule (including any
supplement or amendment thereto) and the documents to be
delivered at the Closing by or on behalf of Seller to
Buyer or any of its representatives in connection with the
transactions contemplated hereby (the Schedules, including
any supplement or amendment thereto, and such Closing
documents are herein referred to, collectively, as the
"ADDITIONAL DOCUMENTS"), contains or will contain any
untrue statement of a material fact, or, to the best
knowledge of Seller and SCH, omits or will omit to state
any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the
statements herein or therein not misleading. Copies of
all documents described on any Schedule hereto which have
been furnished, provided or made available to Buyer or are
hereafter furnished, provided or made available to Buyer
are or shall be, to the best of Seller's and SCH's
knowledge, true, correct and complete.
3.21 DISCLAIMER OF WARRANTIES. THE ASSETS BEING ACQUIRED
BY BUYER UPON RECEIPT OF THE STOCK AND BEING THEREBY
TRANSFERRED BY SELLER ARE IN THEIR CONDITION AT CLOSING,
"AS IS", AND WITH NO WARRANTIES, INCLUDING THE WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
with respect to the Personal Property and Operating
Inventory, any and all of which warranties (both express
and implied) Seller hereby disclaims. Nothing in this
Section 3.21 shall be construed to limit the scope or
effect of the express representations and warranties
contained elsewhere in this Article III.
3.22 NO CONFLICT.The execution, delivery, and performance
of this Agreement and the other agreements contemplated
hereby to which Seller and SCH, or either of them, is a
party and the consummation by Seller and SCH of the
transactions contemplated hereby and thereby does not and
will not (with or without the giving of notice or the
lapse of time or both) contravene, conflict with, or
result in the violation of any provision of the Scheduled
Contracts or the Scheduled Leases, except as may be
described in Schedule 3.6 and Schedule 3.7.
4.REPRESENTATIONS AND WARRANTIES OF BUYER.
As of the date hereof, Buyer represents and warrants to
Seller and SCH the following:
4.1 BUYER CAPACITY.
(a)Buyer is a limited liability company duly organized
and validly existing under the laws of the State of
Georgia, with all limited liability company power and
authority to own, operate and lease its properties.
(b)SCHEDULE 4.1 contains complete and correct copies of
the Articles of Organization and all amendments thereto to
the date hereof and the Operating Agreement as presently
in effect of Buyer.
4.2 CORPORATE AUTHORIZATION/CONTRACT BINDING. (a) The
execution, delivery and performance by Buyer of this
Agreement and the other agreements and transactions
contemplated hereby to be executed and performed by Buyer:
(i) are within Buyer's powers, are not in contravention
of the terms of Buyer's Articles of Organization,
Operating Agreement, or any amendments thereto and have
been duly authorized by the Managing Member of Buyer; and
(ii) except as set forth on SCHEDULE 4.2, on the Closing
Date, (A) will not result in any breach of any indenture,
agreement, lease or instrument to which Buyer is a party
or by which Buyer is bound, (B) will not constitute a
violation of any judgment, decree or order of any court of
competent jurisdiction applicable to Buyer, (C) will not
violate any law, rule or regulation of any governmental
authority applicable to Buyer and (D) will not require any
consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental
or regulatory authority.
(b)This Agreement has been duly and validly executed and
delivered by Buyer, and, as of the Closing, the other
agreements and instruments contemplated hereby will have
been duly and validly executed and delivered by Buyer.
This Agreement constitutes, and upon their execution and
delivery, the other agreements and instruments
contemplated hereby will constitute, the valid, legal and
binding obligations of Buyer, enforceable against it in
accordance with their respective terms except as such
enforceability may be limited by bankruptcy,
reorganization, insolvency, or other laws affecting the
enforcement of creditors' rights generally or the
availability of equitable remedies.
4.3 BROKERAGE. Buyer has not engaged any financial
advisor, broker or similar entity in respect of the
transactions contemplated hereby which may be entitled to
a fee or commission in connection with such transactions.
4.4SECURITIES REPRESENTATION. Buyer is acquiring the
Stock for investment and not with a view to distribution
thereof. Buyer understands that the Stock is not
registered, has no market, will bear a restrictive legend
thereon, and may not be resold except in compliance with
applicable Federal and state securities laws. Buyer is
sophisticated in financial matters, is economically able
to bear the risks of owing the Stock for an indefinite
time, and understands the risks of acquiring and holding
the Stock. Buyer has had access to such books, records and
personnel of Seller and SCH as it deems necessary and has
had opportunity to make such inquiries of and receive
answers from Seller and SCH as it deems necessary to make
the investment decision to acquire the Stock. Buyer does
not consider the purchase of the Stock as a securities
transaction, but rather the purchase of the Business,
that, but for various reasons unique to this transaction,
would otherwise been accomplished by means of a direct
purchase of the Assets.
5.COVENANTS OF SELLER PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date:
5.1 INFORMATION. Seller and SCH shall afford to the
officers and authorized representatives of Buyer access to
the Hospital and will furnish to Buyer such additional
financial data and other information relating to the
Assets or the Business as Buyer may from time to time
reasonably request; provided such access shall occur at
such time or times as will not disrupt delivery of care to
patients. Seller and SCH agree to cooperate reasonably
with Buyer in Buyer's efforts (i) to make any required
filings and to obtain any governmental approvals necessary
in order to consummate the transactions contemplated
hereby, (ii) to respond to any governmental investigation
of such transactions, and (iii) to defend any legal or
administrative proceedings challenging such transactions.
Seller and SCH will, upon reasonable request, cooperate
with Buyer, its representatives and counsel in the
preparation of any document or other material which may be
required by any governmental agency as a predicate to or
result of the transaction herein contemplated. SCH shall
provide Buyer, when normally available, monthly statements
of income with respect to the Business for the interim
period between the effective date of this Agreement and
Closing.
