<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 March 31, 1998
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 May 5, 1998, the following shares of the Registrant were outstanding:
Class A Common Stock 167,216,998 shares
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income --
Three Months Ended March 31, 1998 and 1997.................. 3
Consolidated Statements of Income --
Six Months Ended March 31, 1998 and 1997.................... 4
Consolidated Balance Sheets--
March 31, 1998 and September 30, 1997....................... 5
Consolidated Statements of Cash Flows--
Six Months Ended March 31, 1998 and 1997.................... 6
Notes to Interim Condensed Consolidated Financial
Statements.................................................. 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 9-13
PART II. OTHER INFORMATION....................................... 14-15
SIGNATURES.......................................................... 16
INDEX TO EXHIBITS................................................... 17-18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net patient service revenue........................ $302,922,000 $237,792,000
Costs and expenses:
Salaries and benefits........................... 104,148,000 81,005,000
Supplies and expenses........................... 87,232,000 69,459,000
Provision for doubtful accounts................. 23,747,000 19,497,000
Depreciation and amortization................... 12,564,000 9,010,000
Rent expense.................................... 6,928,000 4,833,000
Interest, net................................... 1,640,000 1,411,000
------------ ------------
Total costs and expenses.................... 236,259,000 185,215,000
------------ ------------
Income before income taxes......................... 66,663,000 52,577,000
Provision for income taxes ........................ 26,165,000 20,635,000
------------ ------------
Net income ........................................ $ 40,498,000 $ 31,942,000
============ ============
Net income per share:
Basic............................................ $ .24 $ .20
Diluted.......................................... $ .24 $ .19
============ ============
Weighted average number of shares outstanding:
Basic............................................ 166,104,000 160,413,000
Diluted.......................................... 170,302,000 164,841,000
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
March 31,
1998 1997
------------ ------------
<S> <C> <C>
Net patient service revenue........................ $537,492,000 $436,954,000
Costs and expenses:
Salaries and benefits........................... 188,715,000 152,947,000
Supplies and expenses........................... 158,312,000 130,775,000
Provision for doubtful accounts................. 45,719,000 38,845,000
Depreciation and amortization................... 22,736,000 17,340,000
Rent expense.................................... 12,389,000 9,261,000
Interest, net................................... 2,073,000 2,486,000
------------ ------------
Total costs and expenses.................... 429,944,000 351,654,000
------------ ------------
Income before income taxes......................... 107,548,000 85,300,000
Provision for income taxes ........................ 42,213,000 33,480,000
------------ ------------
Net income ........................................ $ 65,335,000 $ 51,820,000
============ ============
Net income per share:
Basic........................................... $ .40 $ .32
Diluted......................................... $ .39 $ .31
============ ============
Weighted average number of shares outstanding:
Basic........................................... 164,646,000 159,705,000
Diluted......................................... 168,829,000 164,566,000
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
------------- ----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 4,460,000 $ 67,381,000
Receivables--net.................................... 198,865,000 132,896,000
Supplies, prepaids and other assets................. 31,404,000 21,589,000
Funds held by trustee............................... 1,966,000 1,225,000
Income taxes - receivable and deferred.............. 13,039,000 13,039,000
------------ ------------
Total current assets........................... 249,734,000 236,130,000
Property, plant and equipment......................... 804,034,000 613,752,000
Less accumulated depreciation and
amortization....................................... 162,063,000 141,033,000
Net property, plant and equipment.............. 641,971,000 472,719,000
------------ ------------
Other assets:
Funds held by trustee............................... 3,950,000 944,000
Deferred charges and other assets................... 59,080,000 17,768,000
------------ ------------
Total.......................................... 63,030,000 18,712,000
------------ ------------
$954,735,000 $727,561,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable.................................... $ 40,689,000 $ 33,943,000
Accrued expenses and other liabilities.............. 37,117,000 37,453,000
Current maturities of long-term debt................ 12,453,000 8,263,000
Income taxes--currently payable and deferred........ 36,917,000 3,221,000
------------ ------------
Total current liabilities...................... 127,176,000 82,880,000
Deferred income taxes................................. 19,817,000 18,699,000
Other long-term liabilities........................... 16,290,000 16,112,000
Long-term debt........................................ 80,786,000 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, 167,168,000 and 162,705,000
shares issued and outstanding at March 31,
1998 and September 30, 1997, respectively......... 1,672,000 1,627,000
Additional paid-in capital.......................... 267,846,000 182,780,000
Retained earnings................................... 441,148,000 375,813,000
------------ ------------
Total stockholders' equity..................... 710,666,000 560,220,000
------------ ------------
$954,735,000 $727,561,000
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
March 31,
-----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 65,335,000 $ 51,820,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization..................... 22,736,000 17,340,000
Gain on sale of fixed assets...................... (43,000) (112,000)
Changes in assets and liabilities:
Receivables--net................................ (35,376,000) (3,801,000)
Other current assets............................ (4,634,000) (4,220,000)
Deferred charges and other assets............... 111,000 (2,694,000)
Accounts payable................................ 1,777,000 6,308,000
Accrued expenses and other liabilities.......... (6,823,000) (1,563,000)
Income taxes--
currently payable and deferred................ 11,059,000 8,897,000
Other long term liabilities..................... 177,000 635,000
------------- ------------
Net cash provided by operating activities.... 54,319,000 72,610,000
------------- ------------
Cash flows from investing activities:
Acquisition of facilities, net of cash acquired...... (95,735,000) (51,117,000)
Additions to property, plant and equipment........... (21,677,000) (28,961,000)
Proceeds from sale of equipment...................... 167,000 293,000
------------- ------------
Net cash used in investing activities........ (117,245,000) (79,785,000)
------------- ------------
Cash flows from financing activities:
Proceeds from long-term borrowings................... 211,000 249,000
Principal payments on debt........................... (4,570,000) (4,935,000)
Increase in funds held by trustee.................... (747,000) (107,000)
Issuance of common stock, net of costs............... 5,111,000 8,472,000
------------- ------------
Net cash provided by
financing activities....................... 5,000 3,679,000
------------- ------------
Net decrease in cash................... 62,921,000 (3,496,000)
Cash and cash equivalents at beginning of period....... 67,381,000 31,172,000
------------- ------------
Cash and cash equivalents at end of period............. $ 4,460,000 $ 27,676,000
============= ============
</TABLE>
See accompanying notes.
6
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
- -------------------------
The 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 March 31, 1998 and for the three and six month periods
ended March 31, 1998 and 1997 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 (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
-------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 40,498 $ 31,942 $ 65,335 $ 51,820
======== ======== ======== ========
Denominator:
Denominator for basic earnings
Per share-weighted average shares 166,104 160,413 164,646 159,705
Effect of dilutive securities-
employee stock options 4,198 4,428 4,183 4,861
-------- -------- -------- --------
Denominator for diluted
earnings per share 170,302 164,841 168,829 164,566
======== ======== ======== ========
Basic earnings per share $ .24 $ .20 $ .40 $ .32
======== ======== ======== ========
Diluted earnings per share $ .24 $ .19 $ .39 $ .31
======== ======== ======== ========
</TABLE>
During January 1998 the Company completed an acquisition through a merger
agreement and tax-free stock exchange transaction (see Note 3). As a result,
the Company issued approximately 3,300,000 shares of the Company's Class A
common stock.
7
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions
- ----------------
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.
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 these 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.
The operating results of the foregoing hospitals have been included in the
accompanying consolidated statements of income from the respective dates of
acquisition. The following unaudited pro forma combined summary of operations
of the Company for the six months ended March 31, 1998 and 1997 gives effect to
the operation of the hospitals purchased in November 1997 and January 1998 as if
the hospital acquisitions had occurred as of October 1, 1996 (in thousands,
except per share data):
<TABLE>
<CAPTION>
Six months ended
March 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Net patient service revenue $576,040 $525,948
Net income $ 65,773 $ 55,021
Net income per share:
Basic $ .40 $ .34
Diluted $ .39 $ .33
</TABLE>
4. Subsequent event
- --------------------
In March 1998 the Company announced the execution of a Definitive Agreement
to acquire Regional Healthcare, Inc., a 166-bed health system, comprised of two
acute care hospitals and an ambulatory surgery center, located in Hernando
County, Florida. The total purchase price is approximately $78 million, which
will be financed from available cash on hand and the Company's line of credit.
The transaction is expected to be completed before the end of the current
quarter ending June 30, 1998.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
Three months ended March 31, 1998 compared
------------------------------------------
to three months ended March 31, 1997
------------------------------------
Net patient service revenue for the three months ended March 31,
1998 ("1998 Period") was $302,922,000, as compared to $237,792,000 for
the three months ended March 31, 1997 ("1997 Period"). This
represented an increase in net patient service revenue of $65,130,000,
or 27.4%. Hospitals in operation for the entire 1998 Period and 1997
Period ("same store hospitals") provided $23,764,000 of the increase
in net patient service revenue, which resulted primarily from
inpatient and outpatient volume increases. The remaining increase of
$41,366,000 included $41,765,000 of net patient service revenue from
the acquisition of the 125-bed Southwest hospital effective November
1, 1997, the 221-bed River Oaks Health System effective January 1,
1998, and the 180-bed Riley Memorial Hospital effective January 2,
1998, offset by a decrease of $399,000 in Corporate and miscellaneous
revenue.
During the 1998 Period the Company's hospitals generated total
patient days of service and an occupancy rate of 176,197 and 53.9%,
respectively, versus 138,535 and 50.0%, respectively, for the 1997
Period. Same store patient days and occupancy for the 1998 Period were
151,246 and 54.1%, respectively, versus 138,535 and 50.0%,
respectively for the 1997 Period. Same store admissions for the
Company during the 1998 Period were 29,288, up 6.5. % from the 27,495
admissions during the 1997 Period.
The Company's operating expenses (salaries and benefits, supplies
and expenses, provision for doubtful accounts and rent expense) for
the 1998 Period were $222,055,000 or 73.3% of net patient service
revenue as compared to $174,794,000 or 73.5% of net patient service
revenue for the 1997 Period. Of the total $47,261,000 increase,
approximately $14,168,000 related to same store hospitals, which was
largely attributable to the increased patient volumes. Another
$32,563,000 of increased operating expense related to the acquisitions
mentioned previously, which was offset by a $530,000 decrease in
Corporate and miscellaneous other operating expenses.
The Company's earnings before depreciation and amortization,
interest and income taxes (EBITDA) were $80,867,000 for the 1998
Period as compared to $62,998,000 for the 1997 Period, an increase of
$17,869,000 or 28.4%. The EBITDA margin was 26.7% for the 1998 Period
compared to 26.5% for the 1997 Period.
The Company's depreciation and amortization costs increased by
$3,554,000 and interest expense increased by $229,000. The increase in
depreciation and amortization resulted primarily from the acquisitions
mentioned previously. The increase in interest expense was due largely
from acquired hospital debt, as well as lower investment income in the
1998 Period (as a result of cash used for the acquisitions previously
mentioned), which is netted against interest expense.
9
<PAGE>
Item 2. Management's discussion and Analysis of Financial
Condition and Results of Operations (continued)
The Company's income before income taxes was $66,663,000 for the
1998 Period as compared to $52,577,000 for the 1997 Period, an
increase of $14,086,000 or 26.8%. The increase resulted primarily from
same-store volume increases and the acquisitions mentioned previously.
The Company's provision for income taxes was $26,165,000 for the 1998
Period as compared to $20,635,000 for the 1997 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 $
40,498,000 for the 1998 Period as compared to $31,942,000 for the 1997
Period.
Results of Operations
---------------------
Six months ended March 31, 1998 compared
----------------------------------------
to six months ended March 31, 1997
----------------------------------
Net patient service revenue for the six months ended March 31,
1998 ("1998 Six Month Period") was $537,492,000, as compared to
$436,954,000 for the six months ended March 31, 1997 ("1997 Six Month
Period"). This represented an increase in net patient service revenue
of $100,538,000, or 23.0%. Same store hospitals provided $40,597,000
of the increase in net patient service revenue, which resulted
primarily from inpatient and outpatient volume increases. The
remaining increase of $59,941,000 included $60,705,000 of net patient
service revenue from acquisitions, offset by a decrease of $764,000 in
Corporate and miscellaneous revenue.
During the 1998 Six Month Period the Company's hospitals
generated 309,119 total patient days of service and an occupancy rate
of 49.8%, respectively, versus 253,033 and 47.0%, respectively, for
the 1997 Six Month Period. Same store patient days and occupancy for
the 1998 Six Month Period were 264,733 and 51.1%, respectively, versus
244,418 and 47.3%, respectively, for the 1997 Six Month Period. Same
store admissions for the Company during the 1998 Six Month Period were
52,051 up 5.3% from the 49,430 admissions during the 1997 Six Month
Period.
The Company's operating expenses for the 1998 Six Month Period
were $405,135,000 or 75.4% of net patient service revenue as compared
to $331,828,000 or 75.9% of net patient service revenue for the 1997
Six Month Period. Of the total $73,307,000 increase, approximately
$24,602,000 related to same store hospitals, which was largely
attributable to increased patient volumes. Another $47,674,000 of
increased operating expense related to the hospital acquisitions
mentioned previously. The remaining increase of $1,031,000 represented
an increase in Corporate and miscellaneous other operating expenses.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company's earnings before depreciation and amortization,
interest and income taxes were $132,357,000 for the 1998 Six Month
Period as compared to $105,126,000 for the 1997 Six Month Period, an
increase of $27,231,000 or 25.9%. The Company's EBITDA margin
increased to 24.6% for the 1998 Six Month Period, as compared to 24.1%
for the 1997 Six Month Period.
The Company's depreciation and amortization costs increased by
$5,396,000 and interest expense decreased by $413,000. The increase in
depreciation and amortization resulted primarily from the acquisitions
previously mentioned. The decrease in interest expense reflects lower
investment income in the 1998 Six Month Period, which is netted
against interest expense.
The Company's income before income taxes was $107,548,000 for the
1998 Six Month Period as compared to $85,300,000 for the 1997 Six
Month Period, an increase of $22,248,000, or 26.1%. The increase
resulted primarily from same-store volume increases and the
acquisitions mentioned previously. The Company's provision for income
taxes was $42,213,000 for the 1998 Six Month Period as compared to
$33,480,000 for the 1997 Six Month 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 $65,335,000 for the 1998
Six Month Period as compared to $51,820,000 for the 1997 Six Month
Period.
Liquidity and Capital Resources
-------------------------------
The Company's operating cash flows totaled $54,319,000 for the
1998 Six Month Period as compared to $72,610,000 for the 1997 Six
Month Period. The positive cash flows resulted from the Company's
profitability and management of its working capital. The overall
decrease of $18,291,000 resulted primarily from a buildup of accounts
receivable in newly-acquired hospitals. This will reverse itself over
the next few months when the third party payors begin to pay
remittances that have been delayed pending the processing of the
respective hospital's new provider number. The Company's investing
activities used $117,245,000 and $79,785,000 for the 1998 Six Month
Period and 1997 Six Month Period, respectively. Acquisitions and
ongoing capital expenditure requirements accounted for substantially
all of the funds used in investing activities. Financing activities
provided net cash of $5,000 for the 1998 Six Month Period and
$3,679,000 during the 1997 Six Month Period. See the Condensed
Consolidated Statements of Cash Flows for the six months ended March
31, 1998 and 1997 at page 6 of this Report.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The Company had approximately $14,500,000 of available cash on
hand at April 30, 1998. In addition, the Company has a total of $310
million of credit available under its two unsecured lines of credit.
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, and debt to cash flow and net worth.
In January 1998 the Company acquired certain assets of a 180-bed
general acute care hospital pursuant to the terms of an asset purchase
agreement. Also in January the Company acquired a two hospital, 221-
bed general acute care system via a merger agreement and tax-free
stock exchange transaction. The consideration involved to complete
these two transactions totalled approximately $190.5 million, which
included approximately $80 million in Company common stock, $73.5
million in cash from available cash on hand, and the assumption of $37
million in debt.
In March 1998 the Company announced the execution of a Definitive
Agreement to acquire Regional Healthcare, Inc., a 166-bed health
system, comprised of two acute care hospitals and an ambulatory
surgery center, located in Hernando County, Florida. The total
purchase price is approximately $78 million, which will be financed
from available cash on hand and the Company's line of credit. The
transaction is expected to be completed before the end of the current
quarter ending June 30, 1998.
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.
Year 2000 Computer Issues
-------------------------
The Year 2000 Computer Issue is the result of most computer
programs using two digits rather than four to identify a year in a
data field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results.
The Company expects to be substantially complete with
modifications to its existing computer software by December 31, 1998,
and does not believe the Year 2000 Issue will propose material
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
operational problems for its computers. Relating to certain computer
aided medical equipment, the Company has been contacting third-party
vendors regarding the compliance status of their products. However,
the Company has no assurance that the systems of the Federal and State
governments, other payors or other companies with which the Company's
systems interface on or which they rely, will be upgraded on a timely
basis.
The Company is utilizing both internal and external resources to
complete the Year 2000 modifications. The majority of the costs
relating to the Year 2000 Issue will be expensed as incurred.
Management of the Company does not believe such costs will have a
material adverse impact to the Company's future results of operations.
However, there can be no guarantee that actual results could differ
materially from those anticipated. Factors that might cause material
differences include, but are not limited to, the availability and cost
of trained personnel and the ability to locate and correct all
relevant computer coding and all medical equipment affected.
Forward-Looking Statements
--------------------------
Certain statements contained in this Report, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company
or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both nationally
and in the regions in which the Company operates; industry capacity;
demographic changes; existing government regulations and changes in,
or the failure to comply with, governmental regulations; legislative
proposals for health care reform; the ability to enter into managed
care provider arrangements on acceptable terms; changes in Medicare
and Medicaid payment levels; liability and other claims asserted
against the Company; competition; the loss of any significant ability
to attract and retain qualified personnel, including physicians; the
availability and terms of capital to fund additional acquisitions or
replacement facilities. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-
looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the result of any revision to any
of the forward-looking statements contained herein to reflect future
events or developments.
13
<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
---------------------------------------------------
At the Annual Meeting of Stockholders of the Company on February 17,
1998, the stockholders of the Company adopted proposals to:
a) elect six directors of the Company
<TABLE>
<CAPTION>
Votes For Abstained
----------- ----------
<S> <C> <C>
William J. Schoen 143,941,131 173,337
Kent P. Dauten 143,925,475 188,993
Robert A. Knox 143,939,481 174,987
Charles R. Lees 143,879,924 234,544
Kenneth D. Lewis 125,732,216 18,382,257
William E. Mayberry M.D. 143,923,567 190,901
</TABLE>
b) approve and ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending September
30, 1998 (143,965,058 votes for; 20,911 votes against; 128,499 votes
abstained)
Item 5. Other Information.
-----------------
In March 1998 the Company announced the execution of a Definitive
Agreement to acquire Regional Healthcare, Inc., a 166-bed health
system, comprised of two acute care hospitals and an ambulatory
surgery center, located in Hernando County, Florida. The total
purchase price is approximately $78 million, which will be financed
from available cash on hand and the Company's line of credit. The
transaction is expected to be completed before the end of the current
quarter ending June 30, 1998.
14
<PAGE>
PART II - OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
a. Exhibits:
--------
See Index to Exhibits located on page 17.
b. Reports on Form 8-K:
-------------------
Form 8-K Reporting Date--February 20, 1998
Item Reported--Item 5. Other Events. The Financial
Accounting Standards Board issued Financial Accounting
Standard No. 128, "Earnings per Share" ("Statement 128")
which is effective for financial accounting periods ended
after December 15, 1997. Statement 128 requires the
restatement of prior period earnings per share and
requires additional supplemental information detailing
the calculation of earnings per share. The Registrant
filed this Form 8-K to restate earnings per share for the
Registrant's Annual Report on Form 10-K for the year
ended September 30, 1997.
15
<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: May 7, 1998 BY: /s/ Stephen M. Ray
--------------------------------
Stephen M. Ray
Senior Vice President-Finance
(Duly authorized officer and
Principal Financial Officer)
16
<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.
(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.
(10) Material contracts
Agreement of Merger and Plan of Reorganization among Health Management
Associates, Inc., HMA-RO Acquisition Corp. and River Oaks Hospital, Inc.,
dated as of October 27, 1997, is included herein as Exhibit 10.1 at page 19
of this Report.
Asset Purchase Agreement among Riley Development Systems, Inc. and Meridian
HMA, Inc. and Meridian HMA Nursing Home, Inc., made as of January 7, 1998,
is included herein as Exhibit 10.2 at page 77 of this Report.
<PAGE>
INDEX TO EXHIBITS (Continued)
(11) Statement re computation of per share earnings.
Not applicable.
(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 129 of
this report.
(99) Additional exhibits.
Not applicable.
<PAGE>
EXHIBIT 10.1
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
AMONG
HEALTH MANAGEMENT ASSOCIATES, INC.
HMA-RO ACQUISITION CORP.
AND
RIVER OAKS HOSPITAL, INC.
