<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ____ to ____
Commission File Number 000-18799
-----------
HEALTH MANAGEMENT ASSOCIATES, INC.
------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 61-0963645
- -------------------------------- -----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710
- --------------------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(941)598-3131
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
---
At February 2, 1998, the following shares of the Registrant were outstanding:
Class A Common Stock 163,815,720 shares
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
INDEX
-----
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income --
Three Months Ended December 31, 1997 and 1996.............. 3
Condensed Consolidated Balance Sheets--
December 31, 1997 and September 30, 1997................... 4
Condensed Consolidated Statements of Cash Flows--
Three Months Ended December 31, 1997 and 1996............... 5
Notes to Interim Condensed Consolidated Financial Statements.. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 7-8
PART II. OTHER INFORMATION......................................... 9
SIGNATURES......................................................... 10
INDEX TO EXHIBITS.................................................. 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
December 31,
--------------------------------
1997 1996
------------------ ------------
<S> <C> <C>
Net patient service revenue......... $234,570,000 $199,162,000
Costs and expenses:
Salaries and benefits............ 84,567,000 71,943,000
Supplies and expenses............ 71,080,000 61,316,000
Provision for doubtful accounts.. 21,972,000 19,348,000
Depreciation and amortization.... 10,172,000 8,330,000
Rent expense..................... 5,461,000 4,428,000
Interest, net.................... 433,000 1,075,000
------------ ------------
Total costs and expenses..... 193,685,000 166,440,000
------------ ------------
Income before income taxes.......... 40,885,000 32,722,000
Provision for income taxes ......... 16,048,000 12,845,000
------------ -----------
Net income ......................... $ 24,837,000 $ 19,877,000
============ ============
Net income per share:
Basic........................... $ .15 $ .13
Diluted......................... $ .15 $ .12
============ ============
Weighted average number of
shares outstanding:
Basic................................ 163,219,000 159,013,000
Diluted.............................. 167,537,000 163,771,000
============ ============
</TABLE>
3
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 72,387,000 $ 67,381,000
Receivables--net.................................. 145,670,000 132,896,000
Supplies, prepaids and other assets............... 24,961,000 21,589,000
Funds held by trustee............................. 1,857,000 1,225,000
Income taxes - deferred........................... 13,039,000 13,039,000
------------ ------------
Total current assets............................ 257,914,000 236,130,000
Property, plant and equipment ...................... 644,195,000 613,752,000
Less accumulated depreciation and amortization....
150,720,000 141,033,000
Net property, plant and equipment................ ------------ ------------
493,475,000 472,719,000
Other assets:
Funds held by trustee............................. 943,000 944,000
Deferred charges and other assets................. 16,409,000 17,768,000
------------ ------------
Total........................................... 17,352,000 18,712,000
------------ ------------
$768,741,000 $727,561,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------
Current liabilities:
Accounts payable.................................. $ 35,518,000 $ 33,943,000
Accrued expenses and other liabilities............ 38,220,000 37,453,000
Current maturities of long-term debt.............. 8,540,000 8,263,000
Income taxes--currently payable and deferred...... 17,378,000 3,221,000
------------ ------------
Total current liabilities....................... 99,656,000 82,880,000
Deferred income taxes.............................. 18,699,000 18,699,000
Other long-term liabilities........................ 13,216,000 16,112,000
Long-term debt..................................... 47,835,000 49,650,000
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized .............................. - -
Common stock, Class A, $.01 par value, 300,000,000
shares authorized, 163,647,000 and 162,705,000
shares issued and outstanding at December 31,
1997 and September 30, 1997, respectively....... 1,636,000 1,627,000
Additional paid-in capital ....................... 187,049,000 182,780,000
Retained earnings ................................ 400,650,000 375,813,000
------------ ------------
Total stockholders' equity .................. 589,335,000 560,220,000
------------ ------------
$768,741,000 $727,561,000
============ ============
</TABLE>
4
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
December 31,
-------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 24,837,000 $ 19,877,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 10,172,000 8,330,000
(Gain)/loss on sale of fixed assets............ (56,000) 9,000
Changes in assets and liabilities:
Receivables--net............................. (10,464,000) 2,034,000)
Deferred charges and other assets............ (1,951,000) (1,116,000)
Accounts payable............................. 529,000 3,944,000
Accrued expenses and other liabilities....... 199,000 (1,879,000)
Income taxes--
currently payable and deferred............. 14,157,000 11,502,000
Other long term liabilities.................. (2,897,000) 325,000
------------ ------------
Net cash provided by
operating activities.................... 34,526,000 43,026,000
------------ ------------
Cash flows from investing activities:
Acquisition of facilities, net of cash acquired. (20,232,000) -
Additions to property, plant and equipment........ (10,740,000) (13,592,000)
Proceeds from sale of equipment................... 128,000 15,000
------------ ------------
Net cash used in investing activities..... (30,844,000) (13,577,000)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings................ 136,000 136,000
Principal payments on debt........................ (2,459,000) (2,474,000)
Proceeds from issuance of common stock............ 4,278,000 561,000
(Increase)/decrease in funds held by trustee...... (631,000) 541,000
------------ ------------
Net cash provided by (used in)
financing activities.................... 1,324,000 (1,236,000)
------------ ------------
Net increase in cash
and cash equivalents.............. 5,006,000 28,213,000
Cash and cash equivalents at beginning of period.... 67,381,000 31,172,000
------------ ------------
Cash and cash equivalents at end of period.......... $ 72,387,000 $ 59,385,000
============ ============
</TABLE>
5
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
- -------------------------
The condensed consolidated balance sheet as of September 30, 1997 has
been derived from the audited consolidated financial statements included in
Health Management Associates, Inc.'s (the Company's) 1997 Annual Report. The
interim consolidated financial statements at December 31, 1997 and for the three
months ended December 31, 1997 and 1996 are unaudited; however, such interim
statements reflect all adjustments (consisting only of a normal recurring
nature) which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations for the interim
periods presented. The results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for the full year.
The interim financial statements should be read in conjunction with the audited
consolidated financial statements of the Company included in its 1997 Annual
Report.
2. Earnings Per Share
- ----------------------
In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
December 31,
1997 1996
------------ ------------
<S> <C> <C>
Numerator:
Net income $ 24,837,000 $ 19,877,000
============ ============
Denominator:
Denominator for basic earnings
per share-weighted average shares 163,219,000 159,013,000
Effect of dilutive securities-
Employee stock options 4,318,000 4,758,000
------------ ------------
167,537,000 163,771,000
============ ============
Basic earnings per share $ .15 $ .13
============ ============
Diluted earnings per share $ .15 $ .12
============ ============
</TABLE>
6
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Earnings Per Share (Continued)
- ------------------------------------
During January 1998 the Company completed an acquisition through a
merger agreement and tax-free stock exchange transaction (see Note 4). As a
result, the Company issued approximately 3,300,000 shares of the Company's Class
A common stock.
3. Acquisition
- -----------------
In November 1997 the Company acquired a 125-bed acute care hospital
for consideration totalling approximately $20.9 million, including $20.2 million
in cash and the assumption of $700,000 in debt. The operating results have been
included in the accompanying consolidated statement of income from November 1,
1997, the effective date of the transaction.
4. Subsequent events
- -----------------------
In January 1998 the Company acquired certain assets of a 180-bed
general acute care hospital pursuant to the terms on an asset purchase
agreement. Also in January the Company acquired a two hospital, 221-bed general
acute care system via a merger agreement and a tax-free stock exchange
transaction. The consideration involved to complete the two transactions
totalled approximately $190.5 million, which included approximately $80 million
in Company stock, $73.5 million in cash, and the assumption of $37 million in
debt.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Three months ended December 31, 1997 compared
---------------------------------------------
to three months ended December 31, 1996
---------------------------------------
Net patient service revenue for the three months ended December 31,
1997 ("1997 Period") was $234,570,000, as compared to $199,162,000 for
the three months ended December 31, 1996 ("1996 Period"). This
represented an increase in net patient service revenue of $35,408,000, or
17.8%. Hospitals in operation for the entire 1997 Period and 1996 Period
("same store hospitals") provided $17,184540,000 of the increase in net
patient service revenue, which resulted primarily from inpatient and
outpatient volume increases. The remaining increase of $18,224,000
included $18,589,000 of net patient service revenues from the acquisition
of the 125-bed Stringfellow Memorial Hospital effective January 1, 1997,
the 134-bed Rankin Medical Center effective January 1, 1997, and the 125-
bed Southwest Hospital effective November 1, 1997, offset by a decrease
of $365,000 in Corporate and miscellaneous revenue.
During the 1997 Period the Company's hospitals generated patient
days of service and an occupancy rate of 132,922 and 45.3%, respectively,
versus 114,498 and 43.8%, respectively, for the 1996 Period. Same store
patient days and occupancy rates were 123,039 and 46.9%, respectively,
for the 1997 Period, and 114,498 and 43.8%, respectively, for the 1996
Period. Same store admissions for the Company during the 1997 Period
were 24,619, up 4.1% from the 23,655 admissions during the 1996 Period.
The Company's operating expenses (salaries and benefits, supplies
and expenses, provision for doubtful accounts and rent expense) for the
1997 Period were $183,080,000 or 78.0% of net patient service revenue as
compared to $157,035,000 or 78.8% of net patient service revenue for the
1996 Period. Of the total $26,045,000 increase, approximately
$10,270,000 related to same store hospitals, which was largely
attributable to increased patient volumes. Another $15,275,000 of
increased operating expense related to the acquisitions mentioned
previously. The remaining increase of $500,000 represented a decrease in
Corporate and miscellaneous other operating expenses.
The Company's earnings before depreciation and amortization,
interest and income taxes were $51,490,000 for the 1997 Period as
compared to $42,127,000 for the 1996 Period, an increase of $9,363,000 or
22.2%. The 1997 Period yielded a 22.0% EBITDA margin as compared to the
1996 Period EBITDA margin of 21.2%.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company's depreciation and amortization costs increased by
$1,842,000 and interest expense decreased by $642,000. The increase in
depreciation and amortization resulted primarily from the acquisitions
mentioned previously. The decrease in interest expense resulted from
interest savings on approximately $12,000,000 of mortgage debt retired
during the fourth quarter ended September 30, 1997, as well as higher
investment income in the 1997 Period, which is netted against interest
expense.
The Company's income before income taxes was $40,885,000 for
the 1997 Period as compared to $32,722,000 for the 1996 Period, an
increase of $8,163,000, or 24.9%. The increase resulted primarily from
same store volume increases and the acquisitions mentioned previously.
The Company's provision for income taxes was $16,048,000 for the 1997
Period, as compared to $12,845,000 for the 1996 Period. These provisions
reflect effective income tax rates of 39.25% for both periods. As a
result of the foregoing, the Company's net income was $24,837,000 for the
1997 Period as compared to $19,877,000 for the 1996 Period.
Liquidity and Capital Resources
-------------------------------
The Company's operating cash flows totalled $34,526,000 for the
1997 Period as compared to $43,026,000 for the 1996 Period. The positive
cash flows resulted from the Company's profitability and management of
its working capital. The Company's investing activities used $30,844,000
and $13,577,000 for the 1997 Period and 1996 Period, respectively. A
previously mentioned acquisition in November 1997 accounted for the 1997
Period increase. Financing activities provided net cash of $1,324,000 for
the 1997 Period and used net cash of $1,236,000 during the 1996 Period.
Proceeds from the exercise of employee stock options accounted for the
1997 Period increase. See the Condensed Consolidated Statements of Cash
Flows for the three months ended December 31, 1997 and 1996 at page 5 of
this Report.
In November 1997 the Company acquired a 125-bed general acute
care hospital for consideration totalling approximately $20,900,000,
including $20,200,000 from available cash in the bank, and the assumption
of $700,000 in debt. In January 1998 the Company completed two
acquisitions. The first was a 180-bed general acute care hospital asset
purchase transaction. The second was a two hospital, 221-bed general
acute care hospital system completed through a merger agreement and
resulting tax-free stock exchange transaction. The consideration
involved to complete the two January transactions totalled $190,500,000,
which included approximately $80,000,000 in Company stock, $73,500,000 in
cash from available cash in the bank, and the assumption of $37,000,000
in debt. As a result of the foregoing, the Company had approximately
$11,000,000 of cash on hand at January 31, 1998. In addition, the
Company has a total of $310 million of credit available under its two
unsecured lines of credit.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company's credit agreements contain certain covenants
which, without prior consent of the banks, limit certain activities of
the Company and its subsidiaries, including those relating to merger,
consolidation and the Company's ability to secure indebtedness, make
guarantees, and grant security interests. The Company must also maintain
minimum levels of consolidated tangible net worth, debt service coverage,
liabilities to net worth, current assets to current liabilities and
working capital.
At the present time, the Company anticipates that cash on hand,
internally generated funds and funds available under its lines of credit
will be sufficient to satisfy the Company's requirements for capital
expenditures, future acquisitions and working capital.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities.
---------------------
None.
Item 3. Defaults upon Senior Securities.
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information.
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
a. Exhibits:
--------
See Index to Exhibits located on page 13.
b. Reports on Form 8-K:
-------------------
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTH MANAGEMENT ASSOCIATES, INC.
DATE: February 9, 1998 BY: /s/ Stephen M. Ray
-------------------------------
Stephen M. Ray
Senior Vice President-Finance
(Duly authorized officer and
Principal Financial Officer)
12
<PAGE>
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
Not applicable.
(3) (i) Articles of Incorporation
3.1 The Fifth Restated Certificate of Incorporation, previously filed and
included as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, is incorporated herein by
reference.
3.2 Cettificate of Amendment to Fifth Restated Certificate of
Incorporation, previously filed and included as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1997, is incorporated herein by reference.
(ii) By-laws
The By-laws, as amended, previously filed and included as Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, is incorporated herein by reference.
(4) Instruments defining the rights of security holders, including indentures.
The Exhibits referenced under (3) of this Index to Exhibits are
incorporated herein by reference.
Fourth Amended and Restated Credit and Reimbursement Agreement among the
Company and NationsBank of Florida National Association and the Banks named
therein, dated December 1, 1994, previously filed and included as Exhibit
4.12 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994, is incorporated herein by reference.
Credit Agreement dated May 6, 1996 between First Union National Bank of
Florida and the Company, pertaining to a $10 million working capital and
cash management line of credit, previously filed and included as Exhibit
4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, is incorporated herein by reference.
Amendment Agreement No. 1 to Fourth Amended and Restated Revolving Credit
and Reimbursement Agreement, made as of September 30, 1996, previously
filed and included as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.
13
<PAGE>
INDEX TO EXHIBITS (Continued)
(10) Material contracts
Asset Purchase Agreement by and among Little Rock HMA, Inc. And St. Louis -
Little Rock Hospital, Inc. and Safecare Company, Inc., dated as of October
17, 1997, is included herein as Exhibit 10.1 at page 15 of this report.
(11) Statement re computation of per share earnings.
Statement re computation of per share earnings is included as Exhibit 11.1
at page 79 of this Report.
(15) Letter re unaudited interim financial information.
Not Applicable.
(18) Letter re change in accounting principles.
Not applicable.
(19) Report furnished to security holders.
Not applicable.
(22) Published report regarding matters submitted to vote of security holders.
Not applicable
(23) Consents of experts and counsel.
Not applicable.
(24) Power of Attorney.
Not applicable.
(27) Financial Data Schedule.
Financial Data Schedule is included herein as Exhibit 27.1 at page 80 of
this report.
(99) Additional exhibits.
Not applicable.
14
<PAGE>
EXHIBIT 10
ASSET PURCHASE AGREEMENT
BY
AND
AMONG
LITTLE ROCK HMA, INC.,
AN ARKANSAS CORPORATION
AND
ST. LOUIS - LITTLE ROCK HOSPITALS, INC.,
A MISSOURI CORPORATION
AND
SAFECARE COMPANY, INC.,
A WASHINGTON CORPORATION
Dated as of October 17, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I SALE OF ASSETS BY SELLER AND SAFECARE AND RELATED
MATTERS............................................... 1
Section 1.1 Sale of Assets by Seller.............................. 1
Section 1.2 Sale of Real Property by Seller....................... 2
Section 1.3 Sale of Real Property by SAFECARE..................... 3
Section 1.4 Excluded Assets....................................... 4
Section 1.5 Assumed Liabilities................................... 4
Section 1.6 Excluded Liabilities.................................. 5
Section 1.7 Purchase Price........................................ 6
Section 1.8 Purchase Price Adjustments............................ 7
Section 1.9 Other Adjustments at Closing.......................... 8
Section 1.10 Disclaimer of Warranties.............................. 10
Section 1.11 Interest.............................................. 12
ARTICLE II CLOSING............................................... 12
Section 2.1 Closing............................................... 12
Section 2.2 Actions of Seller and SAFECARE at Closing............. 12
Section 2.3 Actions of Buyer at Closing........................... 16
Section 2.4 Additional Acts....................................... 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.............. 17
Section 3.1 Existence and Corporate Capacity...................... 17
Section 3.2 Corporate Powers; Consents; Absence of Conflicts, Etc. 18
Section 3.3 Binding Agreement..................................... 18
Section 3.4 Financial Statements.................................. 18
Section 3.5 Extraordinary Liabilities............................. 19
Section 3.6 Licenses.............................................. 19
Section 3.7 Medicare Participation/Accreditation.................. 19
Section 3.8 Regulatory Compliance................................. 19
Section 3.9 The Contracts......................................... 20
Section 3.10 Supplies.............................................. 21
Section 3.11 Equipment............................................. 21
Section 3.12 Title................................................. 21
Section 3.13 Quality and Condition of Assets....................... 21
Section 3.14 Insurance............................................. 21
Section 3.15 Employee Benefit Plans................................ 21
Section 3.16 Employee Relations.................................... 22
Section 3.17 Litigation or Proceedings............................. 22
i
<PAGE>
Section 3.18 Special Funds......................................... 22
Section 3.19 Medical Staff Matters................................. 22
Section 3.20 Tax Liabilities....................................... 23
Section 3.21 Post-Balance Sheet Results............................ 23
Section 3.22 Certain Payments...................................... 23
Section 3.23 Property.............................................. 24
Section 3.24 Certain Reports and Documents......................... 24
Section 3.25 Accounts Receivable and Notes Receivable.............. 24
Section 3.26 Ground Lease.......................................... 25
Section 3.27 No Subsidiaries....................................... 25
Section 3.28 Asbestos.............................................. 25
Section 3.29 Environmental Laws.................................... 25
Section 3.30 Seller Real Property.................................. 25
Section 3.31 Full Disclosure....................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SAFECARE............ 26
Section 4.1 Existence and Corporate Capacity...................... 26
Section 4.2 Corporate Powers; Consents; Absence of Conflicts, Etc. 26
Section 4.3 SAFECARE Real Property................................ 27
Section 4.4 Environmental Laws.................................... 27
Section 4.5 Asbestos.............................................. 28
Section 4.6 Full Disclosure....................................... 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER............... 28
Section 5.1 Existence and Corporate Capacity...................... 28
Section 5.2 Corporate Powers; Consents; Absence of Conflicts, Etc. 28
Section 5.3 Binding Effect........................................ 29
Section 5.4 Full Disclosure....................................... 29
ARTICLE VI COVENANTS OF SELLER................................... 29
Section 6.1 Information........................................... 29
Section 6.2 Operations............................................ 30
Section 6.3 Negative Covenants.................................... 30
Section 6.4 Governmental Approvals................................ 31
Section 6.5 FTC Notification...................................... 31
Section 6.6 Additional Financial Information...................... 32
Section 6.7 No-Shop Clause........................................ 32
Section 6.8 Closing Conditions.................................... 32
Section 6.9 Tail Insurance........................................ 32
Section 6.10 Insurance Ratings..................................... 32
Section 6.11 Payment of Accounts Payable........................... 33
Section 6.12 Tenant Estoppel Certificates.......................... 33
ii
<PAGE>
ARTICLE VII COVENANTS OF SAFECARE................................. 33
Section 7.1 Information........................................... 33
Section 7.2 Subdivision of SAFECARE Land.......................... 34
Section 7.3 Affirmative Covenants................................. 34
Section 7.4 Negative Covenants.................................... 34
Section 7.5 No-Shop Clause........................................ 35
Section 7.6 Exercise of SAFECARE Remedies as Lender............... 35
Section 7.7 Tenant Estoppel Certificates.......................... 35
ARTICLE VIII COVENANTS OF BUYER.................................... 36
Section 8.1 FTC Notification...................................... 36
Section 8.2 Confidentiality....................................... 36
Section 8.3 Regulatory Approvals.................................. 37
Section 8.4 Closing Conditions.................................... 37
Section 8.5 Non-Solicitation...................................... 37
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.......... 37
Section 9.1 Representations and Warranties........................ 38
Section 9.2 Opinions of Counsel................................... 38
Section 9.3 Pre-Closing Confirmations............................. 38
Section 9.4 Action/Proceeding..................................... 38
Section 9.5 Adverse Change........................................ 38
Section 9.6 Extraordinary Liabilities/Obligations................. 38
Section 9.7 Vesting/Recordation................................... 39
Section 9.8 Title and Survey Matters.............................. 39
Section 9.9 Title Policy.......................................... 40
Section 9.10 Personal Property Taxes............................... 40
Section 9.11 Recent Agreements and Commitments..................... 41
Section 9.12 Wages and Salaries.................................... 41
Section 9.13 Environmental Report.................................. 41
Section 9.14 Asbestos Report....................................... 41
Section 9.15 Seller Covenant Not to Compete........................ 41
Section 9.16 Retained Land......................................... 41
Section 9.17 Guaranty; Letter of Credit............................ 42
Section 9.18 Condition of Inventory................................ 42
Section 9.19 Condition of Real Property and Assets................. 42
Section 9.20 Zoning................................................ 42
iii
<PAGE>
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
SAFECARE............................................... 43
Section 10.1 Representations and Warranties......................... 43
Section 10.2 Opinion of Buyer's Counsel............................. 43
Section 10.3 Action/Proceeding...................................... 43