5.2 OPERATIONS. With respect to the ownership of the
Assets and the operation of the Business, Seller and SCH
will each:
(a)carry on the Business in substantially the same manner
as it has been conducted heretofore and not make any
change in personnel (other than in the ordinary course of
business) or operations, and not make any change in
finance or accounting policies including the management of
current assets and current liabilities;
(b)maintain the Assets in as good working order and
condition as at present, ordinary wear and tear excepted;
(c)perform in all material respects SCH's obligations
under agreements relating to or affecting the Assets or
the Business;
(d)keep in full force and effect present insurance
policies or other comparable insurance coverage;
(e)use commercially reasonable efforts to maintain and
preserve the business organization of Seller intact,
retain its present employees and maintain its current
relationships with suppliers, customers, patients, and
others having business relations with SCH;
(f)without the consent of Buyer, which will not be
unreasonably withheld, SCH will not incur or commit to any
obligation with respect to any single capital expenditure
in excess of $25,000; and
(g)except in the ordinary course of business, SCH will not
enter into, amend, or cancel Scheduled Contracts or
Scheduled Leases that will be assumed by Buyer, without
Buyer's prior written consent.
5.3 CERTAIN CHANGES. Without the prior written consent
of Buyer, which consent will not be unreasonably withheld,
SCH will not:
(a)sell or agree to sell any of the Assets except for the
depletion of inventories in the ordinary course of
business and the daily sale of accounts receivables
pursuant to Seller's accounts receivable financing
program;
(b)engage in any transaction out of the ordinary course of
business, including any sale, transfer, lease, encumbrance
or granting of a lien upon or a security interest in any
portion of the Assets (except as provided in Section
5.3(a) above);
(c)incur any debt (other than to Seller) or guarantee any
debt; or
(d)increase the compensation payable to any employee,
stockholder, director, or consultant.
5.4 CASUALTY. If, prior to the Closing, the Hospital's
facilities or other Assets sustain damage or destruction
that SCH has not repaired prior to Closing, then the
following provisions shall apply:
(a)If --
(i) such damage or destruction results in any Hospital
facility being unusable for its current purpose, or
(ii) the cost to repair such damage or destruction, or to
replace such damaged or destroyed facilities or other
Assets (collectively, the "Cost to Repair"), is greater
than $1,000,000 and Seller or SCH does not have insurance
coverage therefor,
then Buyer may elect either (1) to terminate this
Agreement and all obligations ofthe parties hereunder or
(2) to complete the transactions contemplated herein and
receive as a credit to the Purchase Price the amount of
such Cost to Repair andthereafter Seller shall have no
obligation to repair such damage or destruction;
(b)If subparagraph (a) does not apply, then:
(i) If Seller or SCH has insurance coverage for the Cost
to Repair any damage or destruction and no other party
with a contractual right to any of such proceeds objects,
then Buyer may elect either (1) to receive from Seller or
SCH all of the proceeds of such insurance paid or payable
and pay to Seller the full Purchase Price hereunder or (2)
to allow Seller or SCH to retain all such insurance
proceeds subject to a reduction of the Purchase Price in
the amount of such insurance proceeds; and
(ii) If and to the extent that the Cost to Repair any
damage or destruction is not covered by insurance,
including without limitation costs that are subject to a
deductible or self-insured retention, then the Purchase
Price shall be reduced by an amount equal to that portion
of the Cost to Repair such damage or destruction that is
not covered by insurance.
5.5 BEST EFFORTS TO CLOSE. Seller and SCH shall use
their best efforts to proceed toward the Closing and to
cause the conditions to Closing to be met as soon as
practicable and consistent with other terms contained
herein. Seller and/or SCH shall notify Buyer as soon as
practicable of any event or matter which comes to Seller's
or SCH's attention which may reasonably be expected to
prevent the conditions to Seller's obligation being met.
5.6 INSURANCE RATINGS. Seller and SCH shall take that
action reasonably requested by Buyer to enable Buyer to
succeed to the Worker's Compensation and Unemployment
Insurance ratings, insurance policies, deposits and other
interests of Seller and SCH and other ratings for
insurance or other purposes established by Seller;
provided, however, that the covenants contained in this
sentence shall not require Seller or SCH to expend its own
funds to satisfy such obligations, nor shall such
covenants permit Buyer to acquire Seller's or SCH's
deposits without compensation to Seller. Buyer shall not
be obligated to succeed to any such rating, insurance
policy, deposit or other interest, except as it may elect
to do so.
5.7 COOPERATION WITH BUYER. Seller and SCH shall
cooperate in all reasonable respects with Buyer in
connection with any required actions of Buyer to obtain
regulatory consents to and approvals of the transfer of
any of the Licenses described in SCHEDULE 3.5 hereof.
6.INDEMNIFICATION.
6.1 INDEMNITY BY BUYER . From and after Closing, Buyer
shall indemnify, defend and hold harmless Seller and SCH
and their respective officers, employees, affiliates and
agents (collectively, "BUYER INDEMNIFIED PARTIES") from
and against any and all liabilities, losses, damages,
demands, claims, suits, actions, judgments, causes of
action, assessments, costs and expenses, including,
without limitation, interest, penalties, reasonable
attorneys' fees, any and all expenses incurred in
investigating, preparing and defending against any
litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of
any claim or litigation (collectively, "DAMAGES"),
asserted against, resulting to, imposed upon, or incurred
or suffered by any of them, directly or indirectly, as a
result of or arising from the following:
(i)any inaccuracy in or breach or nonfulfillment of any of
the representations, warranties, covenants or agreements
made by Buyer in this Agreement or the other agreements
contemplated hereby;
(ii)any liability imposed on any Buyer Indemnified Party
to the extent such liability has been expressly assumed by
Buyer pursuant to this Agreement and any agreement
required herein;
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "BUYER
ADDITIONAL DOCUMENTS") furnished or to be furnished by or
on behalf of Buyer at Closing under this Agreement;
(iv)any liability, obligation or indebtedness of Buyer or
any alleged liability, obligation or indebtedness of Buyer
, including without limitation those relating to
contractual obligations, liabilities to Medicare or
Medicaid programs, tax liabilities or professional
malpractice or general liability claims, arising out of
the operation of the Business after the Effective Time
which is imposed on or made against any Buyer Indemnified
Party, except to the extent such liability or alleged
liability arises out of a liability of Seller that has not
been expressly assumed by Buyer pursuant to this Agreement
and any agreement required herein; and
(v)any claims for fees or commissions of a broker, agent
or similar entity employed or alleged to have been
employed by or on behalf of Buyer in connection with the
transactions contemplated hereby.