D/B/A RIVER OAKS HEALTH SYSTEM
DATED AS OF OCTOBER 27, 1997
(AMENDED AND RESTATED AS OF DECEMBER 11, 1997)
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS....................................................................... 1
1.1 Definitions................................................................ 1
1.2 Interpretation............................................................. 7
ARTICLE 2. THE MERGER........................................................................ 7
2.1 Effective Time of the Merger............................................... 7
2.2 Closing.................................................................... 7
2.3 Effects of the Merger...................................................... 7
ARTICLE 3. EFFECT OF MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES....................... 8
3.1 Election to Retain Certain Shares of River Oaks Common Stock............... 8
(a) Certain Limitations; Aggregation Groups............................. 8
(b) Notice of Election.................................................. 8
(c) Limitation on Aggregate Number of Qualifying Shares................. 9
(d) Revocation of Election.............................................. 9
(e) Restrictions on Qualifying Shares................................... 9
3.2 Effect on Capital Stock.................................................... 9
(a) Capital Stock of Sub................................................ 9
(b) Cancellation of Treasury Stock...................................... 9
(c) Qualifying Shares................................................... 10
(d) Exchanged Shares.................................................... 10
(e) Shares of Dissenters................................................ 10
3.3 Exchange of Certificates................................................... 11
(a) Exchange Agent...................................................... 11
(b) Exchange Procedures................................................. 11
(c) No Fractional Shares................................................ 12
(d) Dividends and Distributions......................................... 12
(e) No Further Ownership Rights in River Oaks Common Stock.............. 12
(f) Termination of Exchange Fund........................................ 12
(g) No Liability........................................................ 13
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF RIVER OAKS...................................... 13
4.1 Organization, Standing and Power........................................... 13
4.2 Capital Structure.......................................................... 13
4.3 Authority, Etc............................................................. 14
4.4 No Conflict................................................................ 14
4.5 Financial Statements....................................................... 15
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4.6 No Additional Material Liabilities......................................... 15
4.7 Information Supplied....................................................... 15
4.8 River Oaks Permits; Compliance with Legal Requirements..................... 15
4.9 Facilities; Real Property.................................................. 17
4.10 Assets; Title; Absence of Liens and Encumbrances........................... 17
4.11 Covenants and Restrictions; Zoning......................................... 18
4.12 Condition of Facilities.................................................... 19
4.13 Equipment; Inventory....................................................... 19
4.14 Environmental Matters...................................................... 19
4.15 Employee Plans............................................................. 20
4.16 Employment Matters......................................................... 22
4.17 Material Agreements........................................................ 22
4.18 Litigation................................................................. 22
4.19 Taxes...................................................................... 23
4.20 Absence of Certain Changes or Events....................................... 23
4.21 Books and Records.......................................................... 24
4.22 Special Funds.............................................................. 24
4.23 Medical Staff Matters...................................................... 24
4.24 Insurance.................................................................. 24
4.25 Trade Names................................................................ 24
4.26 Opinion of Financial Advisor............................................... 24
4.27 Vote Required.............................................................. 25
4.28 Foreign Person............................................................. 25
4.29 Disclosure................................................................. 25
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF HMA............................................. 25
5.1 Organization, Standing and Power........................................... 25
5.2 Authority.................................................................. 25
5.3 No Conflict................................................................ 25
5.4 SEC Documents.............................................................. 26
5.5 Information Supplied....................................................... 26
5.6 Capital Structure.......................................................... 27
5.7 Merger Consideration....................................................... 27
5.8 Disclosure................................................................. 27
ARTICLE 6. COVENANTS OF RIVER OAKS........................................................... 27
6.1 Ordinary Course............................................................ 27
6.2 Dividends; Changes in Stock................................................ 28
6.3 Issuance of Securities..................................................... 28
6.4 Governing Documents........................................................ 28
6.5 River Oaks Permits......................................................... 29
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6.6 Advice of Changes.......................................................... 29
6.7 Access..................................................................... 29
6.8 No Solicitations........................................................... 29
6.9 Cooperation in Preparation of Registration Statement, Etc.................. 30
6.10 Letter of River Oaks' Accountants.......................................... 30
6.11 Shareholders' Meeting and Approval......................................... 30
6.12 Voting Agreements.......................................................... 30
6.13 Affiliates................................................................. 31
6.14 Transaction Expenses....................................................... 31
ARTICLE 7. COVENANTS OF HMA PRIOR TO CLOSING................................................. 31
7.1 Preparation of Registration Statement, Etc................................. 31
7.2 Stock Exchange Listing..................................................... 31
ARTICLE 8. ADDITIONAL COVENANTS OF EACH PARTY................................................ 31
8.1 Additional Agreements; Best Efforts........................................ 31
8.2 Expenses................................................................... 32
8.3 Brokers or Finders......................................................... 32
8.4 Reorganization............................................................. 32
8.5 Other Actions.............................................................. 32
8.6 Confidentiality............................................................ 32
8.7 Publicity.................................................................. 33
ARTICLE 9. CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS...................................... 33
9.1 Conditions to Each Party's Obligation to Effect the Merger................. 33
(a) Registration Statement............................................... 33
(b) Shareholder Approval................................................. 33
(c) NYSE Listing......................................................... 34
(d) Governmental Approvals............................................... 34
(e) No Injunctions or Restraints......................................... 34
9.2 Conditions of Obligations of HMA and Sub................................... 34
(a) Representations and Warranties....................................... 34
(b) Performance of Obligations of River Oaks............................. 34
(c) No Amendments to Resolutions......................................... 34
(d) Articles of Incorporation............................................ 34
(e) River Oaks Permits................................................... 35
(f) Consents Under Agreements............................................ 35
(g) Environmental Assessment............................................. 35
(h) Title Matters........................................................ 35
(i) Letter of River Oaks' Accountants.................................... 35
(j) Voting Agreements.................................................... 35
</TABLE>
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(k) Affiliates' Agreements............................................... 35
(l) Dissenters........................................................... 35
(m) Legal Opinion of Baker, Donelson, Bearman & Caldwell, a
Professional Corporation............................................. 35
(n) Other Evidence....................................................... 37
9.3 Conditions of Obligations of River Oaks.................................... 37
(a) Representations and Warranties....................................... 37
(b) Performance of Obligations of HMA and Sub............................ 37
(c) No Amendments to Resolutions......................................... 37
(d) Tax Opinion.......................................................... 37
(e) Financial Advisor's Opinion.......................................... 37
(f) Legal Opinion of Timothy R. Parry, Esq............................... 38
(g) Legal Opinion of Harter, Secrest & Emery............................. 38
(h) Other Evidence....................................................... 39
ARTICLE 10. COVENANTS AS TO POST-CLOSING MATTERS....................................... 39
10.1 Exchange of Qualifying Shares.............................................. 39
(a) Right to Exchange Qualifying Shares.................................. 39
(b) Right to Call Qualifying Shares for Exchange......................... 39
(c) Automatic Exchange of Qualifying Shares.............................. 39
(d) Anti-Dilution Adjustments............................................ 40
(e) Exchange Procedure for Qualifying Shares............................. 40
(f) Registration of Merger Consideration................................. 40
(g) Exchange Date........................................................ 40
10.2 Purchase of Qualifying Shares.............................................. 41
10.3 Cash Distributions......................................................... 41
10.4 Employees.................................................................. 41
(a) Employment, Etc...................................................... 41
(b) Severance............................................................ 42
(c) Limitations.......................................................... 42
10.5 Medical Staff.............................................................. 42
10.6 Board of Directors......................................................... 42
10.7 Board of Trustees.......................................................... 42
10.8 Name....................................................................... 43
10.9 Commitment to New Services and Facilities.................................. 43
10.10 Indemnification............................................................ 43
(a) Indemnification by HMA............................................... 43
(b) Indemnification by Surviving Corporation............................. 45
(c) Liability Insurance.................................................. 45
(d) Limitations on Indemnification....................................... 45
(e) Survival of Rights................................................... 45
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ARTICLE 11. TERMINATION....................................................................... 45
11.1 Termination................................................................ 45
11.2 Effect of Termination...................................................... 46
11.3 Damages in Certain Circumstances........................................... 47
ARTICLE 12. IN GENERAL........................................................................ 47
12.1 Survival of Representations, Warranties and Agreements..................... 47
12.2 Amendment; Waiver.......................................................... 47
12.3 Notices.................................................................... 47
12.4 Schedules and Other Instruments............................................ 48
12.5 Inferences................................................................. 49
12.6 Governing Law.............................................................. 49
12.7 Assignment................................................................. 49
12.8 Benefit.................................................................... 49
12.9 Entire Agreement; Rights of Ownership...................................... 49
12.10 Counterparts............................................................... 49
TABLE OF EXHIBITS AND SCHEDULES................................................................ 52
</TABLE>
v
<PAGE>
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this "AGREEMENT") has
been made as of October 27, 1997, and amended and restated as of December 11,
1997, by and among HEALTH MANAGEMENT ASSOCIATES, INC., a Delaware corporation
("HMA"), HMA-RO ACQUISITION CORP., a Mississippi corporation and a wholly-owned
Subsidiary of HMA ("SUB"), and RIVER OAKS HOSPITAL, INC. D/B/A RIVER OAKS HEALTH
SYSTEM, a Mississippi corporation ("RIVER OAKS"). This Agreement constitutes a
"plan of merger" within the meaning of article 11 of the MBCA.
WHEREAS, the respective Boards of Directors of HMA, Sub and River Oaks, and
HMA acting as the sole shareholder of Sub, have approved the merger, pursuant
and subject to the terms and conditions of this Agreement, of Sub with and into
River Oaks (the "MERGER"), whereby substantially all of the issued and
outstanding shares of the Common Stock, par value $1.00 per share, of River Oaks
(the "RIVER OAKS COMMON STOCK") will be converted into the right to receive a
specified number of shares of the Class A Common Stock, par value $.01 per
share, of HMA (the "HMA COMMON STOCK"); and the parties each desire to make
certain representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and covenants herein contained, the parties agree to effect the
Merger on the terms and conditions herein provided and further agree as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINITIONS. In addition to the other definitions contained in the
heading paragraph of this Agreement, the foregoing recitals and Section 1.2, the
following terms will, when used in this Agreement, have the following respective
meanings:
"ACQUISITION TRANSACTION" has the meaning given it by Section 6.8.
"AFFILIATE" means a Person which, directly or indirectly, controls, is
controlled by, or is under common control with, the referenced party.
"AGGREGATION GROUP" means any group of the following Record Holders, as of
the record date for the Meeting, who elect by written notice signed by each of
them and received by the Secretary of River Oaks no later than 7:00 p.m., local
time, on the date of the Meeting, to be an Aggregation Group for purposes of
Section 3.1: any Person; such Person's spouse; trusts for the benefit of such
Person, his spouse or his children; and pension or profit sharing funds or
accounts created or controlled by such Person or for his benefit. No Person may
be a member of more than one Aggregation Group.
<PAGE>
"AGREED EBITDA" means the Surviving Corporation's aggregate earnings before
depreciation, interest, income taxes, amortization and intercompany management
fees for its then most recently completed fiscal year, all determined in
accordance with generally accepted accounting principles, except that (a) one-
time or prior year adjustments will be eliminated and (b) the effect of
acquisitions and divestitures during the year will be annualized.
"CERTIFICATES" has the meaning given it by Section 3.3(b).
"CERTIFYING OFFICERS" means: (a) in the case of River Oaks, its Chief
Executive Officer and its Chief Financial Officer; and (b) in the case of HMA,
either its Vice Chairman or its President and Chief Operating Officer or any one
of its Vice Presidents.
"CLOSING" means the consummation of the Merger.
"CLOSING DATE" has the meaning given it by Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended, together with
all rules and regulations promulgated thereunder.
"CONFIDENTIAL INFORMATION" has the meaning given it by Section 8.6.
"CONSTITUENT CORPORATIONS" means River Oaks and Sub, as the constituent
corporations of the Merger.
"CONTRACTS" means and includes all contracts, subcontracts, agreements,
leases, options, notes, bonds, mortgages, indentures, deeds of trust, collateral
assignments, obligations, instruments, concessions, guarantees, licenses,
franchises, permits, purchase orders, arrangements, transactions, commitments,
undertakings and understandings of every kind, written or oral.
"DATE OF THIS AGREEMENT" or "DATE HEREOF" means October 27, 1997.
"DISSENTER" means a Record Holder who dissents from the Merger and
exercises dissenters' rights in accordance with all of the applicable provisions
of article 13 of the MBCA.
"EFFECTIVE TIME" has the meaning given it by Section 2.1.
"EMPLOYEE PLANS" has the meaning given it by Section 4.15(a).
"EMPLOYEES" has the meaning given it by Section 10.4(a).
"ENVIRONMENTAL ASSESSMENT" has the meaning given it by Section 4.14.
"ENVIRONMENTAL LAWS" means, collectively, all federal, state and local
statutes, regulations, ordinances, codes, published guidelines and policies,
directives and orders (including all amendments thereto) pertaining to
environmental matters (which includes air, water vapor, surface
2
<PAGE>
water, groundwater, soil, natural resources, chemical use, health, safety and
sanitation), including the Comprehensive Environmental Response, Compensation
and Liability Act, the Medical Waste Tracking Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Safe Water Drinking Act, the Toxic Substance Control Act and the Occupational
Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all rules and regulations promulgated thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with all rules and regulations promulgated thereunder.
"EXCHANGE AGENT" means First Union National Bank of North Carolina or such
other bank or trust company as HMA may designated.
"EXCHANGE DATE" has the meaning given it by Section 10.1(g).
"EXCHANGE FUND" has the meaning given it by Section 3.3(a).
"EXCHANGED SHARES" has the meaning given it by Section 3.2(d).
"FACILITIES" means facilities located in Flowood, Mississippi consisting of
a general acute care hospital licensed by the State of Mississippi for 110 beds
known as River Oaks Hospital, and a general acute care hospital licensed by the
State of Mississippi for 111 beds known as River Oaks East - Woman's Pavilion,
together with all clinics and other businesses owned or leased by River Oaks or
any of its Subsidiaries, including ROH, Inc. and River Oaks Management Company,
including all real property, whether developed or undeveloped, associated with
any of the foregoing and all buildings, structures, fixtures and other
improvements thereon.
"FIFTH ANNIVERSARY" means the fifth anniversary of the Closing Date.
"FINANCIAL ADVISOR" means The Robinson-Humphrey Company, Inc., the
financial advisor of River Oaks.
"FINANCIAL STATEMENTS" has the meaning given it by Section 4.5.
"FIRST PARTY" has the meaning given it by Section 8.6.
"GOVERNMENTAL ENTITY" means any federal, state or local court, legislative
body, governmental or quasi-governmental body, municipality, political
subdivision, department, commission, board, bureau, department, administration,
council, agency, authority or other instrumentality.
"HAZARDOUS SUBSTANCES" means and includes: (a) any hazardous materials,
hazardous wastes, hazardous substances and toxic substances as those or similar
terms are defined under any Environmental Law; (b) any solid waste generated in
the diagnosis, treatment or immunizations
3
<PAGE>
of human beings or animals or in research pertaining thereto, including special
waste from health care facilities or providers which if improperly treated or
handled may serve to transmit infectious diseases and which is composed of
animal waste, bulk blood and blood products, microbiological waste, pathological
waste or sharps; (c) any asbestos or any material that contains any hydrated
mineral silicate, including chrysolite, amosite, crocidolite, tremolite,
anthophylite and/or actinolite, whether friable or non-friable; (d) any
polychlorinated biphenyls or polychlorinated biphenyl-containing materials or
fluids; (e) radon; (f) any other hazardous, radioactive, toxic or noxious
substance, material, pollutant, contaminant or solid, liquid or gaseous waste;
(g) any petroleum, petroleum hydrocarbons, petroleum products, crude oil or any
fractions thereof, natural gas or synthetic gas; and (h) any substance that,
whether by its nature or its use, is or becomes subject to regulation under any
Environmental Laws or with respect to which any Environmental Laws or
Governmental Entity requires or will require environmental investigation,
monitoring or remediation.
"HMA SEC DOCUMENTS" has the meaning given it by Section 5.4.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"INCLUDING" or "INCLUDES" means, with respect to any matter or thing,
including but not limited to such matter or thing.
"INDEMNIFIABLE CLAIM" has the meaning given it by Section 10.10(a).
"INDEMNIFIED PARTY" has the meaning given it by Section 10.10(a).
"IRS" means the United States Internal Revenue Service.
"JCAHO" means the Joint Commission on Accreditation of Healthcare
Organizations.
"KNOWLEDGE" of River Oaks means the actual knowledge of River Oaks' Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer or any
member of the Executive Committee of River Oaks' Board of Directors; "KNOWLEDGE"
of HMA means the actual knowledge of any of HMA's executive officers.
"LEGAL REQUIREMENTS" means, collectively, all laws, statutes, rulings,
rules, regulations, judgments, orders, decrees, awards, injunctions, writs,
requirements, permits, certificates and ordinances of any Governmental Entity,
as in effect from time to time.
"LOSSES" has the meaning given it by Section 10.10(a) and is further
defined in Section 10.10(a)(i).
"MARKET PRICE" means the average of the closing sales price per share of
the HMA Common Stock on the NYSE on each Trading Day during the 30 calendar day
period ending on the third Trading Day preceding the Closing Date; provided,
however, that if no such reported sales of HMA Common Stock take place on a
Trading Day, then the average of the reported
4
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closing bid and asked prices, regular way, for that Trading Day will instead be
used in calculating the Market Price.
"MATERIAL AGREEMENTS" has the meaning given it by Section 4.17.
"MBCA" means the Mississippi Business Corporation Act.
"MEETING" has the meaning given it by Section 6.11.
"MERGER CONSIDERATION" has the meaning given it by Section 3.2(d).
"NYSE" means the New York Stock Exchange.
"OTHER PARTY" has the meaning given it by Section 8.6.
"PERMITTED ENCUMBRANCES" has the meaning given it by Section 4.10(a).
"PERSON" means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other entity, and
any Governmental Entity.
"PROSPECTUS" has the meaning given it by Section 5.5.
"PROXY STATEMENT" means: (a) the letter to the shareholders of River Oaks
in connection with the Meeting; (b) the notice of the Meeting; (c) the form of
proxy and form of Qualifying Shares Election to be distributed to the
shareholders of River Oaks in connection with the Meeting; (d) the information
contained in the Registration Statement under the captions "Risk Factors Related
to Election to Retain Qualifying Shares," "Background of the Merger and Related
Matters," "Description of the Merger and the Merger Agreement - Certain Federal
Income Tax Consequences," "Amendment of River Oaks Articles of Incorporation,"
"The Special Meeting," "Dissenters' Rights," "Principal Shareholders of River
Oaks," "Interests of Certain Persons in the Merger," "Information About River
Oaks," "Management's Discussion and Analysis of Financial Condition and Results
of Operations of River Oaks" and "Financial Statements of River Oaks;" and (e)
the information with respect to River Oaks or any of its Subsidiaries, directors
or officers contained in the Registration Statement under the captions
"Summary," "Introduction," "Description of the Merger and the Merger Agreement,"
"Unaudited Pro Forma Financial Information," "River Oaks' Directors and
Executive Officers After the Merger," "Description of Capital Stock and
Comparative Rights of HMA Shareholders and River Oaks Shareholders," "Experts"
and "Legal Opinions and Interests of Counsel."
"QUALIFYING SHAREHOLDER" means any Record Holder of Qualifying Shares, for
so long as he holds any Qualifying Shares.
"QUALIFYING SHARES" has the meaning given it by Section 3.1.
"REAL PROPERTY" has the meaning given it by Section 4.9.
5
<PAGE>
"RECORD HOLDER" means a holder of record of River Oaks Common Stock as
shown on the regularly maintained stock transfer records of River Oaks.
"REGISTRATION STATEMENT" has the meaning given it by Section 4.7.
"RELEASE" has the same meaning as given it by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the regulations promulgated thereunder.
"RIVER OAKS PERMITS" has the meaning given it by Section 4.8(a).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, together
with all rules and regulations promulgated thereunder.
"SHAREHOLDER APPROVAL" means approval of this Agreement by the affirmative
vote of a majority of the shares of River Oaks Common Stock outstanding on the
record date for the vote.
"STOCK RIGHTS" has the meaning given it by Section 4.2.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly through an Affiliate, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the Board of Directors or other governing body thereof.
"SURVIVING CORPORATION" means River Oaks, as the surviving corporation of
the Merger.
"TAXES" means, collectively, federal, state and local income, payroll,
withholding, employment, excise, sales, use, real and personal property, use and
occupancy, business and occupation, gross receipts, mercantile, real estate,
capital stock and franchise or other taxes, duties or assessments of any nature
whatsoever, including all penalties and interest thereon and estimated taxes.
"TRADING DAY" means any day on which the NYSE is open for trading.
"VIOLATION" means that the referenced event: (a) conflicts with, or
results in any violation of, or a default (with or without notice or lapse of
time, or both) under, or gives rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets in
connection with, the referenced Contract or other document; or (b) conflicts
with, or results in any violation (with or without notice or lapse of time, or
both) under, or gives rise to any damages, penalty or remedial action under, the
referenced Legal Requirement.
"VOTING DEBT" means bonds, debentures, notes or other evidences of
indebtedness having
6
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the right to vote (or convertible into securities having the right to vote) on
any matters on which the shareholders of the issuer thereof may vote.
1.2 INTERPRETATION. In this Agreement, unless the context otherwise
requires: (a) references to "Articles" and "Sections" are to the Articles or
Sections of this Agreement, and references to "Exhibits" and "Schedules" are to
the Exhibits and Schedules annexed hereto; (b) references to any party to this
Agreement include references to its respective successors and permitted assigns;
(c) references to a judgment include references to any order, writ, injunction,
decree, determination or award of any court or tribunal; (d) any of the terms
defined herein may, unless the context requires otherwise, be used in the
singular or the plural depending on the reference; and (e) the masculine pronoun
includes the feminine and the neuter, as appropriate in the context. The
divisions of this Agreement into articles, sections and subsections and the use
of captions and headings in connection therewith are solely for convenience and
have no legal effect in construing the provisions of this Agreement.
ARTICLE 2. THE MERGER
2.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, the Merger will be consummated by the filing by the Secretary of
State of the State of Mississippi of articles of merger, in such form as
required by, and signed and attested in accordance with, the relevant provisions
of the MBCA (the time of such filing or such later time and date as is specified
in such filing being the "EFFECTIVE TIME").
2.2 CLOSING. The Closing will take place at 10:00 a.m., local time, on
the earliest date practicable after all of the conditions set forth in Article 9
are satisfied or waived by the appropriate party, but in no event later than the
applicable date referred to in Section 11.1(g) (the "CLOSING DATE"), at the
offices of Baker, Donelson, Bearman & Caldwell, a Professional Corporation, 700
North State Street, Suite 500, Jackson, Mississippi 39202, unless another date
or place is agreed to in writing by the parties.
2.3 EFFECTS OF THE MERGER. By virtue of the Merger and without the
necessity of any action by or on behalf of the Constituent Corporations, or
either of them:
(A) at the Effective Time, (i) the separate existence of Sub will
cease and Sub will be merged with and into River Oaks, (ii) the articles of
incorporation of River Oaks as in effect immediately prior to the Effective
Time will be the articles of incorporation of the Surviving Corporation
until thereafter amended, and (iii) the bylaws of Sub as in effect
immediately prior to the Effective Time, as set forth in Exhibit A, will be
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the bylaws of the Surviving Corporation until thereafter amended; and
(B) at and after the Effective Time, the Surviving Corporation will
possess all the rights, privileges, powers and franchises of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due to either of the
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Constituent Corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of the
Constituent Corporations will be vested in the Surviving Corporation; and
all property, rights, privileges, powers and franchises, and all and every
other interest will be thereafter as effectually be the property of the
Surviving Corporation as they were of the respective Constituent
Corporations, and the title to any real estate vested by deed or otherwise,
in either of the Constituent Corporations, will not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations will be preserved unimpaired, and
all debts, liabilities and duties of the respective Constituent
Corporations will thenceforth attach to the Surviving Corporation, and may
be enforced against it to the same extent as if such debts and liabilities
had been incurred or contracted by it.
ARTICLE 3. EFFECT OF MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
3.1 ELECTION TO RETAIN CERTAIN SHARES OF RIVER OAKS COMMON STOCK. Record
Holders of River Oaks Common Stock may elect to retain in the Merger ownership,
in the aggregate, of up to that number of shares of River Oaks Common Stock
which results from subtracting (i) the number of shares of River Oaks Common
Stock held, as of the record date for the Meeting, by Dissenters, from (ii)
151,356 (the "QUALIFYING SHARES"); provided, however, that no holder of River
Oaks Common Stock will have any right to retain shares of River Oaks Common
Stock except as provided by this Section 3.1 and in accordance with all of the
conditions hereof, and for all purposes of this Agreement, the term "Qualifying
Shares" means only those shares which Record Holders have the right to retain as
provided by this Section 3.1.
(A) CERTAIN LIMITATIONS; AGGREGATION GROUPS. Only Record Holders and
Aggregation Groups which hold, as of the record date for the Meeting, 1,000 or
more shares of River Oaks Common Stock may elect to retain ownership of any
Qualifying Shares, and Record Holders and Aggregation Groups which hold less
than 1,000 shares of River Oaks Common Stock will have no rights under this
Section 3.1. In addition: (i) no Aggregation Group may elect to retain more
than 25 percent of the aggregate number of shares held of record by the members
of that Aggregation Group; and (ii) no Record Holder may elect to retain more
than 25 percent of the shares held of record by him, except that members of an
Aggregation Group may, by written notice signed by each of them and received by
the Secretary of River Oaks no later than 7:00 p.m., local time, on the date of
the Meeting, elect that the Qualifying Shares to which they are entitled
pursuant to this Section 3.1 be retained by such members of the Aggregation
Group and in such relative proportions as is set forth in such notice.