Section 10.4 Approvals.............................................. 44
ARTICLE XI TRANSITIONAL ARRANGEMENTS.............................. 44
Section 11.1 Employee Matters....................................... 44
Section 11.2 Seller's Special Covenants............................. 44
ARTICLE XII ADDITIONAL AGREEMENTS.................................. 45
Section 12.1 Allocation of Purchase Price........................... 45
Section 12.2 Termination Prior to Closing........................... 46
Section 12.3 Post-Closing Access to Information..................... 46
Section 12.4 Preservation and Access to Records After the Closing... 46
Section 12.5 Reproduction of Documents.............................. 47
Section 12.6 Cooperation on Tax Matters............................. 47
Section 12.7 Time of Essence........................................ 47
Section 12.8 Terminating Cost Reports............................... 47
Section 12.9 Re-opening of Seller's Prior Cost Reports.............. 48
Section 12.10 Hospital Board of Trustees............................. 48
ARTICLE XIII INDEMNIFICATION 49
Section 13.1 Indemnification by Seller.............................. 49
Section 13.2 Indemnification by Buyer............................... 49
Section 13.3 Indemnification by SAFECARE............................ 49
Section 13.4 Notice and Control of Litigation....................... 50
ARTICLE XIV GENERAL................................................ 52
Section 14.1 Schedules and Closing Agreements....................... 52
Section 14.2 Consented Assignment................................... 52
Section 14.3 Consents, Approvals and Discretion..................... 52
Section 14.4 Waiver of Trial by Jury................................ 52
Section 14.5 Choice of Law.......................................... 53
Section 14.6 Benefit/Assignment..................................... 53
Section 14.7 No Brokerage........................................... 53
Section 14.8 Cost of Transaction.................................... 53
Section 14.9 Confidentiality........................................ 54
Section 14.10 Public Announcements................................... 54
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Section 14.11 Waiver of Breach...................................... 54
Section 14.12 Notice................................................ 54
Section 14.13 Severability.......................................... 55
Section 14.14 Gender, Number and Inferences......................... 55
Section 14.15 Divisions and Headings................................ 56
Section 14.16 Entire Agreement/Amendment............................ 56
Section 14.17 Survival.............................................. 56
Section 14.18 Interpretation........................................ 56
Section 14.19 Counterparts.......................................... 56
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SCHEDULES
---------
Schedule 1.1A Depreciation Schedule
Schedule 1.1B Notes and Accounts Receivable
Schedule 1.1C Prepaid Expenses
Schedule 1.1D Claims and Judgments
Schedule 1.1E Contracts
Schedule 1.1F Joint Ventures
Schedule 1.2A Seller Real Property
Schedule 1.2B Seller Permitted Encumbrances
Schedule 1.3A SAFECARE Real Property
Schedule 1.3B SAFECARE Permitted Encumbrances
Schedule 1.4 Excluded Settlements
Schedule 1.5 Accrued PTO
Schedule 3.4 Financial Statements
Schedule 3.5 Extraordinary Liabilities
Schedule 3.6 Licenses
Schedule 3.7 Medicare Investigations
Schedule 3.8 Regulatory Compliance
Schedule 3.9 Contract Matters
Schedule 3.12 Title
Schedule 3.13 Life Safety Code Deficiencies
Schedule 3.14 Insurance
Schedule 3.15 Employee Benefit Plans
Schedule 3.16 Employee Claims
Schedule 3.17 Litigation or Proceedings
Schedule 3.19 Medical Staff Disputes
Schedule 3.22 Certain Payments
Schedule 3.24 Medicare Reports
Schedule 3.26 Encumbrances on Leasehold Interest
Schedule 3.27 Arrangements with Medical Staff
Schedule 3.28 Asbestos (Seller)
Schedule 3.29 Environmental (Seller)
Schedule 3.30 Seller Real Property Exceptions
Schedule 4.3 SAFECARE Real Property Exceptions
Schedule 4.4 Environmental (SAFECARE)
Schedule 4.5 Asbestos (SAFECARE)
Schedule 7.2 SAFECARE Land
Schedule 7.4 Minimum Leasing Criteria
Schedule 7.7 Tenant Estoppel Certificates
Schedule 9.2A Opinions of Counsel to Seller
Schedule 9.2B Opinions of Counsel to SAFECARE
Schedule 9.11 Recent Agreements and Commitments
Schedule 9.12A Scheduled Employees
Schedule 9.12B Form of Employment Agreement
Schedule 9.17 Form of Nonrecourse Limited Guarantee
Schedule 11.1 Hospital Employees
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of October 17, 1997, by and among LITTLE ROCK HMA, INC., an Arkansas
corporation ("Buyer"), ST. LOUIS - LITTLE ROCK HOSPITALS, INC., a Missouri not-
for-profit corporation ("Seller"), and SAFECARE COMPANY, INC., a Washington
corporation ("SAFECARE").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller owns and operates Southwest Hospital, a general acute care
hospital licensed by the State of Arkansas for 125 beds and located in Little
Rock, Arkansas (the "Hospital"); and
WHEREAS, SAFECARE owns the land upon which the Hospital and certain related
improvements are located and leases such land to Seller; and
WHEREAS, SAFECARE owns the land and related buildings and improvements
constituting the Peter O. Thomas Medical Office Building (the "MOB") which is
located adjacent to the Hospital; and
WHEREAS, Seller and SAFECARE desire to sell to Buyer and Buyer desires to
purchase from Seller and SAFECARE all assets, real, personal and mixed, tangible
and intangible, owned by Seller and SAFECARE, respectively, and associated with
or employed in the operations of the Hospital and the MOB including, without
limitation, all real property, whether developed or undeveloped, associated with
the Hospital and the MOB, but specifically excluding the Excluded Assets
(hereinafter defined);
NOW, THEREFORE, for and in consideration of the premises, and the
agreements, covenants, representations and warranties hereinafter set forth, and
other good and valuable consideration, the receipt and adequacy of which are
forever acknowledged and confessed, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS BY SELLER AND SAFECARE AND RELATED MATTERS
---------------------------------------------------------
SECTION 1.1 SALE OF ASSETS BY SELLER. Subject to the terms and
------------------------
conditions of this Agreement, Seller agrees to sell, convey, transfer, assign
and deliver to Buyer and Buyer agrees to purchase at Closing (hereinafter
defined), all assets, real, personal and mixed, tangible and intangible, owned
by Seller and all of Seller's right, title and interest in and to all assets,
real, personal and mixed, tangible and intangible, used by Seller, and in either
case associated with or employed in the operations of the Hospital, including,
without limitation, the following items (collectively, the "Seller Assets"): (i)
all of Seller's right, title and interest in and to all improvements, buildings
and fixtures constituting the Hospital; (ii) all major, minor or other equipment
(including, without limitation, any mainframe computer, all personal computers,
and
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all right, title and interest of Seller, to the extent assignable, in and to all
data processing, software and source codes related to such computers), vehicles,
furniture and furnishings, including, without limitation, those listed and taken
into consideration in the preparation of the depreciation schedule set forth in
Schedule 1.1A hereto and all warranties and guaranties related thereto; (iii)
all supplies and inventory used or useful in respect of the Hospital; (iv) all
notes and accounts receivable set forth on Schedule 1.1B hereto; (v) assumable
prepaid expenses, claims for refunds and rights to offset in respect thereof
which are described in Schedule 1.1C hereto and the amounts of which are
included in Adjusted Working Capital (hereinafter defined); (vi) all claims,
choses in action and judgments in favor of Seller relating to the Hospital
which are described on Schedule 1.1D hereto; (vii) all financial, patient,
medical staff and personnel records (including, without limitation, all notes
and accounts receivables records relating to the notes and accounts receivable
set forth on Schedule 1.1B, equipment records, medical/administrative libraries,
patient billing records, medical records, documents, catalogs, books, records,
files, operating manuals and current personnel records); (viii) all of the
interest of Seller, to the extent assignable, in all commitments, contracts,
leases, and agreements outstanding in respect of the Seller Assets which Buyer
agrees to assume at Closing and which are described in Schedule 1.1E hereto
(collectively, the "Contracts"), which shall include all contracts with
physicians on the Hospital's medical staff, which are additionally described in
Schedule 1.1E hereto; (ix) all licenses and permits, to the extent assignable,
held by Seller relating to the ownership, development and operations of the
Hospital (including, without limitation, any pending or approved governmental
approvals regarding the Hospital); (x) all patents and patent applications and
all names, trade names, trademarks and service marks (or variations thereof)
owned by the Hospital, specifically including the name "Southwest Hospital";
(xi) Seller's interests, to the extent assignable, in joint ventures and similar
investments related in any way to the operations of the Hospital, as set forth
on Schedule 1.1F hereto; (xii) subject to Section 12.9 hereof, the right to
reopen Medicare and Medicaid cost reports that have received a notice of program
reimbursement (an "NPR") and the time frame for appeal has expired or to amend
such cost reports where an NPR has not been issued to include reimbursement
issues that have not been previously included or properly claimed; (xiii)
Seller's interest in all property, real, personal and mixed, tangible and
intangible, arising or acquired in the ordinary course of Seller's business in
respect of the Hospital between the effective date hereof and Closing; and (xiv)
subject to Seller's rights pursuant to Section 12.8, Seller's Medicare,
Medicaid, CHAMPUS and other third party payor provider numbers, exclusive in
each case enumerated above of the Excluded Assets (hereinafter defined). Seller
shall convey good title to the Seller Assets and all parts thereof to Buyer free
and clear of all liabilities, claims, assessments, security interests, leases,
liens, restrictions and encumbrances, other than the Assumed Liabilities
(hereinafter defined).
SECTION 1.2 SALE OF REAL PROPERTY BY SELLER. Subject to the terms and
-------------------------------
conditions of this Agreement, Seller agrees to sell, convey and transfer to
Buyer and Buyer agrees to purchase at Closing, all of the following described
property (collectively, the "Seller Real Property"): (i) fee simple title in and
to those certain tracts of real property described in Schedule 1.2A hereto,
together with all improvements, buildings and fixtures located thereon or
therein and all rights, titles and interests appurtenant to such land and
improvements including, without limitation, all of Seller's interest in and to
all air and subsurface rights, appurtenant easements,
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adjacent roads, highways, rights-of-way, and oil, gas and other minerals
situated on, in and under the Seller Real Property; (ii) all tangible personal
property and fixtures of any kind now owned by Seller and attached to or used in
connection with the ownership, maintenance or operation of the Seller Real
Property; (iii) Seller's interest in all agreements, service contracts,
warranties, guaranties, indemnity rights and bonds relating to the Seller Real
Property or the personal property described in Section 1.2(ii) hereof; (iv) all
site plans, surveys, plans and specifications, and floor plans in Seller's
possession which relate to the Seller Real Property; (v) all of Seller's rights,
titles and interests under any leases or other agreements demising space and
providing for the use or occupancy of the Seller Real Property (the "Seller Real
Property Leases") and all deposits, whether security or otherwise (the "Seller
Real Property Deposits") paid by tenants in the buildings located on the Seller
Real Property (the "Seller Real Property Tenants") under the Seller Real
Property Leases; and (vi) any and all other rights, privileges and appurtenances
owned by Seller in any way related to, or used in connection with, the operation
of the Seller Real Property. Seller shall convey good and marketable title to
the Seller Real Property to Buyer free and clear of all liabilities, claims,
assessments, security interests, liens, leases, restrictions and encumbrances,
except those matters described on Schedule 1.2B hereto (collectively, the
"Seller Permitted Encumbrances"). At Closing, Seller shall assign to Buyer and
Buyer shall assume all of the obligations of the landlord under the leases
relating to the Seller Real Property that arise or accrue from and after the
date of the Closing.
SECTION 1.3 SALE OF REAL PROPERTY BY SAFECARE. Subject to the terms and
---------------------------------
conditions of this Agreement, including, without limitation, Section 7.2 hereof,
SAFECARE agrees to sell, convey and transfer to Buyer and Buyer agrees to
purchase at Closing, all of the following described property (collectively, the
"SAFECARE Real Property"): (i) fee simple title in and to those certain tracts
of real property containing approximately 13.6 acres of land and described in
Schedule 1.3A hereto, together with all improvements, buildings and fixtures
located thereon or therein which shall include, without limitation, the parcels
of real property upon which the Hospital and the MOB are located and all rights,
titles and interests appurtenant to such land and improvements including,
without limitation, all of SAFECARE's interest in and to all air and subsurface
rights, appurtenant easements, adjacent roads, highways, rights-of-way, and oil,
gas and other minerals situated on, in and under the SAFECARE Real Property;
(ii) all tangible personal property and fixtures of any kind owned by SAFECARE
and attached to or used in connection with the ownership, maintenance or
operation of the SAFECARE Real Property; (iii) SAFECARE's interest in all
agreements, service contracts, warranties, guaranties, indemnity rights and
bonds relating to the SAFECARE Real Property or the personal property described
in Section 1.3(ii) hereof; (iv) all site plans, surveys, plans and
specifications, and floor plans in SAFECARE's possession which relate to the
SAFECARE Real Property; (v) all of SAFECARE's rights, titles and interests under
any leases or other agreements demising space and providing for the use or
occupancy of the MOB (the "MOB Leases") and all deposits, whether security or
otherwise (the "MOB Deposits") paid by tenants in the MOB (the "MOB Tenants")
under the MOB Leases; and (vi) any and all other rights, privileges and
appurtenances owned by SAFECARE in any way related to, or used in connection
with, the operation of the SAFECARE Real Property (except the Retained Land
(hereinafter defined). SAFECARE shall convey good and marketable title to the
SAFECARE Real Property to Buyer free and clear of all liabilities, claims,
assessments, security interests, liens, leases, restrictions and encumbrances,
except those matters described on Schedule 1.3B hereto (collectively, the
"SAFECARE Permitted Encumbrances"). At Closing, SAFECARE and Seller shall
terminate the Lease (hereinafter
3
<PAGE>
defined) which shall vest title in and to all improvements, buildings and
fixtures constituting the Hospital in SAFECARE, all of which shall constitute a
portion of the SAFECARE Real Property. At Closing, SAFECARE shall assign to
Buyer and Buyer shall assume all of the obligations of the landlord under the
MOB Leases that arise or accrue from and after the date of the Closing. As used
in this Agreement, the term "Assets" means, collectively, the Seller Assets, the
Seller Real Property and the SAFECARE Real Property. As used in this Agreement,
the term "Seller Real Property" and "SAFECARE Real Property" means,
collectively, the "Real Property".
SECTION 1.4 EXCLUDED ASSETS. The following items which are related to
---------------
the Assets are not intended by the parties to be a part of the sale and purchase
contemplated hereunder and are excluded from the Assets including, without
limitation, from the Seller Assets (and are hereinafter sometimes referred to as
the "Excluded Assets"): (i) restricted and unrestricted cash and cash
equivalents and all notes and accounts receivable not set forth on Schedule 1.1B
hereto; (ii) any records which by law Seller is required to retain in its
possession; (iii) all right, title and interest of Seller in respect of any
commitment, contract, lease or agreement not assigned to and assumed by Buyer at
Closing; (iv) all inventory and prepaid expenses disposed of or exhausted prior
to Closing in the Ordinary Course of Business (hereinafter defined) and items of
equipment transferred or disposed of in accordance with Section 6.3(v) hereof;
(v) any proprietary information contained in Seller's employee or operation
manuals; (vi) rights to settlements and retroactive adjustments arising out of
the matters set forth in Schedule 1.4 hereto; (vii) the Retained Land; (viii)
any inventory that Buyer elects not to acquire and that is not included at
Seller' cost, net of rebates, in Adjusted Working Capital (hereinafter defined);
(ix) any claims, choses in action and judgments in favor of Seller relating to
the Hospital that are not listed on Schedule 1.1D; (x) all prepaid expenses,
claims for refunds and rights to offset in respect thereof that are not set
forth on Schedule 1.1C and are not included in Adjusted Working Capital; and
(xi) contingent workers' compensation receivables accruing prior to Closing.
SECTION 1.5 ASSUMED LIABILITIES. As of Closing, Buyer agrees to assume
-------------------
only the future payment and performance of the following liabilities
(collectively, the "Assumed Liabilities") of Seller: (i) obligations arising
from and after Closing under the Contracts; (ii) other obligations and/or
expenses to the extent assumed or required to be paid or borne by Buyer under
other provisions of this Agreement or associated with the Assets related to
periods after the Closing Date; (iii) the aggregate current liabilities, if any,
assigned to Buyer by Seller and included in the computation of Adjusted Working
Capital; and (iv) Seller's obligations as of the Closing Date in respect of
accrued vacation pay, sick leave and holiday pay of Seller's employees at the
Hospital who are hired by Buyer as of the Closing Date and any FICA, FUTA,
workers' compensation and any and all other taxes or amounts due and payable as
a result of the exercise by any of Seller's employees of such employees' right
to vacation, sick leave and holiday benefits accrued while in the employ of
Seller, but only to the extent such accrued vacation pay, sick leave and holiday
pay and FICA, FUTA, workers' compensation and any and all other taxes or amounts
due and payable in connection therewith are set forth in Schedule 1.5 delivered
by Seller to Buyer at least three (3) business days prior to the Closing Date
and as adjusted subsequent thereto pursuant to Section 1.8(e) hereof (the
"Accrued PTO"). Buyer shall not be liable for (i) any claims arising from
Seller's assignment and Buyer's assumption of the Assumed Liabilities; (ii)
uncured defaults in performance of the Assumed Liabilities for periods prior to
Closing; (iii) unpaid amounts in respect of the Assumed Liabilities that are due
as of Closing; and/or (iv) rights or remedies claimed by third parties under any
of the Assumed Liabilities which broaden or vary the rights and remedies such
third parties would have had against Seller if the sale
4
<PAGE>
and purchase of the Seller Assets were not to occur.
SECTION 1.6 EXCLUDED LIABILITIES. Except for the Assumed Liabilities or
--------------------
as otherwise herein provided, Buyer shall not assume and under no circumstances
shall Buyer be obligated to pay or assume, and none of the Seller Assets shall
be or become liable for or subject to, any liability of Seller, whether fixed or
contingent, recorded or unrecorded, known or unknown, currently existing or
hereafter arising or otherwise, including, without limitation, the following
(collectively, the "Excluded Liabilities"): (i) indebtedness and other
obligations or guarantees of Seller, including, without limitation, current
liabilities of Seller (except to the extent included in Adjusted Working
Capital) and short-term and long-term indebtedness; (ii) liabilities or
obligations of Seller in respect of periods prior to and including the Closing
Date arising under the terms of the Medicare, Medicaid, CHAMPUS or other third
party payor programs, including, without limitation, any claim, penalty or
sanction relating to any claim for overpayment, subject, however, to Buyer's
indemnification obligations under Section 12.9 hereof relating to re-opening
Seller's prior cost reports; (iii) any liability arising pursuant to the
Medicare, Medicaid, CHAMPUS or any other third party payor programs as a result
of the consummation of the transactions contemplated herein, including, without
limitation, recapture of previously reimbursed expenses; (iv) federal, state or
local tax liabilities or obligations of Seller in respect of periods prior to
Closing or resulting from the consummation of the transactions contemplated
herein, including, without limitation, any income tax, any franchise tax, any
tax recapture, any sales and/or use tax, and, except for the obligations of
Buyer set forth in Section 14.8 hereof, any state and local recording fees and
taxes which may arise upon the consummation of the transactions contemplated
herein and any FICA, FUTA, workers' compensation and any and all other taxes or
amounts due and payable as a result of the exercise by any of Seller's employees
of such employees' right to vacation, sick leave and holiday benefits accrued
while in the employ of Seller (to the extent not included in Section 1.5
hereof); (v) liability for any and all claims by or on behalf of Seller's
employees relating to periods prior to Closing, including, without limitation,
liability for any pension, profit sharing, deferred compensation, or any other
employee health and welfare benefit plans, liability for any EEOC claim, wage
and hour claim, unemployment compensation claim or workers' compensation claim,
liability for all employee wages and benefits, including, without limitation,
accrued vacation pay, sick leave and holiday pay and taxes or other liabilities
related thereto in respect of Seller's employees (to the extent not included in
Section 1.5 hereof), and any liabilities or obligations to former employees
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended;
(vi) liabilities or obligations arising as a result of any breach by Seller at
any time of any contract or commitment that is not assumed by Buyer; (vii)
liabilities or obligations arising out of any breach by Seller prior to Closing
of any Contract; (viii) any obligation or liability asserted under the federal
Hill-Burton program or other restricted grant and loan programs with respect to
the ownership or operation of the Seller Assets; (ix) any liability arising out
of or in connection with claims for acts, omissions and medical malpractice
relating to the ownership or operations of the Hospital which allegedly occurred
prior to Closing; (x) contracts and agreements between Seller and one or more of
Seller's Affiliates, if any, not specifically assumed by Buyer; (xi) any debt,
obligation, expense or liability of Seller arising out of or incurred solely as
a result of any transaction of Seller occurring after Closing or for any
violation by Seller of any law, regulation or ordinance at any time; and (xii)
any liability arising out of the assignment at Closing of any Contract. Buyer
shall not be liable for and shall not assume any liabilities or obligations of
SAFECARE or Seller, as applicable, in respect of the Real Property, except for
prorated ad valorem taxes accruing after the Closing Date and which shall be
assumed by Buyer at Closing and for prorated ad valorem
5
<PAGE>
taxes accruing prior to the Closing Date for which Buyer receives a payment in
cash from Seller at Closing. Buyer acknowledges that Buyer is acquiring the
Real Property subject to the SAFECARE Permitted Encumbrances and the Seller
Permitted Encumbrances, as applicable. As used herein, the term "Affiliate"
means, as to the entity in question, any person or entity that directly or
indirectly controls, is controlled by, or is under common control with, the
entity in question; and the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity whether through ownership of voting securities, by
contract or otherwise. Seller, SAFECARE and Buyer acknowledge that Seller is
not an Affiliate of SAFECARE.
SECTION 1.7 PURCHASE PRICE. Subject to the terms and conditions hereof,
--------------
in reliance upon the representations and warranties of Seller and SAFECARE
herein set forth, respectively, and as consideration for the sale and purchase
of the Assets as herein contemplated, Buyer agrees to tender to Seller and
SAFECARE at Closing as the Purchase Price hereunder (the "Purchase Price") and
in the manner hereinafter provided an aggregate amount equal to (i) Nineteen
Million Five Hundred Thousand Dollars ($19,500,000), plus (ii) an amount equal
----
to the Adjusted Working Capital (provided, however, if such amount is a negative
number then such amount shall be deducted from the Purchase Price), minus (iii)
-----
an amount equal to the accrued vacation pay, sick leave and holiday pay of
Seller's employees at the Hospital that are hired by Buyer as of the Closing
Date and any FICA, FUTA, workers' compensation and any and all other taxes or
amounts due and payable as a result of the exercise by any of Seller's employees
of such employees' right to such vacation, sick leave and holiday benefits
accrued while in the employ of Seller to the extent not included on Schedule 1.5
hereto, minus (iv) the net present value (to be determined by a methodology to
-----
be agreed upon by Seller, SAFECARE and Buyer on or before Closing) of any leases
(other than the lease of that portion of the Real Property upon which the
Hospital is located and improvements, buildings and fixtures located thereon)
which are a part of the Assets and which, in accordance with generally accepted
accounting principles, would be classified as a capital lease and which are
shown on the Financial Statements (hereinafter defined) and either assumed or
refinanced by Buyer at Closing; which Purchase Price shall be further subject to
the prorations and adjustments set forth in this Agreement. In addition, Buyer
shall assume the Assumed Liabilities at Closing. The Purchase Price shall be
due and payable at Closing by wire transfer in immediately available funds to
such account or accounts, for credit to SAFECARE, Seller and/or Affiliates of
SAFECARE which are lenders to Seller, as SAFECARE may direct in writing to Buyer
on or before Closing.
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<PAGE>
SECTION 1.8 PURCHASE PRICE ADJUSTMENTS.