6.2 INDEMNITY BY SELLER AND SCH. From and after the
Closing, Seller and SCH, jointly and severally, shall
indemnify, defend and hold harmless Buyer and its
respective officers, directors, employees, shareholders,
affiliates and agents (collectively, the "SELLER
INDEMNIFIED PARTIES") from and against any and all Damages
asserted against, resulting to, imposed upon, or incurred
or suffered by any of them, directly or indirectly, as a
result of or arising from the following:
(i)any inaccuracy in or breach or nonfulfillment of any of
the representations, warranties, covenants or agreements
made by Seller or SCH in this Agreement or the other
agreements contemplated hereby;
(ii)any liability, obligation or indebtedness of Seller or
SCH or any alleged liability, obligation or indebtedness
of Seller or SCH, including without limitation those
relating to contractual obligations, liabilities
(including recapture of depreciation) to the Medicare or
Medicaid programs, tax liabilities or professional
malpractice or general liability claims, arising out of
the operation of the Business prior to the Effective Time
which is imposed on or made against any Seller Indemnified
Party, except to the extent certain contractual
obligations have been expressly assumed by Buyer pursuant
to this Agreement and any agreement required herein;
(iii)any misrepresentation in or any omission from any
certificate or other document (collectively, the "SELLER
ADDITIONAL DOCUMENTS") furnished or to be furnished by or
on behalf of Seller or SCH at Closing under this
Agreement;
(iv)any claims for fees or commissions of a broker, agent
or similar entity employed or alleged to have been
employed by or on behalf of Seller or SCH in connection
with the transactions contemplated hereby; and
(v) any liability for violations of any Environmental Laws
resulting from underground storage tanks as disclosed in
Schedule 3.17.
6.3 CLAIMS PROCEDURE. (a) If a party to this Agreement
("CLAIMING PARTY") learns of a circumstance giving rise to
a claim for another party to this Agreement ("PERFORMING
PARTY") to make payment, performance, or indemnity under
this Agreement, then the Claiming Party shall give the
Performing Party written notice thereof within a
reasonable time considering the circumstances. No delay
in giving notice to the Performing Party shall work a
forfeiture of the rights of Claiming Party or shall limit
the Performing Party's obligations under this Agreement.
If, however, a delay in giving notice within a reasonable
time prejudices the Performing Party and materially
impairs its ability to mitigate loss, then the Performing
Party shall have no obligation to pay that part of a loss
caused by the delay.
(b)The Performing Party shall defend, and shall have the
right to settle, claims or suits by third parties that are
payable or that are to be indemnified by the Performing
Party under this Agreement. The Claiming Party shall
reasonably cooperate with the Performing Party in the
defense of claims and suits that the Performing Party
defends, and the Performing Party shall reimburse the
Claiming Party for out-of-pocket expenses incurred in
cooperating at the Performing Party's request. The
Claiming Party shall not settle such claims or suits
defended by the Performing Party without the Performing
Party's prior consent, which shall not be unreasonably
withheld. The Claiming Party shall have the right to
approve defense counsel selected by the Performing Party,
which approval shall not be unreasonably withheld, and the
right fully to participate in the defense of such claims
and suits at the Claiming Party's sole cost and expense.
The Claiming Party shall have the right to defend and
settle claims or suits without prejudice to any of their
rights against the Performing Party under this Agreement
if the Performing Party declines or is unable to undertake
the defense of a claim or suit within a reasonable time
after the Performing Party's receipt of notice thereof.
If the Performing Party disputes the Claiming Party's
entitlement to indemnity and asserts the right to defend a
claim or suit, and if the Claiming Party reasonably
believes that the Performing Party's control of the
defense of a claim or suit might prejudice the Claiming
Party, then the Claiming Party shall have the right to
defend such claim or suit. Performing Party shall have
the right fully to participate in the defense of such
claim or suit, and Claiming Party shall not settle such
claim or suit without the Performing Party's prior
consent, which Performing Party shall not unreasonably
withhold.
(c)A Performing Party shall take actions required in this
Section 6 (including the payment of a claim) promptly
following receipt of notice of such claim.
(d)With respect to any Damages due a Buyer Indemnified
Party, the amount of any such Damages shall be credited by
Seller first to interest due and thereafter to the
outstanding principal balance of Note A, and thereafter
any remaining unpaid Damages credited in a similar manner
to Note B, and any further remaining unpaid Damages paid
in cash. With respect to any Damages due a Seller
Indemnified Party, the amount of any such Damages shall
work as an increase to the outstanding principal of Note
B, or if Note B has been paid then an increase to Note C;
and, if Note C has been paid, then in cash.
6.4 LIMITATION ON CLAIMS.
(a)No Seller Indemnified Party nor Buyer Indemnified Party
shall make any claim for indemnification pursuant to
Sections 6.1 or 6.2 with respect to any matter unless:
(i)the amount of the Damages arising out of such matter is
in excess of $25,000 (a "RELEVANT CLAIM"); and
(ii)the aggregate amount of all Damages with respect to
which a Relevant Claim is being made by an Indemnified
Party against any or all of the applicable Indemnifying
Parties (together with all such Relevant Claims previously
made by the applicable Indemnified Parties against the
applicable Indemnifying Parties) exceeds $100,000.
(b)Notwithstanding the provisions of Section 6.4(a), any
indemnified claim having its basis in any of the following
shall not be subject to the thresholds established by such
provisions: (A) a breach of the representations,
warranties, covenants and agreements made in 1.4(b)(2),
3.6, 3.7, 3.9, 3.14(c), 3.14(d), 3.14(e), 3.14(j), 3.15,
3.16, 3.17, 3.18, 3.19, 3.22 and 4.3, (B) fraud or
intentional misrepresentation, (C) a breach by Buyer to
pay or observe any obligation of Seller assumed by Buyer
pursuant to the terms hereof and any agreement required
herein, (D) any breach by Buyer to pay the Purchase Price
hereunder, or (E) a breach by Buyer or Seller of its
obligation under Section 1.9 to pay any post-Closing
adjustment to the Purchase Price required by such Section.
(c)Buyer shall not be under any liability and no claim
under Section 6.1 of this Agreement shall be made to the
extent that SCH or Seller discovered such breach prior to
the Closing Date and failed to disclose such breach to
Buyer as provided in Section 11.2 hereof, except that
Buyer shall be liable to the extent Buyer had knowledge of
such breach or to the extent SCH or Seller would have
nonetheless suffered damages had such breach been
disclosed to Buyer prior to the Closing Date.