(B) NOTICE OF ELECTION. A Record Holder may only retain ownership of
Qualifying Shares by written notice to River Oaks stating his election to do so
and stating the number of whole shares of River Oaks Common Stock (not exceeding
25 percent of the shares held of record by him or by his Aggregation Group, as
the case may be) which he wishes to retain in the Merger. A Record Holder (or
Aggregation Group) which elects to retain more than the number of shares
permitted by Section 3.1(a) will be treated as having duly elected to retain the
largest
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number of whole shares permitted by Section 3.1(a) to be retained in the
circumstances. In order for any such election to be effective, such notice must
be received by the Secretary of River Oaks no later than 7:00 p.m., local time,
on the date of the Meeting, and any notice of election received by River Oaks
after 7:00 p.m., local time, on the date of the Meeting will be void and of no
force or effect.
(C) LIMITATION ON AGGREGATE NUMBER OF QUALIFYING SHARES.
Notwithstanding any other provision hereof to the contrary, in no event will the
number of Qualifying Shares exceed that number which results from subtracting
(i) the number of shares of River Oaks Common Stock held, as of the record date
for the Meeting, by Dissenters, from (ii) 151,356. If Record Holders (including
members of Aggregation Groups) duly elect to retain, in the aggregate, more than
such maximum number of shares, then each such Record Holder will be allocated a
whole number of Qualifying Shares pro rata in the same proportion (but for
rounding) as (A) the number of shares of River Oaks Common Stock that he duly
elected to retain bears to (B) the total number of shares of River Oaks Common
Stock that all such Record Holders duly elected to retain. In no event will
there be any fractional Qualifying Shares.
(D) REVOCATION OF ELECTION. A Record Holder may revoke his election
to retain Qualifying Shares by written notice to River Oaks to that effect,
which notice must be received by the Secretary of River Oaks at any time prior
to the Effective Time.
(E) RESTRICTIONS ON QUALIFYING SHARES. The Qualifying Shares have not
been, and will not be, registered under the Securities Act and, therefore, may
not be sold, transferred, pledged or otherwise disposed of except (i) as
provided by Sections 10.1 or 10.2, or (ii) pursuant to an available exemption
from registration under the Securities Act and applicable "Blue Sky" Legal
Requirements. Any transfer of Qualifying Shares is subject to the Surviving
Corporation receiving an opinion of counsel satisfactory to it that such
transfer is in full compliance with all applicable Legal Requirements, and each
certificate representing Qualifying Shares will bear legends referring to such
restrictions on transferability and sale of the Qualifying Shares and giving
notice that the Qualifying Shares are subject to the provisions of Sections
10.1, 10.2 and 10.3.
3.2 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of shares of River Oaks
Common Stock or of shares of the capital stock of Sub:
(A) CAPITAL STOCK OF SUB. All issued and outstanding shares of the
capital stock of Sub will be converted into the right to receive, in the
aggregate, that number of fully paid and non-assessable shares of the Surviving
Corporation which results from subtracting (i) the number of Qualifying Shares
from (ii) 1,009,040.
(B) CANCELLATION OF TREASURY STOCK. Shares of River Oaks Common
Stock, if any, that are owned by River Oaks as treasury stock will be cancelled
and retired and will cease to exist, and no Merger Consideration will be
delivered in exchange therefor. Shares of HMA Common Stock, if any, owned by
River Oaks as of the Effective Time will remain unaffected by
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the Merger.
(C) QUALIFYING SHARES. Each issued and outstanding Qualifying Share
(up to the aggregate number of Qualifying Shares provided by Section 3.1(c))
will continue to be one issued and outstanding share of the capital stock of the
Surviving Corporation. Each certificate representing immediately prior to the
Effective Date only issued and outstanding Qualifying Shares (and no other
shares of River Oaks Common Stock) will continue to evidence ownership of the
same number of shares of the capital stock of the Surviving Corporation.
(D) EXCHANGED SHARES. "EXCHANGED SHARES" means all shares of River
Oaks Common Stock other than (i) shares of River Oaks Common Stock, if any,
owned by River Oaks as treasury stock, (ii) Qualifying Shares in an aggregate
number not exceeding that provided by Section 3.1(c), and (iii) shares of River
Oaks Common Stock held by Dissenters. Each issued and outstanding Exchanged
Share will be converted into the right to receive that number of fully paid and
non-assessable shares of HMA Common Stock which results from dividing (A)
$79.285 by (B0 the Market Price (such number of fully paid and non-assessable
shares of HMA Common Stock per Exchanged Share being called the "MERGER
CONSIDERATION"), payable to the Record Holders of Exchanged Shares at the
Effective Time. In the event of any stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like
affecting shares of HMA Common Stock between the date of this Agreement and the
Effective Time, the Merger Consideration will be appropriately adjusted so that
each Record Holder will receive in the Merger for his Exchanged Shares the
amount of HMA Common Stock he would have been entitled to receive if the
Effective Time had been immediately prior to such event. As of the Effective
Time, and except as otherwise provided by Sections 3.2(a), 3.2(c) and 3.2(e),
all shares of River Oaks Common Stock will no longer be outstanding and will
automatically be cancelled and retired and will cease to exist, and each holder
of a certificate representing any such shares will cease to have any rights with
respect thereto, except the right to receive the Merger Consideration therefor,
without interest, upon the surrender of such certificate in accordance with
Section 3.3.
(E) SHARES OF DISSENTERS. Any issued and outstanding shares of River
Oaks Common Stock held by a Dissenter will not be converted as provided by
Section 3.2(d) but will from and after the Effective Time represent only the
right to receive such consideration as may be determined to be due to such
Dissenter pursuant to article 13 of the MBCA; provided, however, that shares of
River Oaks Common Stock outstanding immediately prior to the Effective Time and
held by a Dissenter who, after the Effective Time, withdraws his demand for
payment or loses his dissenters' right, in either case as provided by article 13
of the MBCA, will be deemed to be converted, as of the Effective Time, into the
right to receive the Merger Consideration, without interest. Prior to the
Effective Time, River Oaks will give HMA prompt notice of any notices or demands
by Dissenters under article 13 of the MBCA and HMA will have the right to
participate in all negotiations and proceedings with respect to any such notices
or demands. River Oaks will not, except with the prior written consent of HMA,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. Payment to Dissenters will be made only as required by
article 13 of the MBCA and will be made by the Surviving Corporation from its
own separate funds, unless HMA elects, in its discretion, to
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provide all or any portion thereof.
3.3 EXCHANGE OF CERTIFICATES.
(A) EXCHANGE AGENT. HMA will deposit with the Exchange Agent, for
the benefit of the holders of Exchanged Shares and for exchange in accordance
with this Article 3, through the Exchange Agent, certificates representing the
aggregate Merger Consideration for the Exchanged Shares (collectively, the
"EXCHANGE FUND"). HMA will make such deposit as soon as reasonably necessary to
permit the Exchange Agent to perform its obligations hereunder, but in no event
will such deposit be made later than the Closing Date.
(B) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each Record Holder (as of the
close of business on the third business day preceding the Closing Date) of one
or more certificates which immediately prior to the Effective Time represented
any Exchanged Shares (the "CERTIFICATES"): (i) a letter of transmittal (which
will specify that delivery of the Certificates will be effected, and risk of
loss and title to the Certificates will pass, only upon delivery of the
Certificates to the Exchange Agent, and will be in such form and have such other
provisions as HMA may reasonably specify); and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of HMA Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by HMA, together with such letter of transmittal, duly executed, the
holder of such Certificate will be entitled to receive in exchange therefor one
or more certificates representing the Merger Consideration which such holder has
the right to receive pursuant to the provisions of this Article 3, together with
a check representing the cash, if any, referred to in Sections 3.3(c) and
3.3(d), and the Certificate so surrendered will forthwith be cancelled. HMA
will pay any transfer or similar taxes required by reason of the issuance of a
certificate representing shares of HMA Common Stock provided that such
certificate is issued in the name of the Record Holder of the Certificate
surrendered in exchange therefor. HMA will not pay or be responsible for any
transfer or other tax if the obligation to pay such tax is solely that of the
shareholder or if payment of any such tax by HMA would cause the Merger to fail
to qualify as a tax-free reorganization under section 368(a)(2)(E) of the Code.
In the event of a transfer of ownership of River Oaks Common Stock which is not
registered in the transfer records of River Oaks, one or more certificates
representing the proper amount of Merger Consideration may be issued to the
transferee if the Certificate representing such River Oaks Common Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. In the case of any lost, stolen or destroyed
Certificate, the holder thereof may be required, as a condition precedent to
delivery to him of the Merger Consideration, to deliver to HMA such affidavit
and personal indemnity as HMA may reasonably request with respect to the
Certificate alleged to have been lost, stolen or destroyed. Until surrendered
as contemplated by this Section 3.3, each Certificate will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration and the cash, if any, referred to in Sections
3.3(c) and 3.3(d). To the extent that a Certificate represents any Qualifying
Shares, the Exchange Agent will issue a replacement certificate therefor which
represents only Qualifying Shares.
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(C) NO FRACTIONAL SHARES. No fractional share of HMA Common Stock
will be issued in the Merger. Each Record Holder will be entitled to receive in
lieu of any fractional share of HMA Common Stock to which he otherwise would
have been entitled (after taking into account all Exchanged Shares then held of
record by him) cash, payable by check, computed on the basis of the closing
sales price (or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices, regular way) of HMA Common
Stock on the NYSE on the first Trading Day after the Effective Time. HMA will
make available to the Exchange Agent cash in an amount sufficient to make all
such payments in lieu of fractional shares.
(D) DIVIDENDS AND DISTRIBUTIONS. Holders of Certificates will not be
entitled to dividends or other distributions with respect to HMA Common Stock
having a record date prior to the Effective Time. No dividends or other
distributions with respect to HMA Common Stock having a record date after the
Effective Time will be paid to the Record Holder of any unsurrendered
Certificate until such holder surrenders such Certificate (or provides the
affidavit and indemnity referred to in Section 3.3(b)). Subject to the effect
of applicable Legal Requirements, following surrender of any such Certificate
(or provision of such affidavit and indemnity), there will be paid to the record
holder of shares of HMA Common Stock issued in exchange therefor: (i) at the
time of such surrender, the amount of any dividends or other distributions
having a record date after the Effective Time theretofore paid with respect to
such shares of HMA Common Stock, without interest; and (ii) at the appropriate
payment date, the amount of any dividends or other distributions having a record
date after the Effective Time but prior to surrender, and a payment date
subsequent to surrender, payable with respect to such shares of HMA Common
Stock, without interest.
(E) NO FURTHER OWNERSHIP RIGHTS IN RIVER OAKS COMMON STOCK. All
shares of HMA Common Stock issued upon the surrender for exchange of shares of
River Oaks Common Stock in accordance with the terms hereof (including any cash
paid pursuant to Sections 3.3(c) or 3.3(d)) will be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of River Oaks
Common Stock, and there will be no further registration of transfers of the
shares of River Oaks Common Stock (other than the Qualifying Shares and shares
held directly or indirectly by HMA) after the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or its
transfer agent for any reason, such Certificates will be cancelled and exchanged
as provided by this Article 3.
(F) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to holders of Certificates at the end of six months
after the Effective Time will be delivered to HMA upon demand by HMA, and any
holders of Certificates who have not theretofore complied with this Article 3
will thereafter look only to HMA for payment of their claim for Merger
Consideration and the cash, if any, referred to in Sections 3.3(c) and 3.3(d).
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(G) NO LIABILITY. Neither HMA, River Oaks nor the Surviving
Corporation will be liable to any holder of shares of River Oaks Common Stock or
HMA Common Stock, as the case may be, for the Merger Consideration (and cash in
lieu of fractional shares and dividends or distributions with respect thereto,
if any) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF RIVER OAKS
River Oaks represents and warrants to HMA and to Sub, as of the date hereof
and as of the Closing Date, as follows:
4.1 ORGANIZATION, STANDING AND POWER. Each of River Oaks and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the State of Mississippi. Each of River Oaks and its
Subsidiaries has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified and in good standing to do business in each other jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary. River Oaks has heretofore made
available to HMA true, correct and complete copies of the articles of
incorporation and bylaws, as currently in effect, of River Oaks and each of its
Subsidiaries, and has made available to HMA true, correct and complete minute
books and stock records of River Oaks and each of its Subsidiaries. Set forth
in Schedule 4.1 is a complete list of: (a) the Subsidiaries of River Oaks and
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its ownership percentage thereof; (b) the jurisdictions in which the nature of
the business of River Oaks or any of its Subsidiaries, or the ownership or
leasing of their properties, makes qualification as a foreign corporation
necessary; and (c) the joint ventures, partnerships and corporations (other than
Subsidiaries) in which River Oaks or any of its Subsidiaries has an equity
interest, and the ownership percentage thereof in each such entity. Except as
set forth in Schedule 4.1, all of the outstanding capital stock of, or other
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ownership interests in, each Subsidiary of River Oaks is owned directly or
indirectly by River Oaks, free and clear of all title defects, liens,
encumbrances and restrictions.
4.2 CAPITAL STRUCTURE. The authorized capital stock of River Oaks
consists entirely of 10,000,000 shares of River Oaks Common Stock. On the date
hereof: (a) 1,000,415 shares of River Oaks Common Stock are issued and
outstanding; (b) except for this Agreement and except for the stock grants and
options, representing the right to acquire an aggregate 10,750 shares, set forth
in Schedule 4.2, there are no options, warrants, calls, rights, claims,
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commitments or Contracts to which River Oaks or any of its Subsidiaries is a
party or by which any of them is bound obligating River Oaks or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or any Voting Debt of River Oaks or any
of its Subsidiaries, or obligating River Oaks or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right or Contract
(collectively, "STOCK RIGHTS"); and (c) except for an aggregate 10,750 shares
subject to the outstanding Stock Rights set forth in Schedule 4.2, no shares of
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River Oaks Common Stock are or will be reserved for issuance for any purpose.
On the Closing Date and immediately prior to the Effective Time: (i) 1,009,040
shares of River Oaks Common Stock will be issued and outstanding; (ii) except
for
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this Agreement, no Person will have any Stock Rights; and (iii) no shares of
River Oaks Common Stock will be reserved for issuance for any purpose. On the
date hereof, on the Closing Date and immediately prior to the Effective Time:
(A) no shares of River Oaks Common Stock are or will be held by River Oaks in
its treasury; (B) no shares of River Oaks Common Stock are or will be held by
any of River Oaks' Subsidiaries; (C) no Voting Debt is or will be issued or
outstanding; (D0 all outstanding shares of River Oaks Common Stock are and will
be validly issued, fully paid and non-assessable; and (E) no shares of River
Oaks Common Stock are or will be subject to preemptive rights.
4.3 AUTHORITY, ETC. River Oaks has all requisite corporate power and
authority to enter into this Agreement and, subject to Shareholder Approval, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of River
Oaks, subject to Shareholder Approval. The Board of Directors of River Oaks has
duly adopted resolutions which (a) approve and adopt this Agreement and the
consummation of the Merger and (b) recommend that this Agreement and the
consummation of the Merger be approved by the holders of River Oaks Common
Stock. This Agreement has been duly executed and delivered by River Oaks and,
subject to Shareholder Approval, constitutes the valid and binding obligation of
River Oaks, enforceable in accordance with its terms, except as the
enforceability hereof may be limited by (i) bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally, and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.4 NO CONFLICT. The execution and delivery of this Agreement by River
Oaks does not, and the consummation of the transactions contemplated hereby and
the fulfillment of the obligations and undertakings hereunder will not, result
in any Violation of any provision of: (i) the articles of incorporation or
bylaws of River Oaks or any of its Subsidiaries; (b) any Contract applicable to
River Oaks, any of its Subsidiaries or any of their respective assets; or (c)
any Legal Requirement applicable to River Oaks, any of its Subsidiaries or any
of their respective assets; except, in the case of Contracts and Legal
Requirements, for Violations which could not reasonably be expected,
individually or in the aggregate, to have any adverse effect on the validity or
enforceability of this Agreement or a material adverse effect the operations or
financial condition of River Oaks and its Subsidiaries taken as a whole. Except
as set forth in Schedule 4.4, no consent, approval, order or authorization of,
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or registration, declaration or filing with, any Governmental Entity is required
by or with respect to River Oaks or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by River Oaks or the consummation
by River Oaks of the transactions contemplated hereby, except for: (i) the
filing of a premerger notification report by River Oaks under the HSR Act; (ii)
the filing by the Secretary of State of the State of Mississippi as contemplated
by Section 2.1; (iii) those filings required by Section 4.8; and (iv) such
consents, approvals, orders, authorizations or registrations the failure to
obtain which could not reasonably be expected, individually or in the aggregate,
to have any adverse effect on the validity or enforceability of this Agreement
or a material adverse effect on the operations or financial condition of River
Oaks and its Subsidiaries taken as a whole.
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4.5 FINANCIAL STATEMENTS. River Oaks has heretofore made available to HMA
true, correct and complete copies of its audited consolidated financial
statements for the years ended April 30, 1997, 1996 and 1995, and its unaudited
consolidated financial statements for the quarter ended July 31, 1997, together
with all notes thereto (collectively, the "FINANCIAL STATEMENTS"). The audited
Financial Statements and, subject to normal year-end adjustments, lack of
footnotes and other presentation items, the unaudited Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of River Oaks and its consolidated Subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended.
4.6 NO ADDITIONAL MATERIAL LIABILITIES. Except as set forth in the
Financial Statements or in Schedule 4.6: (a) neither River Oaks nor any of its
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Subsidiaries had, as of July 31, 1997, any material liabilities, whether
accrued, absolute, contingent or otherwise, of a kind or character which would
be required (in accordance with generally accepted accounting principles
consistently applied) to be reflected in the consolidated balance sheet of River
Oaks, including any such liabilities related to any facility previously owned,
leased or operated; and (b) since July 31, 1997, except for trade payables
incurred in the ordinary course of business, neither River Oaks nor any of its
Subsidiaries has incurred any such liabilities. All liabilities of River Oaks
and its Subsidiaries incurred since July 31, 1997 will have been properly
recorded in their books and records in accordance with the accounting policies
and procedures of River Oaks consistently applied.
4.7 INFORMATION SUPPLIED. The information supplied or to be supplied by
River Oaks for inclusion in the registration statement filed with the SEC by HMA
in connection with the issuance of shares of HMA Common Stock in the Merger,
including all amendments thereto (the "REGISTRATION STATEMENT"), will, at the
time the Registration Statement becomes effective under the Securities Act, not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make such information not
misleading. The Proxy Statement will, on the date it is mailed to River Oaks'
shareholders and at the time of the Meeting, not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, River Oaks makes no representation or warranty with respect to: (a)
any information contained in the Proxy Statement which was furnished by HMA; (b)
the adequacy or completeness of the opinion delivered by the Financial Advisor
and contained in the Proxy Statement, except that River Oaks knows of no facts
not reported to the Financial Advisor which would materially adversely affect
such opinion; or (c) the opinion of Ernst & Young LLP forming part of the
audited financial statements contained in the Proxy Statement.
4.8 RIVER OAKS PERMITS; COMPLIANCE WITH LEGAL REQUIREMENTS.
(A) River Oaks and its Subsidiaries duly hold all licenses, permits,
certificates, registrations, accreditations, orders, franchises, authorizations
and approvals and, to the knowledge of River Oaks, all consents, variances and
exemptions, of any Governmental Entity which are necessary for the operation of
the Facilities as currently operated, the conduct of the
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business of River Oaks and its Subsidiaries and utilization of the Real
Property, including valid licenses from the State of Mississippi to operate a
110-bed general acute care hospital and a 111-bed general acute care hospital
(collectively, the "RIVER OAKS PERMITS"). Schedule 4.8 contains a complete and
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accurate list of all River Oaks Permits, all of which are in full force and
effect. Each of River Oaks and its Subsidiaries is in compliance with the terms
of each of the River Oaks Permits, except for failures of compliance which could
not reasonably be expected, individually or in the aggregate, to have a material
adverse effect the operations or financial condition of River Oaks and its
Subsidiaries taken as a whole. No action is pending or, to the knowledge of
River Oaks, threatened or recommended by any Governmental Entity to revoke,
withdraw or suspend any River Oaks Permit.
(B) The businesses of each of River Oaks and its Subsidiaries are
being, and since April 30, 1995 have been, conducted in compliance with all
Legal Requirements, except for such Violations that could not reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the operations or financial condition of River Oaks and its Subsidiaries taken
as a whole. To the knowledge of River Oaks, no investigation or review by any
Governmental Entity with respect to River Oaks or any of its Subsidiaries is
pending or threatened, nor has any Governmental Entity indicated an intention to
conduct the same.
(C) With respect to each of the Facilities, River Oaks and its
Subsidiaries are qualified for participation in the Medicare and Medicaid
programs, have current and valid provider agreements with the Medicare and
Medicaid programs and, except as set forth in Schedule 4.8, are in compliance
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with all conditions and standards of participation in such programs, except for
failures of compliance which could not reasonably be expected, individually or
in the aggregate, to have a material adverse effect on the operations or
financial condition of River Oaks and its Subsidiaries taken as a whole, and
have received all health planning approvals necessary for capital reimbursement
on their assets. No action is pending or, to the knowledge of River Oaks,
threatened or recommended by any Governmental Entity to terminate or decertify
any participation of any of the Facilities in the Medicare and Medicaid programs
nor, to the knowledge of River Oaks, has there been any decision not to renew
any provider agreement related to any Facility. With the exception of
deficiencies which are currently the subject of a waiver and those which are the
subject of a plan of correction as set forth on Schedule 4.8, there are no
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outstanding deficiencies or work orders of a material nature of any Governmental
Entity having jurisdiction over any of the Facilities requiring conformity to
any Legal Requirement pertaining to the Facilities, including the Medicaid and
Medicare programs. Complete copies of the most recent survey reports and any
waivers of deficiencies, plans of correction and any other investigation reports
issued with respect to any of the Facilities have been provided to HMA.
(D) All cost reports required to be filed by River Oaks or its
Subsidiaries with respect to the Facilities under Titles XVIII and XIX of the
Social Security Act, or any other applicable Legal Requirements or requirements
of private providers have been prepared and filed in accordance with all Legal
Requirements, and copies of all such reports filed since January 1, 1991 have
been supplied to HMA. River Oaks has paid or made provision to pay through
proper recordation of any net liability all Notices of Program Reimbursement
received from the Medicare program and tentative settlements for periods ended
prior to April 30, 1997 and any similar
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obligations with respect to the Medicaid program.
(E) River Oak and its Subsidiaries are accredited by the JCAHO with
respect to each of the Facilities, and none of the Facilities is conditionally
accredited. The date of each of the Facilities' surveys by the JCAHO within the
past five years, and any statements of deficiencies and plans of correction
related to such surveys, are set forth in Schedule 4.8. With the exception of
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deficiencies which are currently the subject of a waiver and those which are the
subject of a plan of corrections as set forth in Schedule 4.8, there are no
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outstanding deficiencies of a material nature under the JCAHO conditions,
standards and requirements for accreditation. Each of the Facilities is in
material compliance with all conditions, standards and requirements for
accreditation by the JCAHO.