--------------------------
(a) Computation of Adjusted Working Capital. As used herein, the term
---------------------------------------
"Adjusted Working Capital" means the aggregate current assets of Seller
(excluding those Excluded Assets which would otherwise be included in
current assets) sold to Buyer pursuant to Section 1.1 hereof, minus the
aggregate current liabilities of Seller assumed by Buyer pursuant to
Section 1.5 hereof (excluding those Excluded Liabilities which would
otherwise be included in current liabilities), all as determined in
accordance with Seller's historical accounting practices, consistently
applied, but in any case with all notes and accounts receivable set forth
on Schedule 1.1B hereto being included in current assets for purposes of
the computation of Adjusted Working Capital net of an allowance for
uncollectibles and set-offs, deductions, compromises and reductions agreed
upon by Seller and Buyer on or before Closing. For purposes of the
computation of Adjusted Working Capital pursuant to this Section 1.8(a) and
Section 1.8(e) hereof, current liabilities of Seller assumed by Buyer
pursuant to Section 1.5 hereof shall include Accrued PTO reduced by an
amount equal to the sum of (i) fifty percent (50%) of the amount of accrued
sick leave of Seller's employees at the Hospital set forth in Schedule 1.5
hereto plus (ii) fifty percent (50%) of the amount of FICA, FUTA, workers'
compensation and any and all other taxes or amounts due and payable as a
result of the exercise by any of Seller's employees of Seller's employees'
right to sick leave set forth in Schedule 1.5 hereto. For purposes of the
computation of Adjusted Working Capital pursuant to this Section 1.8,
current liabilities of Seller shall not include any post-closing settlement
obligations of Seller pursuant to settlement agreements entered into as
described in Section 6.11 hereof.
(b) Estimates and Adjustments. At least three (3) business days prior
-------------------------
to the Closing Date, Seller shall deliver to Buyer a good faith estimate
based upon Seller's historical accounting procedures of Adjusted Working
Capital as of the Closing Date and containing reasonable detail showing the
derivation of such estimate (such estimate being referred to as the
"Estimated Adjusted Working Capital"), and the increase adjustment to the
Purchase Price for Adjusted Working Capital, if any and as applicable, at
Closing pursuant to Section 1.7 hereof shall be determined using such
estimate. Buyer shall have full access to Seller's financial books and
records pertaining to the Hospital prior to, and for ninety (90) days
following, Closing to confirm or audit working capital computations. Should
Buyer disagree with the determination of Estimated Adjusted Working
Capital, it shall notify Seller within seventy-five (75) days after the
Closing. If Seller and Buyer fail to agree within one hundred (100) days
after the Closing on the amount of Adjusted Working Capital, such
disagreement shall be resolved in accordance with the procedure set forth
in Section 1.8(c) hereof. The final determination or agreement as to
Adjusted Working Capital shall be referred to herein as the "Actual
Adjusted Working Capital." The portion of the Purchase Price for Adjusted
Working Capital shall be increased or decreased after Closing based on the
determination or agreement after Closing of the Actual Adjusted Working
Capital as of the Closing Date, and within five (5) business days after
determination or agreement thereof or resolution pursuant to Section 1.8(c)
hereof any increase shall be paid in cash by Buyer to Seller, and any
decrease shall be paid in cash to Buyer by Seller.
(c) Dispute of Adjustments. In the event that Seller and Buyer are
----------------------
not able to agree on the Actual Adjusted Working Capital within one hundred
(100) days after the
7
<PAGE>
Closing, Seller and Buyer shall each have the right to require that such
disputed determination be submitted to Ernst & Young for computation or
verification in accordance with the provisions of this Agreement. The
results of such accounting firm's report shall be binding upon Seller and
Buyer, and such accounting firm's fees and expenses for such disputed
determination shall be borne equally by Buyer and Seller.
(d) Inventory. Immediately prior to the Closing Date, Seller, at the
---------
sole cost and expense of the Seller, shall conduct a physical inventory of
the supplies on hand at the Hospital as of the Closing Date and shall
prepare a schedule thereof indicating the Estimated Value of Supplies.
Seller shall give Buyer at least three (3) business days written notice of
the date on which such inventory is to be conducted and shall permit Buyer
to monitor same. As used herein, the term "Estimated Value of Supplies"
shall mean the aggregate value of Seller's hospital supplies on hand at the
Hospital as of the Closing Date that are determined by Seller to be usable
in the Ordinary Course of Business (hereinafter defined) based upon
Seller's actual cost (net of any rebates received by Seller) of each item
to be purchased by Buyer and the Estimated Value of Supplies shall be
included in the Adjusted Working Capital.
(e) Accrued PTO. Within ninety (90) days from and after the Closing
-----------
Date, Seller and Buyer shall agree upon the actual amount of Accrued PTO
(the "Actual Accrued PTO") as of the Closing Date in respect of Seller's
employees at the Hospital who are hired by Buyer as of the Closing Date and
shall revise and update Schedule 1.5 accordingly, if and to the extent
Accrued PTO and Actual Accrued PTO are not included respectively within
Estimated Adjusted Working Capital and Actual Adjusted Working Capital. In
the event that Seller and Buyer are not able to agree upon the amount of
the Actual Accrued PTO within such ninety (90) day period, any disputes
will be resolved in accordance with the dispute resolution procedure set
forth in Section 1.8(c) hereof. If the Actual Accrued PTO is greater than
the Accrued PTO, Seller shall tender to Buyer an amount equal to such
excess value within five (5) business days after the determination thereof.
If the Accrued PTO is greater than the Actual Accrued PTO, Buyer shall
tender to Seller an amount equal to such excess value within five (5)
business days after the determination thereof.
SECTION 1.9 OTHER ADJUSTMENTS AT CLOSING. Notwithstanding anything to
----------------------------
the contrary contained herein, the provisions of this Section 1.9 shall survive
the Closing. The following items shall be adjusted or prorated between
SAFECARE, Seller and Buyer, as applicable, at Closing:
(a) Ad valorem and similar taxes and assessments relating to the Real
Property for the calendar year in which the Closing Date occurs shall be
prorated between Seller (or, in the case of the MOB, SAFECARE) and Buyer as
of the Closing Date, based upon the assessed valuation and tax rate figures
for the year in which the Closing Date occurs to the extent the same are
available; provided, that in the event that actual figures (whether for the
assessed value of the Real Property or for the tax rate) for the year of
Closing are not available at the Closing Date, the proration shall be made
using figures from the preceding year for the figures which are unavailable
for the year of Closing, and Seller (or, in the case of the MOB, SAFECARE)
shall pay to Buyer in cash at the Closing Seller's (or, in the case of the
MOB, SAFECARE's) pro rata portion of such taxes and assessments. The
proration for ad valorem taxes and similar taxes and assessments shall
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be final and unadjustable, except as otherwise provided in Section 1.9(g)
hereof. Any special assessments applicable to the SAFECARE Real Property
for improvements presently made to benefit the SAFECARE Real Property shall
be paid by Seller, or, in the case of the MOB, SAFECARE. Any special
assessments applicable to the Seller Real Property for improvements
presently made to benefit the Seller Real Property shall be paid by Seller.
(b) Rents payable with respect to the MOB for the then current month
shall be prorated effective as of the Closing Date, and in addition thereto
SAFECARE shall pay to Buyer in cash at the Closing the amount of any rents
prepaid by any MOB Tenants of the MOB for periods subsequent to the month
of the Closing. Buyer shall make a reasonable attempt to collect rents
delinquent as of the Closing Date in the usual course of Buyer's operation
of the MOB following Closing, and shall first apply any such delinquent
rents actually collected to outstanding current rents (but not future rents
that are not then due and payable), and then out of any excess remaining
(if any), shall reimburse SAFECARE for SAFECARE's pro rata portion of such
delinquent rents owing as of the Closing Date; provided, however, Buyer
shall not be obligated to institute any lawsuit or other collection
procedures to collect such delinquent rents. Notwithstanding the
foregoing, if Buyer shall be unable to collect such delinquent rents and an
MOB Tenant has not tendered their delinquent rent payment to Seller,
SAFECARE shall have the right, upon prior written notice to Buyer, to
pursue any MOB Tenants to collect such delinquencies, but SAFECARE shall
not be entitled to evict any such tenants or to terminate any such MOB
Leases. SAFECARE shall promptly furnish Buyer with notice of any action or
proceeding commenced by SAFECARE in accordance with the immediately
preceding sentence.
(c) SAFECARE shall pay to Buyer in cash at the Closing or credit to
Buyer against the Purchase Price at Closing the amount of any and all MOB
Deposits paid by MOB Tenants under the MOB Leases.
(d) Rents payable with respect to the Seller Real Property for the
then current month shall be prorated effective as of the Closing Date, and
in addition thereto Seller shall pay to Buyer in cash at the Closing the
amount of any rents prepaid by any tenants of the Seller Real Property for
periods subsequent to the month of the Closing. Buyer shall make a
reasonable attempt to collect rents delinquent as of the Closing Date in
the usual course of Buyer's operation of the Seller Real Property following
Closing, and shall first apply any such delinquent rents actually collected
to outstanding current rents (but not future rents that are not then due
and payable), and then out of any excess remaining (if any), shall
reimburse Seller for Seller's pro rata portion of such delinquent rents
owing as of the Closing Date; provided, however, Buyer shall not be
obligated to institute any lawsuit or other collection procedures to
collect such delinquent rents. Seller shall pay to Buyer in cash at the
Closing or credit to Buyer against the Purchase Price at Closing the amount
of any and all Seller Real Property Deposits paid by Seller Real Property
Tenants under the Seller Real Property Leases.
(e) All other income and operating expenses of the Real Property,
including, without limitation, public utility charges, maintenance,
management and other service charges, and all other normal operating
charges with respect to the Real Property shall be
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prorated effective as of the Closing Date, and appropriate cash adjustments
shall be made by Buyer and Seller (or, in the case of the MOB, SAFECARE) to
the Purchase Price at Closing.
(f) Seller and Buyer shall prorate as of the Closing Date, any amounts
which become due and payable after the Closing Date with respect to (i)
property taxes on the Seller Assets and (ii) all utilities servicing any of
the Seller Assets.
(g) If any of the items subject to proration under the foregoing
provisions of this Section 1.9 cannot be prorated at the Closing because of
the unavailability of the information necessary to compute such proration,
or if any errors or omissions in computing prorations at the Closing are
discovered subsequent to the Closing, then such item shall be reapportioned
and such errors and omissions corrected as soon as practicable after the
Closing Date and the proper party reimbursed, which obligation shall
survive the Closing for a period (the "Proration Period") from the Closing
Date until one (1) year after the Closing Date. Neither party hereto shall
have the right to require a recomputation of a Closing proration or a
correction of an error or omission in a Closing proration unless within the
Proration Period one of the parties hereto (i) has obtained the previously
unavailable information or has discovered the error or omission, and (ii)
has given notice thereof to the other party together with a copy of its
good faith recomputation of the proration and copies of all substantiating
information used in such recomputation. The failure of a party to obtain
any previously unavailable information or discover an error or omission
with respect to an item subject to proration hereunder and to give notice
thereof as provided above within the Proration Period shall be deemed a
waiver of its right to cause a recomputation or a correction of an error or
omission with respect to such item after the Closing Date.
SECTION 1.10 DISCLAIMER OF WARRANTIES. Except as expressly set forth in
------------------------
Articles III and IV hereof, the Assets are transferred in their condition on the
Closing Date, "AS IS," WITH NO WARRANTY OF HABITABILITY OR FITNESS FOR
HABITATION, WITH RESPECT TO LAND, BUILDINGS AND IMPROVEMENTS, AND WITH NO
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND BUYER ACKNOWLEDGES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, (i) NEITHER SELLER,
SAFECARE, NOR ANY PRINCIPAL, AGENT, ATTORNEY, EMPLOYEE, BROKER OR OTHER
REPRESENTATIVE OF SELLER OR SAFECARE HAS MADE ANY REPRESENTATIONS OR WARRANTIES
OF ANY KIND WHATSOEVER REGARDING THE ASSETS, EITHER EXPRESS OR IMPLIED, AND (ii)
BUYER AGREES THAT BUYER IS ACQUIRING THE ASSETS IN WHOLLY AN "AS IS" CONDITION
WITH ALL FAULTS AND WAIVES ALL CONTRARY RIGHTS AND REMEDIES AVAILABLE TO IT
UNDER ARKANSAS AND FEDERAL LAW. IN PARTICULAR, BUT WITHOUT LIMITATION, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, NEITHER
SELLER NOR SAFECARE MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO, AND
SHALL HAVE NO LIABILITY FOR: (1) THE CONDITION OF THE ASSETS OR ITS SOILS OR
GROUNDWATERS OR ANY BUILDING, STRUCTURE OR IMPROVEMENTS ON THE REAL PROPERTY OR
THE SUITABILITY, HABITABILITY, MERCHANTABILITY OR FITNESS OF THE ASSETS FOR
BUYER'S INTENDED USE OR
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FOR ANY USE WHATSOEVER; (2) COMPLIANCE WITH ANY APPLICABLE LEASING, SUBDIVISION,
PLANNING, SAFETY, HEALTH, ENVIRONMENTAL, BUILDING, ZONING OR OTHER LAWS,
REGULATIONS OR GOVERNMENTAL REQUIREMENTS OR WITH RESPECT TO THE EXISTENCE OF OR
COMPLIANCE WITH ANY REQUIRED PERMITS, IF ANY, OF ANY GOVERNMENTAL AGENCY OR
COMPLIANCE WITH COVENANTS, CONDITIONS OR RESTRICTIONS (WHETHER OR NOT OF
RECORD); (3) THE AVAILABILITY OR ADEQUACY OF ANY WATER, SEWER OR UTILITY RIGHTS;
(4) THE PRESENCE OF ANY HAZARDOUS OR TOXIC SUBSTANCES IN ANY IMPROVEMENTS ON THE
ASSETS INCLUDING, WITHOUT LIMITATION, ASBESTOS OR UREA-FORMALDEHYDE, OR THE
PRESENCE OF ANY ENVIRONMENTALLY HAZARDOUS OR TOXIC WASTES OR MATERIALS, ON,
UNDER OR ADJACENT TO THE ASSETS; OR (5) ANY OTHER MATTER RELATING TO THE ASSETS.
BUYER REPRESENTS THAT IT IS KNOWLEDGEABLE IN REAL ESTATE MATTERS AND THAT UPON
COMPLETION OF THE INSPECTIONS CONTEMPLATED OR PERMITTED BY THIS AGREEMENT, BUYER
WILL HAVE MADE ALL OF THE INVESTIGATIONS OR INSPECTIONS BUYER DEEMS NECESSARY IN
CONNECTION WITH ITS PURCHASE OF THE ASSETS, AND THAT APPROVAL BY BUYER OF SUCH
INSPECTIONS PURSUANT TO THIS AGREEMENT AND CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT WILL BE DEEMED APPROVAL BY BUYER WITHOUT
RESERVATION OF ALL ASPECTS OF THIS TRANSACTION INCLUDING, BUT NOT LIMITED TO,
THE PHYSICAL CONDITION, USE, TITLE AND FINANCIAL ASPECTS OF THE OPERATION OF THE
ASSETS; ALTHOUGH NOTHING HEREIN SHALL BE DEEMED A LIMITATION OR WAIVER OF
BUYER'S RIGHT TO RELY UPON ANY WARRANTY OR REPRESENTATION OF SELLER OR SAFECARE
CONTAINED IN THIS
11
<PAGE>
AGREEMENT OR IN ANY DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT. SELLER,
BUYER AND SAFECARE ACKNOWLEDGE THAT THIS DISCLAIMER HAS BEEN SPECIFICALLY
NEGOTIATED.
INITIALS: ___________ ___________ ___________
Seller Buyer SAFECARE
SECTION 1.11 INTEREST. Unless otherwise provided herein to the contrary,
--------
any payment required to be made by any party pursuant to this Agreement, if not
paid before seven (7) days after the date such payment is required to be made
(the "Interest Commencement Date"), shall include interest from the Interest
Commencement Date to the day such payment is made, computed at a rate equal to
the lesser of (i) ten percent (10%) per annum or (ii) the highest rate then
permitted by law. All requests for payment pursuant to this Section 1.11 shall
be accompanied by a certificate of an officer of the party entitled to receive
such payment setting forth the amount of the payment due pursuant to this
Agreement (without regard to any amounts payable through operation of this
Section 1.11) and the applicable Interest Commencement Date.
ARTICLE II
CLOSING
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SECTION 2.1 CLOSING. Subject to the satisfaction or waiver by the
-------
appropriate party of all of the conditions precedent to Closing specified in
Articles IX and X hereof, the consummation of the sale and purchase of the
Assets and the other transactions contemplated by and described in this
Agreement (the "Closing") shall take place at the offices of Robinson, Staley &
Marshall, P.A. in Little Rock, Arkansas, at 10:00 a.m. local time on November
__, 1997, or at such other date and/or at such other location as the parties
hereto may mutually designate in writing (the "Closing Date"). The Closing
shall be effective as of 12:01 a.m. (central standard time) on the calendar day
immediately following the Closing Date, or at such other date and/or at such
other location as the parties hereto may mutually designate in writing. If any
condition set forth in Article IX or X hereof is not satisfied or waived by the
appropriate party, the Closing Date shall be on the first (1/st/) business day
after each such condition has been satisfied or waived pursuant to this
Agreement; provided, however, that the Closing Date shall not be later than
November 30, 1997. In the event the Closing has not occurred on or before
November 30, 1997, this Agreement shall terminate and none of the parties to
this Agreement shall have any further rights or obligations under this Agreement
except for those provisions that expressly survive the termination of this
Agreement.
SECTION 2.2 ACTIONS OF SELLER AND SAFECARE AT CLOSING. At the Closing
-----------------------------------------
and unless otherwise waived in writing by Buyer, Seller and SAFECARE, as
applicable, shall deliver to Buyer the following:
(a) From Seller:
(i) Special Warranty Deed, duly executed by Seller in recordable
form, conveying to Buyer good and marketable fee title to the Seller
Real Property, subject only to the Seller Permitted Encumbrances;
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(ii) A General Bill of Sale and Assignment, duly executed by
Seller, conveying to Buyer good title to all tangible assets which are
a part of the Seller Assets and all Seller's right, title and interest
in and to all intangible assets which are a part of the Seller Assets,
free and clear of all liabilities, claims, liens, security interests
and restrictions other than the Assumed Liabilities;
(iii) An Assignment of Contracts, duly executed by Seller,
conveying to Buyer Seller's interest in the Contracts;
(iv) An Owner Policy of Title Insurance covering the Seller Real
Property as described in and provided by Section 9.9 hereof;
(v) Copy of resolutions duly adopted by the board of directors of
Seller authorizing and approving the performance of the transactions
contemplated hereby and the execution and delivery of this Agreement
and the documents described herein, certified as true and of full
force as of Closing, by the appropriate officers of Seller;
(vi) Certificate of the Chairman of the Board of Seller
certifying that each covenant and agreement of Seller to be performed
prior to or as of Closing pursuant to this Agreement has been
performed in all material respects;
(vii) Certificate of incumbency for the officers or directors of
Seller executing this Agreement or making certifications for Closing
dated as of Closing;
(viii) Certificate of existence and good standing of Seller from
the state in which it is incorporated, dated the most recent practical
date prior to Closing;
(ix) The opinion of Seller's counsel as described in and provided
by Section 9.2 hereof;
(x) Certificate of good standing of Seller from the state of
Arkansas, dated the most recent practical date prior to Closing;
(xi) A Covenant Not to Compete Agreement duly executed by Seller
on the terms and in the form required pursuant to Section 9.15 hereof;
(xii) A termination of the Lease (the "Lease Termination
Agreement") creating the leasehold estate of Seller in that portion of
the Real Property on which the Hospital is located, duly executed by
Seller and SAFECARE (and if applicable, any mortgagee or pledgee of
Seller's interest in the Lease) and in recordable form;
(xiii) A FIRPTA Affidavit duly executed by Seller, stating that
neither Seller nor any of its Affiliates holding title to any of the
Seller Real Property is a "foreign person" as defined in the Federal
Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax
Reform Act;
(xiv) All original Tenant Estoppel Certificates required to be
delivered by
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Seller Real Property Tenants of the Seller Real Property and originals
of any Seller Estoppel Certificates delivered by Seller pursuant to
Section 6.12 hereof, and any Substitute Estoppel Certificates required
to be delivered by Seller pursuant to Section 7.7 hereof;
(xv) An Assignment and Assumption of Leases, duly executed by
Seller and Buyer, conveying the Seller Real Property Leases to Buyer;
(xvi) All original Seller Real Property Leases together with
letters addressed to the Seller Real Property Tenants in such form as
may be mutually agreed upon by Seller and Buyer, notifying the Seller
Real Property Tenants of the sale of the Seller Real Property to
Buyer;
(xvii) Such other instruments and documents as are reasonably
necessary to satisfy the conditions precedent to Buyer's obligations
hereunder.
(b) From SAFECARE:
(i) Special Warranty Deed, duly executed by SAFECARE in
recordable form, conveying to Buyer good and marketable fee title to
the SAFECARE Real Property, subject only to the SAFECARE Permitted
Encumbrances;
(ii) Copy of resolutions duly adopted by the board of directors
of SAFECARE authorizing and approving the performance of the
transactions contemplated hereby and the execution and delivery of
this Agreement and the documents described herein, certified as true
and of full force as of Closing, by the appropriate officers of
SAFECARE;
(iii) Certificate of the President or a Vice President of
SAFECARE certifying that each covenant and agreement of SAFECARE to be
performed prior to or as of Closing pursuant to this Agreement has
been performed in all material respects;
(iv) Certificate of incumbency for the officers of SAFECARE
executing this Agreement or making certifications for Closing dated as
of Closing;
(v) Certificate of existence and good standing of SAFECARE from
the state in which it is incorporated, dated the most recent practical
date prior to Closing;
(vi) Certificate of good standing of SAFECARE from the state of
Arkansas, dated the most recent practical date prior to Closing;
(vii) The opinion of SAFECARE's counsel as described in and
provided by Section 9.2 hereof;
(viii) A FIRPTA Affidavit duly executed by SAFECARE, stating
that neither SAFECARE nor any of its Affiliates holding title to any
of the
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<PAGE>
SAFECARE Real Property is a "foreign person" as defined in the Federal
Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax
Reform Act;
(ix) An Owner Policy of Title Insurance covering the SAFECARE
Real Property as described in and provided by Section 9.9 hereof;
(x) A General Bill of Sale and Assignment, duly executed by
SAFECARE, conveying to Buyer good title to all of SAFECARE's tangible
assets which are a part of the SAFECARE Real Property and all of
SAFECARE's right, title and interest in and to all intangible assets
which are a part of the SAFECARE Real Property;
(xi) An Assignment and Assumption of Contracts, duly executed by
SAFECARE, conveying to Buyer SAFECARE's interest in the service
contracts relating to the SAFECARE Real Property that Buyer agrees to
assume at Closing;
(xii) A rent roll prepared with respect to the MOB which shall
be certified by SAFECARE as being true and correct as of the date not
more than five (5) days prior to Closing;
(xiii) A Lease Termination Agreement, duly executed by Seller
and SAFECARE and in recordable form;
(xiv) An Assignment and Assumption of Leases, duly executed by
SAFECARE and Buyer, conveying the MOB Leases to Buyer;
(xv) The agreement regarding the Retained Land, duly executed by
SAFECARE and Buyer pursuant to Section 9.16 hereof;
(xvi) All original MOB Leases together with letters addressed to
the MOB Tenants in such form as may be mutually agreed upon by
SAFECARE and Buyer, notifying the MOB Tenants of the sale of the MOB
to Buyer;
(xvii) Original Tenant Estoppel Certificates executed by the MOB
Tenants in the form required pursuant to Section 7.7 hereof;
(xviii)Guaranty, duly executed by SAFECARE, together with the
original of the Letter of Credit, pursuant to and as such terms are
defined in Section 9.17 hereof; and
(xix) Such other instruments and documents as are reasonably
necessary to satisfy the conditions precedent to Buyer's obligations
hereunder.