(d)Neither Seller nor SCH shall be under any liability and
no claim under Section 6.2 of this Agreement shall be made
to the extent that Buyer discovered such breach prior to
the Closing Date and failed to disclose such breach to SCH
and Seller as provided in Section 11.2 hereof, except that
SCH and Seller shall be liable to the extent either SCH or
Seller had knowledge of such breach or to the extent Buyer
would have nonetheless suffered damages had such breach
been disclosed to SCH or Seller prior to the Closing Date.
(e)If an Indemnifying Party is liable to an Indemnified
Party for breach of any representation, warranty or
undertaking, the liability of the Indemnifying Party shall
be reduced and any amount paid by such Indemnifying Party
shall be refunded to the extent that the Indemnified Party
is eligible to obtain a reduction in its liability for tax
(whether by way of credit or otherwise and calculated
assuming that the Indemnified Party is taxed at the
maximum rate applicable to such entity) which it would not
have been eligible for had the breach which gave rise to
liability of the Indemnifying Party not arisen.
(f)Each Indemnified Party shall cooperate in all
reasonable respects with the reasonable requests of its
applicable Indemnifying Parties in the conduct of
litigation, the making of settlements and the enforcement
of any right of contribution to which the Indemnified
Parties may be entitled from any person or entity in
connection with the subject matter of any litigation
subject to indemnification hereunder. In addition, the
Indemnified Parties shall, upon the reasonable requests by
their applicable Indemnifying Parties or counsel selected
by such Indemnifying Parties, attend hearings and trials,
assist in the securing and giving of evidence, assist in
obtaining the presence or cooperation of witnesses, make
available its own personnel, and assist in effecting
settlements; and shall take such action as is reasonably
necessary and appropriate in connection with such
litigation. Seller Indemnified Parties shall not, except
at their own cost, voluntarily make any payment, assume
any obligation, incur any expense, or settle or compromise
any claim without the express approval of Seller
Indemnifying Parties in connection with any matter that is
subject to indemnification hereunder.
(g)The indemnification provided under Sections 6.1 and 6.2
shall survive the execution and delivery of this
Agreement, the closing of the transactions contemplated
hereby and the satisfaction of all other obligations of
any party hereto under this Agreement. In respect of the
indemnification provided under Section 6.1(i) and 6.2(i)
relating to or arising out of a breach of a representation
or warranty, and with respect to the indemnification
provided under Sections 6.1(iii) and 6.2(iii) relating to
or arising out of a misrepresentation in or omission from
a Buyer Additional Document or a Seller Additional
Document and which constitutes a "bring down" of a party's
representations and warranties made in this Agreement, no
indemnification may be asserted under this Agreement
unless the party making the claim gives the party against
whom the claim is to be made notice of such claim before
the end of the applicable Survival Period (as defined in
Section 12.17 hereto); PROVIDED, that such claim shall
survive the expiration of the Survival Period if notice
thereof, as required by Section 6.3, was given prior to
the expiration of the Survival Period. In respect of the
other indemnification provided under Sections 6.1 and 6.2,
there shall be no limitation on when a claim for
indemnification hereunder may be sought other than as set
forth in Section 6.1 or 6.2, and the parties hereby waive
any such limitation which may be imposed by law.
(h)If a Performing Party pays a claim to a Claiming Party
pursuant to this Agreement, then such party shall be
subrogated to all rights of the party to or for whom the
claim was paid against others for recovery of the loss,
except affiliates, employees, officers, directors,
successors or assigns of the party to or for whom the
claim was paid.
6.5 JURISDICTION; SERVICE OF PROCESS. Each of the
parties hereto severally agrees that any legal action or
proceeding with respect to this Agreement or to enforce
any judgment obtained against any party hereto in
connection with this Agreement may be brought by any other
party hereto or any Seller Indemnified Party or Buyer
Indemnified Party in the United States District Courts
which are located in the city of Jackson, Mississippi, or
any other court to the jurisdiction of which such party
hereto or any of its respective properties is or may be
subject. In connection with any action or proceeding
relating to this Agreement, each of the parties hereto
severally irrevocably submits to the jurisdiction of the
United States District Courts located in the city of
Jackson, Mississippi and irrevocably waives any present or
future objection to venue in any such court, and any
present or future claim that any such court is an
inconvenient forum. Nothing herein shall affect the right
of the a party to serve process in any manner permitted by
law or to bring any civil suit, action or proceeding
against any party hereto or its respective property in the
courts of any jurisdiction in which venue may be granted.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer hereunder are subject to the
satisfaction, on or prior to the Closing Date, of the
following conditions unless waived in writing by Buyer:
7.1 REPRESENTATIONS/WARRANTIES; COMPLIANCE WITH
COVENANTS. The representations and warranties of Seller
and SCH contained in this Agreement shall be true and
correct in all material respects when made and on and as
of the Closing Date, as though such representations and
warranties had been made on and as of such Closing Date;
and the covenants and conditions of this Agreement to be
complied with or performed by Seller or SCH on or before
the Closing Date pursuant to the terms hereof shall have
been duly complied with and performed in all material
respects.
7.2 OPINION OF SELLER'S COUNSEL. Buyer shall have
received an opinion from Michener, Larimore, Swindle,
Whitaker, Flowers, Sawyer, Reynolds & Chalk L.L.P.,
counsel to Seller and SCH, dated as of the Closing Date,
substantially in the form of APPENDIX 7.2.
7.3 ACTION/PROCEEDING. No action, proceeding,
investigation or administrative hearing before a court or
any other governmental agency or body shall have been
instituted against any party hereto (and remain
unresolved) which seeks injunctive relief in anticipation
of the sale of the Stock and may reasonably be expected to
prohibit the sale of the Stock to Buyer or seeks damages
in a material amount by reason of the consummation of such
sale; nor shall any party hereto have received
notification from any governmental agency of the United
States of America or the State of Mississippi of such
agency's current intent to seek injunctive relief in
anticipation of the sale of the Stock to prohibit the sale
of the Stock to Buyer.
7.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the
Seller shall have executed and/or delivered to Buyer all
documents, agreements and instruments contemplated by
Section 2.2.
7.5 INFORMATION SYSTEMS AGREEMENT. Seller and Buyer
shall have executed and delivered an Information Systems
Agreement (the "INFORMATION SYSTEMS AGREEMENT"), in
substantially the form attached hereto as APPENDIX 7.5.
8.CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SCH.