(F) Schedule 4.8 includes a true, correct and complete statement of:
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(i) the bed categories for which each Facility is, and immediately prior to
Closing will be, licensed and/or qualified for Medicare and Medicaid; (ii) the
number of beds in each such category; (iii) the number of beds in each such
category which are, and immediately prior to Closing will be, available for use
in such Facility; and (iv) the number of patients, as of stated date reasonably
proximate to the date hereof, admitted in each Facility who (A) qualify for
Medicare, (B) qualify for Medicaid and (C) qualify for neither Medicare nor
Medicaid. Except as set forth in Schedule 4.8, immediately prior to Closing, no
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beds will be in use at any Facility in any category for which such Facility is
not licensed. River Oaks has no knowledge that the number of licensed beds in
any category may be reduced by any Governmental Entity.
(g) Schedule 4.8 includes a true, correct and complete statement of
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all ancillary patient services that are, and immediately prior to Closing will
be, offered by each Facility, the licensed capacity of each service (if
applicable) and the number of available beds (if applicable). Neither River
Oaks nor any of its Subsidiaries has received notice that any Facility will not
be properly licensed or certified to provide any such service prior to or upon
the consummation of the Merger.
4.9 FACILITIES; REAL PROPERTY. Schedule 4.9 is a true, correct and
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complete list of the Facilities and a true, correct and complete description of
all real property owned, leased, operated or used by River Oaks or any of its
Subsidiaries (collectively, the "REAL PROPERTY"). River Oaks has heretofore
delivered to HMA true, correct and complete original or certified copies of all
existing title insurance policies, exception documents, title reports and
surveys with respect to each parcel of the Real Property.
4.10 ASSETS; TITLE; ABSENCE OF LIENS AND ENCUMBRANCES.
(A) River Oaks and its Subsidiaries collectively own or validly lease
all properties and assets, real, personal and mixed, tangible and intangible,
comprising and employed in the operation of or associated with the Facilities.
Except for leased assets, each of River Oaks and its Subsidiaries has good and
marketable title to all of the Real Property and all of their respective other
assets, including those reflected in the consolidated balance sheet of River
Oaks as of July 31, 1997, free and clear of all title defects, liens, pledges,
security interests, claims,
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encumbrances and restrictions except, with respect to all such assets, the
following encumbrances (collectively, "PERMITTED ENCUMBRANCES"): (i) mortgages
and liens securing debt reflected as liabilities in the Financial Statements;
(ii) mechanics', carriers', workers', repairmen's, statutory or common law liens
being contested in good faith and by appropriate proceedings, which contested
liens are listed in Schedule 4.10(a); (iii) liens for current Taxes not yet due
----------------
and payable which have been fully reserved against, or which, if due, are being
contested in good faith and by appropriate proceedings, which contested liens
are listed in Schedule 4.10(a); and (iv) such imperfections of title, easements,
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encumbrances and other liens, if any, as are set forth in the deeds or leases
covering the Real Property or the surveys heretofore delivered to HMA or which
are not substantial in character, amount or extent, and do not, singly or in the
aggregate, materially detract from the value, or interfere with the present use,
of the properties and assets subject thereto or affected thereby or otherwise
materially impair the operations of River Oaks or any of its Subsidiaries as
presently conducted.
(B) All leases pursuant to which River Oaks or any of its
Subsidiaries leases the Real Property or personal property are valid, binding
and enforceable in accordance with their respective terms, and there is not,
under any of such leases, any existing default on the part of River Oaks or any
of its Subsidiaries or, to the knowledge of River Oaks, any existing default on
the part of any other party thereto, or any event which, with notice or lapse of
time or both, would constitute such a default. Schedule 4.10(b) sets forth a
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true, correct and complete list of all such leases.
(C) Except as set forth in Schedule 4.10(c), no Real Property is
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located within or adjacent to a flood or lakeshore erosion hazard area, fresh
water wetlands as defined under applicable Legal Requirements, coastal zone
management area or any other parcel protected, regulated or controlled by any
Legal Requirements. Neither the whole nor any portion of any parcel of the Real
Property has been condemned, requisitioned or otherwise taken by any public
authority, no notice of any such condemnation, requisition or taking has been
received by River Oaks or any of its Subsidiaries and, to River Oaks' knowledge,
no such condemnation, requisition or taking is threatened or contemplated. River
Oaks has no knowledge of any public improvements which may result in special
assessments against or otherwise affecting the Real Property.
4.11 COVENANTS AND RESTRICTIONS; ZONING. The Real Property currently
conforms to and complies with, all covenants, conditions, restrictions,
reservations, land use, zoning, health, fire, water and building codes and other
applicable Legal Requirements, except for failures of conformance or compliance
which could not reasonably be expected, individually or in the aggregate, to
have a material adverse effect the operations or financial condition of River
Oaks and its Subsidiaries taken as a whole, and no such Legal Requirements
prohibit or limit or condition the use or operation of the Facilities or the
Real Property as currently used and operated. There is no pending or, to River
Oaks' knowledge, contemplated, threatened or anticipated change in the zoning
classification of any of the Facilities or any portion thereof.
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4.12 CONDITION OF FACILITIES. Each of the Facilities is suitable for its
current and intended use and is in proper condition for such use. To River Oaks'
knowledge, except for the items set forth in Schedule 4.12: (a) each of the
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Facilities is in good state of repair and condition, ordinary wear and tear
excepted; (b) there are no dangerous conditions or defects existing upon or in
any of the Facilities (except those attendant in the operation of a hospital
facility in the ordinary course of business); (c) there are no structural
defects in any Facility or Real Property that would adversely affect the
operation of such Facility or Real Property as presently conducted; and (d)
there are no life safety code deficiencies or other survey requirements which
are not subject to waiver or currently the subject of a plan of correction which
is being implemented. Except as set forth in Schedule 4.12, all gas, electric
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power, storm sewer, sanitary sewer, water and other utility services necessary
for the current operation and use of each Facility are available at the
boundaries of each Facility and when necessary direct connection has been made
to all such utility facilities. The Facilities have access to public roads
sufficient for River Oaks and its Subsidiaries to operate their business and, to
River Oaks' knowledge, there are no plans, studies or efforts by any
Governmental Entity that would modify or realign any street or highway adjacent
to any of the Facilities.
4.13 EQUIPMENT; INVENTORY. River Oaks has heretofore delivered to HMA a
depreciation schedule listing, as of April 30, 1997, all of the equipment owned
by River Oaks or any of its Subsidiaries. Each Facility contains all equipment,
inventories and other personal property in sufficient condition and in
quantities (of not less than that required by applicable Governmental Entities)
to operate such Facility at the capacity for which it is currently operated.
4.14 ENVIRONMENTAL MATTERS. River Oaks has heretofore conducted a Phase I
environmental assessment of the Real Property (the "ENVIRONMENTAL ASSESSMENT")
and has provided the same to HMA and its counsel. Except as disclosed in
Schedule 4.14 or the Environmental Assessment: (a) none of the Facilities or
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the Real Property is in Violation of any Environmental Laws, except for
Violations which could not reasonably be expected, individually or in the
aggregate, to have a material adverse effect the operations or financial
condition of River Oaks and its Subsidiaries taken as a whole; (b) neither River
Oaks nor any of its Subsidiaries has Released any Hazardous Substances in a
manner that has Violated any Environmental Laws and, to River Oaks' knowledge,
there has been no such Release by any previous owner or operator of any of the
Real Property; (c) none of the Facilities or the Real Property has (i) ever had
any underground storage tanks, as defined in 42 U.S.C. (S)(S) 6991(1)(A)(I),
whether empty, filled or partially filled with any substance, or (ii) any
asbestos or any material that contains any hydrated mineral silicate, including
chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite,
whether friable or non-friable; (d) neither River Oaks, any of its Subsidiaries
nor any of the Facilities has received any request for information, notice or
order alleging that it may be a potentially responsible party under any
Environmental Laws for the investigation or remediation of a Release or
threatened Release of Hazardous Substances; (e) no event has occurred with
respect to any of the Facilities or the Real Property which, with the passage of
time or the giving of notice, or both, would constitute a Violation of or non-
compliance with any applicable Environmental Law or River Oaks Permit; and (f)
there is no lien, notice, litigation or, to River Oaks' knowledge, threat of
litigation relating to an alleged unauthorized Release of any Hazardous
Substance on, about or beneath the Real Property (or any portion thereof), or
the migration of any Hazardous Substance to or from
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property adjoining or in the vicinity of the Real Property, or alleging any
obligation under Environmental Laws. River Oaks will immediately notify HMA
should River Oaks, any of its Subsidiaries or any of the Facilities receive any
such request for information, notice or order, or become aware of any lien,
notice, litigation or threat of litigation relating to an alleged unauthorized
Release of any Hazardous Substance on, about or beneath the Real Property (or
any portion thereof) or any other environmental contamination or liability with
respect to the Real Property (or any portion thereof). River Oaks and its
Subsidiaries hold all River Oaks Permits required under any Environmental Law in
connection with the use of the Real Property or the operation of the Facilities.
4.15 EMPLOYEE PLANS.
(A) Schedule 4.15 lists all employment agreements, all union, guild,
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labor or collective bargaining agreements, all employee benefit plans, and all
other arrangements or understandings, explicit or implied, written or oral,
whether for the benefit of one or more Persons, relating to employment,
compensation or benefits, to which River Oaks or any of its Subsidiaries is a
party or is obligated to contribute, or by which River Oaks or any of its
Subsidiaries is bound, including: (i) all employee benefit plans within the
meaning of section 3(3) of ERISA; (ii) all deferred compensation, bonus, stock
option, stock purchase, stock incentive, stock appreciation rights, restricted
stock, severance or incentive compensation plans, agreements or arrangements;
(iii) plans, agreements or arrangements providing for "fringe benefits" or
perquisites to employees, officers, directors or agents; and (iv) all
employment, consulting, termination or indemnification agreements (collectively,
"EMPLOYEE PLANS"). River Oaks has delivered to or made available for inspection
by HMA true, correct and complete copies of all Employee Plans, all related
summary plan descriptions, the most recent determination letters received from
the IRS, Form 5500 Annual Reports for the last three years (including all
attachments thereto), the most recent financial reports and summary annual
reports and, where applicable, summary descriptions of any Employee Plans not
otherwise reduced to writing. Except as set forth on Schedule 4.15, there are
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no negotiations, demands or proposals that are pending or have been made since
the respective dates of the Employee Plans which concern matters now covered, or
that would be covered, by any Employee Plan.
(B) River Oaks and each of its Subsidiaries and each of the Employee
Plans have complied and are in compliance in all material respects with the
applicable provisions of the Code, ERISA and all other applicable Legal
Requirements. River Oaks and each of its Subsidiaries have performed all of
their obligations under all of the Employee Plans, including the full payment
when originally due of all amounts required to be made as contributions thereto
or otherwise.
(C) With respect to each Employee Plan that is an "employee benefit
plan" within the meaning of section 3(3) of ERISA, or a "plan" within the
meaning of section 4975(e)(1) of the Code, no transaction has occurred which is
prohibited by section 406 of ERISA or which could give rise to a material
liability under section 4975 of the Code or sections 502(i) or 409 of ERISA.
None of the Employee Plans nor any fiduciary thereof has been the direct or
indirect subject of an audit, investigation or examination by any Governmental
Entity within the last five
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years. There are no actions, suits, penalties or claims (other than routine
undisputed claims for benefits) pending or threatened against or arising our of
any of the Employee Plans or the respective assets thereof and, to the knowledge
of River Oaks, no facts exist which could give rise to any such actions, suits,
penalties or claims which might have a material adverse effect on any Employee
Plan or on River Oaks and its Subsidiaries taken as a whole.
(D) Each Employee Plan that is intended to qualify under section
401(a) of the Code is so qualified and has received a favorable determination
letter from the IRS. There have been no developments since the respective dates
of such determination letters that would create a material risk of causing the
loss of qualification of the subject Employee Plan.
(E) Neither River Oaks nor any of its Subsidiaries maintains or has
at any time maintained, or has or could have any liability with respect to, an
Employee Plan subject to Title IV of ERISA. No Employee Plan is or ever has been
a "multiemployer plan" within the meaning of section 3(37) of ERISA. Neither
River Oaks nor any of its Subsidiaries has or could have any liability with
respect to a "multiemployer plan" as defined under section 3(37) of ERISA. No
Employee Plan now holds or has heretofore held any stock or other securities
issued by River Oaks or any of its Subsidiaries. Neither River Oaks nor any of
its Subsidiaries has established or contributed to, is required to contribute to
or has or could have any liability with respect to any "voluntary employees'
beneficiary association" within the meaning of section 501(c)(9) of the Code,
any "welfare benefit fund" within the meaning of section 419 of the Code, any
"qualified asset account" within the meaning of section 419A of the Code or any
"multiple employer welfare arrangement" within the meaning of section 3(40) of
ERISA.
(F) All group health plans of River Oaks and its Subsidiaries have
been operated in compliance with the group health plan continuation coverage
requirements of sections 601 through 608 of ERISA and section 4980B of the Code,
Title XXII of the Public Health Service Act and the provisions of the Social
Security Act, to the extent such requirements are applicable. Except to the
extent required under section 4980B of the Code, neither River Oaks nor any of
its Subsidiaries provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired employee or any former employee.
(G) No provision of any Employee Plan restricts the ability of HMA or
the Surviving Corporation to terminate the future accruals of obligations
thereunder after the Effective Time; provided, however, that no such
representation or warranty is made with respect to liabilities already accrued
at the time of such termination.
(H) Except as set forth in Schedule 4.15, each Form 5500 required to
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be filed by River Oaks or any of its Subsidiaries has been filed in accordance
with all applicable Legal Requirements.
(I) There has been no act or omission by River Oaks or any of its
Subsidiaries that has given rise or may give rise to fines, penalties, Taxes or
related charges under sections 4980D, 502(c) or 502(l) of ERISA, Chapters 43, 46
or 47 of Subtitle D of the Code, or Chapter 68 of Subtitle F of the Code.
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(J) Solely for purposes of this Section 4.15, all references to River
Oaks or any of its Subsidiaries includes any Person which, together with River
Oaks or any of its Subsidiaries, is considered an affiliated organization within
the meaning of sections 414(b), 414(c), 414(m) or 414(o) of the Code or sections
3(5) or 4001(b)(1) of ERISA.
4.16 EMPLOYMENT MATTERS. Except as disclosed in Schedule 4.16: (a) each
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of River Oaks and its Subsidiaries is in compliance in all material respects
with all Legal Requirements respecting employment and employment practices,
terms and conditions of employment, wages and hours; (b) neither River Oaks nor
any of its Subsidiaries is engaged in any unfair labor or unlawful employment
practice; (c) there is no unlawful employment practice discrimination charge
pending before the Equal Employment Opportunity Commission or any state
"referral agency" recognized thereby; (d) there is no unfair labor practice
charge or complaint against River Oaks or any of its Subsidiaries pending before
the National Labor Relations Board; (e) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the knowledge of River Oaks,
threatened against or involving or affecting River Oaks, any of its Subsidiaries
or any of the Facilities, and no representation question exists respecting any
of their respective employees; and (fi no grievance or arbitration proceeding is
pending against River Oaks or any of its Subsidiaries and no written claim
therefor exists.
4.17 MATERIAL AGREEMENTS. Schedule 4.17 contains a true, correct and, to
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the knowledge of River Oaks, complete list of all Contracts, not listed on any
other Schedule, to which River Oaks or any of its Subsidiaries or any of the
Facilities is a party which are not cancelable by River Oaks or its Subsidiaries
upon notice of 30 days or less (collectively, whether listed in Schedule 4.17 or
in any other Schedule, the "MATERIAL AGREEMENTS"). True, correct and complete
copies of all Material Agreements, and true, correct and complete summaries of
all Material Agreements which have not been reduced to writing, have been
delivered or made available to HMA. Each Material Agreement constitutes the
valid and legally binding obligation of River Oaks or its Subsidiary, as the
case may be, and is enforceable against River Oaks or its Subsidiary, as the
case may be, in accordance with its terms. To River Oaks' knowledge, each
Material Agreement constitutes the valid and legally binding obligation of the
other party thereto and is enforceable against such party in accordance with its
terms. Each of the Material Agreements constitutes the entire agreement between
the respective parties thereto relating to the subject matter thereof. To River
Oaks' knowledge, in all material respects all obligations required to have been
performed under the terms of the Material Agreements 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 under any of the Material
Agreements, and each of the Material Agreements is in full force and effect
without default on the part of any party thereto. Except as set forth in
Schedule 4.17, each of the Material Agreements: (a) is with a party who is
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neither a director, officer, employee or Affiliate of River Oaks, nor a member
of the medical staff of the Facilities nor, to the knowledge of River Oaks, an
Affiliate of any of the foregoing; (b) was entered into on an arm's-length basis
in the ordinary course of business; and (c) has not been amended. Except as
noted in Schedule 4.17, none of the Material Agreements requires consent for or
-------------
is otherwise affected by the Merger.
4.18 LITIGATION. Except as disclosed in Schedule 4.18, there is no action,
-------------
suit, pro-
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ceeding, arbitration or investigation pending or, to the knowledge of River
Oaks, threatened against or affecting River Oaks, any of its Subsidiaries or any
Facility (or any of their respective officers or directors in connection with
the business of River Oaks or any of its Subsidiaries), which if adversely
determined could reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the operations or financial condition of River
Oaks and its Subsidiaries taken as a whole, or on the Medicare or Medicaid
provider status of any Facility, nor is there any judgment, injunction, decree,
rule or order of any Governmental Entity or arbitrator outstanding against River
Oaks, any of its Subsidiaries or any Facility which could reasonably be
expected, individually or in the aggregate, to have such an effect.
4.19 TAXES. River Oaks and its Subsidiaries have filed all tax returns
required to be filed by any of them and have paid all Taxes required to be paid
as shown on such returns. The Financial Statements reflect, and the financial
statements of River Oaks at the Closing Date will reflect, an adequate accrual,
based on the facts and circumstances existing as of the respective dates
thereof, for all Taxes payable by River Oaks and its Subsidiaries (whether or
not shown in any return) through the respective dates thereof. All such filed
tax returns are in all material respects correct, complete and accurate.
Neither River Oaks nor any of its Subsidiaries has taken, plans or intends to
take any action which would result in any liability to River Oaks or any of its
Subsidiaries for Taxes as a result of the transactions contemplated by this
Agreement. To River Oaks' knowledge there are no material deficiencies for any
Taxes proposed, asserted or assessed against River Oaks or any of its
Subsidiaries. The federal income tax returns of River Oaks and its Subsidiaries
consolidated in such returns have been examined by and settled with the IRS, or
the statute of limitations with respect to such years has expired, for all
fiscal years through the fiscal year ended April 30, 1994, except with respect
to claims for refund.
4.20 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Schedules or in the Financial Statements and except as contemplated by this
Agreement, since April 30, 1997, River Oaks and its Subsidiaries have conducted
their respective businesses only in the ordinary and usual course, and there has
not been: (a) any material adverse change in the operations, assets or
financial condition of River Oaks or any of its Subsidiaries; (b) any material
damage, destruction, loss or casualty to any assets of River Oaks or any of its
Subsidiaries, whether or not covered by insurance, which assets are material to
the ongoing operations or business of River Oaks or any of its Subsidiaries as
presently conducted; (c) any sale, assignment, transfer or disposition of any
item of plant, property or equipment of the Facilities having a net book value
in excess of $10,000 (other than supplies), except in the ordinary course of
business; (d) any material change in any method of accounting or accounting
practice by River Oaks or any of its Subsidiaries; (e) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of River Oaks' capital stock; or (f) any
transaction, commitment, dispute or other event or condition (not affecting the
hospital industry as a whole or the hospital industry in the State of
Mississippi) individually or in the aggregate having or which, insofar as
reasonably can be foreseen, in the future is reasonably likely to have, a
material adverse effect on the operations, assets or financial condition of
River Oaks and its Subsidiaries, or on the Medicare or Medicaid provider status
of any Facility.
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4.21 BOOKS AND RECORDS. River Oaks has provided HMA with complete access to
all of the books and records of River Oaks, its Subsidiaries and the Facilities.
All of such books and records are true, correct and complete in all material
respects, and are and have been maintained in substantial compliance with all
applicable Legal Requirements. Without limiting the generality of the foregoing:
(a) River Oaks and its Subsidiaries have maintained continuous ownership, care,
custody and control of all patient medical records of the Facilities in
compliance with all Legal Requirements; (b) all such patient medical records
have been maintained for at least six years unless a longer retention period is
required by Legal Requirements; and (c) River Oaks and its Subsidiaries have
maintained the security and confidentiality of all patient medical records as
required by Legal Requirements.
4.22 SPECIAL FUNDS. Neither River Oaks nor any of its Subsidiaries is
subject to any liability in respect of amounts received by any of them or others
for the purchase or improvement of any assets or any part thereof under
restricted or conditioned grants or donations, including monies received under
the Public Health Service Act, 42 U.S.C. (S)(S)291 et seq.
4.23 MEDICAL STAFF MATTERS. River Oaks has heretofore provided to HMA true,
correct and complete copies of the bylaws and rules and regulations of the
medical staff of the Facilities. Except as set forth in Schedule 4.23, there
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are no pending or, to River Oaks' knowledge, 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.
4.24 INSURANCE. River Oaks has heretofore provided to HMA a true, correct
and complete list of the current insurance coverages of River Oaks and its
Subsidiaries, including names of carriers and amounts of coverage. River Oaks
and each of its Subsidiaries has been and is insured by financially sound and
reputable insurers with respect to its properties and the conduct of its
business in such amounts and against such risks as are reasonable in relation to
their respective businesses, and each will maintain such insurance at least
through the Closing Date.
4.25 TRADE NAMES. Except as set forth in Schedule 4.25, River Oaks or one
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of its Subsidiaries owns, is licensed under or otherwise has the right to use
all Facility names used in the conduct of its business at each Facility, and
neither River Oaks nor any of its Subsidiaries or Facilities has received any
notice from any Person challenging or questioning the right of River Oaks or any
of its Subsidiaries to use a Facility name.
4.26 OPINION OF FINANCIAL ADVISOR. The Board of Directors of River Oaks has
received the preliminary oral opinion of the Financial Advisor as of September
22, 1997, to the effect that, as of such date, the consideration to be received
in the Merger by River Oaks' shareholders is fair to River Oaks' shareholders
from a financial point of view. Copies of the final form of such opinion of the
Financial Advisor will be delivered to HMA when delivered to the Board of
Directors of River Oaks. HMA will also receive copies of any other letters
containing opinions of value or otherwise evaluating the transactions
contemplated hereby prepared by the Financial Advisor for informational
purposes, except that any comparative analyses may be excised therefrom.
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4.27 VOTE REQUIRED. The affirmative vote of a majority of the shares of
River Oaks Common Stock outstanding on the record date for the vote is the only
vote of the holders of River Oaks Common Stock necessary to approve this
Agreement and the consummation of the Merger.
4.28 FOREIGN PERSON. Neither River Oaks nor any of its Subsidiaries is a
"foreign person" within the meaning of section 1445(f)(3) of the Code.
4.29 DISCLOSURE. Neither the provisions of this Agreement with respect to
River Oaks and its Subsidiaries, nor the Schedules nor any other document or
written information furnished to HMA or its representatives by or on behalf of
River Oaks or any of its Subsidiaries pursuant hereto, includes any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements made herein and therein not misleading.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF HMA
HMA represents and warrants to River Oaks as follows:
5.1 ORGANIZATION, STANDING AND POWER. HMA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Mississippi. Each of HMA and Sub has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a material adverse effect on HMA and its Subsidiaries
taken as a whole.