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SECTION 2.3 ACTIONS OF BUYER AT CLOSING. At the Closing and unless
---------------------------
otherwise waived in writing by Seller and SAFECARE, Buyer shall deliver to
Seller and SAFECARE, as applicable, the following:
(i) An amount equal to the Purchase Price (as increased or decreased
pursuant to Section 1.8 hereof) in immediately available funds;
(ii) An Assumption Agreement, duly executed by Buyer, pursuant to
which Buyer shall assume the future payment and performance of the
obligations of Seller relating to the Assumed Liabilities;
(iii) Copies of resolutions duly adopted by the board of directors of
Buyer authorizing and approving Buyer's performance of the transactions
contemplated hereby and the execution and delivery of this Agreement and
the documents described herein, certified as true and in full force as of
Closing by an appropriate officer of Buyer;
(iv) Certificates of the President or a Vice President of the Buyer
certifying that each covenant and agreement of Buyer to be performed prior
to or as of Closing pursuant to this Agreement has been performed in all
material respects;
(v) Certificates of incumbency for the respective officers of the
Buyer executing this Agreement or making certifications for Closing dated
as of Closing;
(vi) Certificates of existence and good standing of Buyer from the
state of its organization or incorporation, each dated the most recent
practical date prior to Closing;
(vii) The opinion of Buyer's counsel as described in and provided by
Section 10.2;
(viii) An Assignment and Assumption of Leases, duly executed by
SAFECARE and Buyer, conveying the MOB Leases to Buyer;
(ix) An Assignment and Assumption of Leases, duly executed by Seller
and Buyer, conveying the Seller Real Property Leases to Buyer;
(x) The agreement regarding the Retained Land, duly executed by
SAFECARE and Buyer pursuant to Section 9.16 hereof;
(xi) An Assignment and Assumption of Contracts, duly executed by
Buyer, in connection with the service contracts relating to the SAFECARE
Real Property that Buyer agrees to assume at Closing; and
(xii) Such other instruments and documents as are reasonably
necessary to satisfy the conditions precedent to Seller's and SAFECARE's
obligations hereunder.
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SECTION 2.4 ADDITIONAL ACTS. From time to time after Closing, Buyer and
---------------
Seller shall each execute and deliver such other instruments of conveyance,
transfer and assumption, and take such other actions as the other shall
reasonably request, to more effectively convey and transfer full right, title
and interest to, vest in, and place Buyer in legal and actual possession of, any
and all of the Assets and to perform their respective obligations hereunder. In
the case of Contracts and rights which cannot be transferred effectively without
the consents of third parties, Seller shall use its reasonable efforts to obtain
such consents promptly. Seller shall cooperate reasonably with Buyer (but at no
out-of-pocket expense to Seller) to furnish such information and documents in
its possession or under its control as may reasonably be requested by Buyer as
will enable Buyer to prosecute any and all petitions, applications, claims and
demands relating to the Assets. From time to time after Closing, Buyer,
SAFECARE and Seller shall each execute and deliver such other instruments of
conveyance, transfer and assumption, and take such other actions as the other
shall reasonably request, to more effectively convey and transfer, vest in, and
place Buyer in legal and actual possession of, the Real Property and to perform
their respective obligations hereunder in respect of the Real Property.
Additionally, Seller, SAFECARE and Buyer shall cooperate with and use their
respective good faith reasonable efforts to have their respective directors,
officers and employees cooperate with each other party on and after Closing in
furnishing information, evidence, testimony and other assistance in connection
with any action, proceeding, arrangement or dispute of any nature with respect
to matters pertaining to all periods prior to Closing in respect of the items
subject to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As of the date hereof and as of the Closing Date, Seller represents and
warrants to Buyer the following:
SECTION 3.1 EXISTENCE AND CORPORATE CAPACITY. Seller is a corporation
--------------------------------
which is duly organized, validly existing and in good standing under the laws of
the State of Missouri. Seller has the requisite power and authority to enter
into this Agreement, perform its obligations hereunder and to conduct its
business as now being conducted.
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SECTION 3.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS, ETC. The
------------------------------------------------------
execution, delivery and performance of this Agreement by Seller and all other
agreements referenced herein or ancillary hereto to which it is a party and the
consummation of the transactions contemplated herein by Seller: (i) are within
its corporate powers, are not in contravention of law or of the terms of its
articles of incorporation, bylaws or any amendments thereto and have been duly
authorized by all appropriate corporate action; (ii) to Seller's knowledge,
except for notification to the Arkansas Health Department and except as
otherwise expressly provided in this Agreement, do not require any approval or
consent of, or filing with, any governmental agency or authority bearing on the
validity of this Agreement which is required by law or the regulations of any
such agency or authority; (iii) except as set forth in Schedule 1.1E and
Schedule 3.6 will neither conflict with nor result in any material breach or
contravention of, nor permit the acceleration of the maturity of the Assumed
Liabilities, or the creation of any lien, charge or encumbrance affecting any
Assets; (iv) to Seller's knowledge, except for notification to the Arkansas
Health Department, will not violate any statute, law, rule or regulation of any
governmental authority to which Seller or the Assets are subject; and (v) will
not violate any judgment of any court or governmental authority to which Seller
or the Assets is subject.
SECTION 3.3 BINDING AGREEMENT. This Agreement and all agreements to
-----------------
which Seller will execute and deliver at Closing are and will constitute the
valid and legally binding obligations of Seller and are and will be enforceable
against Seller in accordance with the respective terms hereof or thereof, except
as enforceability may be restricted, limited or delayed by applicable bankruptcy
or other laws affecting creditors' rights generally and except as enforceability
may be subject to general principles of equity.
SECTION 3.4 FINANCIAL STATEMENTS. Seller has delivered to Buyer copies
--------------------
of the following financial statements of the Hospital on an accrual-basis
(Schedule 3.4) (the "Financial Statements"): (i) Unaudited Balance Sheet current
through the nine months ended September 30, 1997 (the "Balance Sheet Date");
(ii) Unaudited Income Statement for the nine-month period ended on the Balance
Sheet Date; and (iii) Audited Balance Sheets, Income Statements and Statements
of Cash Flows for the fiscal year of the Hospital ended on December 31, 1994,
1995 and 1996. Such audited Financial Statements have been prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis throughout the periods indicated. Such unaudited Financial
Statements materially conform to generally accepted accounting principles and
practices consistently applied, except as to the absence of footnotes and normal
audit adjustments and as otherwise may be set forth in Schedule 3.4. Such
Audited Balance Sheets present fairly in all material respects in accordance
with the foregoing accounting principles the financial condition of the Hospital
as of the dates indicated thereon, and such Audited Income Statements and
Statements of Cash Flows present fairly in all material respects in accordance
with the foregoing accounting principles the results of operations of the
Hospital for the periods indicated thereon. Except as otherwise disclosed by
Seller to Buyer in writing, since the Balance Sheet Date, there have occurred no
material adverse changes in the financial condition or business of the Hospital
as reflected in such Financial Statements.
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SECTION 3.5 EXTRAORDINARY LIABILITIES. Seller has delivered to Buyer a
-------------------------
list (Schedule 3.5) that, to Seller's knowledge, accurately sets forth all
liabilities of Seller as of the Balance Sheet Date relating to the Hospital not
included within Schedule 3.4, which are of the kind and character required in
financial statements prepared in accordance with generally accepted accounting
principles and which were incurred other than in the Ordinary Course of
Business, whether accrued, absolute, contingent or otherwise, together with, in
the case of those liabilities as to which the liabilities are not fixed, a good
faith estimate of the maximum amount which may be payable in respect thereof.
To the knowledge of Seller, except as disclosed in Schedules 3.4 or 3.5, Seller
has no other material liabilities of any nature, whether accrued, absolute,
contingent or otherwise.
SECTION 3.6 LICENSES. The Hospital is duly licensed by the State of
--------
Arkansas to operate as a 114-bed surgical and general, acute care hospital and
an 11-bed recuperation center. The ancillary departments located at the
Hospital which are required to be specifically licensed are duly licensed by the
appropriate state agencies. Seller has all other material licenses, permits and
approvals which are needed or required by law to operate the business related to
or affecting the Hospital. Seller has delivered to Buyer an accurate list and
summary description (Schedule 3.6) of all such licenses and permits and of all
other material franchises, certificates of need and certificate of need
applications, trademarks, trade names, service marks, patents, patent
applications and copyrights, owned or held by Seller relating to the ownership,
development or operations of the Hospital and the Assets, all of which are now
and as of Closing shall be in good standing and, to Seller's knowledge, are not
subject to meritorious challenge.
SECTION 3.7 MEDICARE PARTICIPATION/ACCREDITATION. The Hospital is
------------------------------------
qualified for participation in the Medicare and Medicaid programs, has a current
and valid provider contract with the Medicare and Medicaid programs, and, except
as set forth in Schedule 3.7 hereto, is in compliance with the conditions of
participation in such programs. The Hospital is duly accredited, with no
contingencies, by the Joint Commission on Accreditation of Healthcare
Organizations (the "JCAHO") for the three (3) year period ending October 31,
1997. Except as set forth on Schedule 3.7, Seller has not received any notice
from either the Medicare or Medicaid programs of any pending or threatened
investigations or surveys, and to Seller's knowledge, no such investigations or
surveys are pending or threatened other than in the Ordinary Course of Business.
Seller has provided to Buyer complete and correct copies of Seller's Medicare
cost reports for Seller's fiscal years ended on December 31, 1993, 1994, 1995
and 1996.
SECTION 3.8 REGULATORY COMPLIANCE. Except as set forth on Schedule 3.8
---------------------
hereto, to Seller's knowledge, Seller is in material compliance with, and Seller
has received no notices of any violations or non-compliance with, all applicable
statutes, rules, regulations and requirements of all federal, state and local
governmental agencies having jurisdiction over the Hospital and the operations
of the Hospital, including, without limitation, the Internal Revenue Service and
the State of Arkansas, and Seller has timely filed all reports, data and other
information required to be filed with such commissions, boards, bureaus and
agencies where a failure to file timely would have a material adverse effect on
the operations of the Hospital or the Assets.
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SECTION 3.9 THE CONTRACTS. Seller has delivered to Buyer an accurate
-------------
list (Schedule 3.9) of all contracts which affect the Hospital, the Assets or
the operation thereof, to which Seller is a party or by which Seller or any of
the Assets of Seller is bound (including, without limitation, provider based
physician agreements, agreements with health maintenance organizations,
preferred provider organizations or other alternative delivery systems, joint
venture or partnership agreements, employment agreements, contracts, tenant
leases, equipment leases, equipment maintenance agreements, agreements with
municipalities and labor organizations, loan agreements, bonds, mortgages, liens
or other security agreements). Seller has delivered true and correct copies of
such contracts to Buyer. Except for such contracts, there are not: (i) any
contracts or commitments involving any obligation which affects the Assets and
which cannot, or in reasonable probability will not, be performed or terminated
before ninety (90) days after the Closing Date without payment of penalty or
equivalent thereof; (ii) any contracts or commitments affecting ownership of,
title to, use of, or any interest in real estate, other than the Seller
Permitted Encumbrances; (iii) any patent licensing agreements or any other
agreements, licenses or commitments with respect to patents, patent
applications, trademarks, trade names, service marks, technical assistance,
copyrights or other like terms affecting the Assets; (iv) any contract, license
or commitment relating to data processing programs, software or source codes
utilized in connection with the Assets; (v) any collective bargaining agreements
or other contracts or commitments to or with any labor unions or other employee
representatives or groups of employees affecting or which could affect the
Assets; (vi) any employment contracts or any other contracts, agreements or
commitments to or with individual employees or agents affecting or which could
affect the Assets; (vii) any contracts or commitments providing for payments
based in any manner on the revenues or profits of the Assets; or (viii) any
contract or commitment, whether in the ordinary course of business or not, which
involves future payments, performance or services or delivery of goods or
materials, to or by Seller of any amount or value in excess of Ten Thousand
Dollars ($10,000) in the aggregate affecting or which could affect the Assets.
Buyer shall assume only those contracts approved by Buyer and set forth on
Schedule 1.1E hereto, which shall be referred to herein as the "Contracts".
Seller further warrants and represents that: (i) the Contracts constitute valid
and legally binding obligations of the parties thereto and are enforceable in
accordance with their terms; (ii) each Contract constitutes the entire agreement
by and between the respective parties thereto; (iii) except as set forth on
Schedule 1.1E hereto, all obligations required to be performed by Seller (and,
to Seller's knowledge, the other parties to such Contracts) under the terms of
the Contracts have been performed, no act or omission has occurred or failed to
occur which, with the giving of notice, the lapse of time or both would
constitute a default by Seller (and, to Seller's knowledge, the other parties to
such Contracts) under the Contracts and each of such Contracts is now and will
be upon and after the Closing Date in full force and effect without default on
the part of Seller or, to Seller's knowledge, the other parties to such
Contracts; (iv) except as expressly set forth on Schedule 1.1E, none of the
Contracts requires consent to the assignment to and assumption by Buyer, and
Seller will use Seller's reasonable efforts to obtain any required consents
prior to Closing; and (v) except as set forth on Schedule 1.1E hereto, the
assignment of the Contracts to and assumption of such Contracts by Buyer will
not result in any penalty, premium or variation of the rights, remedies,
benefits or obligations of any party thereunder.
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SECTION 3.10 SUPPLIES. All the inventory and supplies constituting any
--------
part of the Assets are of a quality and quantity usable and salable in the
Ordinary Course of Business of the Hospital. Inventory and supplies are carried
at the lower of cost or market, on a first-in, first-out basis and are properly
stated in the Financial Statements.
SECTION 3.11 EQUIPMENT. Seller has delivered to Buyer a depreciation
---------
schedule as of January 31, 1997 (Schedule 1.1A), which has been updated to the
Balance Sheet Date and takes into consideration all the equipment associated
with, or constituting any part of, the Seller Assets. Since the Balance Sheet
Date, Seller has not sold or otherwise disposed of any item of equipment having
a value in excess of $500 associated with, or constituting any part of, the
Assets, except in the Ordinary Course of Business with comparable replacement
thereof. As used herein, the term "Ordinary Course of Business" shall mean in
the ordinary course of business of the Hospital comparable to the manner in
which such business was conducted by Seller during the first six (6) calendar
months of 1997.
SECTION 3.12 TITLE. Except as set forth on Schedule 3.12 hereto, as of
-----
Closing, Seller shall own and hold good title to all tangible assets, real,
personal or mixed and valid title to Seller's rights, titles and interests in
and to all intangible assets associated with or employed in the operation of the
Hospital (other than the fee simple interest in that portion of the Real
Property upon which the Hospital is located) or located on the Real Property,
all of which shall be a part of the Assets. At Closing, Seller will convey to
Buyer good title to all properties, tangible assets and leasehold estates, real,
personal and mixed, and Seller's rights, titles and interests in and to all
intangible assets, constituting or associated with the Seller Assets or any part
thereof (other than the fee title interest in that portion of the Real Property
upon which the Hospital is located), subject to no mortgage, lien, pledge,
security interest, conditional sales agreement, right of first refusal, option,
restriction, liability, encumbrance or charge, except the Assumed Liabilities
and the Seller Permitted Encumbrances.
SECTION 3.13 QUALITY AND CONDITION OF ASSETS. Other than with respect to
-------------------------------
representations and warranties as herein provided, Seller shall transfer the
Seller Assets to Buyer and Buyer shall accept the Seller Assets from Seller on
an "as is, where is" basis as set forth in Section 1.10 hereof. Schedule 3.13
describes all Life Safety Code deficiencies known by Seller related to the
Assets.
SECTION 3.14 INSURANCE. Seller has delivered to Buyer an accurate
---------
schedule (Schedule 3.14) disclosing the insurance policies covering the
ownership and operations of the Seller Assets, which Schedule reflects the
policies' numbers, terms, identity of insurers, amounts and coverage. All of
such policies are now and will be until Closing in full force and effect on a
claims made basis with no premium arrearages.
SECTION 3.15 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule
----------------------
3.15 hereto, Seller does not have and has never had any pension, profit sharing,
deferred compensation or other employee pension or health or welfare benefit
plan or arrangement relating to the operations of the Hospital.
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SECTION 3.16 EMPLOYEE RELATIONS. There is no pending or, to the
------------------
knowledge of Seller, threatened employee strike, work stoppage or labor dispute.
To the knowledge of Seller, no union representation question exists respecting
any employees of Seller, no collective bargaining agreement exists or is
currently being negotiated by Seller, no demand has been made for recognition by
a labor organization by or with respect to any employees of Seller, no union
organizing activities by or with respect to any employees of Seller are taking
place, and none of the employees of Seller is represented by any labor union or
organization. There is no unfair practice claim against Seller before the
National Labor Relations Board, or any strike, dispute, slowdown, or stoppage
pending or, to the knowledge of Seller, threatened against or involving the
Hospital and none has occurred. Seller is in material compliance with, and
Seller has received no notices of any violations or non-compliance with, all
federal and state laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours. Seller is not engaged in any
unfair labor practices. Except as set forth on Schedule 3.16, there are no
pending or, to the knowledge of Seller, threatened EEOC claims, wage and hour
claims, unemployment compensation claims, workers' compensation claims, sexual
harrassment claims, or the like.
SECTION 3.17 LITIGATION OR PROCEEDINGS. Seller has delivered to Buyer an
-------------------------
accurate list and summary description (Schedule 3.17) of all litigation or
proceedings with respect to the Hospital and the Assets to which Seller is a
party. Except as set forth on Schedule 3.17, Seller is not in material default
(and Seller has not received any notice of any default) under any law or
regulation material to the operation of the Hospital, or under any order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located. Except to the extent
set forth on Schedule 3.17, there are no claims, actions, suits, proceedings or
investigations pending, or to the knowledge of Seller, threatened against or
affecting Seller with respect to the Hospital or the Assets, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality wherever
located.
SECTION 3.18 SPECIAL FUNDS. None of the Assets are subject to, and
-------------
Seller shall indemnify and hold Buyer harmless from and against, any liability
in respect of amounts received by Seller or others for the purchase or
improvement of the Assets or any part thereof under restricted or conditioned
grants or donations, including, without limitation, monies received under the
Public Health Service Act, 42 U.S.C. Section 291 et seq.
-- ---
SECTION 3.19 MEDICAL STAFF MATTERS. Seller has heretofore provided to
---------------------
Buyer true, correct, and complete copies of the bylaws and rules and regulations
of the medical staff of the Hospital. With regard to the medical staff of the
Hospital and except as set forth on Schedule 3.19 hereto, there are no pending
or, to the knowledge of Seller, threatened disputes with applicants, staff
members or health professional affiliates and all appeal periods in respect of
any medical staff member or applicant against whom an adverse action has been
taken have expired.
22
<PAGE>
SECTION 3.20 TAX LIABILITIES.
---------------
(a) True and correct copies of Seller's income tax returns filed for
the fiscal year ended December 31, 1995, and the two previous fiscal years
of Seller have been delivered to Buyer;
(b) All tax returns, including, without limitation, income tax
returns, employee payroll tax returns, employee unemployment tax returns
and franchise tax returns, for periods prior to and including Closing which
are required to be filed by Seller (collectively "Returns") have been filed
or will be filed within the time and in the manner provided by law
(including any valid extensions thereof),and the tax liabilities of Seller
shown thereon have been paid by Seller;
(c) All taxes, penalties, interest, and any other statutory additions
which have become due by Seller pursuant to Returns, and any assessments
received by Seller (collectively "Payable Tax Items") have been paid or
adequately provided for by the reserves shown in the Balance Sheet of
Seller as of the Balance Sheet Date;
(d) There are no tax liens on any of the Assets, except for inchoate
liens with respect to taxes not yet due and payable; and
(e) To Seller's knowledge, there are no pending questions nor are
there issues known to Seller, relating to, or claims or assessments for,
Payable Tax Items. Proper and accurate amounts have been withheld by
Seller from employees of Seller for all periods in full and complete
compliance with the tax and other withholding provisions of all applicable
laws and all of such amounts have been duly and validly remitted to the
proper taxing authority.
SECTION 3.21 POST-BALANCE SHEET RESULTS. Except as approved in writing
--------------------------
by Buyer, since the Balance Sheet Date there has not been: (i) any material
adverse change in the financial condition, assets, income or business of Seller;
(ii) any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the Assets; (iii) any labor dispute, law or
regulation or any event or condition of any character materially adversely
affecting the business of Seller; (iv) any sale, assignment, transfer or
disposition of any item of plant, property or equipment having a value in excess
of One Thousand Dollars ($1,000) (other than supplies), except in the Ordinary
Course of Business with comparable replacement thereof; or (v) any transaction
by Seller outside the Ordinary Course of Business.
SECTION 3.22 CERTAIN PAYMENTS.
----------------
(a) Except as set forth on Schedule 3.22, subject to the provisions of
Section 3.22(b) hereto, to the knowledge of Seller, neither Seller, nor
anyone acting on behalf of Seller, has made or received any "sensitive"
payments pertaining to the Hospital, and no such person has maintained any
unrecorded cash or noncash assets out of which any "sensitive" payments
might be made. "Sensitive" payments mean any unlawful (i) payment to or
from governmental officials or employees, (ii) commercial bribes or kick-
backs, (iii) amounts paid with an understanding that rebates or refunds
will be made in
23
<PAGE>
contravention of the laws of any applicable jurisdiction, either directly
or through a third party, (iv) political contributions on behalf of Seller,
and (v) payments or commitments (whether made in the form of commissions,
payments of fees for goods or services received, or otherwise) made with
the understanding or under circumstances which would indicate that all or
part thereof is to be paid by the recipient to government officials or
employees or as a commercial bribe, influence payment or kick-back.
(b) Seller, and its officers and directors, have used their reasonable
efforts in good faith to avoid engaging in any activities in violation of
Medicare laws or regulations promulgated pursuant thereto.
SECTION 3.23 PROPERTY. The Assets (excluding the MOB and Excluded
--------
Assets) comprise all of the tangible and intangible personal, real and mixed
properties and rights and privileges that are associated with or employed in the
operation of the Hospital.
SECTION 3.24 CERTAIN REPORTS AND DOCUMENTS. Seller has delivered to
-----------------------------
Buyer true and complete copies of all material reports (including cost reports),
statements, returns or declarations filed or required to be filed with any
governmental entity or agency with respect to any of the Assets which relate to
Seller's Medicare or other cost basis therein (collectively, the "Reports").