The obligations of Seller and SCH hereunder are subject to
the satisfaction, on or prior to the Closing Date, of the
following conditions unless waived in writing by Seller
and SCH:
8.1 REPRESENTATIONS/WARRANTIES; COMPLIANCE WITH
COVENANTS. The representations and warranties of Buyer
contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as
though such representations and warranties had been made
on and as of such Closing Date; the covenants and
conditions of this Agreement to be complied with or
performed by Buyer on or before the Closing Date pursuant
to the terms hereof shall have been duly complied with and
performed in all material respects.
8.2 OPINION OF BUYER'S COUNSEL. Seller shall have
received from Nelson Mullins Riley & Scarborough, L.L.P.,
counsel to Buyer, an opinion dated as of the Closing Date
and addressed to Seller, substantially in the form of
APPENDIX 8.2.
8.3 ACTION/PROCEEDING. No action, proceeding,
investigation or administrative hearing before a court or
any other governmental agency or body shall have been
instituted against any party hereto (and remain
unresolved) which seeks injunctive relief in anticipation
of the sale of the Stock and may reasonably be expected to
prohibit the sale of the Stock to Buyer or seeks damages
in a material amount by reason of the consummation of such
sale; nor shall any party hereto have received
notification from any governmental agency of the United
States of America or the State of Mississippi of such
agency's current intent to seek injunctive relief in
anticipation of the sale of the Stock to prohibit the sale
of the Stock to Buyer or the parties' execution hereof.
8.4 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the
Buyer shall have executed and/or delivered to Seller all
documents, agreements and instruments contemplated by
Section 2.3.
8.5 SELLER AND SCH BOARD APPROVAL. The Board of
Directors of Seller and SCH shall have approved this
Agreement and the transactions contemplated hereby.
9.PARTICULAR COVENANTS OF BUYER.
9.1 BEST EFFORTS TO CLOSE. Buyer shall use their best
efforts to proceed toward the Closing and to cause the
conditions to Closing to be met as soon as practicable and
consistent with other terms contained herein. Buyer shall
notify Seller as soon as practicable of any event or
matter which may reasonably be expected to prevent the
conditions to Buyer's obligations being met.
9.2 EMPLOYEE MATTERS. Effective as of the Effective Time
Buyer will provide employee welfare benefits and paid
time-off benefits to employees of SCH that are of
commensurate with those of the employees of SCH prior to
the Effective Time. Buyer understands and agrees that as
of the Effective Time, the employees of SCH will no
longer be permitted to participate in the benefits
provided and/or sponsored by Seller. Notwithstanding the
foregoing, nothing in this Section 9.2 constitutes a
guarantee of employment or a contract of employment for
any such employees, and Seller understands and agrees that
all such employees will be employees "at will" of SCH
unless Buyer has expressly agreed to assume a written
contract of employment existing prior to the Closing Date.
9.3 CONSENTS AND REGULATORY APPROVALS. Buyer
acknowledges that except as provided in Section 5.9
hereof, neither Seller nor SCH shall have any
responsibility for obtaining any regulatory consents to
and approvals of the transfer of the Licenses described in
SCHEDULE 3.5 hereof.
9.4 CHANGE OF NAME. Buyer agrees that it will cause all
signs and usage, if any, incorporating the name
"Paracelsus"(and all variations thereof) which are located
at any of the Hospitals or used in the Business to be
removed or modified as soon as reasonably practicable
after the Closing Date and in any event within 30 days
after the Closing Date.
9.5 BUYER'S PAYMENT OF THE PURCHASE PRICE. Subject to
the conditions to Closing set forth in this Agreement,
Buyer shall pay the Purchase Price for the Assets in
accordance with Section 2.3(a).
9.6 PRESERVATION AND ACCESS TO BOOKS AND RECORDS AFTER
THE CLOSING. (a) After the Closing, Buyer shall keep and
preserve all medical records and medical charts existing
as of the Closing of patients of the Hospital for so long
as Buyer is required by law to maintain such records (but
in no event less that seven years, beginning on the
Closing Date). Buyer acknowledges that as a result of
entering into this Agreement and operating the Business,
it will gain access to patient and other information which
is subject to rules and regulations concerning
confidentiality. Buyer agrees to abide by any such rules
and regulations relating to the confidential information
it acquires. Buyer agrees after Closing to maintain the
patient records at the Business in accordance with
applicable law (including, if applicable, Section
1861(v)(i)(1) of the Social Security Act (42 U.S.C.
section 1395x(v)(1)(1)) and requirements of relevant
insurance carriers. In addition, Seller shall be entitled
to remove from the Hospital any such patient records, but
only for purposes of pending litigation involving a
patient to whom such records refer, as certified in
writing prior to removal by counsel retained by Seller in
connection with such litigation; provided, however, that
to the extent Seller is not required by subpoena or court
order to use originals of the patient records for such
purposes, Seller shall use copies of patient records. Any
original patient records so removed from the Business
shall be promptly returned to Buyer following its use by
Seller. Notwithstanding the foregoing provisions, Seller
shall not be entitled to review, have access to, have
copies of or remove from the premises of the Business any
medical records or patient charts relating to any period
after the expiration of the applicable statute of
limitations expires for the bringing of any action against
Seller for its ownership of the Business prior to the
Effective Time.
(b)After the Closing, Buyer shall keep and preserve all
other records of the Business existing as of the Closing
which are delivered to Buyer by Seller for a period of 7
years or such longer period (if any) as such records are
required to be kept and preserved by any federal or state
law or regulation. After the Closing, upon reasonable
written notice by Seller to Buyer, Seller shall be
entitled, during regular business hours, to have access to
and make copies of all records pertaining to the operation
of the Business (other than medical records which shall be
governed by the provisions of Section 9.8(a) hereof) prior
to the Closing for any lawful corporate purpose.
(c)Should Buyer decide to dispose of any books or records
which they have been obligated to maintain pursuant to
Section 9.8, Buyer shall advise Seller in writing of such
intention and Seller shall have not less than 60 days
after receipt of such notice to elect in writing to have
Buyer deliver such records to Seller.
10.PARTICULAR COVENANTS OF SELLER AND SCH.
10.1 GOVERNMENTAL APPROVALS. Seller and SCH shall assist
and cooperate with Buyer and Buyer's representatives and
counsel in obtaining all governmental consents, approvals
and licenses which Buyer reasonably deems necessary or
appropriate and in the preparation of any document or
other material which may be required by any governmental
agency as a predicate to or result of the transactions
contemplated herein.