5.2 AUTHORITY. Each of HMA and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of HMA and Sub. This Agreement has
been duly executed and delivered by HMA and Sub and constitutes the valid and
binding obligation of HMA and Sub, enforceable against them in accordance with
its terms, except as the enforceability hereof may be limited by (a) bankruptcy,
insolvency or other laws relating to or affecting creditors' rights generally
and (b) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
5.3 NO CONFLICT. The execution and delivery of this Agreement by HMA and
by Sub does not, and the consummation of the transactions contemplated hereby
and the fulfillment of the obligations and undertakings hereunder will not,
result in any Violation of any provision of: (a) the certificate or articles of
incorporation or bylaws of HMA or of Sub; (b) any Contract applicable to HMA,
Sub or any of their respective assets; or (c) any Legal Requirement applicable
to HMA, Sub or any of their respective assets; except, in the case of Contracts
and Legal Requirements, for Violations which could not reasonably be expected,
individually or in the aggregate, to have any adverse effect on the validity or
enforceability of this Agreement or a
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material adverse effect on the operations or financial condition of HMA and its
Subsidiaries taken as a whole. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to HMA or Sub in connection with the execution and delivery
of this Agreement by HMA and Sub or the consummation by HMA and Sub of the
transactions contemplated hereby, except for: (i) the filing of a premerger
notification report by HMA under the HSR Act; (ii) the filing with the SEC of
the Registration Statement and such reports under the Exchange Act as may be
required in connection with this Agreement and the consummation of the
transactions contemplated hereby, and the obtaining from the SEC of such orders
as may be so required; (iii) the filing of such documents with, and the
obtaining of such orders from, state authorities, including state securities
authorities, that are required in connection with the transactions contemplated
by this Agreement; (iv) the filing by the Secretary of State of the State of
Mississippi contemplated by Section 2.1; and (v) such consents, approvals,
orders, authorizations or registrations the failure to obtain which could not
reasonably be expected, individually or in the aggregate, to have any adverse
effect on the validity or enforceability of this Agreement or a material adverse
effect on the operations or financial condition of HMA and its Subsidiaries
taken as a whole.
5.4 SEC DOCUMENTS. HMA has made available to River Oaks a true, correct
and complete copy of HMA's Annual Report on Form 10-K for the year ended
September 30, 1996, quarterly reports on Form 10-Q for the quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997, and definitive proxy
statement for the annual meeting of shareholders of HMA held on February 18,
1997, all as filed by HMA with the SEC (collectively, the "HMA SEC DOCUMENTS").
As of their respective dates, the HMA SEC Documents complied in all material
respects with the requirements of the Securities Act and Exchange Act, and none
of the HMA SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of HMA included in the HMA SEC
Documents comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the consolidated financial position of HMA and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
5.5 INFORMATION SUPPLIED. The Registration Statement and the prospectus
forming a part thereof (the "PROSPECTUS") will, at the time the Registration
Statement becomes effective under the Securities Act, not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. At
the time it becomes effective under the Securities Act, the Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act. Notwithstanding the foregoing, HMA makes no representation
or warranty with respect to any information contained in the Proxy Statement.
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5.6 CAPITAL STRUCTURE. The authorized capital stock of HMA consists of
300,000,000 shares of HMA Common Stock, and 5,000,000 shares of Preferred Stock,
par value $.01 per share. At the close of business on June 30, 1997: (a)
108,373,168 shares of HMA Common Stock were issued and outstanding; (b)
9,351,242 shares of HMA Common Stock were subject to issuance upon exercise of
outstanding rights under HMA's various stock plans; (c) no shares of HMA Common
Stock were held by HMA in its treasury; (d) no shares of such Preferred Stock
were issued or outstanding; and (e) no Voting Debt was issued or outstanding.
All outstanding shares of HMA Common Stock are validly issued, fully paid and
non-assessable and not subject to preemptive rights.
5.7 MERGER CONSIDERATION. The HMA Common Stock constituting the Merger
Consideration has been duly authorized and, when issued and delivered against
receipt of the shares of River Oaks Common Stock exchanged therefor pursuant to
this Agreement, will be duly authorized, validly issued, fully paid and non-
assessable and free of preemptive rights of any security holder of HMA.
5.8 DISCLOSURE. Neither the provisions of this Agreement with respect to
HMA and Sub nor any other document or written information furnished to River
Oaks or its representatives by or on behalf of HMA or Sub pursuant hereto,
includes any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements made herein and therein not
misleading.
ARTICLE 6. COVENANTS OF RIVER OAKS
During the period from the date of this Agreement and continuing until the
Effective Time, River Oaks agrees, for itself and its Subsidiaries, to perform
as follows (except as otherwise expressly contemplated or permitted by this
Agreement, or to the extent that HMA otherwise consents in writing):
6.1 ORDINARY COURSE. Each of River Oaks and its Subsidiaries will: (a)
carry on its business in substantially the same manner as has heretofore been
conducted and not make any material change in the personnel, operations,
finance, accounting practices or policies or assets of the Facilities; (b)
maintain the Facilities and all parts thereof in good working order and
condition, ordinary wear and tear excepted; (c) perform all of its obligations
under the Material Agreements and not enter into, amend or terminate any
Material Agreement except in the ordinary course of business; (d) take all
reasonable actions necessary and appropriate to obtain appropriate releases,
consents, estoppels and other instruments as HMA may reasonably request; (e)
neither cancel, nor allow to lapse nor make any material change in the coverage
of any insurance policy applicable to River Oaks, any of its Subsidiaries or any
Facility; (f) pay all Taxes as they become due, confer with HMA prior to the
filing of any tax return or protest by it or any of its Subsidiaries and not
take any position with respect to Taxes to which HMA reasonably objects; (g) use
its best efforts to maintain and preserve its business organization intact,
retain employees at the Facilities (except for employment terminations in
accordance with past practices), maintain relationships with physicians,
consistent with the bylaws, rules and regulations of the Medical
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Staff, maintain relationships with suppliers, customers and others having
business relations with the Facilities consistent with the terms of such
relationships, and take such other actions as are necessary to cause the smooth,
efficient and successful transition of such business operations and employee and
other relations at the Effective Time; (h) neither make offers of employment to
any Persons for periods subsequent to the Effective Time (except for offers made
in the ordinary course for employment on an at will basis), nor enter into any
Employee Plan with respect thereto, nor incur or agree to incur any liability
not in the ordinary course of business, except for those offers, Employee Plans
and liabilities currently under negotiation and identified in Schedule 6.1; (i)
------------
neither adopt nor amend in any material respect any Employee Plan; (j) not
increase the compensation, in any form, payable or to become payable to any
director, officer, employee, consultant or agent, except for employees'
compensation increases in the ordinary course of business in accordance with
existing personnel policies; (k) except as set forth in Schedule 6.1, not incur
------------
any indebtedness or guarantee any indebtedness except in the ordinary course of
business consistent with past practices, nor issue any debt securities; (l) not
create or assume any mortgage, pledge or other lien or encumbrance upon any of
its assets, irrespective of when acquired, other than Permitted Encumbrances;
(m) neither acquire nor agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any Person; (n) neither make nor authorize
any purchase order or capital expenditure in excess of $10,000 except in the
ordinary course of business or except as identified in Schedule 6.1; (o) neither
------------
sell, lease, assign nor otherwise transfer or dispose of any assets (other than
supplies), except in the ordinary course of business; (p) not amend, terminate
or waive any right related to the Facilities or their businesses, except in the
ordinary course of business; and (q) not take any other action outside the
ordinary course of business that would materially adversely affect the business
operations of River Oaks, any of its Subsidiaries or any of the Facilities.
6.2 DIVIDENDS; CHANGES IN STOCK. River Oaks will not: (a) declare or pay
any dividends, whether in cash, stock or otherwise, nor make any other
distributions in respect of the River Oaks Common Stock; (b) split, combine,
reclassify or recapitalize the River Oaks Common Stock, or issue, authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of River Oaks Common Stock; or (c) repurchase or
otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of River Oaks Common Stock.
6.3 ISSUANCE OF SECURITIES. River Oaks will not, nor will it permit any of
its Subsidiaries to: (a) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of capital stock or Voting Debt or any
securities convertible into any such shares, Voting Debt or convertible
securities, except for the issuance of an aggregate of 8,625 shares of River
Oaks Common Stock upon exercise of the Stock Rights set forth in Schedule 4.2;
------------
or (b) grant any Stock Rights.
6.4 GOVERNING DOCUMENTS. Prior to the Closing Date, River Oaks will submit
to its shareholders for vote a proposal to amend its articles of incorporation
to deny shareholders the right to cumulate votes in the election of directors,
and promptly upon adoption of such proposal by the shareholders, River Oaks will
cause to be filed by the Secretary of State of the State of
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Mississippi articles of amendment effecting the same. Except for such amendment,
neither River Oaks nor any of its Subsidiaries will amend or propose to amend
its articles of incorporation or bylaws.
6.5 RIVER OAKS PERMITS. River Oaks and its Subsidiaries will maintain all
River Oaks Permits in full force and effect, will cooperate and take all action
reasonably necessary to assist the Surviving Corporation in obtaining the River
Oaks Permits, and will promptly provide HMA with copies of all filings made with
any Governmental Entity.
6.6 ADVICE OF CHANGES. River Oaks will confer on a regular and frequent
basis with HMA, report on operational matters and promptly advise HMA orally and
in writing of any change or event having, or which, insofar as can reasonably be
foreseen, could have, a material adverse effect on River Oaks or any of its
Subsidiaries or any Facility or on the ability of River Oaks to perform its
obligations hereunder. Except as may otherwise be set forth in writing signed
by the parties, River Oaks acknowledges that HMA does not and will not waive any
rights it may have under this Agreement as a result of such consultations, nor
will HMA be responsible for any decisions made by River Oaks' officers and
directors with respect to matters which are the subject of such consultation.
6.7 ACCESS. River Oaks and its Subsidiaries will afford to the authorized
representatives and agents of HMA full and complete access to the medical staff,
employees and other personnel of River Oaks and its Subsidiaries, and to the
Facilities, the assets and the books, records and other information of River
Oaks and its Subsidiaries, including the right to inspect the same and conduct
audits and verifications thereof; provided, however, that: (a) none of the
foregoing violates patient confidentiality or impairs the privilege of
confidentiality afforded by Legal Requirement or Contract to River Oaks' books
and records; (b) HMA has first provided reasonable notice of such access and
inspection and conducts the same during normal business hours and in such a
manner as not to interfere unreasonably with the operation of the Facilities or
the conduct of the business of River Oaks and its Subsidiaries; and (c) no such
inspections will have taken place, and no employees or other personnel of River
Oaks will have been contacted by HMA, without HMA first having coordinating such
inspection or contact with the River Oaks' Chief Executive Officer; and provided
further that no such access or inspection by HMA will limit the effect of River
Oaks' representations and warranties contained in this Agreement.
6.8 NO SOLICITATIONS. River Oaks will not, nor will it permit any of its
Subsidiaries to, nor will it authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or by any of its Subsidiaries to,
initiate, solicit, encourage (by way of furnishing non-public information or
otherwise), negotiate or take any other action to facilitate any inquiries or
the making of any proposal which constitutes, or may reasonably be expected to
lead to, any proposal or offer to acquire all or any substantial part of the
business or assets of River Oaks and its Subsidiaries, or a controlling portion
of the capital stock of River Oaks, whether by merger, consolidation, purchase
of assets, tender offer, exchange offer or otherwise, whether for cash,
securities or any other consideration or combination thereof (any such
transaction being called an "ACQUISITION TRANSACTION"), nor entertain, agree to,
endorse, participate in any discussions or negotiations or
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recommend any Acquisition Transaction, except if River Oaks' Board of Directors
concludes in good faith, based on written advice of independent outside counsel
and after consultation with its financial advisors, that taking such action is
necessary in order for the Board of Directors to act in a manner consistent with
its fiduciary duty to the shareholders of River Oaks under applicable Legal
Requirements. In the event that River Oaks, any of its Subsidiaries or any of
its officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants or other representatives receives any inquiries,
proposals or offers as contemplated by this Section 6.8, River Oaks will
promptly inform HMA as to that fact and furnish to HMA the specifics thereof.
6.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT, ETC. River Oaks
will promptly prepare the Proxy Statement, will cooperate with HMA in its
preparation and filing with the SEC of the Registration Statement and the
Prospectus, including the Proxy Statement, will cause its independent auditors
to cooperate in the preparation of financial statements for the Registration
Statement and Prospectus, and will use its best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing and prior to February 1, 1998.
6.10 LETTER OF RIVER OAKS' ACCOUNTANTS. River Oaks will use its
commercially reasonable best efforts to cause to be delivered to HMA a letter of
Ernst & Young LLP, River Oaks' independent auditors, dated a date within two
business days before the date on which the Registration Statement becomes
effective and addressed to HMA, in form and substance reasonably satisfactory to
HMA and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.
6.11 SHAREHOLDERS' MEETING AND APPROVAL. The Board of Directors of River
Oaks will call a special meeting of the shareholders of River Oaks for the
purpose of considering and voting to approve this Agreement (the "MEETING") and
will use it best efforts to hold the Meeting as promptly as practicable, and
prior to February 1, 1998, in accordance with applicable Legal Requirements (it
being understood that the Registration Statement must be effective prior to the
time definitive proxy soliciting material for the Meeting can be distributed).
The Board of Directors of River Oaks will, subject to their fiduciary duties
under the laws of the State of Mississippi, recommend that River Oaks'
shareholders approve this Agreement, and will not condition its recommendation
on any basis other than the terms and conditions of this Agreement, and such
recommendation will be contained in the Proxy Statement. River Oaks will deliver
to HMA promptly at the conclusion of the Meeting a certificate of the Secretary
of River Oaks certifying the number of shares of River Oaks Common Stock as to
which written notices of intent to demand payment were delivered prior to the
vote thereon in accordance with section 79-4-13.21 of the MBCA and which were
not voted in favor of approval of this Agreement, such certificate to include
the names, mailing addresses and number of shares owned of record by each
shareholder who has delivered such a notice.
6.12 VOTING AGREEMENTS. River Oaks will use its best efforts to cause each
member of the Board of Directors of River Oaks to deliver to HMA, as soon as
practicable after the date of this Agreement (but in any event prior to the
filing of the Registration Statement), a written
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agreement substantially in the form of Exhibit B, by which he agrees to vote all
---------
shares of River Oaks Common Stock owned directly or indirectly by him in favor
of approval of this Agreement.
6.13 AFFILIATES. Prior to the Closing Date, River Oaks will deliver to HMA
a letter identifying all Persons who are, at the time this Agreement is
submitted for Shareholder Approval, Affiliates of River Oaks for purposes of
Rule 145 under the Securities Act. River Oaks will use its best efforts to cause
each such Person to deliver to HMA on or prior to the Closing Date a written
agreement substantially in the form of Exhibit C.
---------
6.14 TRANSACTION EXPENSES. The aggregate expenses not paid in the ordinary
course by River Oaks in connection with this Agreement and the consummation of
all of the transactions contemplated hereby, including fees and expenses paid to
River Oaks' directors, officers, attorneys, accountants and advisors, including
the Financial Advisor (but excluding surveys and environmental audits), will
not, commencing July 18, 1997 and continuing through the Closing Date, exceed
$2,000,000.
ARTICLE 7. COVENANTS OF HMA PRIOR TO CLOSING
During the period from the date of this Agreement and continuing until the
Effective Time, HMA agrees to perform as follows:
7.1 PREPARATION OF REGISTRATION STATEMENT, ETC. HMA will promptly prepare
the Registration Statement and the Prospectus and file the same, including the
Proxy Statement, with the SEC, will cooperate with River Oaks in its preparation
of the Proxy Statement, and will use its best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing and prior to February 1, 1998. HMA will also take any action
(other than qualifying to conduct business in any jurisdiction in which it is
now not so qualified) required to be taken under any applicable state securities
laws in connection with the issuance of HMA Common Stock in the Merger.
7.2 STOCK EXCHANGE LISTING. Prior to the Closing Date, HMA will use its
best efforts to cause the shares of HMA Common Stock to be issued in the Merger
to be listed on the NYSE, subject only to official notice of issuance.
ARTICLE 8. ADDITIONAL COVENANTS OF EACH PARTY
8.1 ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use its best efforts
to take or cause to be taken all action, and to do or cause to be done all
things necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this Agreement,
subject to Shareholder Approval, including cooperating fully with the other
parties, providing information and making all necessary filings in connection
with, among other things, the HSR Act, the Securities Act and state securities
Legal Requirements. Each of the parties will
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take or cause to be taken all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by any of them in
connection with the Merger or the taking of any action contemplated by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
each party will reasonably cooperate to take all such necessary action.
8.2 EXPENSES. HMA and River Oaks will each bear its respective legal,
accounting and other expenses in connection with the transactions contemplated
hereby, whether or not the Merger is consummated.
8.3 BROKERS OR FINDERS. Each party represents, as to itself and its
Affiliates, that no agent, broker, investment banker, financial advisor or other
Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except the Financial Advisor, whose fees and
expenses will be paid by River Oaks in accordance with River Oaks' agreement
with such firm (a true, correct and complete copy of which has been delivered to
HMA prior to the date hereof).
8.4 REORGANIZATION. From and after the date hereof and until the
Effective Time, neither HMA nor River Oaks nor any of their respective
Subsidiaries or other Affiliates will knowingly take any action, or knowingly
fail to take any action, which would jeopardize qualification of the Merger as a
reorganization within the meaning of sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code, or enter into any Contract with respect to the foregoing. Following
the Effective Time, HMA will use its best efforts to conduct the business of the
Surviving Corporation, and will cause the Surviving Corporation to use its best
efforts to conduct its business, in a manner which would not jeopardize the
characterization of the Merger as a reorganization within the meaning of
sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. Each of HMA and the
Surviving Corporation will file all federal and state income tax returns
consistent with the treatment of the Merger as a reorganization within the
meaning of section 368(a)(1)(A) and 368(a)(2)(E) of the Code.
8.5 OTHER ACTIONS. Neither River Oaks nor HMA will, nor will they permit
any of their respective Subsidiaries to, knowingly take any action that would or
is reasonably likely to cause any of its representations and warranties set
forth in this Agreement to be untrue as of the date made or any of the
conditions to the Merger set forth in Article 9 not to be satisfied. Prior to
the Effective Time, each of the parties agrees to use its best efforts to: (a)
obtain the satisfaction of its conditions to Closing as set forth in Article 9
as soon as practicable; (b) facilitate contacts, negotiations and communications
with any Persons reasonably necessary to insure a smooth transition of control
of the Facilities; and (c) assist one another in obtaining any consents required
or desirable from any Person to effect the consummation of the transactions
contemplated hereby.
8.6 CONFIDENTIALITY. HMA and Sub (treated as one party for this purpose)
and River
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Oaks (each, the "FIRST PARTY") will, and will use its best efforts to cause its
Affiliates, employees, representatives and agents to, hold in strict confidence
all Confidential Information of the other party (each, the "OTHER PARTY"),
unless compelled to disclose the same by judicial or administrative process or,
in the opinion of counsel, by other Legal Requirements; provided, however, that
in either such case the First Party will provide the Other Party with prompt
prior notice thereof so that the Other Party may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Section 8.6. In the event that such protective order or other remedy is not
obtained, or the Other Party waives compliance with the provisions hereof, the
First Party will furnish only that portion of Confidential Information which, in
the written opinion of the First Party's counsel, is required, and the First
Party will exercise best efforts to obtain reliable assurance that confidential
treatment will be accorded such of the disclosed Confidential Information as the
Other Party so designates. The First Party will not otherwise disclose
Confidential Information to any person, except with the consent of the Other
Party. In the event that the Merger is not consummated, the First Party will
promptly return all Confidential Information to the Other Party. For the
purposes hereof, "CONFIDENTIAL INFORMATION" means all information of any kind
concerning the Other Party or any of its Affiliates, obtained directly or
indirectly from the Other Party or any of its Affiliates, employees,
representatives or agents in connection with the transactions contemplated
hereby, except information (a) ascertainable or obtained from public or
published sources, (b) received from a third party not known by the First Party
to be under an obligation to keep such information confidential, (c) which is or
becomes known to the public (other than through a breach of this Agreement), or
(d) which was in the First Party's possession prior to disclosure thereof to the
First Party and which was not subject to any obligation to keep such information
confidential. The First Party recognizes that any breach of the provisions of
this Section 8.6 would result in irreparable harm to the Other Party and its
Affiliates and, therefore, that the Other Party will 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 its other
legal and equitable remedies.
8.7 PUBLICITY. Subject to Legal Requirements, the rules of the SEC and the
NYSE and the provisions of this Agreement, so long as this Agreement is in
effect, each party will use its best efforts to assure that the timing and
content of any press release or other public statement with respect to the
transactions contemplated by this Agreement will be determined by mutual
agreement of the parties.
ARTICLE 9. CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of River Oaks, HMA and Sub to effect the Merger are
subject to the satisfaction prior to the Closing Date of each of the following
conditions:
(A) REGISTRATION STATEMENT. The Registration Statement will have
become effective under the Securities Act and will not be the subject of any
stop order or proceedings seeking a stop order.
(B) SHAREHOLDER APPROVAL. This Agreement will have been approved by
the
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affirmative vote of a majority of the shares of River Oaks Common Stock
outstanding on the record date for the vote.
(C) NYSE LISTING. The shares of HMA Common Stock issuable to holders
of River Oaks Common Stock pursuant to this Agreement will have been authorized
for listing on the NYSE upon official notice of issuance.
(D) GOVERNMENTAL APPROVALS. Other than the filing provided for by
Section 2.1, all licenses, franchises, certificates, permits, accreditations,
authorizations, consents, orders or approvals of, or registrations, declarations
or filings with, or expirations of waiting periods imposed by, any Governmental
Entity the failure to obtain which would have a material adverse effect on the
consummation of the Merger, will have occurred, been filed or been obtained,
including any authorizations required under the HSR Act; and HMA will have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the HMA Common Stock in exchange for the River Oaks Common
Stock and to consummate the Merger.
(E) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger will be in effect.
9.2 CONDITIONS OF OBLIGATIONS OF HMA AND SUB. The obligations of HMA and
Sub to effect the Merger are subject to the satisfaction of the following
additional conditions, unless waived by HMA:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of River Oaks set forth in this Agreement will be true and correct in
all respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement, and HMA will have received a certificate signed on behalf of
River Oaks by its Certifying Officers to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF RIVER OAKS. River Oaks will have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and HMA will have
received a certificate signed on behalf of River Oaks by its Certifying Officers
to such effect.
(C) NO AMENDMENTS TO RESOLUTIONS. Neither the Board of Directors of
River Oaks nor any committee thereof will have amended, modified, rescinded or
repealed the resolutions heretofore adopted by the Board of Directors which
approve this Agreement, the consummation of the Merger and the performance of
all of River Oaks' and the Board of Directors' obligations hereunder, and will
not have adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions, and HMA
will have received a certificate signed on behalf of River Oaks by its
Certifying Officers to such effect.
(D) ARTICLES OF INCORPORATION. HMA will have received a copy,
certified by the
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Secretary of State of the State of Mississippi as of a date reasonably proximate
to the Closing Date, of the complete articles of incorporation of River Oaks,
including the articles of amendment referred to in Section 6.4.