Except as set forth on Schedule 3.24 hereto, as of the time or times of filing,
each of the Reports was prepared in substantial compliance with all existing
laws, rules and regulations pertaining thereto. Except as set forth on Schedule
3.24 hereto, (i) Seller has not requested an extension of time in which to file
any Report which as of the date hereof has not been filed; (ii) Seller is not
delinquent in the payment of any amounts due under any of the Reports or under
any other report or filing; (iii) there are no written or threatened proposals
for any amounts due by Seller under the Medicare or Medicaid programs; (iv)
there are no current, pending or threatened claims, assessments, notices,
proposals to assess or audits of Seller with respect to any of the Reports or
any other report or filing; (v) except for Medicare cost reports reopened by
Seller prior to the Closing Date, Seller has not executed any presently
effective waiver or extension of the statute of limitations regarding the
challenge of any statement made in or amount shown on any of the Reports, or for
the assessment or collection of any amount due thereunder; and (vi) all of the
Reports accurately reflect the information to be included thereon and do not
claim, and neither Seller nor the Hospital has received, reimbursement in excess
of the amount provided by law and there are no facts or circumstances which may
reasonably be expected to give rise to any material disallowance under any of
the Reports.
SECTION 3.25 ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE. All notes and
----------------------------------------
accounts receivable constituting a part of the Assets represent and constitute
bona-fide indebtedness owing to Seller for services actually performed or for
goods or supplies actually provided in the amounts indicated on Schedule 1.1B
hereto with no known set-offs, deductions, compromises or reductions (other than
those agreed upon by Seller, SAFECARE and Buyer and included in Adjusted Working
Capital pursuant to Section 1.8(e) hereof). Seller has provided Buyer with a
complete and accurate aging report of all such accounts receivable and with a
schedule of all accounts receivable which have been assigned to collection
agencies or are otherwise held or assigned for collection.
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<PAGE>
SECTION 3.26 GROUND LEASE. Seller has delivered to Buyer a true, correct
------------
and complete copy of the ground lease agreement (the "Lease") between SAFECARE
and Seller, pursuant to which Seller leases that portion of the Real Property on
which the Hospital is situated from SAFECARE. The Lease is currently in full
force and effect and has not been surrendered or terminated (Seller and Buyer
acknowledging that the Lease shall be terminated at the Closing). Seller owns
all tenant's right, title and interest in and to the Lease and leasehold estate
created pursuant to the Lease and, except as set forth on Schedule 3.26, has not
pledged, assigned or encumbered its interest therein and no party has any rights
to sublet any portion of the Hospital pursuant thereto.
SECTION 3.27 NO SUBSIDIARIES. Seller has no subsidiaries. Seller is not
---------------
a party to any joint venture or other arrangements with physicians on the
medical staff of the Hospital, except as set forth on Schedule 3.27 hereto.
SECTION 3.28 ASBESTOS. Except as set forth in Schedule 3.28 or except as
--------
set forth in the Environmental Phase I Assessment Report obtained by Buyer prior
to Closing, the Hospital's physical plant does not contain any asbestos in any
form.
SECTION 3.29 ENVIRONMENTAL LAWS. Except as set forth in Schedule 3.29 or
------------------
the Environmental Phase I Assessment Report obtained by Buyer prior to Closing,
the Real Property is not in violation of any federal, state or local statutes,
regulations, laws or orders pertaining to environmental matters, including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA"), the Environmental Cleanup Responsibility Act ("ECRA")
and the Resource Conservation and Recovery Act ("RCRA"); provided however, for
the period of time prior to September 10, 1986, this representation and warranty
is made by Seller to its knowledge. Except as set forth on Schedule 3.29 or the
Environmental Phase I Assessment Report obtained by Buyer prior to Closing, no
Hazardous Substances (which for purposes of this Section 3.29 shall mean and
include polychlorinated biphenyls, asbestos and any substances, materials,
constituents, wastes or other elements which are included under or regulated by
any federal, state or local law, rule or regulation pertaining to environmental
regulation, contamination, clean-up or disclosure, including, without
limitation, CERCLA, ECRA, RCRA and the Medical Waste Tracking Act of 1988, 42
U.S.C. (S)(S) 6992, et seq.) have been or through the Closing Date will be,
disposed of on or released or discharged from (including groundwater
contamination) or in respect of the Real Property; provided however, for the
period of time prior to September 10, 1986, this representation and warranty is
made by Seller to its knowledge.
SECTION 3.30 SELLER REAL PROPERTY. Seller owns fee simple title to the
--------------------
Seller Real Property described in Schedule 1.2A hereto, and all buildings,
improvements and fixtures thereon and all appurtenances and rights thereto.
Seller represents, warrants and covenants to Buyer as follows with respect to
the Seller Real Property: (i) if any lien or liens, including, without
limitation, deed of trust liens, mechanics and materialmen's liens and judgment
liens, are asserted against the Seller Real Property by, through or under Seller
or any Affiliate of Seller which are not Seller Permitted Encumbrances, Seller
shall obtain the release of such liens prior to Closing; (ii) except as set
forth in Schedule 3.30, Seller has not received notice of a violation of any
applicable ordinance or other law, order, regulation or requirement, and has not
received notice of condemnation, lien, assessment or the like, relating to any
part of the Seller Real Property or the operation thereof; (iii) Seller has not
received notice of a violation of any applicable zoning ordinances, and, to
Seller's knowledge, the consummation of the transactions contemplated herein
25
<PAGE>
will not result in a violation of any applicable zoning ordinance or the
termination of any applicable zoning variance now existing; (iv) no party has
been granted any license, lease or other right relating to the use or occupancy
of the England Clinic or, to Seller's knowledge, the other Seller Real Property,
or any part thereof, except for the Seller Permitted Encumbrances; and (v) at
Closing, Seller shall convey to Buyer by Special Warranty Deed good and
marketable fee title to the Seller Real Property, free and clear of any lease,
mortgage, lien, restriction, agreement, claim or other encumbrance, except for
the Seller Permitted Encumbrances.
SECTION 3.31 FULL DISCLOSURE. The representations and warranties of
---------------
Seller in this Agreement and the Schedules of Seller hereto and all closing
documents furnished to Buyer and Buyer's representatives by Seller pursuant
hereto do not and will not include any untrue statement of a material fact or,
to the knowledge of Seller, omit to state any material fact necessary to make
the statements made not misleading. To the knowledge of Seller, all other
information required to be furnished by Seller to Buyer and Buyer's
representatives pursuant to the terms of this Agreement do not and will not
include any untrue statement or material fact, or omit to state any material
fact necessary to make the statements made and to be made not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAFECARE
------------------------------------------
As of the date hereof and as of the Closing Date, SAFECARE represents and
warrants to Buyer the following:
SECTION 4.1 EXISTENCE AND CORPORATE CAPACITY. SAFECARE is a corporation
--------------------------------
which is duly organized, validly existing and in good standing under the laws of
the State of Washington. SAFECARE has the requisite power and authority to enter
into this Agreement, perform its obligations hereunder and to conduct its
business as now being conducted.
SECTION 4.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS, ETC. The
------------------------------------------------------
execution, delivery and performance of this Agreement by SAFECARE and all other
agreements referenced herein or ancillary hereto to which it is a party and the
consummation of the transactions contemplated herein by SAFECARE: (i) are
within its corporate powers, are not in contravention of law or of the terms of
its articles of incorporation, bylaws or any amendments thereto and have been
duly authorized by all appropriate corporate action; (ii) to SAFECARE's
knowledge, and except as otherwise expressly herein provided, do not require any
approval or consent of, or filing with, any governmental agency or authority
bearing on the validity of this Agreement which is required by law or the
regulations of any such agency or authority; (iii) will not violate any statute,
law, rule or regulation of any governmental authority known to SAFECARE to which
SAFECARE or the SAFECARE Real Property may be subject; and (iv) will not violate
any judgment of any court or governmental authority to which SAFECARE or the
SAFECARE Real Property is subject.
26
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SECTION 4.3 SAFECARE REAL PROPERTY. SAFECARE owns fee simple title to
----------------------
the SAFECARE Real Property described in Schedule 1.3A hereto, and all buildings,
improvements and fixtures thereon and all appurtenances and rights thereto
constituting the MOB (except for MOB Tenants' interests in fixtures or other
assets owned by the MOB Tenants) and after termination of the Lease at Closing
will own fee simple title to all buildings, improvements and fixtures located on
that portion of the SAFECARE Real Property on which the Hospital is located and
all appurtenances and rights thereto constituting the Hospital. SAFECARE
represents, warrants and covenants to Buyer as follows with respect to the
SAFECARE Real Property: (i) if any lien or liens, including, without
limitation, deed of trust liens, mechanics and materialmen's liens and judgment
liens, are asserted against the SAFECARE Real Property by, through or under
SAFECARE or any Affiliate of SAFECARE which are not SAFECARE Permitted
Encumbrances, SAFECARE shall obtain the release of such liens prior to Closing;
(ii) except as set forth in Schedule 4.3, SAFECARE has not received notice of a
violation of any applicable ordinance or other law, order, regulation or
requirement, and has not received notice of condemnation, lien, assessment or
the like, relating to any part of the SAFECARE Real Property or the operation
thereof; (iii) SAFECARE has not received notice of a violation of any zoning
ordinances applicable to the SAFECARE Real Property, and, to SAFECARE's
knowledge, the consummation of the transactions contemplated herein will not
result in a violation of any zoning ordinance applicable to the SAFECARE Real
Property or the termination of any zoning variance applicable to the SAFECARE
Real Property now existing; (iv) no party has been granted by or through
SAFECARE any license, lease or other right relating to the use or occupancy of
the MOB or, to SAFECARE's knowledge, the other SAFECARE Real Property, or any
part thereof, except Seller and except for the SAFECARE Permitted Encumbrances
and as set forth on Schedule 4.3 hereof; and (v) at Closing, SAFECARE shall
convey to Buyer by Special Warranty Deed good and marketable fee title to the
SAFECARE Real Property, free and clear of any lease, mortgage, lien,
restriction, agreement, claim or other encumbrance, except for the SAFECARE
Permitted Encumbrances.
SECTION 4.4 ENVIRONMENTAL LAWS. Except as set forth in Schedule 4.4
------------------
hereof or in the Environmental Phase I Assessment Report obtained by Buyer prior
to Closing, that portion of the Real Property on which the Hospital and the MOB
are located (but specifically excluding the improvements) is not in violation of
any federal, state or local statutes, regulations, laws or orders pertaining to
environmental matters, including, without limitation, CERCLA, ECRA and RCRA;
provided, however, for the period of time prior to September 10, 1986, this
- --------
representation and warranty is made by SAFECARE to its knowledge. Except as set
forth in Schedule 4.4 hereof or in the Environmental Phase I Assessment Report
obtained by Buyer prior to Closing, no Hazardous Substances (which for purposes
of this Section 4.4 shall mean and include polychlorinated biphenyls, asbestos
and any substances, materials, constituents, wastes or other
elements which are included under or regulated by any federal, state or local
law, rule or regulation pertaining to environmental regulation, contamination,
clean-up or disclosure,
27
<PAGE>
including, without limitation, CERCLA, ECRA, RCRA and the Medical Waste Tracking
Act of 1988, 42 U.S.C. (S)(S) 6992, et seq.) have been or through the Closing
Date will be, disposed of on or released or discharged from (including
groundwater contamination) or in respect of that portion of the Real Property on
which the Hospital and the MOB are located (but specifically excluding the
improvements thereon); provided, however, for the period of time prior to
--------
September 10, 1986, this representation and warranty is made by SAFECARE to its
knowledge.
SECTION 4.5 ASBESTOS. Except as set forth in Schedule 4.5 and except as
--------
set forth in the Environmental Phase I Assessment Report obtained by Buyer prior
to Closing, to SAFECARE's knowledge, the MOB does not contain any asbestos in
any form.
SECTION 4.6 FULL DISCLOSURE. The representations and warranties of
---------------
SAFECARE in this Agreement and Schedules of SAFECARE hereto and all closing
documents furnished to Buyer and Buyer's representatives by SAFECARE pursuant
hereto do not and will not include any untrue statement of a material fact or,
to the knowledge of SAFECARE, omit to state any material fact necessary to make
the statements made not misleading. To the knowledge of SAFECARE, all other
information required to be furnished by SAFECARE to Buyer and Buyer's
representatives pursuant to the terms of this Agreement do not and will not
include any untrue statement or material fact, or omit to state any material
fact necessary to make the statements made and to be made not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As of the date hereof and as of the Closing Date, Buyer represents and
warrants to Seller the following:
SECTION 5.1 EXISTENCE AND CORPORATE CAPACITY. Buyer is a corporation,
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Arkansas.
SECTION 5.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS, ETC. The
------------------------------------------------------
execution, delivery and performance of this Agreement by Buyer and all other
agreements referenced in or ancillary hereto to which Buyer is a party and the
consummation of the transactions contemplated herein by Buyer: (i) are within
Buyer's corporate powers and are not in contravention of the terms of Buyer's
articles of incorporation or bylaws or any amendments thereto and have been
approved by all requisite corporate action; (ii) will neither conflict with nor
result in any material breach or contravention of, or the creation of any lien
under, any indenture, agreement, lease, instrument or understanding to which
Buyer is a party or by which Buyer is bound; (iii) to the best of Buyer's
knowledge, after due inquiry and except as otherwise expressly herein provided,
do not require any approval or consent of, or filing with, any governmental
agency or authority bearing on the validity of this Agreement which is required
by law or the regulations of any such agency or authority; (iv) will not violate
any statute, law, rule or regulation of any governmental authority to which
Buyer may be subject; and (v) will not violate any judgment of any court or
governmental authority to which Buyer may be subject.
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SECTION 5.3 BINDING EFFECT. This Agreement and all other agreements to
--------------
which Buyer will become a party hereunder are and will constitute the valid and
legally binding obligations of Buyer and are and will be enforceable against
Buyer in accordance with the respective terms hereof and thereof, except as
enforceability against Buyer may be restricted, limited or delayed by applicable
bankruptcy or other laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
SECTION 5.4 FULL DISCLOSURE. This Agreement and all other documents and
---------------
information furnished to Seller and Seller's representatives and to SAFECARE and
SAFECARE's representatives by Buyer pursuant to this Agreement do not and will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made and to be made not
misleading.
ARTICLE VI
COVENANTS OF SELLER
-------------------
Seller hereby covenants as follows:
SECTION 6.1 INFORMATION. Between the date of this Agreement and the
-----------
Closing Date, Seller shall afford to the officers and authorized representatives
and agents (which shall include accountants, attorneys, bankers and other
consultants of Buyer) of Buyer reasonable access upon reasonable prior written
notice to inspect and conduct surveys of the plants, properties, books and
records of Seller relating to the Assets; shall permit Buyer to conduct audits
and verifications of the books and records of the Hospital; and shall furnish
Buyer with such additional financial and operating data and other information
available from the records maintained by Seller as to the business and
properties of Seller relating to the Assets as Buyer may from time to time
reasonably request without regard to where such information may be located.
Buyer's right of access and inspection shall be made in such a manner as not to
interfere unreasonably with the operation of the Assets. Each of Seller and
SAFECARE shall have the right to designate a representative for purposes of
coordinating and overseeing Buyer's on-site due diligence investigation of any
property it owns. Buyer shall give Seller's or SAFECARE's (as appropriate)
designated representative, if any, advance notice of its investigation of the
Assets, describing the nature of the review work to be undertaken and the
estimated duration of the review. Representatives of each of Seller and
SAFECARE shall have the right to accompany Buyer and its agents, representatives
and contractors that are performing tests on or about the Assets in connection
with such testing and to limit the duration, frequency and means of such testing
to the extent reasonably necessary to avoid disruption of Hospital operations.
Buyer covenants that it will conduct its tests and other due diligence
activities in a professional, sensitive and confidential manner. Buyer shall
indemnify, defend and hold Seller and SAFECARE harmless from and against all
losses, damages, liabilities, claims, fines, penalties, causes of action and
expenses arising from or out of the presence or activities of Buyer or its
agents, employees, representatives, consultants or contractors on the Assets,
both before and after Closing, including, but not limited to, clean-up costs
related to hazardous and toxic materials and substances resulting from Buyer's
presence or activities, and, if Buyer does not purchase the Assets, Buyer shall
repair any damage to the Assets caused by such presence or activities. Buyer's
obligations under this paragraph shall survive termination of this Agreement.
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SECTION 6.2 OPERATIONS. From the date hereof until the Closing Date,
----------
unless Buyer and Seller otherwise consent in writing, Seller will: (i) carry on
Seller's business in the Ordinary Course of Business and not make any material
change in personnel, operations, finance, accounting policies, or real or
personal property; (ii) maintain the Assets and Seller Real Property and all
parts thereof in as good working order and condition as at present, ordinary
wear and tear excepted; (iii) take all actions necessary and appropriate to (a)
permit Seller on the Closing Date to vest good title to all tangible assets and
Seller's interest in all intangible assets constituting Seller Assets and Seller
Real Property in Buyer and (b) render title to the Seller Assets and Seller Real
Property free and clear of all liens, security agreements, claims, charges and
encumbrances and obtain appropriate releases, consents, estoppels and other
instruments as shall be necessary to permit Seller to perform its obligations
hereunder other than Assumed Liabilities and Seller Permitted Encumbrances; (iv)
keep in full force and effect present insurance policies or other comparable
insurance; (v) maintain and preserve Seller's business organization
substantially intact, retain substantially all of Seller's present employees at
the Hospital and maintain in the Ordinary Course of Business Seller's
relationship with physicians and customers and to take such actions as are
necessary to cause the smooth, efficient and successful transition of such
business operations and employee and other relations to Buyer as of Closing;
(vi) permit and allow reasonable access by Buyer to make offers of post-Closing
employment to any of Seller's personnel, which personnel shall be allowed to
accept such offers without penalty, competing offer or interference, and to
establish relationships with physicians and others having business relations
with Seller; and (vii) Seller shall not knowingly allow any Hazardous Substances
to be discharged, possessed, managed, processed or otherwise handled on the Real
Property in a manner which is in violation of applicable law, and Seller shall
take reasonable efforts to comply with all environmental laws affecting the Real
Property. Seller shall promptly notify Buyer should Seller become aware of any
lien, notice, litigation or threat of litigation relating to any alleged
unauthorized release of any Hazardous Substance or the existence of any
Hazardous Substance or other environmental contamination, liability or problem
with respect to or arising out of or in connection with the Real Property.
Seller shall promptly notify Buyer of any sale of any asset of the Hospital with
a replacement cost of over $15,000.
SECTION 6.3 NEGATIVE COVENANTS. From the date hereof to the Closing
------------------
Date, Seller will not, without the prior written consent of Buyer: (i) amend or
terminate any of the Contracts, enter into any contract or commitment (other
than any written settlement agreements executed pursuant to Section 6.11 hereof
and any written settlement agreements with SAFECARE or its Affiliates), or incur
or agree to incur any liability, except in the Ordinary Course of Business and
in no event greater than Ten Thousand Dollars ($10,000) per item or which is not
terminable without cause or penalty within ninety (90) days following Closing
and except for any indebtedness of Seller to SAFECARE or an Affiliate of
SAFECARE (provided that any liens and security interest against any of the
Assets securing such indebtedness shall be released at Closing and Buyer shall
not be obligated to assume any of such indebtedness); (ii) make offers of
employment to any employees of Seller at the Hospital for employment with Seller
or any Affiliate of Seller for periods subsequent to Closing, other than those
employees who do not accept offers of post-Closing employment from Buyer; (iii)
increase compensation payable or to become payable or make a bonus payment to or
otherwise enter into one or more bonus agreements with any employee or agent,
except in the Ordinary Course of Business in accordance with existing personnel
policies; (iv) create, assume or permit to exist any new mortgage, pledge or
other lien or encumbrance upon any of the Seller Assets or Seller Real Property,
whether now owned or hereafter acquired, except to SAFECARE or any of its
Affiliates (provided that such matters shall be released at
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Closing); (v) sell, lease, assign or otherwise transfer or dispose of any
property, plant or equipment (other than supplies), except in the Ordinary
Course of Business with comparable replacement thereof or sell, lease, assign or
otherwise transfer or dispose of any portion of the Seller Real Property; (vi)
take any action outside the Ordinary Course of Business; (vii) amend or modify
the Lease or any Seller Real Property Lease or enter into any new Seller Real
Property Lease or cause a termination or surrender thereof, without the prior
written consent of Buyer, except for an amendment to the Lease to remove the
Retained Land from the Lease; (viii) reduce inventory of the Hospital except in
the Ordinary Course of Business; or (ix) change its procedure or methodology of
accounting practices from those historically applied. Seller agrees that any
sale, lease, assignment, transfer or other disposition of any property, plant or
equipment of the Hospital in violation of Section 6.3(v) shall entitle Buyer to
an equitable adjustment of the Purchase Price at Closing.
SECTION 6.4 GOVERNMENTAL APPROVALS. Between the date of this Agreement
----------------------
and the Closing Date, Seller shall assist and cooperate, at no out-of-pocket
cost to Seller, 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.
SECTION 6.5 FTC NOTIFICATION. Between the date of this Agreement and
----------------
the Closing Date, Seller shall, if and to the extent required by law, file all
reports or other documents required or requested by the Federal Trade Commission
("FTC") or the United States Department of Justice ("Justice Department") under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and
all regulations promulgated thereunder, concerning the transactions contemplated
hereby, and comply promptly with any requests by the FTC or Justice Department
for additional information concerning such transactions, so that the waiting
period specified in the HSR Act will expire as soon as reasonably possible after
the execution and delivery of this Agreement. Seller agrees to furnish to Buyer
such information concerning Seller as Buyer needs to perform its obligations
under Section 8.1 of this Agreement.
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SECTION 6.6 ADDITIONAL FINANCIAL INFORMATION. On or before Closing,
--------------------------------
Seller will deliver to Buyer an Audited Balance Sheet, Income Statement and
Statement of Cash Flows for the fiscal year of the Hospital ended on December
31, 1996, prepared in accordance with generally accepted accounting principles,
applied on a consistent basis throughout the period indicated. Such audited
financial statements for 1996 shall be prepared by Ernst & Young. Within thirty
(30) days following the end of each calendar month prior to the Closing Date,
Seller will deliver to Buyer true and complete copies of the unaudited balance
sheets and the related unaudited statements of income and cash flow of, or
relating to, the Hospital for each month then ended, which presentation shall be
true, correct and complete in all material respects, shall have been prepared
from and in accordance with the books and records of the Hospital and which
shall fairly present the financial position, results of operations and cash flow
of the Hospital as of the date and for the period indicated, all in accordance
with generally accepted accounting principles consistently applied, except as to
the absence of footnotes and normal audit adjustments.