11.TERMINATION.
11.1 OPTIONAL TERMINATION. This Agreement may be
terminated at any time prior to the Closing as follows:
(a)by the mutual agreement of Buyer and Seller;
(b)by Buyer in accordance with the provisions of Section
5.4;
(c)by either Buyer or Seller, if any court of competent
jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby
and such order, decree, ruling or other action shall have
become final and non-appealable;
(d)in the event either Seller or SCH, on one hand, or
Buyer on the other hand, commits a breach of any
representation, warranty, covenant or agreement made
herein, which breach, if left uncured, would result in a
material adverse effect on the condition or value of the
Assets or the operation of the Business, by either Buyer
or Seller, provided such terminating party did not cause
or commit such breach, and provided further, that this
right to terminate shall be subject to the parties' rights
to cure set forth herein;
(e)by either Buyer or Seller if the Closing has not
occurred by September 30, 1999 because a condition to the
terminating party's obligation to close set forth, in
respect of Buyer in Article 7, and, in respect of Seller
and SCH in Article 8, was not satisfied on such date,
unless the date for Closing has been extended by the
mutual agreement of the parties hereto, and
(f)by Buyer if Buyer's examination of SCH's books and
records and due diligence investigation of SCH's
operations and condition reveals facts or circumstances
unacceptable to Buyer.
11.2 NOTICE; EFFORTS TO REMEDY. Seller and SCH on the
one hand and Buyer on the other will notify the other
party promptly in writing of, and contemporaneously will
provide the other party with true and complete copies of
any and all information and documents relating to, and
will use their reasonable best efforts to cure within
fifteen (15) days (or by any subsequent date agreed upon
by the parties), any event, transaction or circumstance
occurring that causes or would cause any covenant or
agreement under this Agreement made by the notifying party
to be breached, or that renders or would render untrue any
representation or warranty of the notifying party
contained in this Agreement as if the same were made on or
as of the date of such event, transaction or circumstance.
Each party will also use their reasonable best efforts to
cure within fifteen (15) days (or by any subsequent date
agreed upon by the parties), any violation or breach of
any representation, warranty, covenant or agreement made
by such violating or breaching party in this Agreement.
The party not in such violation or breach, as the case may
be, may terminate this Agreement (to the extent such
remedy is available to such party pursuant to Section
11.1(d) hereof); provided, however, that after the date
established by the parties for Closing, such non-violating
or non-breaching party may terminate this Agreement (to
the extent such remedy is available to the non-violating
or non-breaching party pursuant to Section 11.1(d) hereof)
unless the breach or misrepresentation has been cured to
the reasonable satisfaction of such non-breaching or non-
misrepresenting party. Furthermore, each party shall
notify the other party promptly in writing of any event,
transaction or circumstance occurring that causes or would
cause any covenant or agreement of such other party under
this Agreement to be breached, or that renders or would
render untrue any representation or warranty of such other
party contained in this Agreement as if the same were made
on or as of the date of such event, transaction or
circumstance. Such other party shall have thirty (30)
days in which to effect a cure of such breach or
misrepresentation before the non-breaching or non-
misrepresenting party may terminate this Agreement (to the
extent such remedy is available to the non-breaching or
non-misrepresenting party pursuant to Section 11.1(d)
hereof); provided, however, that after the date
established by the parties for Closing, such non-breaching
or non-misrepresenting party may terminate this Agreement
(to the extent such remedy is available to the non-
breaching or non-misrepresenting party pursuant to Section
11.1(d) hereof) unless the breach or misrepresentation has
been cured to the reasonable satisfaction of such non-
breaching or non-misrepresenting party. The failure of
the discovering party to notify the other party of any
such discovered event, transaction or circumstance shall
not release the other party from any liability to the
discovering party resulting from the breach attendant to
such discovered event, transaction or circumstance;
provided, however, that, unless the other party had
independent knowledge of such event, circumstance or
condition, such other party's liability shall be limited
to the damages that would have nonetheless resulted to the
discovering party had the discovering party disclosed such
discovered event, transaction or circumstance to the other
party prior to Closing.
11.3 NOTICE OF ABANDONMENT. In the event of any
termination pursuant to Section 11.1, written notice shall
forthwith be given to the other parties hereto except with
respect to a termination pursuant to Section 11.1(a).
11.4 EFFECT OF TERMINATION. Except for the obligations
contained in Sections 6.1(v), 6.2(v), 12.7, 12.8 and 12.20
hereof, upon the due termination of this Agreement
pursuant to Section 11.1(a), (b), (c) or (e), this
Agreement shall forthwith become null and void, and
neither party hereto nor any of its officers, directors,
trustees, members or shareholders shall have liability
hereunder, provided, however that in no event shall a
party hereto be released from liability for damages under
this Agreement or otherwise following termination under
Section 11.1(d) in the event such party's breach resulted
in the failure to close by any such termination date and
such breaching party was not otherwise excused from its
obligation so to close under this Agreement. Any and all
claims or awards for damages (including without limitation
punitive damages) following termination under Section
11.1(d) shall not exceed $2,000,000. The parties hereto
specifically agree to and acknowledge the preceding:
______________________[Seller representative initials],
__________________________________[SCH representative
initials],
____________________________________________________[Buyer
representative initials].
12.GENERAL.
12.1 EXHIBITS, SCHEDULES AND OTHER INSTRUMENTS. Each
Exhibit, Certificate, Appendix and Schedule, if any, to
this Agreement shall be considered a part hereof as if set
forth herein in full. Any fact disclosed on one Schedule
hereto shall be deemed to be disclosed on each other
applicable schedule. Buyer shall have 5 days following
receipt of any Schedule not provided on the date of
execution of this Agreement to approve, or to disapprove
in writing with the specific reason for any disapproval,
any such Schedule. Seller shall have the right to update
any Schedule prior to Closing, which updated Schedule
shall also be subject to Buyer's approval. Buyer shall
not unreasonably disapprove of any updated Schedule that
reflects only changes resulting from operations of the
Hospital in the ordinary course. Upon receiving notice
from Buyer of a disapproved Schedule, Seller shall use its
best efforts to remove or remedy any item or event
disclosed in the disapproved Schedule, but if it is unable
to do so within 10 business days, Buyer shall have the
option of waiving its disapproval or terminating this
Agreement without liability to either party.