(E) RIVER OAKS PERMITS. River Oaks and its Subsidiaries will have all
River Oaks Permits that are necessary or appropriate to permit the use,
ownership and operation of each of the Facilities by the Surviving Corporation
after Closing in substantially the same manner as conducted by River Oaks
immediately prior to Closing, and all such River Oaks Permits will be in full
force and effect and not subject to any pending or threatened proceedings to
revoke, make conditional or adversely modify, limit, or otherwise affect the
authority, rights, privileges or permissions conveyed thereby.
(F) CONSENTS UNDER AGREEMENTS. River Oaks will have obtained the
consent or approval of each Person whose consent or approval is required in
order to permit the continuation or succession by the Surviving Corporation
pursuant to the Merger to any obligation, right or interest of River Oaks or any
of its Subsidiaries under any Contract, except those for which failure to obtain
such consents and approvals would not, in the reasonable opinion of HMA,
individually or in the aggregate, have a material adverse effect on the
operations or financial condition of River Oaks and its Subsidiaries taken as a
whole or upon consummation of the transactions contemplated hereby.
(G) ENVIRONMENTAL ASSESSMENT. The Environmental Assessment will be
reasonably satisfactory to HMA in its sole discretion.
(H) TITLE MATTERS. HMA will have received with respect to each parcel
of the Real Property: (i) a redated survey map; (ii) redated abstracts of title,
downdated to the Closing Date, showing the interests of River Oaks and its
Subsidiaries in the Real Property being subject only to Permitted Encumbrances;
and (iii) statements of zoning, land use and subdivision compliance,
satisfactory to HMA, from all applicable municipalities.
(I) LETTER OF RIVER OAKS' ACCOUNTANTS. HMA will have received the
letter of Ernst & Young LLP referred to in Section 6.10.
(J) VOTING AGREEMENTS. Within the time provided by Section 6.12, HMA
will have received from each member of the Board of Directors of River Oaks an
executed copy of an agreement substantially in the form of Exhibit B.
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(K) AFFILIATES' AGREEMENTS. HMA will have received from each Person
named in the letter referred to in Section 6.13 an executed copy of an agreement
substantially in the form of Exhibit C.
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(L) DISSENTERS. Prior to the taking of the vote on the Merger,
written notices of intent to demand payment in accordance with section 79-4-
13.21 of the MBCA will not have been delivered with respect to more than 10
percent of the outstanding shares of River Oaks Common Stock.
(M) LEGAL OPINION OF BAKER, DONELSON, BEARMAN & CALDWELL, A
PROFESSIONAL CORPORATION. Baker, Donelson, Bearman & Caldwell, a Professional
Corporation, counsel to River Oaks, will have furnished to HMA their written
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to HMA, to the effect that: (i) each of River Oaks and its
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Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and carry on its business as described in the Proxy Statement; (ii) River Oaks
has the requisite corporate power and authority and has taken all corporate
action necessary to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, this Agreement has been duly and validly
authorized, executed and delivered by River Oaks, and this Agreement constitutes
a legal, valid and binding agreement of River Oaks, enforceable against it in
accordance with its terms, except that such enforceability may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights or remedies generally and
subject to general equitable principles (regardless of whether enforcement is
sought in a proceeding at law or in equity); (iii) the authorized capital stock
of River Oaks consists entirely of 10,000,000 shares of River Oaks Common Stock;
on the Closing Date, 1,009,040 shares of River Oaks Common Stock are issued and
outstanding, no shares of River Oaks Common Stock are held by River Oaks in its
treasury, no shares of River Oaks Common Stock are reserved for issuance for any
purpose, no shares of River Oaks Common Stock are held of record by any of River
Oaks' Subsidiaries, and to the best of such counsel's knowledge no Voting Debt
is issued or outstanding; (iv) to the best of such counsel's knowledge, except
for this Agreement, no Person has any Stock Rights; (v) all outstanding shares
of River Oaks Common Stock are validly issued, fully paid and non-assessable and
are not subject to preemptive rights; (vi) the execution and delivery of this
Agreement by River Oaks does not, and the consummation of the transactions
contemplated hereby and the fulfillment of the obligations and undertakings
hereunder will not, result in any Violation of any provision of: (A) the
articles of incorporation or bylaws of River Oaks or any of its Subsidiaries;
(B) any Material Agreement known to such counsel and applicable to River Oaks,
any of its Subsidiaries or any of their respective assets; or (C) any Legal
Requirement applicable to River Oaks, any of its Subsidiaries or any of their
respective assets; except, in the case of Contracts and Legal Requirements, for
Violations which could not reasonably be expected, individually or in the
aggregate, to have any adverse effect on the validity or enforceability of this
Agreement or a material adverse effect on the operations or financial condition
of River Oaks and its Subsidiaries taken as a whole; (vii) without limiting the
generality of the foregoing, the retention and ownership of Qualifying Shares by
one or more shareholders of River Oaks will not result in any Violation of any
Legal Requirement; and (viii) to the best of such counsel's knowledge, except as
disclosed in Schedule 4.18, there is no action, suit, proceeding, arbitration or
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investigation pending or threatened against or affecting River Oaks, any of its
Subsidiaries or any Facility (or any of their respective officers or directors
in connection with the business of River Oaks or any of its Subsidiaries), which
if adversely determined could reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the operations or financial
condition of River Oaks and its Subsidiaries taken as a whole, or on the
Medicare or Medicaid provider status of any Facility, nor is there any judgment,
injunction or decree, rule or order of any Governmental Entity or arbitrator
outstanding against River Oaks, any of its Subsidiaries or any Facility which
could reasonably be expected, individually or in the aggregate, to have such an
effect. Such counsel will also state that they have participated in conferences
with officers and other representatives of River Oaks, representatives of the
independent accountants of River Oaks and representatives of HMA, at which the
contents of the Proxy Statement and related matters were discussed, and that,
although such counsel is not passing upon, and is not assuming any
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responsibility for, the accuracy, completeness or fairness of the statements
contained in the Proxy Statement, on the basis of the foregoing (relying as to
materiality principally upon officers and other representatives of River Oaks),
no facts have come to such counsel's attention which lead them to believe that
the Proxy Statement (other than (A) the financial statements, including the
notes thereto and the auditors' reports thereon, and the financial statement
schedules contained therein, (B) the other financial and statistical information
contained therein, and (C) all information contained therein relating to HMA or
its Subsidiaries, directors or officers), at the time the Registration Statement
became effective under the Securities Act, contained an untrue statement of
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(N) OTHER EVIDENCE. HMA will have received such other certificates,
instruments and documents as it may reasonably require to demonstrate the
satisfaction of the conditions set forth in this Section 9.2.
9.3 CONDITIONS OF OBLIGATIONS OF RIVER OAKS. The obligation of River Oaks
to effect the Merger is subject to the satisfaction of the following conditions
unless waived by River Oaks:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of HMA and Sub set forth in this Agreement will be true and correct
in all respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement, and River Oaks will have received a certificate signed on behalf
of HMA by its Certifying Officer to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF HMA AND SUB. HMA and Sub will have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and River Oaks will
have received a certificate signed on behalf of HMA by its Certifying Officer to
such effect.
(C) NO AMENDMENTS TO RESOLUTIONS. Neither the Board of Directors of
HMA nor any committee thereof will have amended, modified, rescinded or repealed
the resolutions heretofore adopted by the Board of Directors which approve this
Agreement, the consummation of the Merger and the performance of all of HMA's
obligations hereunder, and will not have adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such resolutions, and River Oaks will have received a
certificate signed on behalf of HMA by its Certifying Officer to such effect.
(D) TAX OPINION. River Oaks will have received the opinion of Baker,
Donelson, Bearman & Caldwell, a Professional Corporation, in form and substance
reasonably satisfactory to it, that the Merger will constitute a reorganization
under section 368(a) of the Code.
(E) FINANCIAL ADVISOR'S OPINION. River Oaks will have received a
final form of opinion from the Financial Advisor that, as of the date of mailing
of the Proxy Statement to the shareholders of River Oaks in connection with the
Merger, the consideration to be received in the Merger by River Oaks'
shareholders is fair to River Oaks' shareholders from a financial point of
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view.
(F) LEGAL OPINION OF TIMOTHY R. PARRY, ESQ. Timothy R. Parry, Esq.,
Vice President and General Counsel for HMA, will have furnished to River Oaks
his written opinion, dated the Closing Date, in form and substance reasonably
satisfactory to River Oaks, to the effect that: (i) each of HMA and Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and carry on its business
as described in the Registration Statement; (ii) each of HMA and Sub has the
requisite corporate power and authority and has taken all corporate action
necessary to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, this Agreement has been duly and validly
authorized, executed and delivered by each of HMA and Sub, and this Agreement
constitutes a legal, valid and binding agreement of each of HMA and Sub,
enforceable against it in accordance with its terms, except that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights or remedies generally and subject to general equitable
principles (regardless of whether enforcement is sought in a proceeding at law
or in equity); and (iii) the execution and delivery of this Agreement by HMA and
by Sub does not, and the consummation of the transactions contemplated hereby
and the fulfillment of the obligations and undertakings hereunder will not,
result in any Violation of any provision of: (A) the certificate or articles of
incorporation or bylaws of HMA or of Sub; (B) any Contract known to him and
applicable to HMA, Sub or any of their respective assets; or (C) any Legal
Requirement applicable to HMA, Sub or any of their respective assets; except, in
the case of Contracts and Legal Requirements, for Violations which could not
reasonably be expected, individually or in the aggregate, to have any adverse
effect on the validity or enforceability of this Agreement or a material adverse
effect on the operations or financial condition of HMA and its Subsidiaries
taken as a whole.
(G) LEGAL OPINION OF HARTER, SECREST & EMERY. Harter, Secrest &
Emery, counsel to HMA, will have furnished to River Oaks their written opinion,
dated the Closing Date, in form and substance reasonably satisfactory to River
Oaks, to the effect that: (i) the Registration Statement and the Prospectus
(other than (A) the financial statements, including the notes thereto and the
auditors' reports thereon, and the financial statement schedules contained
therein, (B) the other financial and statistical information contained therein,
(C) the exhibits thereto, (D) all information contained therein relating to
River Oaks or its Subsidiaries, directors or officers, including the Proxy
Statement, and (E) all documents and other information incorporated by reference
therein), at the time the Registration Statement became effective under the
Securities Act, complied as to form in all material respects with the
requirements of Form S-4 and the Securities Act; and (ii) the HMA Common Stock
constituting the Merger Consideration, when offered as described in the
Registration Statement, and upon the delivery thereof to shareholders of River
Oaks in accordance with the terms and conditions of this Agreement and as
described in the Registration Statement, will have been duly authorized, validly
issued, fully paid and non-assessable. Such counsel will also state that they
have participated in conferences with officers and other representatives of HMA,
representatives of the independent accountants of HMA and representatives of
River Oaks, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed, and that, although such counsel
is not passing
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upon, and is not assuming any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus, on the basis of the foregoing (relying as to materiality principally
upon officers and other representatives of HMA), no facts have come to such
counsel's attention which lead them to believe that, the Registration Statement
(other than (A) the financial statements, including the notes thereto and the
auditors' reports thereon, and the financial statement schedules contained
therein, (B) the other financial and statistical information contained therein,
(C) the exhibits thereto, (D) all information contained therein relating to
River Oaks or its Subsidiaries, directors or officers, including the Proxy
Statement, and (E) all documents and other information incorporated by reference
therein), at the time it became effective under the Securities Act, contained an
untrue statement of material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(H) OTHER EVIDENCE. River Oaks will have received such other
certificates, instruments and documents as it may reasonably require to
demonstrate the satisfaction of the conditions set forth in this Section 9.3.
ARTICLE 10. COVENANTS AS TO POST-CLOSING MATTERS
From and after the Effective Time, and until such time as is expressly
provided by this Agreement, HMA agrees, for itself and the Surviving
Corporation, and River Oaks agrees, for the holders of River Oaks Common Stock,
as follows:
10.1 EXCHANGE OF QUALIFYING SHARES.
(A) RIGHT TO EXCHANGE QUALIFYING SHARES. Prior to the Fifth
Anniversary, each Qualifying Shareholder will have the right, exercisable from
time to time by written notice received by HMA on or before any February 10, May
10, August 10 or December 10, to exchange on the Exchange Date all or any
portion (not less than one whole share) of his Qualifying Shares for the Merger
Consideration.
(B) RIGHT TO CALL QUALIFYING SHARES FOR EXCHANGE. If at any time
prior to the Fifth Anniversary there is a change in any Legal Requirement, the
result of which is that the ownership of any Qualifying Shares by Qualifying
Shareholders (i) becomes a Violation of any Legal Requirement or (ii) materially
interferes with the Surviving Corporation's ability to operate or expand the
operations of the Facilities, then HMA will have the right, exercisable by
written notice given to each Qualifying Shareholder, to call all of the
outstanding Qualifying Shares for exchange for the Merger Consideration, in
which event each Qualifying Shareholder will be obligated to present all of his
Qualifying Shares for exchange on the Exchange Date.
(C) AUTOMATIC EXCHANGE OF QUALIFYING SHARES. On the Fifth
Anniversary, by virtue of the Merger and without any action on the part of any
Qualifying Shareholder, each issued and outstanding Qualifying Share will be
converted into the right to receive the Merger Consideration. As of the Fifth
Anniversary, all Qualifying Shares will no longer be outstanding
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and will automatically be cancelled and retired and will cease to exist, and
each holder of a certificate representing any Qualifying Shares will cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration therefor, without interest, upon the surrender of such certificate
in accordance with Section 10.1(e).
(D) ANTI-DILUTION ADJUSTMENTS. In the event of any stock dividend,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like affecting shares of HMA Common Stock between the date of this
Agreement and any Exchange Date, the Merger Consideration will be appropriately
adjusted so that each Qualifying Shareholder will receive for his Qualifying
Shares the amount of HMA Common Stock he would have been entitled to receive if
such Exchange Date had been immediately prior to such event.
(E) EXCHANGE PROCEDURE FOR QUALIFYING SHARES. Qualifying Shares
exchanged pursuant to this Section 10.1 will be exchanged substantially in
accordance with the procedures provided by Section 3.3, except that: (i) the
terms "Effective Time" and "Closing Date" as used in Section 3.3 will instead
refer to the Exchange Date; (ii) the terms "Exchanged Shares" and "River Oaks
Common Stock" as used in Section 3.3 will instead refer to the Qualifying
Shares; (iii) the term "Exchange Agent" as used in Section 3.3 will instead
refer to HMA or such agent or agents as may be appointed by HMA; and (iv) all
references in Section 3.3 to "Qualifying Shares" will have no force or effect.
All shares of HMA Common Stock issued upon the surrender for exchange of
Qualifying Shares in accordance with the terms of this Section 10.1 (including
any cash paid pursuant to Sections 3.3(c) or 3.3(d)) will be deemed to have been
issued in full satisfaction of all rights pertaining to the Qualifying Shares,
and there will be no further registration of transfers of the Qualifying Shares
after the Fifth Anniversary.
(F) REGISTRATION OF MERGER CONSIDERATION. The Registration Statement
will cover the issuance of the Merger Consideration in exchange for the
Qualifying Shares on a delayed basis pursuant to Rule 415 promulgated under the
Securities Act. Until there are no Qualifying Shares outstanding, HMA will: (i)
use its best efforts to maintain the effectiveness of the Registration
Statement, or a successor registration statement covering issuance of the Merger
Consideration in exchange for the Qualifying Shares; (ii) comply with all
applicable "Blue Sky" Legal Requirements in connection therewith; and (iii)
comply in a timely fashion with all of its periodic reporting obligations under
the Exchange Act.
(G) EXCHANGE DATE. With respect to each exchange made pursuant to
this Section 10.1, "EXCHANGE DATE" means the earliest practicable date on which
registered shares of the Merger Consideration may be issued in exchange for
Qualifying Shares without Violation of any Legal Requirement, including the
Securities Act and applicable "Blue Sky" Legal Requirements. In the case of an
exchange pursuant to Sections 10.1(a) or 10.1(b), HMA will use its best efforts
to cause the Exchange Date to occur within 30 days following the applicable
notice date, unless the filing of a post-effective amendment to the Registration
Statement or a successor registration statement is required, in which case HMA
will prepare and file the same with the SEC within such 30-day period and will
use its best efforts to cause the Exchange Date to occur as soon as practicable
thereafter. In the case of an exchange pursuant to Section 10.1(c), HMA will use
its best efforts to cause the Exchange Date to occur on the Fifth Anniversary.
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10.2 PURCHASE OF QUALIFYING SHARES. Prior to the Fifth Anniversary, each
Qualifying Shareholder will have the right, exercisable from time to time on 30
days' written notice to the Surviving Corporation, to require the Surviving
Corporation to purchase all or any portion (not less than one whole share) of
his Qualifying Shares for cash at a price equal to: (a) the product of Agreed
EBITDA multiplied by 6.0; minus (b) the amount of any long-term debt, including
third-party and intercompany debt, of the Surviving Corporation; multiplied by
(c) a fraction, the numerator of which is the number of Qualifying Shares then
being sold by such Qualifying Shareholder, and the denominator of which is the
total number of shares of capital stock of the Surviving Corporation issued and
outstanding at the Effective Time (appropriately adjusted in the event of any
stock dividend, subdivision, reclassification, recapitalization, combination,
exchange of shares or the like affecting shares of the capital stock of the
Surviving Corporation since the Effective Time). Such cash price will be paid
to the Qualifying Shareholder upon his delivery to the Surviving Corporation of
good title to the Qualifying Shares then being sold, free and clear of all
liens, encumbrances, restrictions and charges of any kind, and all stock
certificates representing the Qualifying Shares then being sold, duly endorsed
for transfer.
10.3 CASH DISTRIBUTIONS. For so long as there are any Qualifying Shares
outstanding, the Surviving Corporation will, to the extent permitted by
corporate law, pay to each Record Holder thereof, within 90 days after the close
of each fiscal year, an annual cash distribution in an amount equal to: (a) the
amount of the Surviving Corporation's after-tax profits for that fiscal year
(assuming taxation on the basis of the Surviving Corporation not being
consolidated with HMA's other operations), determined in accordance with
generally accepted accounting principles and consistent with the internal
accounting of the other hospitals owned and operated by HMA; minus (to the
extent not already deducted in arriving at the amount of such after-tax profits)
(b) reasonable deductions for reserves, intercompany management fees, debt
payments, capital improvements, replacements and contingencies of the Surviving
Corporation; multiplied by (c) a fraction, the numerator of which is the number
of Qualifying Shares then held by such Qualifying Shareholder, and the
denominator of which is the total number of shares of capital stock of the
Surviving Corporation issued and outstanding at the Effective Time
(appropriately adjusted in the event of any stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like
affecting shares of the capital stock of the Surviving Corporation since the
Effective Time).
10.4 EMPLOYEES.
(A) EMPLOYMENT, ETC. HMA, as majority shareholder of the Surviving
Corporation, will assure that on the Closing Date, the Surviving Corporation
will continue the employment on an at will basis of all employees, including
management staff, of River Oaks on the day immediately preceding the Closing
Date (collectively, the "EMPLOYEES"), and offer to each Employee (i)
substantially the same compensation and terms and conditions of employment as
were in effect for him immediately preceding the Closing Date, and (ii) the
Surviving Corporation's standard employee benefit package, which is comparable
to the benefits provided to employees at other HMA facilities. Without limiting
the generality of the foregoing, the Surviving Corporation will honor its
employment agreement with John J. Cleary existing on the date hereof. All
Employees will be covered by the Surviving Corporation's standard personnel
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policies and procedures. The Surviving Corporation will retain the right to
change or terminate any such benefits and any such policies and procedures at
any time and from time to time as the Surviving Corporation deems appropriate in
its sole discretion. The Surviving Corporation will give each Employee full
credit for all service with River Oaks, as if such service had been with HMA and
its Affiliates, for purposes of eligibility to participate in, vesting and
payment of benefits under (but not for purposes of determining the amount of any
benefit under) HMA's 401(k) plan and any other employee benefit plan maintained
by the Surviving Corporation, as permitted by law and the terms of each such
plan.
(B) SEVERANCE. In the event that any Employee, not party to a written
employment Contract with River Oaks immediately prior to the date hereof, who
held the position of Executive Vice President or higher on the Closing Date is
discharged without cause by the Surviving Corporation within 12 months after the
Closing Date, the Surviving Corporation will pay such Employee severance in an
amount equal to 150 calendar days' compensation at the rate paid to him
immediately preceding the Closing Date.
(C) LIMITATIONS. Nothing contained in this Section 10.4 will limit
the Surviving Corporation's management prerogatives with respect to Employees,
or create any employment Contracts or any right of continued employment for any
specific Employee or create any right of action by any Employee, any group of
Employees or any other third party, either jointly or severally.
10.5 MEDICAL STAFF. HMA, as majority shareholder of the Surviving
Corporation, will assure that on the Closing Date the Surviving Corporation will
offer retention to the River Oaks medical staff, including any physician
employees, with the same privileges (subject to the then applicable medical
staff bylaws) to all physicians on the medical staff.
10.6 BOARD OF DIRECTORS. For a period of at least five years following the
Closing Date, and irrespective of whether there are any Qualifying Shares
outstanding: (a) the Board of Directors of the Surviving Corporation will
consist of seven directors; (b) four of the members of the Board of Directors,
and their successors, will be elected by HMA; (c) the other three members of the
Board of Directors will be Glen C. Warren, M.D., George W. Truett, M.D. and
Walter R. Shelton, M.D. (or, in the event that any of them is unable or
unwilling to serve, a Person selected by the other(s) of them); and (d) HMA will
vote all of its shares of the Surviving Corporation in favor of the election of
such three Persons as directors.
10.7 BOARD OF TRUSTEES. HMA, as majority shareholder of the Surviving
Corporation, will assure that following Closing, the Surviving Corporation will
establish a Board of Trustees consisting of representatives from the Board of
Directors of the Surviving Corporation, the medical staff, members of the
community and HMA. Members of the Board of Trustees will serve at the pleasure
of the Board of Directors of the Surviving Corporation, and will initially
include Howard B. Cheek, M.D., as Moderator, Cindy Haden Wright, M.D., Glenn F.
Morris, M.D., William E. Bowlus, M.D. and Charles C. Bush, M.D. The Board of
Trustees will meet on a regular basis with HMA and its responsibilities will
include: (a) acting on behalf of the Surviving Corporation for the purpose of
granting medical staff privileges to physicians and other
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members of the medical staff; (b) establishing and maintaining accreditation and
meeting accrediting agency requirements relating to medical staff credentials,
quality assurance and oversight of hospital responsibilities; (c) amending the
Surviving Corporation's medical staff bylaws, rules and regulations; (d)
promoting community involvement and community service; (e) reviewing the
Surviving Corporation's operating and capital budgets for each fiscal year and
making recommendations to the Board of Directors with respect thereto; (f)
providing support and advice to the chief executive officer of the Surviving
Corporation with respect to operational issues; and (g) in general, assisting
and advising the Surviving Corporation and HMA in the development of hospital
policy.
10.8 NAME. HMA, as majority shareholder of the Surviving Corporation,
will assure that the Surviving Corporation continues using the name "River Oaks
Hospital" as the name of its acute care hospital Facility for at least five
years following the Closing Date.