SECTION 6.7 NO-SHOP CLAUSE. From and after the date of the execution
--------------
and delivery of this Agreement by Seller until the earlier of the termination of
this Agreement or the Closing Date, Seller will not, without the prior written
consent of Buyer: (i) offer for sale or lease the Seller Assets or Seller Real
Property (or any material portion thereof) or any ownership interest of any
entity owning any of the Seller Assets or Seller Real Property; (ii) solicit
offers to buy all or any material portion of the Seller Assets or Seller Real
Property or any ownership interest of any entity owning any of the Seller Assets
or Seller Real Property; (iii) conduct discussions or negotiations with any
party (other than Buyer) looking toward such an offer or solicitation or looking
toward a merger or consolidation of any entity owning any of the Seller Assets
or Seller Real Property; or (iv) enter into any agreement with any party (other
than Buyer) with respect to the sale or other disposition of the Seller Assets
or Seller Real Property (or any material portion thereof) or any ownership
interest in any entity owning any of the Assets or with respect to any merger,
consolidation, or similar transaction involving any entity owning any of the
Assets.
SECTION 6.8 CLOSING CONDITIONS. Between the date of this Agreement and
------------------
the Closing Date, Seller will use its reasonable efforts to cause the conditions
specified in Articles IX and X hereof over which Seller has control to be
satisfied as soon as reasonably practicable, but in all events before the
Closing Date.
SECTION 6.9 TAIL INSURANCE. No later than five (5) days prior to the
--------------
Closing Date, Seller shall deliver to Buyer evidence satisfactory to Buyer that
Seller maintains professional negligence liability insurance for all periods
prior to the Closing Date with minimum limits of liability of $1,000,000 for
each occurrence and $10,000,000 in the aggregate.
SECTION 6.10 INSURANCE RATINGS. Seller will take all action reasonably
-----------------
requested (but at no out-of-pocket cost to Seller) by Buyer to enable Buyer to
succeed to the workman's compensation and unemployment insurance ratings,
insurance policies, deposits and other interests of the Hospital and other
ratings for insurance or other purposes established by Seller for the
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Hospital. Buyer shall not be obligated to succeed to any such rating, insurance
policy, deposit or other interest, except as it may elect in its sole
discretion.
SECTION 6.11 PAYMENT OF ACCOUNTS PAYABLE. Seller acknowledges that it is
---------------------------
currently delinquent in the payment of a substantial portion of its trade
accounts payable constituting a portion of its current liabilities. Between the
date of this Agreement and the Closing Date, Seller has disclosed to Buyer that
it intends to attempt to settle with such creditors on a discounted basis.
Seller agrees that all of Seller's trade accounts payable shall either be (i)
settled by Seller pursuant to written settlement agreements on or prior to
Closing (with evidence hereof satisfactory to Buyer delivered to Buyer prior to
Closing) or (ii) assigned by Seller to Buyer and included in the computation of
Adjusted Working Capital at Closing.
SECTION 6.12 TENANT ESTOPPEL CERTIFICATES. Seller shall use reasonable
----------------------------
efforts to obtain a Tenant Estoppel Certificate (herein so called) in
substantially the form of Schedule 7.7 hereto from all of the Seller Real
Property Tenants under the Seller Real Property Leases. Notwithstanding the
foregoing, Buyer's obligation to close the transactions contemplated by this
Agreement is subject to the condition that Seller either (i) obtain and deliver
to Buyer original executed Tenant Estoppel Certificates dated within thirty (30)
days prior to the Closing and executed by all Seller Real Property Tenants under
the Seller Real Property Leases or (ii) execute and deliver to Buyer at Closing
Tenant Estoppel Certificates on behalf of such tenants (the "Seller Estoppel
Certificates"). The certifications made in each of the Seller Estoppel
Certificates shall (iii) be to the best of Seller's knowledge and (iv) survive
the Closing (unless displaced by delivery to Buyer of a Tenant Estoppel
Certificate from the applicable tenant on or before forty-five (45) days after
the date of Closing).
ARTICLE VII
COVENANTS OF SAFECARE
---------------------
SAFECARE hereby covenants as follows:
SECTION 7.1 INFORMATION. Subject to Section 6.1 hereof, between the
-----------
date of this Agreement and the Closing Date, SAFECARE shall afford to the
officers and authorized representatives and agents of Buyer during normal
business hours on reasonable prior written notice full and complete access to
and the right to inspect the Real Property and all records of SAFECARE relating
to the Real Property. Without limiting the generality of the foregoing, no
later than ten (10) days after the date of this Agreement, SAFECARE shall
deliver or cause Seller to deliver to Buyer the following items: (i) true,
correct and complete copies of any and all MOB Leases, including, without
limitation, all amendments, modifications and extensions thereof; (ii) a current
rent roll for the MOB, certified by SAFECARE, as being true and correct in all
material respects as of the date of such rent roll; (iii) a current certified
inventory of all tangible personal property owned by SAFECARE and located on,
related to, or used in connection with the MOB; (iv) true, correct and complete
copies of any and all service, maintenance, management or other contracts
relating to the ownership and operation of the MOB; (v) true, correct and
complete copies of any and all warranties and guaranties relating to the MOB, or
any part thereof, or to the personal property owned by SAFECARE and located on,
attached to, or used in connection with the MOB; (vi) true, correct and complete
copies of all plans and specifications and all licenses and
33
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permits with respect to the construction of the improvements and the ownership
and operation of the MOB, including, without limitation, the certificate of
occupancy, if any, within the possession of SAFECARE; (vii) true, correct and
complete copies of all fire, hazard, extended coverage, liability and other
insurance policies held by SAFECARE on the MOB or certificates of insurance
evidencing such insurance policies; (viii) true, correct and complete copies of
all of the most recent real estate and personal property tax statements or tax
certificates with respect to the MOB; and (ix) all soil, environmental or
engineering studies regarding the MOB which SAFECARE has in its possession, if
any.
SECTION 7.2 SUBDIVISION OF SAFECARE LAND. Buyer and SAFECARE
----------------------------
acknowledge that as of the date of this Agreement, the SAFECARE Real Property
consists of an approximately 13.6-acre tract of land (described in Schedule
1.3A) that is a part of an approximately 36.3-acre tract of land described in
Schedule 7.2 hereof (collectively, the "SAFECARE Land"). Prior to the Closing
Date, SAFECARE, at its sole cost and expense, shall use reasonable efforts to
cause the SAFECARE Land to be subdivided and replatted (if required) into two
(2) or more separate tracts of land in full compliance with the applicable
requirements of the relevant governmental authorities and all applicable
statutes, ordinances and restrictions including, without limitation, platting
statutes and ordinances. After such subdivision and replatting, the SAFECARE
Real Property shall consist of approximately 13.6 acres of land. The other
tracts of land that are created after subdividing the SAFECARE Land and that are
adjacent to and contiguous with the SAFECARE Real Property is hereinafter
referred to as the "Retained Land." Buyer shall have the right to approve the
configuration, boundaries, access to streets and other public rights-of-way, and
area of each of the SAFECARE Real Property and the Retained Land and shall be
provided with such easements and access agreements as are necessary in Buyer's
judgment to operate the Hospital and the MOB as a condition to Buyer's
obligations to consummate the transactions contemplated by this Agreement.
SECTION 7.3 AFFIRMATIVE COVENANTS. From the date hereof until the
---------------------
Closing Date, SAFECARE will use its reasonable good faith efforts to (i) perform
all of SAFECARE's obligations under agreements relating to or affecting the
SAFECARE Real Property; (ii) take such actions as are necessary to permit
SAFECARE (a) to convey good and marketable title to the SAFECARE Real Property
in Buyer on the Closing Date and (b) render title to the SAFECARE Real Property
free and clear of all liens, security agreements, claims, charges and
restrictions and encumbrances of record (except for the SAFECARE Permitted
Encumbrances) and to obtain releases, consents, estoppels and other instruments
as Buyer may reasonably request; (iii) keep, maintain and repair the MOB in a
good and presentable condition and comply with all laws affecting the MOB; and
(iv) advise Buyer promptly of any litigation, arbitration or administrative
hearing before any governmental agency concerning or affecting the SAFECARE Real
Property which is instituted or threatened after the date hereof.
SECTION 7.4 NEGATIVE COVENANTS. From the date hereof until the Closing
------------------
Date, SAFECARE will not, without the prior written consent of Buyer: (i) except
to the extent permitted
34
<PAGE>
in Section 7.6 hereof, amend or terminate any of the agreements with Seller
relating to or affecting the SAFECARE Real Property including, without
limitation, the Lease; (ii) create, assume or permit to exist any new mortgage,
pledge, lien, claim, charge or restriction or encumbrance upon the SAFECARE Real
Property; (iii) sell, assign or otherwise transfer or dispose of any of the
SAFECARE Real Property; (iv) enter into any written or oral contract or other
agreement in respect of the SAFECARE Real Property that will not be fully
performed by SAFECARE on or before the Closing Date; or (v) enter into any new
lease or amend, modify or terminate any existing lease or other agreements
demising space and providing for use or occupancy of the SAFECARE Real Property
except for an amendment to the Lease to remove the Retained Land from the Lease.
SECTION 7.5 NO-SHOP CLAUSE. From and after the date of the execution
--------------
and delivery of this Agreement by SAFECARE until the earlier of the termination
of this Agreement or the Closing Date, SAFECARE will not, without the prior
written consent of Buyer: (i) offer for sale the SAFECARE Real Property (or any
material portion thereof) or any ownership interest of any entity owning any of
the SAFECARE Real Property; (ii) solicit offers to buy all or any material
portion of the SAFECARE Real Property or any ownership interest of any entity
owning any of the SAFECARE Real Property; (iii) hold discussions with any party
(other than Buyer) looking toward such an offer or solicitation or looking
toward a merger or consolidation of any entity owning any of the SAFECARE Real
Property; or (iv) enter into any agreement with any party (other than Buyer)
with respect to the sale or other disposition of the SAFECARE Real Property (or
any material portion thereof) or any ownership interest in any entity owning any
of the Real Property or with respect to any merger, consolidation, or similar
transaction involving any entity owning any of the SAFECARE Real Property.
SECTION 7.6 EXERCISE OF SAFECARE REMEDIES AS LENDER. Buyer hereby
---------------------------------------
expressly consents to SAFECARE or any of its Affiliates (a) taking any actions
that are necessary or desirable in order to accomplish a sale of the Assets to
Buyer on terms consistent with those set forth in this Agreement and (b) filing,
issuing, delivering, publishing or otherwise distributing any notices relating
to the sale or other disposition of the Assets pursuant to an exercise of any
rights or remedies they may have arising out of or relating to a breach of any
security documents and/or any other agreements relating to the Assets which
occurs or is discovered by SAFECARE after the date hereof provided that (1) such
notices are not directed to any particular prospective purchaser(s) (other than
parties with potential liens on the Assets); and (2) SAFECARE does not engage
in any sale negotiations or discussions with or enter into any agreements to
sell all or any material portion of the Assets to, any party other than Buyer
in violation of Section 7.5 hereof.
SECTION 7.7 TENANT ESTOPPEL CERTIFICATES. SAFECARE shall use reasonable
----------------------------
efforts to obtain Tenant Estoppel Certificates (herein so called) in
substantially the form of Schedule 7.7 hereto from all of the MOB Tenants under
the MOB Leases. Notwithstanding the foregoing, Buyer's obligation to close the
transactions contemplated by this Agreement is subject to the following
condition precedent, to be satisfied prior to the date of the Closing. SAFECARE
shall have obtained, and delivered to Buyer, original executed Tenant Estoppel
Certificates dated within thirty (30) days prior to the Closing and executed by
MOB Tenants under the MOB Leases leasing not less than eighty percent (80%) of
the rentable square footage of the MOB, including, without limitation, all MOB
Tenants under MOB Leases in excess of three thousand (3,000) rentable square
feet. SAFECARE shall use reasonable efforts to obtain the Tenant Estoppel
Certificates but shall have no obligation to make any payment or to institute
any action or proceeding pursuant
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to the MOB Leases in order to satisfy this condition. If this condition is not
satisfied by SAFECARE or waived by Buyer on or prior to the date of Closing,
Buyer may terminate this Agreement. If such condition precedent has been
satisfied but less than all of the MOB Tenants have executed and delivered
Tenant Estoppel Certificates to Buyer, Seller, at the Closing, shall execute and
deliver to Buyer Tenant Estoppel Certificates for such tenants (the "Substitute
Estoppel Certificates"). The certifications made in each of the Substitute
Estoppel Certificates shall (i) be to Seller's knowledge and (ii) survive the
Closing (unless displaced by delivery to Buyer of a Tenant Estoppel Certificate
from the applicable tenant on or before forty-five (45) days after the date of
Closing).
ARTICLE VIII
COVENANTS OF BUYER
------------------
Buyer hereby covenants as follows:
SECTION 8.1 FTC NOTIFICATION. Between the date of this Agreement and
----------------
the Closing Date, Buyer shall, at its expense, if and to the extent required by
law, file all reports or other documents required or requested from Buyer by the
FTC or the Justice Department under the HSR Act, and all regulations promulgated
thereunder as promptly as reasonably possible, concerning the transactions
contemplated hereby, and comply promptly with any requests by the FTC or Justice
Department for additional information concerning such transactions, so that the
waiting period specified in the HSR Act will expire as soon as reasonably
possible after the execution and delivery of this Agreement. Buyer agrees to
furnish to Seller such information concerning Buyer as Seller needs to perform
its obligations under Section 6.5 of this Agreement.
SECTION 8.2 CONFIDENTIALITY. Except as otherwise required by law,
---------------
Buyer, SAFECARE and Seller agree to keep this Agreement and its contents
confidential and not disclose the same to any third party (except attorneys,
accountants or other consultants hired by them and except to the applicable
governmental agencies in connection with any required notification or
application for approval or exemption therefrom and except for key physicians on
Hospital's Medical Staff as selected by Buyer without the consent of the other
party). With respect to information provided by Seller in connection with and
relative to this proposed transaction, Buyer agrees to keep all such information
confidential which is not in the pubic domain, exercising the same care in
handling, such information as it would exercise with similar information of its
own and, if requested, to return to Seller (or, in the alternative, destroy) any
such written information in the event negotiations are not pursued.
Except as required by law, any release to the public of information with
respect to the matters set forth herein will be made only in the form and manner
approved by the parties and their respective counsel. For the purposes hereof,
"Confidential Information" shall mean all information of any kind concerning
Seller, obtained directly or indirectly from 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 Seller 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 the Buyer's
possession prior to disclosure thereof to Buyer in connection with
36
<PAGE>
the Letter of Intent (hereinafter defined) or this Agreement.
SECTION 8.3 REGULATORY APPROVALS. Between the date of this Agreement
--------------------
and the Closing Date, Buyer (i) will use its best efforts to obtain, as promptly
as practicable, all approvals, authorizations and clearances of governmental and
regulatory authorities required to consummate the transactions contemplated
hereby; (ii) will provide such other information and communications to
governmental and regulatory authorities as such authorities may reasonably
request; and (iii) will cooperate with Seller in obtaining, as soon as
practicable, all approvals, authorizations and clearances of governmental and
regulatory authorities required of Seller to consummate the transactions
contemplated hereby.
SECTION 8.4 CLOSING CONDITIONS. Between the date of this Agreement and
------------------
the Closing Date, Buyer will use its best efforts to cause the conditions
specified in Articles IX and X hereof over which Buyer has control to be
satisfied as soon as reasonably practicable, but in all events before the
Closing Date.
SECTION 8.5 NON-SOLICITATION. If this Agreement is terminated, from the
----------------
date of this Agreement until the date which is one (1) year after the written
termination of this Agreement hereunder, neither Buyer, nor any subsidiary or
partnership or other entity controlled by Buyer or any of its Affiliates, will
knowingly solicit the employment of or a contractual relationship with any
employee of the Hospital (collectively, "Hospital Employees") for the provision
of services in the Little Rock, Arkansas area at any location other than the
Hospital. Nothing herein shall impose liability on Buyer, however, for any
general advertisements not specifically directed to Hospital Employees nor for
any isolated or inadvertent solicitation made by representatives of Buyer who
are unaware of this requirement. The hiring of any person who shall have
independently contacted Buyer, or any subsidiary or partnership or other entity
controlled by Buyer or any of its Affiliates, shall not be deemed to have been
the result of solicitation by Buyer or any subsidiary or partnership or other
entity controlled by Buyer or any of its Affiliates.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
--------------------------------------------
The obligations of Buyer hereunder are, at the option of Buyer, subject to
the satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Buyer; provided, however, that Buyer shall not waive
the provisions of Section 6.11 hereof without the written consent of Seller and
SAFECARE.
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SECTION 9.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of Seller and SAFECARE contained in this Agreement shall be true 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 each and all of the
terms, covenants and conditions of this Agreement to be complied with or
performed by Seller or SAFECARE on or before the Closing Date pursuant to the
terms hereof shall have been duly complied with and performed.
SECTION 9.2 OPINIONS OF COUNSEL. Buyer shall have received an opinion
-------------------
from counsel to Seller in respect of Seller and the Seller Assets and from
counsel to SAFECARE in respect of SAFECARE and the SAFECARE Real Property dated
as of the Closing Date and addressed to Buyer, each in substantially the form
set forth in Schedules 9.2A and B, respectively.
SECTION 9.3 PRE-CLOSING CONFIRMATIONS. Buyer shall have obtained
-------------------------
documentation or other evidence reasonably satisfactory to Buyer that Buyer has:
(i) received approval from all governmental agencies whose approval is required
to complete the transactions herein contemplated, including, without limitation,
any planning approvals; (ii) received written confirmation from the appropriate
persons of the State of Arkansas as to hospital licensure and certificate of
need matters and written confirmation from all other applicable licensure
agencies that upon Closing all licenses required by law to operate the Hospital
as currently operated will be transferred to, or issued or reissued in the name
of Buyer; (iii) obtained reasonable assurances that Medicare and Medicaid
certification of the Hospital for its operation by Buyer will be effective as of
Closing and that Buyer may participate in and receive reimbursement from such
programs effective as of Closing; and (iv) obtained such other consents and
approvals as may be legally or contractually required for Buyer's consummation
of the transactions described herein.
SECTION 9.4 ACTION/PROCEEDING. No action or proceeding before a court
-----------------
or any other governmental agency or body shall have been instituted or
threatened which is reasonably expected to result in the restraint or
prohibition of the transactions herein contemplated, and no governmental agency
or body shall have taken any other action or made any request of Seller,
SAFECARE or Buyer as a result of which Buyer reasonably and in good faith
concludes that such action or request would materially adversely affect the
value of the Assets in Buyer's hands or the operation of the Hospital by Buyer.
SECTION 9.5 ADVERSE CHANGE. No material adverse change in the results
--------------
of operations, financial condition or businesses of Seller in respect of the
Hospital and SAFECARE in respect of the MOB shall have occurred, and there shall
not have been any material loss or damage to the Assets, whether or not covered
by insurance or any condemnation or taking of any of the Assets.
SECTION 9.6 EXTRAORDINARY LIABILITIES/OBLIGATIONS. Neither Seller nor
-------------------------------------
SAFECARE shall have incurred any liability or obligation outside the Ordinary
Course of Business since the date hereof which affects the Assets. Neither
SAFECARE nor Seller shall (i) be in receivership or dissolution; (ii) have made
any assignment for the benefit of creditors; (iii) have been adjudicated a
bankrupt; or (iv) have filed a petition in voluntary bankruptcy, a petition or
answer seeking reorganization, or an arrangement with creditors under the
federal bankruptcy law or any other similar law or statute of the United States
or any state, nor shall any such petition have been filed against either of them
which shall not be dismissed within ninety (90) days thereafter.
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SECTION 9.7 VESTING/RECORDATION. Seller and SAFECARE shall have
-------------------
furnished to Buyer, in form and substance satisfactory to Buyer and approved by
Buyer's counsel, deeds, bills of sale, assignments or other instruments of
transfer and consents and waivers by others, necessary or appropriate to
transfer to and effectively vest in Buyer all of Seller's and SAFECARE's
respective rights, titles and interests in and to the Assets, in proper
statutory form for recording if such recording is necessary or appropriate.
SECTION 9.8 TITLE AND SURVEY MATTERS.
------------------------
(a) Title Commitment. Prior to the Closing Date, Buyer shall have
----------------
received a current title commitment (the "Title Commitment") issued by a
title insurance company acceptable to Buyer and Seller (the "Title
Company"), together with legible copies of all exceptions to title
referenced therein. The Title Commitment shall set forth the state of
title to the Real Property, together with all exceptions or conditions to
such title, including, without limitation, all easements, restrictions,
rights-of-way, covenants, reservations, and all other encumbrances
affecting the Real Property which would appear in an owner's title policy,
if issued. The Title Commitment shall contain the express commitment of
the Title Company to issue an owner's title policy (the "Title Policy") to
Buyer on ALTA Form 1970B, with 1984 revisions, in an amount equal to the
portion of the Purchase Price allocated to the Real Property, insuring good
and marketable title to the Real Property (subject only to the Permitted
Encumbrances), with the standard printed exceptions endorsed or deleted in
accordance with Section 9.9 hereof.
(b) Survey. Prior to the Closing Date, Buyer shall have received a
------
survey(s) of the SAFECARE Real Property (whether one or more, the
"Survey"). The Survey shall (i) be currently dated (which may include a
current re-certification of a previously prepared survey plat); (ii) show
the location on the SAFECARE Real Property of all buildings, structures and
other improvements, fences, evidences of abandoned fences, lakes, ponds,
creeks, streams, rivers, easements, roads, and rights-of-way; (iii)
identify all easements and rights-of-way by reference to the recording
information applicable to the documents creating such easements or rights-
of-way; (iv) show any encroachments onto the SAFECARE Real Property from
any adjacent property, any encroachments from the SAFECARE Real Property
onto adjacent property, and any encroachments into any easement or
restricted area within the SAFECARE Real Property; (v) locate all
buildings, structures and other improvements (such as buildings, power
lines, fences, and the like); (vi) locate all dedicated public streets or
other roadways providing access to the SAFECARE Real Property, including
all curb cuts and all alleys; (vii) locate all set-back lines and similar
restrictions covering the SAFECARE Real Property or any part thereof and
any violations of such restrictions; and (viii) show thereon a legal
description of the boundaries of the SAFECARE Real Property by metes and
bounds or other appropriate legal description. The Survey shall otherwise
be in accordance with minimum technical standards established by the State
of Arkansas for land surveyors. The Survey shall contain the surveyor's
certification to Buyer, SAFECARE, and the Title Company that (i) the Survey
was made on the ground; (ii) except as shown thereon, there are no visible
or recorded easements, discrepancies, conflicts, encroachments, or
overlapping of improvements except as shown on the Survey; (iii) the Survey
correctly shows all visible or recorded easements or rights of way across
the SAFECARE Real Property or any other easements or rights of way of which
the surveyor has been advised, including, without
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limitation, those matters affecting title reflected in the Title
Commitment; (iv) the Survey correctly shows the location of all buildings,
structures, and other improvements situated on the SAFECARE Real Property;
(v) except as shown thereon, all streets abutting the SAFECARE Real
Property and all means of ingress to and egress from the SAFECARE Real
Property have been completed, dedicated, and accepted for public
maintenance by the City of Little Rock, Arkansas; (vi) except as shown
thereon, the SAFECARE Real Property is not located within the 100 year
flood plain or other flood hazard area; (vii) the Survey is a true,
correct, and accurate representation of the SAFECARE Real Property; and
(viii) such other matters as may be required by the Title Company to allow
it to issue the Title Policy. All costs of preparing, revising and
updating the Survey shall be paid by Seller.