12.2 PRE-CLOSING ACCESS. Seller shall give Buyer, its
accountants, counsel, and other representatives access to
the premises and offices of the Hospital, management and
supervisory employees of the Hospital, and make such
information as Buyer may reasonably request available to
Buyer, as may be necessary for Buyer to examine the Assets
and Business being acquired. No such inspection by Buyer
shall unreasonably interfere with Seller's conduct of
business in the ordinary course.
12.3 ADDITIONAL ASSURANCES. The provisions of this
Agreement shall be self-operative and shall not require
further agreement by the parties except as may be herein
specifically provided to the contrary; provided, however,
at the request of either party, the other party shall
execute such additional instruments and take such
additional acts as are reasonably necessary to effectuate
this Agreement.
12.4 CONSENTS, APPROVALS AND DISCRETION. Whenever this
Agreement requires any consent or approval to be given by
either party or either party must or may exercise
discretion, the parties agree that such consent or
approval shall not be unreasonably withheld or delayed and
such discretion shall be reasonably exercised.
12.5 CHOICE OF LAW. THE PARTIES AGREE THAT THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF MISSISSIPPI
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
12.6 BENEFIT/ASSIGNMENT. Subject to the provisions
herein to the contrary, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and
their respective legal representatives, successors and
assigns; provided, however, that no party may assign this
Agreement without the prior written consent of the other
party, except to a party's senior secured lenders, and
with respect to Seller, in connection with a sale of all
or substantially all Seller's assets provided the
purchaser specifically assumes Seller's obligations
herein.
12.7 COSTS OF TRANSACTION. Subject to the other terms
and provisions hereof, whether or not the transactions
contemplated hereby shall be consummated, the parties
agree as follows: (i) Seller and SCH will pay the fees,
expenses, and disbursements of Seller and SCH and their
respective agents, representatives, accountants, and
counsel incurred in connection with the subject matter
hereof and any amendments hereto; and (ii) Buyer shall pay
the fees, expenses and disbursements of Buyer and its
respective agents, representatives, accountants and
counsel incurred in connection with the subject matter
hereof and any amendments hereto. Buyer shall pay any
transfer taxes and recording fees resulting from the
consummation of the transactions contemplated hereby.
12.8 CONFIDENTIALITY. With respect to Confidential
Information provided by SCH or Seller in connection with
and relative to the transactions contemplated by this
Agreement, Buyer agrees to use reasonable best efforts to
cause its officers, employees, representatives and agents
to hold all such Confidential Information in strict
confidence and only to disclose such Confidential
Information to such duly authorized persons as are
necessary to effect the transactions contemplated hereby,
and, if requested, to return all originals and copies of
any such written Confidential Information to Seller or SCH
in the event for any reason the sale of the Stock is not
consummated. Nothing in this Section shall prohibit the
use of such Confidential Information for such governmental
filings as are required by law or governmental regulations
or the disclosure of such Confidential Information if such
disclosure is compelled by judicial or administrative
process or, in the opinion of Buyer's counsel, other
requirements of law. Subject to Seller's disclosure
obligations under federal securities laws, any release to
the public of information with respect to the transactions
contemplated hereby will be made only in the form and
manner approved by the parties and their respective
representatives. Buyer agrees that it will not use, and
will not knowingly permit others to use, any Confidential
Information in a manner detrimental to the Business, SCH
or Seller or to their competitive disadvantage. Buyer ,
its officers, employees and agents recognize that any
breach of this Section would result in irreparable harm to
Seller and SCH and that therefore either Seller or SCH
shall be entitled to an injunction to prohibit any such
breach by Buyer and its officers, employees and agents in
addition to all of their other legal and equitable
remedies. For the purposes hereof, "CONFIDENTIAL
INFORMATION" shall mean all information of any kind
concerning SCH or Seller obtained, directly or indirectly,
from SCH or Seller in connection with the transactions
contemplated by this Agreement except information (i)
ascertainable or obtained from public or published
information, (ii) received from a third party not known by
Buyer to be under an obligation to keep such information
confidential, (iii) which is or becomes known to the
public (other than through a breach of this Agreement), or
(iv) which was in Buyer's possession prior to disclosure
thereof to Buyer in connection herewith.
12.9 WAIVER. The waiver by either party of a breach or
violation of any term or provision of this Agreement shall
not operate as, or be construed to be, a waiver of any
subsequent breach of the same provision by any party or of
the breach of any other term or provision of this
Agreement. The delay or a failure of a party to transmit
any written notice hereunder shall not constitute a waiver
by such party of any default hereunder or of any other or
further default under this Agreement except as may
expressly be provided for by the terms of this Agreement.
12.10 TAX ALLOCATION. The allocation of the Purchase
Price for tax purposes shall be set forth in a statement
prepared in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended, which statement shall be
prepared in a manner generally consistent with the form of
Internal Revenue Service Form 8594 and a manner consistent
with the Purchase Price allocation provided under Section
1.5. Buyer and Seller shall cooperate in the preparation
of such statement of allocation and each party hereto
shall file a copy of such statement as, and if, required
by applicable law.
12.11 INTERPRETATION. Each of the parties has agreed to
the use of the particular language of the provisions of
this Agreement including all attached Exhibits and
Schedules and any questions of doubtful interpretation
shall not be resolved by any rule or interpretation
against the draftsman but rather in accordance with the
fair meaning thereof, having due regard to the benefits
and rights intended to be conferred upon the parties
hereto and the limitations and restrictions upon such
rights and benefits intended to be provided. Whenever any
matter herein is represented, warranted or stated herein
to be to the "KNOWLEDGE OF," to the "BEST KNOWLEDGE OF" or
to the "BEST KNOWLEDGE AND BELIEF OF" Seller or SCH, or
words of similar import, such representation, warranty or
statement shall mean all matters with respect to which (a)
Seller has received written notice or (b) any of the
following persons has knowledge or with reasonable inquiry
under the circumstances would have knowledge: any director
or officer of Seller or SCH, as the case may be, or any
administrator, assistant administrator or controller at
the Hospital.
12.12 NOTICE. Any notice, demand or communication
required, permitted, or desired to be given hereunder
shall be in writing and shall be deemed effectively given
when personally delivered, when received by telegraphic or
other electronic means (including telefax and telex) or
overnight courier, or five days after being deposited in
the United States mail, with postage prepaid, certified
mail, return receipt requested, addressed as follows:
Buyer:Associates Capital Group, L.L.C.