10.9 COMMITMENT TO NEW SERVICES AND FACILITIES. HMA, as majority
shareholder of the Surviving Corporation, will assure that appropriate capital
and management resources, as determined in the reasonable judgment of the Board
of Directors of the Surviving Corporation and pursuant to customary capital
expenditure processes, are committed to the continued growth and expansion of
services and facilities. The Surviving Corporation will use reasonable resources
to pursue capital projects for current physical plant improvement, additional
medical office building development, expansion of River Oaks Hospital surgery
suites, expansion of River Oaks Hospital diagnostic imaging and outpatient
services, and the addition of an appropriate financial and clinical integrated
information system, with such reasonable changes as the Board of Directors of
the Surviving Corporation deems necessary for the proper and efficient operation
of the Facilities.
10.10 INDEMNIFICATION.
(A) INDEMNIFICATION BY HMA. In the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil or
administrative, in which any Person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee or fiduciary of River Oaks or any of its Subsidiaries (each,
an "INDEMNIFIED PARTY") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to, this
Agreement or the consummation of the Merger, whether in any case asserted or
arising before or after the Effective Time (each, an "INDEMNIFIABLE CLAIM"), the
parties hereto agree to cooperate and use their best efforts to defend against
and respond to the same. After the Effective Time HMA will indemnify and hold
harmless, as and to the fullest extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement (collectively, "LOSSES") in connection with any
Indemnifiable Claim, subject to the following terms and conditions:
(I) As used herein, the term "Losses" includes only Losses
actually paid or incurred, and does not include: (A) any Losses to the extent of
amounts recoverable from any surety, insurance carrier or third party obligor,
or the cost of maintaining any surety or insurance policies, and no right of
subrogation against HMA will accrue hereunder to or for the benefit of
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any surety, insurance company or any third party; (B) any incidental or
consequential damages that an Indemnified Party may suffer; or (C) any cost or
expense previously counted in determining Losses. Each Indemnified Party will
submit in a timely manner to any applicable surety, insurance carrier or third
party obligor all claims for Losses for which such entity may have liability.
(II) If an Indemnifiable Claim is made or threatened against one
or more Indemnified Parties, such Indemnified Parties will promptly (and in any
case within 30 days of such claim being formally made) give HMA notice thereof,
which notice will specify in detail the nature of the Indemnifiable Claim and
the basis for indemnification; provided, however, that failure to so notify HMA
will not affect the obligations of HMA under this Section 10.10(a) except to the
extent that such failure materially prejudices HMA. HMA will have 30 days after
receipt of such notice to assume and control the defense of such Indemnifiable
Claim at its expense and through counsel of its choice reasonably satisfactory
to the Indemnified Parties who are subject to the Indemnifiable Claim. Each such
Indemnified Party will cooperate with HMA in such defense and make available to
HMA all pertinent records, materials and information in his possession or under
his control relating thereto as is reasonably requested by HMA. With respect to
any Indemnifiable Claim that is being assumed and defended in good faith by HMA,
HMA will not be liable for any settlement which is effected without HMA's prior
written consent (which may be withheld in HMA's discretion).
(III) If HMA elects not to defend against the Indemnifiable
Claim, or if HMA fails to assume defense of the Indemnifiable Claim within the
30-day period referred to in Section 10.10(a)(ii), the Indemnified Parties who
are subject to such Indemnifiable Claim will then be entitled to assume and
control the defense thereof at HMA's expense and through one firm of counsel of
their choice reasonably satisfactory to HMA. In the event that the defendants
in, or targets of, any Indemnifiable Claim include more than one Indemnified
Party, and any such Indemnified Party reasonably concludes, based on the written
opinion of its own counsel, that there may be one or more legal defenses
available to him which are in conflict with those available to HMA, the
Surviving Corporation or any other Indemnified Party, then such Indemnified
Party may employ at HMA's expense separate counsel, reasonably satisfactory to
HMA, to represent him with respect to such Indemnifiable Claim. HMA will pay to
each such Indemnified Party expenses in advance of the final disposition of such
Indemnifiable Claim, to the fullest extent permitted by law, upon receipt from
such Indemnified Party of an appropriate undertaking. HMA will use its best
efforts to assist in the vigorous defense of such Indemnifiable Claim; provided,
however, that HMA will not be liable for any settlement of such Indemnifiable
Claim which is effected without HMA's prior written consent (which consent will
not be unreasonably withheld).
(IV) HMA will be subrogated to any and all defenses, claims and
setoffs which any Indemnified Party asserted or could have asserted against the
party making an Indemnifiable Claim. Each Indemnified Party will execute and
deliver to HMA such documents as may be reasonably necessary to establish by way
of subrogation the ability and right of HMA to assert such defenses, claims and
setoffs.
44
<PAGE>
(B) INDEMNIFICATION BY SURVIVING CORPORATION. HMA and the Surviving
Corporation agree that all rights to indemnification and all limitations of
liability existing in favor of the Indemnified Parties provided by the articles
of incorporation and by-laws of the Surviving Corporation or of any of its
Subsidiaries as in effect on the date hereof with respect to matters occurring
prior to the Effective Time will survive the Merger and will continue in full
force and effect, without any amendment thereto, for a period of at least three
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnifiable Claim asserted or made within
such period will continue until the final disposition of such Indemnifiable
Claim.
(C) LIABILITY INSURANCE. HMA will assure that either: (i) the policy
of directors' and officers' liability insurance maintained by River Oaks on the
date hereof is kept in full force and effect by the Surviving Corporation for
three years following the Effective Time; or (ii) all Persons covered by such
policy at the Effective Time are instead covered for such period by the policy
of directors' and officers' liability insurance regularly maintained by HMA and
its Subsidiaries.
(D) LIMITATIONS ON INDEMNIFICATION. Notwithstanding any other
provision hereof to the contrary, neither HMA nor the Surviving Corporation will
have any obligation hereunder to any Indemnified Party: (i) when and if a court
of competent jurisdiction ultimately determines, and such determination has
become final and non-appealable, that indemnification of such Indemnified Party
in the manner contemplated hereby would have been prohibited by applicable law
or by the Surviving Corporation's articles of incorporation if such Indemnified
Party had sought indemnification from the Surviving Corporation; or (ii) if the
Indemnifiable Claim arises, in whole or in part, out of any material
misrepresentation by River Oaks contained in this Agreement or any material
breach of any covenant, representation, warranty or agreement of River Oaks
contained in this Agreement. In either such event, HMA will be promptly
reimbursed by such Indemnified Party for any expenses advanced on his behalf by
HMA.
(E) SURVIVAL OF RIGHTS. The provisions of this Section 10.10 are
intended to benefit the Indemnified Parties and will be binding on all
successors and assigns of HMA. In the event HMA or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then and in each such case, proper provision will be made
so that the successors and assigns of HMA assume the obligations set forth in
this Section 10.10.
ARTICLE 11. TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after Shareholder Approval:
(A) by mutual consent of the respective Boards of Directors of HMA and
River Oaks;
45
<PAGE>
(B) by HMA, upon notice to River Oaks, if (without any breach by HMA
of any of its obligations hereunder) compliance with any condition set
forth in Sections 9.1 or 9.2 becomes impossible, and such failure of
compliance is not waived by HMA; or
(C) by River Oaks, upon notice to HMA, if (without any breach by River
Oaks of any of its obligations hereunder) compliance with any condition set
forth in Sections 9.1 or 9.3 becomes impossible, and such failure of
compliance is not waived by River Oaks; or
(D) by HMA, upon notice to River Oaks, if between the date hereof and
the Closing Date: (i) there has occurred (or been discovered) any event,
condition or change in the operations, financial condition, assets,
liabilities (contingent or otherwise), income or business of River Oaks and
its Subsidiaries (other than (A) events, conditions and changes affecting
the hospital industry as a whole or the hospital industry in the State of
Mississippi, or (B) changes in income resulting from business operations in
the ordinary course), or any damage, destruction or loss, whether or not
covered by insurance, that adversely impairs the value of River Oaks, any
of its Subsidiaries, any of the Facilities or any of their respective
assets; and (ii) the reasonably anticipated aggregate ongoing effect of
such events, conditions and changes on the operations, financial condition,
assets, liabilities (contingent or otherwise), income or business of the
Surviving Corporation subsequent to Closing exceeds $1,500,000;
(E) by River Oaks if the Market Price is greater than $31.00 (unless
HMA agrees to proceed to Closing at a Market Price of $31.00, in which
event, notwithstanding the provisions of Section 1.1, the term "Market
Price" for all purposes of this Agreement will instead mean $31.00);
(F) by HMA if the Market Price is less than $22.00 (unless River Oaks
agrees to proceed to Closing at a Market Price of $22.00, in which event,
notwithstanding the provisions of Section 1.1, the term "Market Price" for
all purposes of this Agreement will instead mean $22.00); or
(G) by HMA or by River Oaks, upon notice to the other, at any time
after February 1, 1998 (except that if the parties' failure to reach
Closing by such date is the result of delay associated with review of the
Registration Statement by the SEC, and on the condition that the parties
continue to use their best efforts to have the Registration Statement
declared effective, then the parties agree to extend such date to a date
not more than 35 days after the date the SEC agrees that the Registration
Statement can be declared effective, in which event such later date will be
the applicable date for purposes of this Section 11.1(g)).
11.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by any party as provided by Section 11.1, this Agreement will immediately become
void and of no effect, and there will be no liability or obligation on the part
of HMA, Sub, River Oaks or any of their respective officers or directors to any
other party hereto except as otherwise provided by Sect-
46
<PAGE>
ion 11.3.
11.3 DAMAGES IN CERTAIN CIRCUMSTANCES. In the event that: (a) the Board
of Directors of River Oaks concludes in good faith, based on written advice of
independent outside counsel and after consultation with its financial advisors,
that taking such action is necessary in order for the Board of Directors to act
in a manner consistent with its fiduciary duty to the shareholders of River Oaks
under applicable law; and (b) the Board of Directors of River Oaks withdraws,
modifies or conditions its recommendation to the shareholders of River Oaks that
they approve this Agreement; and (c) the Merger fails to be consummated; and (d)
within one year from the date of the Meeting, River Oaks publicly announces,
executes a definitive agreement for or closes an Acquisition Transaction with a
party other than HMA or its Affiliates; then River Oaks will, within five
business days thereafter, pay to HMA, as liquidated damages and not as a
penalty, the amount of $2,000,000. Alternatively, in the event that River Oaks
fails to obtain Shareholder Approval of this Agreement at the Meeting, then
River Oaks will, within five business days thereafter, pay to HMA, as liquidated
damages and not as a penalty, the amount of $2,000,000. The parties agree that
the provisions of this Section 11.3 are reasonable in light of the costs and
expenses borne and to be borne by HMA in furtherance of consummation of the
Merger and the losses and competitive disadvantage HMA would suffer as a result
of devoting significant attention to consummation of the Merger to the exclusion
of pursuing other business opportunities.
ARTICLE 12. IN GENERAL
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Unless
otherwise specifically provided herein, the representations, warranties and
agreements contained in this Agreement or in any instrument delivered pursuant
to this Agreement will survive the Closing.
12.2 AMENDMENT; WAIVER. This Agreement may be amended by the parties at
any time before or after Shareholder Approval but, after Shareholder Approval,
no amendment will be made which by law requires further approval by the
shareholders of River Oaks without such further approval. This Agreement may
not be amended except by an instrument in writing signed by each of the parties.
No waiver of compliance with any provision or condition hereof, and no consent
provided for herein, will be effective unless evidenced by an instrument in
writing duly executed by the party sought to be charged therewith. No failure
on the part of any party to exercise, and no delay in exercising, any of its
rights hereunder will operate as a waiver thereof, nor will any single or
partial exercise by either party of any right preclude any other or future
exercise thereof or the exercise of any other right.
12.3 NOTICES. Each notice and other communication given hereunder will be
in writing and will be deemed given when delivered personally, sent by
telecopier (receipt of which is confirmed), mailed by commercial express courier
(with receipt confirmed) or mailed by registered or certified mail (return
receipt requested) to the party for which it is intended at the following
address (or at such other address for a party as is specified by like notice):
47
<PAGE>
(A) if to River Oaks prior to the Effective Time, to:
River Oaks Hospital, Inc.
d/b/a River Oaks Health System
P.O. Box 5100
1030 River Oaks Drive
Jackson, Mississippi 39208
Attention: John J. Cleary, Chief Executive Officer
fax: (601) 936-2275
with a copy to:
Baker, Donelson, Bearman & Caldwell, a Professional
Corporation
700 North State Street, Suite 500
Jackson, Mississippi 39202
Attention: Richard G. Cowart, Esq.
fax: (601) 351-2424
(B) if to HMA or Sub, or to River Oaks after the Effective Time, to:
Health Management Associates, Inc.
5811 Pelican Bay Boulevard, Suite 500
Naples, Florida 34108-2710
Attention:
William J. Schoen
Chairman and Chief Executive Officer
fax: (941) 597-5794
with a copy to:
Health Management Associates, Inc.
5811 Pelican Bay Boulevard, Suite 500
Naples, Florida 34108-2710
Attention:
Office of General Counsel
fax: (941) 597-5794
(C) if to any Qualifying Shareholder after the Effective Time, to the
most recent address for such Qualifying Shareholder shown on the books and
records of the Surviving Corporation.
12.4 SCHEDULES AND OTHER INSTRUMENTS. Each Schedule, each certificate
provided hereunder and each written disclosure required hereby is incorporated
by reference into this Agreement and will be considered a part hereof as if set
forth herein in full; provided, however,
48
<PAGE>
that information set forth on any Schedule, certification or written disclosure
constitutes a representation and warranty of the party providing the same, and
not the mutual agreement of the parties as to the facts therein stated. No
Schedule may be amended after the date of its delivery, except by mutual written
agreement of HMA and River Oaks. In the event that: (a) River Oaks presents to
HMA a written proposed amendment to any Schedule; and (b) HMA fails to agree to
such amendment in writing; and (c) HMA nevertheless proceeds to close the
Merger; then HMA waives any claim which it may have against River Oaks, or its
directors, officers or agents, based on an alleged breach of representation or
warranty which would not have been a breach had HMA agreed to the amendment as
proposed; provided, however, that the foregoing does not affect HMA's right to
terminate this Agreement as provided by Article 11.
12.5 INFERENCES. 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 any party will be drawn from the fact that
any portion of this Agreement has been drafted by or on behalf of such party.
49
<PAGE>
12.6 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Mississippi without regard to its
principles of conflicts of laws.
12.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any of the parties (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations hereunder to any direct or indirect wholly-
owned Subsidiary of HMA.
12.8 BENEFIT. Subject to express provisions herein to the contrary, this
Agreement will inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives, successors and permitted assigns.
This Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
12.9 ENTIRE AGREEMENT; RIGHTS OF OWNERSHIP. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
The parties acknowledge that no party will have the right to acquire or will be
deemed to have acquired shares of the capital stock of any other party pursuant
to the Merger until the Effective Time.
12.10 COUNTERPARTS. This Agreement, and any document or instrument
required or permitted hereunder, may be executed in counterparts, each of which
will be deemed an original and all of which together will constitute but one and
the same instrument.
50
<PAGE>
IN WITNESS WHEREOF, HMA, Sub and River Oaks, each pursuant to the
approval and authority duly given by resolutions adopted by its Board of
Directors, have caused this Agreement of Merger and Plan of Reorganization, as
amended and restated, to be executed as of the date first above written.
HEALTH MANAGEMENT ASSOCIATES, INC.
By: /s/ Earl P. Holland
-----------------------------------
Its Vice Chairman
Attest:
/s/ Timothy R. Parry
- ----------------------------
Its Secretary
HMA-RO ACQUISITION CORP.
By: /s/ Earl P. Holland
-----------------------------------
Its Vice Chairman
Attest:
/s/ Timothy R. Parry
- ----------------------------
Its Secretary
RIVER OAKS HOSPITAL, INC.
D/B/A RIVER OAKS HEALTH SYSTEM
By: /s/ Glen C. Warren
-----------------------------------
Its Chairman
Attest:
/s/ George W. Truett
- ----------------------------
Its Secretary
51
<PAGE>
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Bylaws of Sub and of Surviving Corporation
Exhibit B Form of Voting Agreement
Exhibit C Form of Affiliates' Agreement
Schedule 4.1 Subsidiaries, Etc.
Schedule 4.2 Stock Rights
Schedule 4.4 Conflicts; Consents
Schedule 4.6 Additional Material Liabilities
Schedule 4.8 River Oaks Permits, Etc.
Schedule 4.9 Facilities and Real Property
Schedule 4.10(a) Certain Encumbrances
Schedule 4.10(b) Leases
Schedule 4.10(c) Wetlands
Schedule 4.12 Condition of Facilities
Schedule 4.14 Environmental Matters
Schedule 4.15 Employee Plans
Schedule 4.16 Employment Matters
Schedule 4.17 Other Material Agreements
Schedule 4.18 Litigation
Schedule 4.23 Medical Staff Matters
Schedule 4.25 Trade Names
Schedule 6.1 Changes
52
<PAGE>
================================================================================
Exhibit 10.2
ASSET PURCHASE AGREEMENT
AMONG
RILEY DEVELOPMENT SYSTEMS, INC.
AND OTHERS
AS SELLER
AND
MERIDIAN HMA,INC.
AND MERIDIAN HMA NURSING HOME, INC.