SECTION 9.9 TITLE POLICY. At the Closing, Buyer shall have received,
------------
the Title Policy, together with such endorsements thereto required by Buyer.
The Title Policy shall be issued on ALTA Form 1970-B (with 1984 revisions) in an
amount equal to the portion of the Purchase Price allocated to the Real Property
and shall insure to Buyer good and marketable title in and to the Real Property.
The Title Policy may contain the Seller Permitted Encumbrances and SAFECARE
Permitted Encumbrances on the Seller Real Property and the SAFECARE Real
Property, respectively, but shall contain no additional exceptions to title to
the Real Property other than the standard exceptions contained in an ALTA Form
1970-B (with 1984 revisions) owners' policy, with the standard exception as to
taxes limited to taxes for the current and subsequent years "not yet due and
payable", with the standard exception for parties in possession limited to
"tenants in possession, as tenants only, under recorded or unrecorded leases,"
with the standard exception as to unrecorded easements, visible and apparent
easements, or other matters would be disclosed by an inspection of the Real
Property deleted, with the standard exception as to mechanics', materialmen's,
or similar liens or other matters relating to the completion of construction and
payment of bills with respect thereto deleted, with the standard exception as to
areas, boundaries, discrepancies, encroachments, and other matters which would
be disclosed by a survey of the Real Property deleted, and with such additional
deletions or modifications to the standard policy form or endorsements thereto
as Buyer may require in connection with its review of the Title Commitment and
Survey and as may be permitted by state law and the Title Company.
SECTION 9.10 PERSONAL PROPERTY TAXES. Seller shall have paid or at
-----------------------
Closing will pay all personal property taxes and assessments due and payable on
the Assets for all calendar years prior to Closing. Any such property taxes for
the calendar year in which Closing occurs shall be prorated to the Closing Date.
If the Assets have not been rendered for taxation for 1997, Buyer and Seller
shall prorate such property taxes on the Assets based upon the 1996 tax amounts.
All such prorations of personal property taxes and assessments shall be final
and unadjustable.
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SECTION 9.11 RECENT AGREEMENTS AND COMMITMENTS. Seller shall have
---------------------------------
delivered to Buyer an accurate list and substantially complete description
(Schedule 9.11), as of the Closing Date, showing all contracts and commitments
relating to the Assets entered into by Seller since the date of this Agreement,
which agreements Buyer may assume at its option.
SECTION 9.12 WAGES AND SALARIES. Seller shall have paid or made
------------------
arrangements satisfactory to Buyer for the payment [which may be satisfied to
the extent of their assumption by Buyer pursuant to Section 1.5(iv)] of all
wages, salaries, vacation pay, sick leave and holiday pay and associated taxes,
accrued with respect to all of Seller's employees in respect of the Hospital as
of Closing.
SECTION 9.13 ENVIRONMENTAL REPORT. An environmental engineering firm
--------------------
selected by Buyer shall have delivered a Phase I Environmental Site Assessment
to Buyer with respect to the Assets, including the Hospital and the Real
Property which in part comprise the Assets, and the scope, findings and
conclusions of such report shall have been reasonably satisfactory to Buyer. All
costs and expenses of obtaining this report shall be borne by Buyer.
SECTION 9.14 ASBESTOS REPORT. An environmental engineering firm selected
---------------
by Buyer shall have delivered a report to Buyer with respect to any existence of
asbestos in any part or portion of the Assets, and the scope, findings and
conclusions of such report shall have been reasonably satisfactory to Buyer.
All costs and expenses of obtaining this report shall be borne by Buyer.
SECTION 9.15 SELLER COVENANT NOT TO COMPETE. Seller shall have executed
------------------------------
and delivered to Buyer a Covenant Not to Compete Agreement in form, substance
and on terms and conditions satisfactory to Buyer and Seller generally providing
that for a period of time commencing on the Closing Date and expiring on the
third (3/rd/) anniversary of the Closing Date, Seller will not, directly or
indirectly, through any Affiliates or otherwise in any capacity, own, manage,
operate, control, participate in the management or control of, be employed by,
consult with, maintain or continue any interest whatsoever in any healthcare
facility (which shall include, without limitation, general acute care hospitals,
specialty hospitals, comprehensive rehabilitation facilities, rehabilitation
agencies, diagnostic imaging centers, inpatient or outpatient psychiatric or
substance abuse facilities, ambulatory or other types of surgery centers and
home health agencies) that is located within thirty (30) miles of the Hospital.
SECTION 9.16 RETAINED LAND. Buyer and SAFECARE shall have entered into
-------------
an agreement mutually agreeable to Buyer and SAFECARE setting forth covenants
and restrictions and a right of first refusal in favor of Buyer with respect to
the Retained Land.
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SECTION 9.17 GUARANTY; LETTER OF CREDIT. SAFECARE shall have delivered
--------------------------
to Buyer a non-recourse limited guaranty (the "Guaranty") in form and substance
satisfactory to SAFECARE and Buyer, guaranteeing Seller's continuing
obligations, covenants, agreements and liabilities (including, without
limitation, indemnification obligations under Article XIII hereof but excluding
any indemnification obligations relating to representations and warranties and
covenants made by Seller with respect to the Seller Real Property known as the
"Port Land") under this Agreement; provided, however, the Guaranty shall provide
--------
that such foregoing obligations shall be guaranteed only to the extent they
remain unpaid by SAFECARE or Seller after demand has been made by Buyer for
payment thereof within the two (2) year period commencing on the Closing Date
and expiring on the second (2/nd/) anniversary of the Closing Date. To secure
payment and performance of the guaranteed obligations under the Guaranty,
SAFECARE shall cause an irrevocable, unconditional letter of credit (the "Letter
of Credit") in an amount equal to One Million Seven Hundred Thousand Dollars
($1,700,000) and in form and substance satisfactory to Buyer from a financial
institution reasonably acceptable to Buyer to be issued to and naming Buyer as
the beneficiary. As provided in the Guarantee, SAFECARE shall be obligated to
renew the Letter of Credit from time to time until all of the obligations
guaranteed under the Guaranty shall have been paid and performed in full and
until such time as there are no further guaranteed obligations under the
Guaranty.
SECTION 9.18 CONDITION OF INVENTORY. Buyer shall be reasonably satisfied
----------------------
that all the inventory and supplies constituting any part of the Assets are as
of the Closing Date substantially of a quality and quantity usable and salable
in the Ordinary Course of Business of the Hospital.
SECTION 9.19 CONDITION OF REAL PROPERTY AND ASSETS. Buyer shall be
-------------------------------------
reasonably satisfied with its inspection, survey, audit and review of the Assets
and the Real Property pursuant to its rights under Sections 6.1 and 7.1 hereof
and the condition of the Real Property, the Assets and of the books and records
of the Hospital shall be acceptable in all respects to Buyer in its sole
discretion.
SECTION 9.20 ZONING.
------
(a) The Hospital, the Real Property and the current operation thereof
shall be in compliance with all applicable zoning ordinances. Buyer shall
have received ALTA Form 3.1 zoning endorsements to the Title Policy at
Closing with regard to the Hospital and the Real Property.
(b) The consummation of the transactions contemplated under this
Agreement will not result in a violation of any applicable zoning ordinance
or the termination of any applicable zoning variance now existing.
(c) If any zoning variances exist with respect to the Hospital and the
Real Property, Buyer shall have received reasonable assurances from the
City of Little Rock, Arkansas that if the improvements on such property are
damaged or destroyed subsequent to Closing, Buyer may repair or replace the
same to the condition existing immediately prior to Closing.
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ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SAFECARE
----------------------------------------------------------
The obligations of Seller and SAFECARE hereunder are, at the option of
Seller and SAFECARE, subject to the satisfaction, on or prior to the Closing
Date, of the following conditions unless waived in writing by Seller and
SAFECARE:
SECTION 10.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true when made and as
of the Closing Date as though such representations and warranties had been made
on and as of such Closing Date; and each and all of the terms, 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.
SECTION 10.2 OPINION OF BUYER'S COUNSEL. Seller and SAFECARE shall have
--------------------------
received an opinion of counsel to Buyer dated as of the Closing Date and
addressed to Seller and SAFECARE, in form and substance satisfactory to Seller
and SAFECARE, to the effect that: (i) Buyer is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Arkansas;
(ii) Buyer has full corporate power and authority to make, execute, deliver and
perform this Agreement, and all corporate proceedings required to be taken by
Buyer to authorize the execution and performance of this Agreement and the
closing documents of Buyer pursuant hereto, and to purchase and receive the
Assets as herein contemplated, have all been duly and properly taken; (iii) this
Agreement and the other instruments delivered hereunder by Buyer constitute the
valid and binding obligations of Buyer enforceable against Buyer in accordance
with their terms, except as enforceability against Buyer may be limited,
restricted or delayed by applicable bankruptcy or other laws affecting
creditor's rights and debtor's relief generally and except as enforceability may
be subject to general principles of equity; and (iv) to the best of such
counsel's knowledge, Buyer is not in default under, and the consummation of the
transactions described herein will not violate or result in a breach or default
under, any law or regulation, or under any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality wherever located. Such opinion shall include any other matters
incident to the matters herein contemplated as Seller or SAFECARE or Seller's
counsel or SAFECARE's counsel may reasonably request. In rendering such
opinion, such counsel may rely upon certificates of governmental officials and
may place reasonable reliance upon certificates of officers of Buyer.
SECTION 10.3 ACTION/PROCEEDING. No action or proceeding before a court
-----------------
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transactions herein contemplated, and no
governmental agency or body shall have taken any other action or made any
request of Seller, SAFECARE or Buyer as a result of which either Seller or
SAFECARE reasonably and in good faith deems it inadvisable to proceed with the
transactions hereunder.
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SECTION 10.4 APPROVALS. The parties shall have obtained all governmental
---------
and other third party approvals necessary for the transactions contemplated by
this Agreement, including, without limitation, all governmental approvals
necessary for the subdivision of the Real Property from the Retained Land.
ARTICLE XI
TRANSITIONAL ARRANGEMENTS
-------------------------
SECTION 11.1 EMPLOYEE MATTERS. Buyer shall, as of the Closing Date,
----------------
undertake the following commitment in connection with the operation of the
Hospital. Schedule 11.1 sets forth a list of all employees of the Hospital and
their job descriptions. Subject to the terms of this Section, Buyer agrees to
employ immediately after Closing substantially all the employees of the Hospital
as of the Closing Date and to submit to Seller at least three (3) business days
prior to Closing a list of the Hospital's employees that Buyer shall not employ
following Closing; provided, however, as of the Closing Date, Buyer shall employ
such number of the employees of the Hospital and shall retain for a period of
ninety (90) days following the Closing Date such number of Seller's employees at
the Hospital as shall be necessary to avoid any potential liability by Seller
for a violation of the Workers Adjustment Retraining and Notification Act (the
"Warn Act") (or any similar law of the State of Arkansas) attendant to Seller's
failure to notify such employees of a "mass layoff" or "plant closing" as
defined in the Warn Act (or any similar law of the State of Arkansas). For
purposes of determining Buyer's compliance with the foregoing provision,
employees terminated by Seller during the period of ninety (90) days immediately
prior to the Closing Date, all of whom are listed in Schedule 11.1, shall not be
taken into consideration and Buyer's indemnification shall not extend to any
Warn Act violations resulting from the aggregation of pre-Closing and Closing
Date terminations of employment by Seller. Buyer agrees to indemnify and hold
Seller harmless from and against any liability asserted against Seller under the
Warn Act as a result of Buyer's failure to comply with the provisions of the
Warn Act as of or after the Closing Date or Buyer's failure to comply with the
provisions of this Section 11.1. Nothing herein contained shall be deemed either
to affect or to limit in any way the management prerogatives of Buyer with
respect to employees, or to create or to grant to such employees any third party
beneficiary rights or claims or causes of action of any kind or nature.
SECTION 11.2 SELLER'S SPECIAL COVENANTS.
--------------------------
(a) Special Covenants. Seller shall not during the period commencing
-----------------
on the Closing Date and terminating one (1) year thereafter: (i) except as
otherwise required by law, disclose any non-public proprietary information
relating to the Hospital, Buyer, or any principal or related entity of
Buyer to any health care provider which is in competition with or may
reasonably be expected to be in competition with the Hospital; provided,
however, that historical financial information of Seller and the Hospital
will not be deemed to constitute "proprietary information" hereunder; (ii)
directly or indirectly (either as principal, agent or consultant, or
through any corporation, firm or organization in which any controlling
person of Seller is an officer, director, employee, substantial
shareholder, partner, member or with which such person is otherwise
affiliated) ("Directly or Indirectly") induce or attempt to influence any
employee of the Hospital to terminate his employment with Buyer or any of
its Affiliates, provided that Seller's carrying over of employee benefits
to another hospital or advertising of available positions will not be
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deemed to constitute an "inducement" hereunder, or hire any employee who
now or at such later date shall be an employee of the Buyer or the
Hospital, unless Buyer receives upon request a certificate from the
President of Seller stating that after investigation it was determined that
the hired employee was not induced to leave such employment; or (iii)
directly or indirectly induce or attempt to influence any physician having
staff privileges at the Hospital (except for hospital-based physicians) to
terminate such privileges or hire to serve as a physician with another
hospital facility any physician who now has or at such later date shall
have staff privileges at the Hospital.
(b) Injunction; Duration and Scope Limitation. In the event of an
-----------------------------------------
actual or threatened breach by Seller of any provision of Section 11.2(a),
Buyer shall be entitled to an injunction restraining Seller from the
prohibited conduct, without the necessity of posting a bond, cash or
otherwise. Notwithstanding any other provision of this Agreement, if a
court of competent jurisdiction should hold that the duration or scope
(geographic or otherwise) of the covenants contained in Section 11.2(a) are
unreasonable, then, to the extent permitted by law, the court may prescribe
a duration and/or scope (geographic or otherwise) that is reasonable and
judicially enforceable. The parties agree to accept such determination,
subject to their rights of appeal, which the parties hereto agree shall be
substituted in place of any and every offensive part of Section 11.2(a),
and as so modified Section 11.2(a) shall be as fully enforceable as if set
forth herein by the parties in the modified form. Nothing herein stated
shall be construed as prohibiting Buyer or any third party from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of damages from any breaching party.
(c) Separate Claims. The existence of any claim or cause of action by
---------------
Seller against Buyer, whether predicated upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by Buyer of the
restrictive covenants contained in Section 11.2(a), but shall be litigated
separately.
ARTICLE XII
ADDITIONAL AGREEMENTS
---------------------
SECTION 12.1 ALLOCATION OF PURCHASE PRICE. The allocation of the
----------------------------
Purchase Price among the various classes of Assets shall be as agreed by the
parties hereto, in accordance with and as provided by Section 1060 of the
Internal Revenue Code of 1986, as amended. On or before ten (10) days prior to
Closing, Seller shall provide SAFECARE and Buyer with a preliminary allocation
of the Purchase Price prepared by Valuation Counselors, Inc. for SAFECARE's and
Buyer's review and approval. The parties agree that any tax returns or other
tax information they may file or cause to be filed with any governmental agency
shall be prepared and filed consistently with such agreed upon allocation. In
this regard, the parties agree that, to the extent required, they will each
properly prepare and timely file Form 8594 in accordance with Section 1060 of
the Code.
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SECTION 12.2 TERMINATION PRIOR TO CLOSING. Notwithstanding anything
----------------------------
herein to the contrary, this Agreement may be terminated at any time: (i) on or
prior to the Closing Date by mutual consent of Buyer, SAFECARE and Seller; (ii)
on or prior to the Closing Date by Buyer, if there has been a material and
adverse change in the financial condition or prospects for future results of
operations of the Hospital since the date hereof; (iii) by Buyer if on the
Closing Date any of the conditions specified in Article IX of this Agreement
have not been satisfied and shall not have been waived by Buyer; (iv) by Seller
or SAFECARE if on the Closing Date any of the conditions specified in Article X
of this Agreement have not been satisfied and shall not have been waived by
Seller or SAFECARE; and (v) by Buyer, SAFECARE or Seller if the Closing shall
not have taken place on or before 11:59 p.m. (Little Rock, Arkansas time) on
November 30, 1997 (which date may be extended by mutual agreement of Buyer and
Seller), unless the party desiring to terminate as above provided is in default
hereunder.
SECTION 12.3 POST-CLOSING ACCESS TO INFORMATION. Seller and Buyer
----------------------------------
acknowledge that subsequent to Closing each party may need access to information
or documents in the control or possession of the other party for the purposes of
concluding the transactions herein contemplated, audits, compliance with
governmental requirements and regulations, and the prosecution or defense of
third party claims. Accordingly, Seller and Buyer agree that for a period of
five (5) years after Closing each will make reasonably available to the other's
agents, independent auditors and/or governmental agencies upon written request
and at the expense of the requesting party such documents and information as may
be available relating to the Assets for periods prior and subsequent to Closing
to the extent necessary to facilitate concluding the transactions herein
contemplated, audits, compliance with governmental requirements and regulations
and the prosecution or defense of claims.
SECTION 12.4 PRESERVATION AND ACCESS TO RECORDS AFTER THE CLOSING. After
----------------------------------------------------
the Closing, Buyer shall, in the ordinary course of business and as required by
law, keep and preserve all medical records and other records of the Hospital
existing as of the Closing and which constitute a part of the Assets delivered
to Buyer at Closing. Buyer acknowledges that as a result of entering into this
Agreement and operating the Hospital 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 to maintain
the patient records delivered to Buyer at Closing at the Hospital after Closing
in accordance with applicable law (including, if applicable, Section
1861(v)(i)(l) of the Social Security Act (42 U.S.C. (S)1395(v)(1)(l)), and
requirements of relevant insurance carriers, all in a manner consistent with the
maintenance of patient records generated at the Hospital after Closing. Upon
reasonable notice, during normal business hours, at the sole cost and expense of
Seller and upon Buyer's receipt of appropriate consents and authorizations,
Buyer will afford to the representatives of Seller, including its counsel and
accountants, full and complete access to, and copies of, the records transferred
to Buyer at the Closing (including, without limitation, access to patient
records in respect of patients treated by Seller at the Hospital). Upon
reasonable notice, during normal business hours and at the sole cost and expense
of Seller or SAFECARE, Buyer shall also make its officers and employees
available to Seller or SAFECARE at reasonable times and places after the
Closing. In addition, Seller shall be entitled, at Seller's sole risk, 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 and only upon Buyer's receipt of appropriate consents and
authorizations. Any patient record so removed from the Hospital shall be
promptly
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returned to Buyer following its use by Seller. Any access to the Hospital, its
records or Buyer's personnel granted to Seller in this Agreement shall be upon
the condition that any such access not materially interfere with the business
operations of Buyer.
SECTION 12.5 REPRODUCTION OF DOCUMENTS. This Agreement and all documents
-------------------------
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed; (ii) the documents delivered at
the Closing; and (iii) financial statements, certificates and other information
previously or hereafter furnished to Seller, SAFECARE or Buyer, may, subject to
the provisions of Section 12.9 hereof, be reproduced by Seller, SAFECARE and
Buyer by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and Seller, SAFECARE and Buyer may destroy
any original documents so reproduced. Seller, SAFECARE and Buyer agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial, arbitral or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was
made by Seller, SAFECARE or Buyer in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 12.6 COOPERATION ON TAX MATTERS. Following the Closing, the
--------------------------
parties shall cooperate reasonably with each other and shall make available to
the other, as reasonably requested and at the expense of the requesting party,
and to any taxing authority, all information, records or documents relating to
tax liabilities or potential tax liabilities of Seller for all periods on or
prior to the Closing and any information which may be relevant to determining
the amount payable under this Agreement, and shall preserve all such
information, records and documents (to the extent a part of the Assets delivered
to Buyer at Closing) at least until the expiration of any applicable statute of
limitations or extensions thereof.
SECTION 12.7 TIME OF ESSENCE. Time is of the essence in the performance
---------------
of this Agreement.
SECTION 12.8 TERMINATING COST REPORTS. Seller, at its expense, shall
------------------------
prepare and timely file all terminating and other cost reports required or
permitted by law to be filed under the Medicare and Medicaid and other third
party payor programs with respect to the operations of the Hospital for any and
all periods ending on or prior to the Closing Date and/or as a result of the
consummation of the transactions contemplated herein. Seller shall retain all
rights to any amounts receivable from Medicare, Medicaid or such other third
party payor programs to the extent any of such constitute Excluded Assets and
shall remain obligated for all amounts due Medicare, Medicaid and such other
third party payors with respect to such reports, and Buyer and Seller hereby
acknowledge and agree that except as provided in this Section 12.8 Buyer is not
being assigned or otherwise receiving and is not hereby assuming any of such
amounts receivable or due. In the event Buyer shall receive written notice of
any pending or threatened claim, assessment, notice or proposal to assess or
audit Seller with respect to any cost report for any period ending on or prior
to the Closing Date or as a result of the consummation of the transactions
contemplated herein, Buyer shall give Seller and SAFECARE prompt written notice
thereof. Buyer agrees that Seller and SAFECARE shall thereafter have the right
to contest, appeal and/or settle any such claim, assessment or related
proceeding (and Buyer shall, at SAFECARE's or Seller's request, reasonably
cooperate to permit SAFECARE and/or Seller to do so); provided that in the event
any such claim, assessment or related proceeding is not a claim subject to
indemnification pursuant to Article XIII (an "Indemnified Claim"), such claim,
assessment or
47
<PAGE>
related proceeding relates solely to Seller and creates no obligation or
liability on Buyer and has no financial impact whatsoever on Buyer. In the
event any such claim, assessment or related proceeding that is not an
Indemnified Claim creates any obligations or liabilities on Buyer or has any
financial impact whatsoever on Buyer, Buyer shall have the exclusive right to
contest, appeal and/or settle any such claim, assessment or related proceeding
without the consent of SAFECARE or Seller. Buyer shall promptly remit to Seller
any recoveries or other amounts received by Buyer in respect to the Excluded
Assets described in Section 1.4(vi). Seller shall use the allocated Purchase
Price determined in accordance with Section 12.1 hereof as being the fair value
of the Assets for purposes of Medicare and Medicaid cost reporting hereunder.
SECTION 12.9 RE-OPENING OF SELLER'S PRIOR COST REPORTS. Seller hereby
-----------------------------------------
grants to Buyer the right to reopen or amend cost reports for periods commencing
on January 1, 1990 and ending on or prior to Closing that previously have been
prepared and filed by the Seller. The right to reopen a cost report commences
after the NPR has been issued and the one hundred eighty (180) day time period
for the timely filing of an appeal has expired. The right being assigned
includes all reimbursement issues (other than those set forth on Schedule 1.4
hereof) that have not been appealed by Seller within the one hundred eighty
(180) day time frame. In addition, for cost reports that have been filed or
will be filled and an NPR has not been issued, Seller is assigning the right to
amend such cost reports for all issues not included or properly claimed in such
filed cost reports. Buyer will be entitled to receive seventy percent (70%) and
Seller shall be entitled to receive thirty percent (30%) of any benefits derived
from the specific reimbursement issues resulting from such reopenings or
amendments related to cost reporting periods ending on or prior to Closing and
Buyer shall indemnify, defend and hold Seller harmless from and against any
liability for such specific issues resulting directly from such actions. Buyer
shall have the right to prosecute appeals related to such specific reimbursement
issues resulting from such reopenings and amendments and shall bear the expenses
of such appeal activities. Seller shall cooperate with Buyer in any such
actions to the extent required for the prosecution of any such claim for
reimbursement including appeals.