P.O. Box 380995
Birmingham, Alabama 35238
Attention: Chief Executive Officer
Seller:Paracelsus Healthcare Corporation
515 W. Greens Road, Suite 500
Houston, Texas 77067
Attention: President
or to such other address, and to the attention of such
other person or officer as any party may designate, with
copies thereof to the respective counsel thereof as
notified by such party.
12.13 SEVERABILITY. In the event any provision of this
Agreement is held to be invalid, illegal or unenforceable
for any reason and in any respect, such invalidity,
illegality, or unenforceability shall in no event affect,
prejudice or disturb the validity of the remainder of this
Agreement, which shall be in full force and effect,
enforceable in accordance with its terms, including,
without limitation, those terms which contemplate or
require the further agreements of the parties.
Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable
provision as may be possible and still be legal, valid or
enforceable.
12.14 GENDER AND NUMBER. Whenever the context of this
Agreement requires, the gender of all words herein shall
include the masculine, feminine and neuter, and the number
of all words herein shall include the singular and plural.
12.15 DIVISIONS AND HEADINGS. The divisions of this
Agreement into sections and subsections and the use of
captions and headings in connection therewith are solely
for convenience and shall have no legal effect in
construing the provisions of this Agreement.
12.16 CONSENTED ASSIGNMENT. Anything contained herein to
the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any claim, right,
contract, license, lease, commitment, sales order or
purchase order if an attempted assignment thereof without
the consent of another party thereto would constitute a
breach thereof or in any material way affect the rights of
Seller thereunder, unless such consent is obtained. If
such consent is not obtained, or if an attempted
assignment would be ineffective or would materially affect
Seller's or SCH's rights thereunder so that Buyer would
not in fact receive all such rights, Seller shall
cooperate in any reasonable arrangement designed to
provide for Buyer during the Contract Period (as defined
below) the benefit under any such claims, rights,
contracts, licenses, leases, commitments, sales orders or
purchase orders, including, without limitation,
enforcement, at no out-of-pocket cost to Seller, of any
and all rights of Seller against the other party or
parties thereto arising out of the breach or cancellation
by such other party or otherwise. To the extent that any
claim, right, contract, license, lease, commitment, sales
order or purchase order to be assigned to or acquired by
Buyer pursuant to this Agreement also applies to
facilities or operations other than those being sold
pursuant hereto, then Seller also agrees that during the
Contract Period, upon the written request of Buyer, it
will use its reasonable best efforts to cause the
services, property or other benefits provided or made
available under such claim, right, contract, license,
lease, commitment, sales order or purchase order to
continue to be available to Buyer on terms and conditions
substantially similar to those presently in effect. The
term "CONTRACT PERIOD" shall mean with respect to any
contract or other right the period beginning on the
Closing Date and ending on the earlier of (a) the
expiration of the term of the given contract or other
right and (b) the third anniversary of the Closing Date.
12.17 SURVIVAL. The representations, warranties,
covenants and agreements made by the parties herein shall
survive the Closing; provided, however, that the
representations and warranties made by the parties herein
shall expire on the first anniversary of the Closing Date
except with respect to matters for which Buyer has given
notice of claim under Section 6.3, and except with respect
to the representations and warranties set forth in
Sections 3.1, 3.2, 3.10, 3.15, 3.16, 3.17, 3.19, 3.22,
4.1, 4.2, 4.3 and 4.4 (and the indemnities with respect
thereto), which shall survive for the applicable statute
of limitations periods (collectively, the "SURVIVAL
PERIOD").
12.18 ENTIRE AGREEMENT/AMENDMENT. Except for the
confidentiality provisions contained in paragraphs VI and
VIII of the letter of intent between Paracelsus and Buyer,
dated August 26, 1999, as extended, (the "LOI") (which
provisions (the "LOI PROVISIONS") will survive the
execution and delivery of this Agreement), this Agreement
supersedes all prior contracts, understandings and
agreements, whether written or oral, and constitutes the
entire agreement of the parties respecting the within
subject matter and no party shall be entitled to benefits
other than those specified herein. As between or among
the parties, no oral statements or prior written material
(other than the LOI Provisions) not specifically included
herein shall be of any force and effect; and the parties
specifically acknowledge that in entering into and
executing this Agreement, the parties relied solely upon
the representations and agreements contained in this
Agreement and no others, except as to those materials
referenced in Section 4.4 hereof. No terms, conditions,
warranties, or representations, other than those contained
herein (or in the LOI Provisions) and no amendments or
modifications hereto, shall be binding unless made in
writing and signed by the party to be charged.
12.19 COUNTERPARTS. This Agreement may be executed in
multiple originals or counterparts, each and all of which
shall be deemed an original and all of which together
shall constitute but one and the same instrument.
12.20 RISK OF LOSS. Notwithstanding any other provision
hereof to the contrary, the risk of loss in respect of
casualty to the Assets shall be borne by Seller through
the time of Closing and by the Buyer thereafter.
12.21 PUBLIC ANNOUNCEMENT. SCH and Seller, on one hand,
and Buyer, on the other hand, mutually agree that, prior
to the Closing, no party shall issue any press release or
make any public announcement of the transaction which is
the subject of this Agreement without the prior consent of
each other party, except where a public announcement is
required by law as reasonably determined by such party.
Additionally, SCH and Seller, on one hand, and Buyer on
the other hand, each agrees that, prior to the Closing, it
will not, and will cause its officers, directors,
partners, employees, counselors and representatives not
to, discuss any aspects of this Agreement with any third
party (other than their respective representatives,
lenders, prospective underwriters and counselors) without
the prior written consent of the other party hereto.
[The next page of this Agreement is the signature page]
PAGE
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in multiple originals by their
duly authorized officers and their corporate seals duly
affixed hereto, all as of the day and year first above
written.
PARACELSUS HEALTHCARE CORPORATION
By:
Name: Michael M. Brooks
Title: Senior Vice President, Development
PARACELSUS SENATOBIA COMMUNITYHOSPITAL, INC.
By:
Name: R. T. Pinchback
Title: Vice President
ASSOCIATES CAPITAL GROUP, L.L.C.
By:
Name: Leonard P. Bryant
Title: Managing Member