SECTION 12.10 HOSPITAL BOARD OF TRUSTEES. Within thirty (30) days after
--------------------------
the Closing Date, Buyer shall appoint an advisory board of trustees for the
Hospital to be comprised of the Hospital's Chief Executive Officer, physicians
on the Hospital's medical staff and community representatives in accordance with
standard Health Management Associates ("HMA") policies and procedures. The
advisory board of trustees shall be responsible for the maintenance of practices
and procedures to meet or satisfy requirements of the JCAHO and similar
accreditation requirements relating to medical staff credentialing and quality
assurance of the Hospital in accordance with HMA's model board of trustee
bylaws.
48
<PAGE>
ARTICLE XIII
INDEMNIFICATION
---------------
SECTION 13.1 INDEMNIFICATION BY SELLER. Seller shall defend and
-------------------------
indemnify Buyer and hold Buyer wholly harmless from and against any and all
losses, liabilities, damages, costs (including, without limitation, court costs
and costs of appeal) and expenses (including, without limitation, reasonable
attorney's fees) that Buyer incurs as a result of (i) any claims made against
Buyer by third parties based upon the operation of the Hospital prior to the
Closing Date (including, without limitation, the generality of the foregoing,
any claims, penalties and sanctions for overpayments under any Medicaid,
Medicare or third party provider contracts for periods prior to Closing), (ii)
any and all debts, obligations or liabilities of Seller that are retained under
Section 1.5 and those that are not specifically assumed by Buyer pursuant to the
terms of this Agreement as Assumed Liabilities under Section 1.4 hereof, (iii)
any misrepresentation or breach of warranty by Seller under this Agreement
including, without limitation, in any Seller Estoppel Certificates or Substitute
Estoppel Certificates; and (iv) any claims or other actions of any kind or
nature arising out of or in connection with any employee pension benefit plans
and employee health or welfare benefit plans including, without limitation, any
ERISA plans of the Hospital.
SECTION 13.2 INDEMNIFICATION BY BUYER. Buyer shall defend and indemnify
------------------------
Seller and SAFECARE and hold Seller and SAFECARE wholly harmless from and
against any and all losses, liabilities, damages, costs (including, without
limitation, court costs and costs of appeal) and expenses (including, without
limitation, reasonable attorney's fees) that Seller or SAFECARE, as applicable,
incurs as a result of (i) any claims made against Seller or SAFECARE, as
applicable, by third parties based upon the operation of the Hospital after the
Closing Date, (ii) any and all debts, obligations or liabilities of Seller or
SAFECARE, as applicable, that are assumed by Buyer pursuant to the terms of this
Agreement as Assumed Liabilities under Section 1.4 hereof, and (iii) any
misrepresentation or breach of warranty by Buyer under this Agreement.
SECTION 13.3 INDEMNIFICATION BY SAFECARE. SAFECARE shall defend and
---------------------------
indemnify Buyer and hold Buyer wholly harmless from and against any and all
losses, liabilities, damages, costs (including, without limitation, court costs
and costs of appeal) and expenses (including, without limitation, reasonable
attorneys' fees) that Buyer incurs as a result of any misrepresentation or
breach of warranty by SAFECARE under this Agreement.
49
<PAGE>
SECTION 13.4 NOTICE AND CONTROL OF LITIGATION. If any claim or liability
--------------------------------
is asserted orally or in writing against a party entitled to indemnification
under this Article XIII (the "Indemnified Party") or if the Indemnified Party
has knowledge of any claim or liability, which in any case would give rise to a
claim under this Article XIII, the Indemnified Party shall notify the person
giving the indemnity ("Indemnifying Party") in writing of the same within ten
(10) business days of receipt of such assertion of a claim or liability or
acquisition of such knowledge; provided, however, that the Indemnifying Party
-------- -------
shall not have any liability under Section 13.1, 13.2 or 13.3 for any claims
until such claims, in the aggregate, total at least Fifty Thousand Dollars
($50,000) and then only for the amount in excess thereof. Thereafter, the
Indemnifying Party shall be responsible for all such claims, excluding the
initial Fifty Thousand Dollars ($50,000) in claims. The obligations of the
Indemnifying Party to the Indemnified Party shall be reduced by any insurance
proceeds available to the Indemnified Party. The Indemnifying Party shall have
the right to defend a claim and control the defense, settlement and prosecution
of any litigation. If the Indemnifying Party, within fifteen (15) business days
after notice of such claim, fails to undertake the defense of any such claim,
the Indemnified Party will (upon further notice to the Indemnifying Party) have
the right, subject to the provisions hereof, to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the Indemnifying Party. Anything in this Section 13.4 notwithstanding, (i)
if there is a reasonable likelihood that such claim will materially and
adversely affect the Indemnified Party other than as a result of money damages
or other money payments, the Indemnified Party shall have the right, at its own
cost and expense, to defend, compromise and settle such claim, and (ii) the
Indemnifying Party shall not, without the written consent of the Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant to the Indemnified Party a release from all liability in respect to
such claim. All parties agree to cooperate fully as necessary in the defense of
such matters to keep the amount of such claim or liability and the costs of the
defense thereof at the lowest practicable amount. Should the Indemnified Party
fail to notify the Indemnifying Party in the time required above, this indemnity
shall terminate and be of no further force and effect with respect to the
subject matter of the required notice in the event that the Indemnified Party's
failure to notify in the time required above materially adversely affects the
Indemnifying Party's ability to defend such matter. In all cases referred to in
this Article XIII, there shall be excluded any claim or liability to the extent
that such claim or liability (i) is the subject matter of another indemnity
provision of this Agreement or (ii) arises as a result of the willful misconduct
or gross negligence of any Indemnified Party.
The following shall apply to all claims for indemnity under this Article
XIII:
(a) To the extent the Indemnified Party is entitled to defend any
claim or liability hereunder, the Indemnified Party shall pursue diligently
and in good faith the defense of such claim or liability.
(b) Each Indemnified Party shall supply the Indemnifying Party with
such information as the Indemnifying Party shall reasonably request to
defend or participate in any proceeding permitted by this Article XIII.
(c) No Indemnified Party shall enter into a settlement or other
compromise or consent to a judgment with respect to any claim or liability
without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or
50
<PAGE>
delayed, unless such Indemnified Party waives its rights with respect to
such claims or liability under this Article XIII; provided that the payment
of an amount to which a claim or liability relates when legally compelled
to do so by a government entity of competent jurisdiction after which a
request for a refund of such amount is diligently pursued by appropriate
procedures in accordance with the terms of this Article XIII will not be
considered a settlement, compromise or consent to judgment requiring the
Indemnifying Party's prior consent or resulting in a waiver of such
Indemnified Party's rights of indemnification with respect to such amount.
Except as otherwise provided in the immediately preceding sentence, the
entering into any such settlement or compromise or consent without the
Indemnifying Party's prior written consent shall constitute a waiver by
such Indemnified Party of all of its rights of indemnification hereunder in
respect of such matter.
(d) In the event the Indemnifying Party shall be obligated to
indemnify any Indemnified Party pursuant to this Article XIII, the
Indemnifying Party shall be subrogated (without warranty by the Indemnified
Party) to the rights of such Indemnified Party in respect of the matter as
to which the indemnity was paid and may pursue the same at the Indemnifying
Party's expense. If any Indemnified Party shall obtain a recovery of all
or any part of any amount which the Indemnifying Party shall have paid to
such Indemnified Party or for which the Indemnifying Party shall have
reimbursed such Indemnified Party pursuant to this Article XIII, such
Indemnified Party shall promptly pay or cause to be paid to the
Indemnifying Party an amount equal to such recovery together with any
interest (other than interest for the period, if any, after such claims or
liabilities were paid by such Indemnified Party until such claims or
liabilities were paid or reimbursed by the Indemnifying Party) received by
such Indemnified Party on account of such payment or reimbursement.
In the event the Seller is the Indemnifying Party, the following provisions
shall apply to all claims for indemnity under this Article XIII.
(1) When any notice is required to be given by the Indemnified Party
to the Indemnifying Party, the Indemnified Party shall also give such
notice to SAFECARE.
(2) When the Indemnified Party is required to obtain the consent of
the Indemnifying Party pursuant to any provision of this Article XIII, the
Indemnified Party shall also obtain the consent of SAFECARE.
(3) The Buyer agrees that SAFECARE shall be entitled to control the
defense of, settlement and prosecution of any litigation which is the
subject of any claim for indemnity hereunder.
51
<PAGE>
ARTICLE XIV
GENERAL
-------
SECTION 14.1 SCHEDULES AND CLOSING AGREEMENTS. Each certificate, written
--------------------------------
disclosure required herein and the Schedules hereto shall be considered a part
hereof as if set forth herein in full. Any other provision herein to the
contrary notwithstanding, the Schedules and all certificates, written
disclosures or agreements to be executed at Closing provided for herein and not
delivered at the time of execution of this Agreement or which are incomplete at
the time of execution of this Agreement shall be delivered or completed prior to
the Closing Date, and it shall be deemed a condition precedent to the Closing
hereunder that the Schedules and each such certificate, written disclosure or
such closing agreements shall meet with the approval of the party to whom the
Schedules or such certificate, written disclosure or such closing agreements is
to be delivered hereunder. If a party, in its sole discretion, determines that
it should not consummate the transactions contemplated by this Agreement because
of (i) any information contained in a Schedule that is delivered to such party,
(ii) any information added to, or modification contemplated by, a Schedule to
make such Schedule complete or updated as of the Closing Date, or (iii) any
failure to agree on the terms and conditions of such closing agreements, then
such party may terminate this Agreement by giving written notice to the other
parties of such party's intent to terminate.
SECTION 14.2 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 or SAFECARE 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 SAFECARE's rights thereunder
so that Buyer would not in fact receive all such rights, Seller shall upon the
request of Buyer cooperate in any reasonable arrangement designed to provide for
Buyer the benefits under any such claim, right, contract, license, lease,
commitment, sales order or purchase order, including, without limitation,
enforcement of any and all rights of Seller or SAFECARE against the other party
or parties thereto arising out of the breach or cancellation by such other party
or otherwise.
SECTION 14.3 CONSENTS, APPROVALS AND DISCRETION. Except as herein
----------------------------------
expressly provided to the contrary, 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.
SECTION 14.4 WAIVER OF TRIAL BY JURY. To the extent permitted by
-----------------------
applicable law, each party hereto irrevocably waives any and all rights it may
have to demand that any action, proceeding or counterclaim arising out of or in
any way related to this Agreement or the relationships of the parties hereto be
tried by jury. This waiver extends to any and all rights to demand a trial by
jury arising from any source including, but not limited to, the Constitution of
the United States or any state therein, common law or any applicable statute or
regulations. Each party hereto acknowledges that it is knowingly and
voluntarily waiving its right to demand trial by jury.
52
<PAGE>
SECTION 14.5 CHOICE OF LAW. The parties agree that this Agreement shall
-------------
be governed by and construed in accordance with the laws of the State of
Arkansas.
SECTION 14.6 BENEFIT/ASSIGNMENT. Subject to 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 neither Seller nor SAFECARE may assign this
Agreement without the prior written consent of Buyer, and that Buyer may not
assign this Agreement to any person not an Affiliate of Buyer without the prior
written consent of Seller and SAFECARE, which may be withheld in their sole
discretion. Any assignment by any party shall not relieve such assignor from
its obligations hereunder.
SECTION 14.7 NO BROKERAGE. Seller, SAFECARE and Buyer represent to each
------------
other that no broker has in any way been contracted in connection with the
transactions contemplated hereby. Seller, SAFECARE and Buyer agree to indemnify
the other parties from and against all loss, cost, damage or expense arising out
of claims for fees or commissions of brokers employed or alleged to have been
employed by such indemnifying party.
SECTION 14.8 COST OF TRANSACTION. Whether or not the transactions
-------------------
contemplated hereby shall be consummated and except as otherwise provided
herein, the parties agree as follows: (i) Seller will pay the fees, expenses,
and disbursements of Seller and its agents, representatives, accountants, and
counsel incurred in connection with the subject matter hereof and any amendments
hereto and shall pay one-half of any and all recording fees and sales or
recording taxes incurred in connection with the transfer and conveyance of the
Assets and Real Property to Buyer; (ii) SAFECARE will pay the fees, expenses,
and disbursements of SAFECARE and its agents, representatives, accountants, and
counsel incurred in connection with the subject matter hereof and any amendments
hereto; and (iii) Buyer shall pay the fees, expenses and disbursements of Buyer
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter hereof and any amendments hereto and one-half of any and
all recording fees and sales or recording taxes incurred in connection with the
transfer and conveyance of the Assets and the Real Property to Buyer. Seller
shall pay eighty-five percent (85%) of all costs or fees necessary to issue the
standard Title Commitment for the Real Property (other than the MOB) and all
premiums for the standard Title Policy issued pursuant to such Title Commitment,
the zoning endorsement and the deletion of the survey exception and for the
costs of any other endorsements that Buyer requires to the standard Title Policy
and Buyer shall pay the remaining fifteen percent (15%) of such costs or fees.
SAFECARE shall pay eighty-five percent (85%) of all costs and fees necessary to
issue the standard Title Commitment for the MOB and all premiums for the
standard Title Policy issued pursuant to such Title Commitment and for the cost
of any endorsements that Buyer requires to the standard Title Policy and Buyer
shall pay the remaining fifteen percent (15%) of such costs or fees.
53
<PAGE>
SECTION 14.9 CONFIDENTIALITY. It is understood by the parties hereto
---------------
that the information, documents and instruments delivered to Buyer by Seller or
SAFECARE or Seller's agents or SAFECARE's agents and the information, documents
and instruments delivered to Seller or SAFECARE by Buyer or Buyer's agents are
of a confidential and proprietary nature. Each of the parties hereto agrees
that both prior and subsequent to Closing they will maintain the confidentiality
of all such confidential information, documents or instruments delivered to them
by each of the other parties hereto or their agents in connection with the
negotiation of this Agreement. Each of the parties hereto further agrees that
if the transactions contemplated hereby are not consummated, they will return
all such documents and instruments and all copies thereof in their possession to
the other party to this Agreement. Each of the parties hereto recognizes that
any breach of this Section would result in irreparable harm to the other parties
to this Agreement and their Affiliates and that therefore any of Seller,
SAFECARE or Buyer shall be entitled to an injunction to prohibit any such breach
or anticipated breach, without the necessity of posting a bond, cash or
otherwise, in addition to all of their other legal and equitable remedies.
Nothing in this Section, however, shall prohibit the use of such confidential
information, documents or information for such governmental filings as in the
mutual opinion of Buyer's counsel, SAFECARE's counsel and Seller's counsel are
(i) required by law or governmental regulations or (ii) otherwise appropriate.
SECTION 14.10 PUBLIC ANNOUNCEMENTS. Each of the parties mutually agree
--------------------
that no party hereto shall release, publish or otherwise make available to the
public in any manner whatsoever any information or announcement regarding the
transactions herein contemplated without the prior written consent of the other
parties, except for discussions with third parties regarding compromising
payments of accounts payable under Section 6.11 hereof or parties to Contracts
for purposes of obtaining such parties' consent to assignment of such Contracts
to Buyer, information and filings reasonably necessary to be directed to
governmental agencies to fully and lawfully effect the transactions herein
contemplated or required in connection with securities and other laws. Nothing
herein shall prohibit either party from responding to questions presented by the
press or media without first obtaining prior consent of the other parties
hereto.
SECTION 14.11 WAIVER OF BREACH. The waiver by any party of a breach or
----------------
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or other
provision hereof.
SECTION 14.12 NOTICE. Any notice, demand or communication required,
------
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered, when received by telegraphic or other electronic
means (including telecopy and telex) or overnight courier, or five (5) days
after being deposited in the United States mail, with postage prepaid thereon,
certified or registered mail, return receipt requested, addressed as follows:
BUYER: Little Rock HMA, Inc.
5811 Pelican Bay Blvd.
Suite 500
Naples, Florida 33963-2710
Attention: Timothy R. Parry, General Counsel
54
<PAGE>
With a copy to: Annis, Mitchell, Cockey, Edwards & Roehn, P.A.
Suite 2100, One Tampa City Center
P.O. Box 3433
Tampa, Florida 33601
Attention: Stephen J. Mitchell
SELLER: St. Louis - Little Rock Hospitals, Inc.
11401 Interstate 30
Little Rock, Arkansas 72209
Attention: Tim Hill, Chief Executive Officer
With a copy to: Robinson, Staley & Marshall
28/th/ Floor, First Commercial Building
400 West Capital, Suite 2891
Little Rock, Arkansas 72201
Attention: William T. Marshall, Esq.
SAFECARE: SAFECARE Company, Inc.
700 Fifth Avenue, Suite 2600
Seattle, Washington 98104
Attention: Randy Trettevik, Vice President
With a copy to: Smith, Gambrell & Russell, LLP
1230 Peachtree Street, Suite 3100
Atlanta, Georgia 30309
Attention: Howard E. Turner, Esq.
or to such other address, and to the attention of such other person or officer
as any party may designate.
SECTION 14.13 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 and remain in full force and effect, enforceable in accordance
with its terms.
SECTION 14.14 GENDER, NUMBER AND INFERENCES. 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. Inasmuch as this Agreement is the result of
negotiations between sophisticated parties of equal bargaining power represented
by counsel, no inference in favor of, or against, either party shall be drawn
from the fact that any portion of this Agreement has been drafted by or on
behalf of such party.
55
<PAGE>
SECTION 14.15 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.
SECTION 14.16 ENTIRE AGREEMENT/AMENDMENT. This Agreement supersedes all
--------------------------
previous contracts and constitutes the entire agreement of whatsoever kind or
nature existing between or among the parties representing the within subject
matter (including the Letter of Intent (herein so called) signed September 18,
1997) and no party shall be entitled to benefits other than those specified
herein. As between or among the parties, no oral statement or prior written
material not specifically incorporated herein shall be of any force and effect.
The parties specifically acknowledge that in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements
contained in this Agreement and no others. All prior representations or
agreements, whether written or verbal, not expressly incorporated herein are
superseded unless and until made in writing and signed by all parties hereto.
SECTION 14.17 SURVIVAL. The representations, warranties and indemnity
--------
obligations set forth in this Agreement shall survive the Closing and the
execution and delivery of all other agreements described, referenced or
contemplated herein until the second anniversary of the Closing Date, whereupon
they shall terminate (except for the representations and warranties contained in
Sections 3.1, 3.2, 3.7, 3.12, 3.20, 4.1, 4.2, 4.3, 5.1, 5.2 and 12.9 hereof
which shall survive thereafter until the expiration of any applicable statute of
limitations), and shall not be deemed merged into any instruments or agreements
delivered at Closing or thereafter. The covenants set forth in this Agreement
(other than any referred to in the immediately preceding sentence, which shall
survive for the period set forth therein) shall survive the Closing and shall
not be deemed merged into any instruments or agreements delivered at Closing or
thereafter. This Agreement may be executed in two or more counterparts, each
and all of which shall be deemed an original and all of which together shall
constitute but one and the same instrument.
SECTION 14.18 INTERPRETATION. In this Agreement, unless the context
--------------
otherwise requires: (i) references to this Agreement are references to this
Agreement and to the Schedules; (ii) references to Articles and Sections are
references to articles and sections of this Agreement; (iii) references to any
party to this Agreement shall include references to its respective successors
and permitted assigns; (iv) references to a judgment shall include references to
any order, writ, injunction, decree, determination or award of any court or
tribunal; and (v) references to a person shall include references to any
individual, company, body corporate, association, partnership, firm, joint
venture, trust or governmental agency. Whenever any reference is made herein to
a fact being "known" to any party or a representation or warranty being to the
"knowledge" of any party hereto, or words of similar import, any such reference
shall be deemed to include only the actual knowledge (without presuming any
requirement to make any investigation to confirm the accuracy of such knowledge)
in the case of SAFECARE, of the president and any vice president thereof and, in
the case of Seller, of Tim Hill, Nancy Treece, Becky Messenger or Jim Limbird.
SECTION 14.19 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts by one or more of the undersigned and all such counterparts so
executed shall together be deemed and constitute one final agreement, as if one
document had been signed by all parties hereto; and each such counterpart shall
be deemed an original, binding the parties subscribed hereto and multiple
signature pages affixed to a single copy of this Agreement shall be deemed to be
a fully executed original Agreement.
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple originals by their authorized officers, all as of the date
and year first above written.
BUYER: LITTLE ROCK HMA, INC.,
an Arkansas corporation
By: /s/ Gary C. Bell
----------------------------------------------
Gary C. Bell, Senior Vice President
SELLER: ST. LOUIS - LITTLE ROCK HOSPITALS, INC.,
a Missouri corporation
By: /s/ R.W. Windham
-----------------------------------------------
Name: R.W. Windham
---------------------------------------
Title: Chairman
--------------------------------------
SAFECARE: SAFECARE COMPANY, INC.,
a Washington corporation
By: /s/ Eddie L. Hendrikson
----------------------------------------------
Name: Eddie L. Hendrikson
--------------------------------------
Time: President
-------------------------------------
By: /s/ Randy Trettevik
----------------------------------------------
Name: Randy Trettevik
-------------------------------------
Time: Vice President
--------------------------------------
57
<PAGE>
EXHIBIT 11.1
HEALTH MANAGEMENT ASSOCIATES, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended
December 31,
----------------------------
1997 1996
------------------ --------
<S> <C> <C>
Numerator:
Net income........................ $ 24,837 $ 19,877
======== ========
Denominator:
Denominator for basic earnings
per share-weighted average shares.. 163,219 159,013
Effect of dilutive securities-
employee stock options............. 4,318 4,758
-------- --------
167,537 163,771
======== ========
Basic earnings per share ............ $ .15 $ .13
======== ========
Diluted earnings per share........... $ .15 $ .12
======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements included within the Company's December 31,
1997 Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 72,387,000
<SECURITIES> 0
<RECEIVABLES> 201,184,000
<ALLOWANCES> 55,514,000
<INVENTORY> 16,645,000
<CURRENT-ASSETS> 257,914,000
<PP&E> 644,195,000
<DEPRECIATION> 150,720,000
<TOTAL-ASSETS> 768,741,000
<CURRENT-LIABILITIES> 99,656,000
<BONDS> 47,835,000
1,636,000
0
<COMMON> 0
<OTHER-SE> 587,699,000
<TOTAL-LIABILITY-AND-EQUITY> 768,741,000
<SALES> 0
<TOTAL-REVENUES> 234,570,000
<CGS> 0
<TOTAL-COSTS> 161,108,000
<OTHER-EXPENSES> 10,172,000
<LOSS-PROVISION> 21,972,000
<INTEREST-EXPENSE> 433,000
<INCOME-PRETAX> 40,885,000
<INCOME-TAX> 16,048,000
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