AS BUYER
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. PURCHASE AND SALE 2
1.1 Purchase and Sale............................................................................ 2
-----------------
1.2 Excluded Assets.............................................................................. 4
--------------
1.3 Assumed Leases, Contracts and Liabilities.................................................... 5
----------------------------------------
1.4 Excluded Liabilities......................................................................... 5
-------------------
1.5 Omitted Items................................................................................ 6
-------------
ARTICLE II. PURCHASE PRICE ................................................................................ 6
2.1 Purchase Price............................................................................... 6
-------------------
2.2 Working Capital Adjustments.................................................................. 7
---------------------------
2.3 Allocation of Purchase Price................................................................. 8
----------------------------
2.4 Hold-back from Purchase Price................................................................ 8
-----------------------------
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER ..................................................... 9
3.1 Organization, Qualification and Authority.................................................... 9
----------------------------------------
3.2 Absence of Default........................................................................... 9
-----------------
3.3 Financial Statements......................................................................... 10
--------------------
3.4 Operations Since September 30, 1996.......................................................... 10
-----------------------------------
3.5 Taxes........................................................................................ 10
----
3.6 Employment and Employee Benefit Plans........................................................ 11
------------------------------------
3.7 Licenses and Permits......................................................................... 12
--------------------
3.8 JCAHO and Accreditations..................................................................... 12
------------------------
3.9 Medicare, Medicaid, and Other Third-Party Payors............................................. 12
------------------------------------------------
3.10 Peer Review.................................................................................. 13
-----------
3.11 Title to Assets.............................................................................. 13
---------------
3.12 Leases and Contracts......................................................................... 14
-------------------
3.13 Environmental Matters........................................................................ 15
---------------------
3.14 Miscellaneous Representations Relating to Real Estate........................................ 16
-----------------------------------------------------
3.15 Construction................................................................................. 17
------------
3.16 Litigation................................................................................... 17
----------
3.17 Seller's Employees........................................................................... 17
-----------------
3.18 Labor Relations.............................................................................. 17
---------------
3.19 Insurance.................................................................................... 18
---------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.20 Medical Staff................................................................................ 18
------------
3.21 Conflicts of Interest........................................................................ 18
---------------------
3.22 Intellectual Property; Computer Software..................................................... 19
----------------------------------------
3.23 Inventories.................................................................................. 19
-----------
3.24 Compliance with Laws......................................................................... 19
--------------------
3.25 Broker's or Finder's Fee..................................................................... 19
------------------------
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER 20
4.1 Organization, Qualification and Authority.................................................... 20
-----------------------------------------
4.2 Absence of Default........................................................................... 20
------------------
4.3 Broker's or Finder's Fee..................................................................... 20
------------------------
4.4 Buyer's Cash on Hand......................................................................... 21
--------------------
4.5 WARN Act..................................................................................... 21
--------
ARTICLE V. COVENANTS OF PARTIES ........................................................................... 21
5.1 Preservation of Business and Assets.......................................................... 21
-----------------------------------
5.2 Absence of Material Change................................................................... 21
--------------------------
5.3 Access to Books and Records.................................................................. 21
---------------------------
5.4 Consents to Assignments...................................................................... 22
-----------------------
5.5 Good Faith................................................................................... 22
----------
5.6 Commercially Reasonable Efforts; Further Assurances.......................................... 22
---------------------------------------------------
5.7 Preserve Accuracy of Representations and Warranties.......................................... 23
---------------------------------------------------
5.8 Maintain Books and Accounting Practices...................................................... 23
---------------------------------------
5.9 Indebtedness; Liens.......................................................................... 23
-------------------
5.10 Compliance with Laws and Regulatory Consents................................................. 23
--------------------------------------------
5.11 Maintain Insurance Coverage.................................................................. 24
---------------------------
5.12 Medicare and Medicaid Reporting.............................................................. 24
-------------------------------
5.13 Current Return Filing........................................................................ 24
---------------------
5.14 Performance.................................................................................. 24
-----------
5.15 WARN Act..................................................................................... 24
--------
5.16 Termination of Employee Plans................................................................ 25
-----------------------------
5.17 Charity Care................................................................................. 25
------------
5.18 Nursing Scholarships......................................................................... 25
--------------------
5.19 Winding up Seller's Business................................................................. 25
----------------------------
5.20 Affiliations and Education Programs.......................................................... 26
-----------------------------------
5.21 Use of Name.................................................................................. 26
-----------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI. TITLE AND SURVEY .............................................................................. 26
6.1 Title Report and Policy...................................................................... 26
----------------------
6.2 Survey....................................................................................... 26
------
6.3 UCC Searches................................................................................. 27
------------
6.4 Defects and Cure............................................................................. 27
----------------
ARTICLE VII. CLOSING ...................................................................................... 27
7.1 Closing...................................................................................... 27
------
7.2 Termination.................................................................................. 28
-----------
ARTICLE VIII. SELLER'S CONDITIONS TO CLOSE ................................................................. 28
8.1 Representations and Warranties True at Closing; Compliance with Agreement.................... 28
-------------------------------------------------------------------------
8.2 Regulatory Approvals......................................................................... 29
--------------------
8.3 No Material Adverse Change................................................................... 29
--------------------------
8.4 No Action/Proceeding......................................................................... 29
--------------------
8.5 Compliance with Article XI................................................................... 29
--------------------------
8.6 Order Prohibiting Transactions............................................................... 29
------------------------------
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE .................................................................. 30
9.1 Representations and Warranties True at Closing; Compliance with Agreement.................... 30
-------------------------------------------------------------------------
9.2 No Material Adverse Change................................................................... 30
--------------------------
9.3 Regulatory Approvals......................................................................... 30
--------------------
9.4 No Action/Proceeding......................................................................... 30
--------------------
9.5 Compliance with Article X.................................................................... 30
-------------------------
9.6 Order Prohibiting Transaction................................................................ 30
-----------------------------
9.7 Defeasance of Bonds.......................................................................... 31
-------------------
9.8 Consents..................................................................................... 31
-------
ARTICLE X. OBLIGATIONS OF SELLER AT CLOSING ............................................................... 31
10.1 Documents Relating to Title.................................................................. 31
---------------------------
10.2 Possession................................................................................... 32
----------
10.3 Opinion of Seller's Counsel.................................................................. 32
---------------------------
10.4 Corporate Existence and Corporate Resolution................................................. 32
--------------------------------------------
10.5 Closing Certificate.......................................................................... 32
-------------------
10.6 Third Party Consents......................................................................... 32
--------------------
10.7 Taxes and Other Payments..................................................................... 33
------------------------
10.8 Notice to Third-Party Payors and Others...................................................... 33
---------------------------------------
10.9 Evidence of Tail Insurance................................................................... 33
--------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
10.10 Additionally Requested Documents; Post Closing Assistance................................... 33
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING ............................................................ 33
11.1 Purchase Price.............................................................................. 33
--------------
11.2 Corporate Good Standing or Existence and Certified Board Resolutions........................ 33
--------------------------------------------------------------------
11.3 Opinion of Buyer's Counsel.................................................................. 33
--------------------------
11.4 Assumption of Liabilities................................................................... 34
-------------------------
11.5 Closing Certificate......................................................................... 34
-------------------
11.6 Seller's Employees.......................................................................... 34
-----------------
11.7 Health Insurance............................................................................ 34
----------------
11.8 Employment of Key Executives................................................................ 35
----------------------------
ARTICLE XII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION ................................................. 35
12.1 Survival.................................................................................... 35
--------
12.2 Indemnification by Seller................................................................... 35
------------------------
12.3 Indemnification by Buyer.................................................................... 36
------------------------
12.4 Procedure for Indemnification............................................................... 36
-----------------------------
12.5 Minimum Net Worth........................................................................... 38
-----------------
ARTICLE XIII. MISCELLANEOUS................................................................................ 38
13.1 No Assignment............................................................................... 38
-------------
13.2 Other Expenses.............................................................................. 38
--------------
13.3 Notices..................................................................................... 38
-------
13.4 Controlling Law............................................................................. 39
---------------
13.5 Headings.................................................................................... 39
--------
13.6 Benefit..................................................................................... 39
-------
13.7 Partial Invalidity.......................................................................... 40
------------------
13.8 Waiver...................................................................................... 40
------
13.9 Counterparts................................................................................ 40
------------
13.10 Interpretation.............................................................................. 40
--------------
13.11 Entire Agreement............................................................................ 40
----------------
13.12 Legal Fees and Costs........................................................................ 40
--------------------
13.13 Knowledge................................................................................... 40
---------
13.14 Parties in Interest......................................................................... 40
-------------------
13.15 No Consequential Damages.................................................................... 41
------------------------
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit No. Subject Matter
- ----------- --------------
A Bill of Sale and Assignment
B Form of Opinion of Seller's Counsel
C Form of Notice to Third-Party Payors
D Form of Opinion of Buyer's Counsel
E License Agreement
F Audited Financial Statements Marked for "Adjusted Net Working
Capital"
G Consent to Assignment and Transfer of Right of First Refusal
H Form of Requisition from Escrow Account
SCHEDULES
Schedule Subject Matter
- -------- --------------
B Clinics
1.1(d) Real Estate (including legal description and street addresses)
1.1(e) Excluded Equipment and Furnishings
1.2(d) Excluded Contracts
1.2(i) Deferred Compensation Plan
1.3(a) Assumed Contracts, Purchase Orders and Operating Leases
1.3(b) Adjusted Net Working Capital Liabilities
1.3(c) Capital Leases
1.3(d) Labor and Employment-Related Liabilities
1.3(g) Liabilities and Commitments
1.3(h) Medicare, Blue Cross and Medicaid Liabilities
1.4 Notes
2.2 Agreed Accounting Procedures
2.3 Purchase Price Allocation
3.2 Consents
3.3 Financial Statements
3.4 Changes in Operations Since 9/30/96
3.6(a) Employment Matters
3.6(b) Employee Benefit Plans
3.6(c) Assumed Employee Benefit Plan Obligations
3.7(a) Licenses and Permits
3.8 JCAHO and Accreditations
v
<PAGE>
3.9(a) Program Agreements
3.9(b) Statement of Deficiencies and Plan of Correction (Form HCFA-2567)
3.9(c) Pending Decertification or Participation
3.9(d) Third Party Payor Agreements
3.9(f) Violation of Fraud and Abuse or Self Referral Laws
3.10 Peer Review Agreement
3.11(a) Non-reflected Assets
3.11(b) Tradenames
3.11(c) Addresses for Receivables
3.12(a) Leases and Contracts
3.12(c) Default or Breach
3.13(b) Hazardous Materials
3.13(e) Property Excluded from Section 3.13
3.15 Construction
3.16 Litigation
3.17 Employees
3.18 Labor Relations
3.19 Insurance
3.20 Disciplinary Actions with Medical Staff
3.21 Conflicts of Interest
3.22 Intellectual Property
3.25 Brokers and Finders
5.11 Maintain Insurance Coverage
5.18 Nursing Scholarships
5.19 Post-Closing Activities
6.1 Permitted Exceptions
11.6 Employees Within Five Years of Retirement
13.13 List of Certain Seller Employees
<PAGE>
GLOSSARY OF DEFINED TERMS
Defined Term Section
- ------------ -------
Acquired Assets 1.1
Adjusted Net Working Capital 2.1
Affiliates 3.13(b)
Agents 3.13(b)
Agreed Accounting Procedures 2.2(b)
Assumed Liabilities 1.3
Blue Cross 3.9(d)
Bonds 1.4(a)
Buyer Page 1
Buyer's Objection 6.4
CERCLA 3.13(a)
Claim 12.4(a)
Clinics Recital B
Closing 7.1
Closing Statement 2.2(b)
COBRA coverage 1.3(g)
Code 2.3
Commitment 6.1
control 3.13(b)
Defects 6.4
Employee Benefit Plan 3.6(b)
Equipment and Furnishings 1.1(e)
ERISA 3.6(b)
Escrow Account 2.4
Escrow Agent 2.4
Estimated Adjusted Net 2.1
Working Capital
Excluded Assets 1.2
Excluded Liabilities 1.4
Financial Statements 3.3(a)
Hazardous Substances 3.13(a)
HMA 5.1
Home Care Agency Recital B
Hospital Recital B
Improvements 2.4
Indemnitee 12.4(a)
Indemnitor 12.4(a)
Intellectual Property 3.22
Interim Financial Statements 3.3(b)
Inventory 1.1(f)
<PAGE>
JCAHO 3.8(a)
Leases and Contracts 3.12(a)
Licenses and Permits 3.7(a)
Minority Interests Recital C
MRI Recital C
Non-material Conflicts 3.21
Non-material Contracts 3.12(a)
Notes 1.4(a)
Notice 12.4(a)
Nursing Home Recital B
part-time employee 3.17
Pension Plan 5.16(a)
Permitted Exceptions 6.1
Program Agreements 3.9(a)
Programs 3.9(a)
Property Recital B
Purchase Price 2.1
Rate 12.4
RCC Page 1
RCRA 3.13(a)
RDS Page 1
Real Estate 1.1(d)
Receivables 1.1(g)
Related Assets Recital B
RHHS Page 1
RMH Page 1
RPHC Page 1
Seller Page 1
Sowashee Parcel 3.13(e)
Seller's Election 6.4
Survey 6.2
Third Party Claims 12.1
Title Evidence 6.4
Title Policy 6.1
Transferred Employees 11.6
UCC Searches 6.3
WARN 4.5
viii
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 7th day of January, 1998, by and among
RILEY DEVELOPMENT SYSTEMS, INC., a Mississippi non-profit corporation ("RDS"),
THE RILEY HOSPITAL & BENEVOLENT ASSOCIATION D/B/A RILEY MEMORIAL HOSPITAL, a
Mississippi non-profit corporation ("RMH"), RILEY CARE CENTER, INC., a
Mississippi non-profit corporation ("RCC"), RILEY HOME HEALTH SERVICES, INC., a
Mississippi non-profit corporation ("RHHS"), and RILEY PROPERTY HOLDING COMPANY,
a Mississippi non-profit corporation ("RPHC"), and MERIDIAN HMA, INC., a
Mississippi corporation ("MERIDIAN HMA"), and MERIDIAN HMA NURSING HOME, INC., a
Mississippi corporation ("MERIDIAN HMA NURSING"). RDS, RMH, RCC, RHHS and RPHC
are collectively referred to herein as "SELLER." Meridian HMA and Meridian HMA
Nursing are collectively referred to herein as "BUYER."
R E C I T A L S:
----------------
K. RDS is the sole member of RMH, which has entered into management
contracts with RCC and RHHS.
L. Seller owns and operates (1) an acute care hospital in Meridian,
Mississippi, licensed by the Mississippi State Board of Health for 180
medical/surgical beds (the "HOSPITAL"); (2) an 82-bed nursing home (the "NURSING
HOME"); (3) a home health care agency (the "HOME CARE AGENCY"); (4) certain real
estate related to the Hospital, the Nursing Home and the Home Care Agency (the
"PROPERTY"); and (5) physician clinics in six buildings (one of which is vacant)
staffed by nine full-time physicians and one part-time physician as listed on
Schedule B hereto (collectively, the "CLINICS"). The Nursing Home, the Home
Care Agency, the Property and the Clinics are collectively referred to as the
"RELATED ASSETS."
M. Seller, either directly or indirectly, as a stockholder owns a
joint venture interest comprising less than 100% equity interest in the
following: (1) a one-third interest in Regional Medical Support Services, Inc.,
a for-profit magnetic resonance imaging ("MRI") center; (2) a one-third interest
in Meridian Heart Services, Inc., a for-profit heart catheterization center; and
(3) an investment in Mississippi Medical Supply Alliance, LLC, a Delaware
limited liability corporation. Seller's interests in the properties, operations
and facilities described in this paragraph C are collectively referred to as the
"MINORITY INTERESTS."
N. Except for Excluded Assets described in Section 1.2, Seller
desires to sell and transfer to Buyer the Acquired Assets (as defined in Section
1.1), including the Hospital, the Related Assets and the Minority Interests; and
Buyer desires to purchase the same from Seller, subject to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants,
agreements and conditions contained in this Agreement, acknowledged by each of
the undersigned, the undersigned agree as follows:
<PAGE>
ARTICLE I. PURCHASE AND SALE
1.1 PURCHASE AND SALE. Except as provided in Section 1.2, Seller
-----------------
agrees to sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase from Seller all right, title and interest in all of the following
assets (collectively, the "ACQUIRED ASSETS"):
(a) The Hospital;
(b) The Related Assets;
(c) The Minority Interests;
(d) The Property as more particularly described in Schedule 1.1(d),
all leaseholds, easements, plants, fixed assets, improvements, buildings,
structures and fixtures (including fixed machinery and fixed equipment) situated
thereon or forming a part thereof and all appurtenances, easements and rights-
of-way related thereto and the right of first refusal granted to Seller to
purchase the remaining property owned by Sowashee Building Corporation in Block
56 of and according to Ragsdale's Survey of the City of Meridian, County of
Lauderdale, State of Mississippi, as more particularly described in and pursuant
to the Consent to Assignment and Transfer attached hereto as Exhibit G
(collectively, the "REAL ESTATE");
(e) All tangible personal property, medical and other equipment,
machinery, data processing hardware and software, furniture, furnishings,
appliances, vehicles and other tangible personal property of every description
and kind and all replacement parts therefor which are either owned by Seller or
used or maintained or operated by Seller in connection with the Hospital and the
Related Assets, wherever located, excluding the items listed on Schedule 1.1(e)
(collectively, the "EQUIPMENT AND FURNISHINGS");
(f) All inventories of goods and supplies used or maintained in
connection with or located in the Hospital or the Related Assets, including
food, cleaning materials, disposables, linens, consumables, office supplies,
drugs and medical supplies (collectively, the "INVENTORY");
(g) All Seller's patient accounts receivable, notes (other than
physician notes, if any) and long-term patient and other receivables, whether or
not written off (collectively, the "RECEIVABLES");
(h) All patient, medical, personnel and other records of the Hospital
and the Related Assets other than Excluded Assets (including both hard and
microfiche copies), and all manuals, books and records used in operating the
Hospital and the Related Assets, including personnel policies and manuals and
computer software;
(i) To the extent transferable, all licenses, permits, registrations,
certificates, consents, accreditations, approvals and franchises, and all
applications therefor, necessary to construct, operate and conduct the business
of the Hospital and the Related Assets, together with
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assignments thereof, if required, and all waivers which Seller currently has, if
any, of any requirements pertaining to such licenses, permits, registrations,
certificates, consents, accreditations, approvals and franchises;
(j) All plans and surveys, including "as-built" plans, all plats,
specifications, engineers' drawings, and architectural renderings and similar
items relating to the Acquired Assets in Seller's possession or obtainable by
Seller without unreasonable cost, including those relating to utilities,
easements and roads;
(k) All goodwill associated with the Hospital, the Related Assets and
other intangible assets including, to the extent assignable by Seller, all
warranties (express or implied) and rights and claims assertable by Seller
related to the operation of the Hospital and the Related Assets;
(l) Those prepaid assets selected by Buyer and identified, along with
the agreed value thereof based on generally accepted accounting principles, and
included on Exhibit F;
(m) Seller's contract and leasehold rights and interests pursuant to
contracts for purchase or lease of real and personal property, rights of first
refusal, construction contracts, contracts for purchase, sale or lease of
equipment, goods or services currently furnished or to be furnished at or to the
Hospital or the Related Assets;
(n) All assets, except the Excluded Assets (as defined in Section
1.2), reflected on the Financial Statements (as defined in Section 3.3(a)) and
any additions thereto up through the Closing less deletions therefrom sold or
consumed in the ordinary course of business;
(o) All patents and patent applications associated with the Hospital
or the Related Assets; and
(p) All other property, other than Excluded Assets, of every kind,
character or description owned by Seller and used or held for use in the
business of the Hospital or the Related Assets, whether or not reflected on the
Financial Statements, wherever located and whether or not similar to the items
specifically set forth above.
Meridian HMA Nursing is purchasing the Nursing Home and all of the
Property, Equipment and Furnishings, Inventory, Receivables and other assets
relating thereto. Meridian HMA is purchasing all other assets. The assets
purchased hereunder shall be allocated between Meridian HMA Nursing and Meridian
HMA as determined by agreement between Meridian HMA Nursing and Meridian HMA.
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<PAGE>
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER DOCUMENT TO
THE CONTRARY, ALL TANGIBLE AND INTANGIBLE ASSETS ARE SOLD IN THEIR CONDITION "AS
IS" WITH NO WARRANTIES OF HABITABILITY OR FITNESS FOR HABITATION OR WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
1.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not
---------------
purchasing or assuming obligations with respect to the following (collectively,
the "EXCLUDED ASSETS"):
(a) Seller's cash, cash equivalents and investments in marketable
securities and all accrued interest earnings on such cash equivalents and
investments in marketable securities at Closing;
(b) All original corporate records and fiscal records of Seller and
all other records that Seller is required by law to retain in its possession as
described in Schedule 1.2(b);
(c) Seller's incidence of ownership in Primex Systems, Inc., a for-
profit company, all the stock of which is owned by RDS;
(d) Rights under any other agreements or contracts described on
Schedule 1.2(d);
(e) Seller's membership (and all liabilities related thereto) in the
following non-profit entities: the American Hospital Association and the
Mississippi Hospital Association;
(f) Any claims of Seller against third parties not relating to the
Acquired Assets, choate or inchoate, known or unknown, contingent or otherwise;
(g) All of the tradenames of Seller;
(h) Seller's interest in or related to (i) The Mississippi Casualty
Insurance Company, (ii) the State of Mississippi Workers' Compensation Program,
and (iii) that certain unemployment trust established by the Mississippi
Hospital Association; and
(i) The Deferred Compensation Plan provided by Aetna Life Insurance
and Annuity Company and acquired by Seller for certain physicians employed by it
and the deposit arrangement made with Trustmark National Bank for the benefit of
Eric Weis, in each case as described on Schedule 1.2(i).
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<PAGE>
1.3 ASSUMED LEASES, CONTRACTS AND LIABILITIES. At Closing, Buyer
-----------------------------------------
will assume and agree to pay or perform, as the case may be, all of the
following (collectively, the "ASSUMED LIABILITIES"):
(a) All obligations with respect to those contracts, purchase orders
and operating leases which are described on Schedule 1.3(a) hereto;
(b) All liabilities included in the calculation of Adjusted Net
Working Capital (as defined in Section 2.1), as set forth on Schedule 1.3(b)
hereto;
(c) All obligations with respect to capital leases for usable, non-
obsolete, movable equipment, as set forth on Schedule 1.3(c) hereto;
(d) All pre-Closing payroll and employee benefit expense, as set
forth on Schedule 1.3(d) hereto;
(e) All amounts receivable or payable under the Programs (as defined
in Section 3.9(a)) if any gain or loss occurs as a result of the sale of the
Hospital and the Related Assets pursuant to this Agreement;
(f) All liabilities arising out of or associated with Buyer's
obligations pursuant to Section 11.6;
(g) All liabilities and commitments arising out of or by reason of a
transaction or event occurring on and after Closing for all of the following:
suits, claims, indemnities, mortgages, contingent liabilities and other
obligations of the Hospital and the Related Assets (including malpractice or
discrimination claims or suits whether scheduled or unscheduled); all
impositions of income tax and other taxes relating to the Hospital and the
Related Assets and all obligations to give notice of and to provide continuation
health care coverage for employees, former employees, and their dependents or
any qualified beneficiary of such employees in accordance with the requirements
for the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(hereinafter referred to as "COBRA COVERAGE"), including the obligation to
continue COBRA coverage for all employees of Seller and their dependents
entitled thereto on the Closing Date as set forth in Schedule 1.3(g) hereto; and
(h) All liabilities and commitments (whether arising or existing
prior to, on or following the Closing) of Seller for recapture or prior period
adjustments under Medicare, Blue Cross (as defined in Section 3.9(d)) and
Medicaid as set forth in Schedule 1.3(h) hereto.
1.4 EXCLUDED LIABILITIES. Seller shall remain responsible for all
--------------------
liabilities, other than the Assumed Liabilities, arising or existing prior to
the Closing relating or related, directly or indirectly, to any one or more of
the Acquired Assets and Seller shall also remain liable for the following
liabilities whether arising or existing prior to, on or following the Closing
(collectively, the "EXCLUDED LIABILITIES"):
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<PAGE>
(a) All obligations of Seller pursuant to or related to (i) the
$16,980,000 Mississippi Hospital Equipment and Facilities Authority Hospital
Revenue Bonds (Riley Memorial Hospital Project), Series 1992 A and Series 1992 B
(collectively, the "BONDS"), and (ii) the notes payable described in Schedule
1.4 (the "NOTES").
(b) Liabilities, obligations and responsibilities of Seller arising
from its operations or continued existence after Closing, but only to the extent
the same do not relate, directly or indirectly, to any one or more of the
Acquired Assets;
(c) Liabilities or obligations with respect to the ownership or
operation of any assets owned or operated by Seller other than the Acquired
Assets;
(d) Liabilities and obligations arising from or relating to the
Excluded Assets;
(e) All liabilities and commitments arising out of or by reason of a
transaction or event occurring prior to Closing for all of the following: suits,
claims, indemnities, mortgages, contingent liabilities and other obligations of
Seller (including malpractice or discrimination claims or suits whether
scheduled or unscheduled); any and all investment tax credit recapture;
depreciation recapture, except as provided in Section 1.3(c), (e), (f) or (h);
and all impositions of income tax and other taxes, except as provided in Section
1.3(d), (e), (f), (g) or (h); and
(f) All assets and liabilities of all employee
benefit plans of Seller.
1.5 OMITTED ITEMS. If at any time after the date of this Agreement,
-------------
either Buyer or Seller discovers any item which such party believes should have
been included on one or more of the Schedules to this Agreement, the party
discovering such omission shall notify the other of the omission and of the
reason such party believes that the item in question should have been included
on one or more Schedules. The parties shall then confer in good faith regarding
the amendment of the Schedule or Schedules in question to include the item
omitted.
ARTICLE II. PURCHASE PRICE
2.1 PURCHASE PRICE. Subject to the terms and conditions hereof, the
--------------
purchase price (the "PURCHASE PRICE") payable by Buyer to Seller for the
Acquired Assets will be $65,000,000 in cash for the Purchased Assets plus
----
$7,736,009 in cash, representing the parties' estimate of the Adjusted Net
Working Capital (as defined below) at Closing (the "ESTIMATED ADJUSTED NET
WORKING CAPITAL") payable in immediately available funds by wire transfer as
provided in Section 7.1. Any necessary post-closing adjustments to the Purchase
Price shall be made in accordance with Section 2.2. "ADJUSTED NET WORKING
CAPITAL" means, with respect to Seller, the excess, if any, of (x) those current
assets marked as such on the financial statements as of November 30, 1997
attached hereto as Exhibit F over (y) those current liabilities marked as such
on the financial statements attached hereto as Exhibit F.
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<PAGE>
2.2 WORKING CAPITAL ADJUSTMENTS. It is the intent of Buyer and
---------------------------
Seller that Buyer purchase the Adjusted Net Working Capital of Seller as of
Closing. Therefore, Buyer and Seller agree to take the following actions:
(a) At the Closing, Buyer shall pay to Seller an amount equal to the
Estimated Adjusted Net Working Capital.
(b) Seller shall consult with Buyer in the course of preparing and,
within sixty (60) days after Closing, Seller will deliver or cause to be
delivered to Buyer, a statement as of Closing (the "CLOSING STATEMENT") that
sets forth in reasonable detail the Adjusted Net Working Capital of Seller as of
Closing. Buyer and Seller acknowledge and agree that the purpose of the
procedures and adjustments contemplated by this Section 2.2 is to reflect
accurately the Adjusted Net Working Capital of Seller at Closing using the
accounting procedures set forth on Schedule 2.2 (the "AGREED ACCOUNTING
PROCEDURES"). The Closing Statement shall be certified by Seller as having been
prepared using the Agreed Accounting Procedures. Buyer agrees that any
adjustments proposed in accordance with the following paragraph will not involve
changes in or challenges to any of the Agreed Accounting Procedures that have
been consistently applied.
(c) Following the delivery of the Closing Statement to Buyer, Buyer
will have the right to review the Closing Statement to determine whether it was
prepared in accordance with the Agreed Accounting Procedures. Seller will
permit Buyer and its independent accountants access at all reasonable times to
all of the working papers, analyses and schedules of Seller utilized or prepared
in connection with the preparation of the Closing Statement. Within the 30-day
period after receipt of the Closing Statement, Buyer will, in a written notice
to Seller, either accept the Closing Statement or describe in reasonable detail
any proposed adjustments to such Closing Statement and the reasons therefor. If
Seller has not received such notice of proposed adjustments within such 30-day
period, Buyer will be deemed irrevocably to have accepted the Closing Statement.
(d) Buyer and Seller will negotiate in good faith to resolve any
disputes over any proposed adjustments to the Closing Statement. However, if
any such dispute is not resolved within thirty (30) days following the receipt
by Seller of the proposed adjustments, Buyer and Seller jointly will select an
independent public accounting firm that is nationally recognized in the United
States to resolve such disputes, which resolution will be final and binding.
The fees and expenses of such accounting firm will be shared by Buyer and Seller
in proportion to the relative amounts of the disputed amount determined to be
for the account of Buyer and Seller, respectively.
(e) Upon the acceptance of the Closing Statement by Buyer or the
resolution in writing of any disputes arising out of any proposed adjustments,
(A) if the Adjusted Net Working Capital of Buyer as set forth on the Closing
Statement is greater than the Estimated Adjusted Net Working Capital, Buyer will
promptly (but in no event more than five (5) days thereafter) pay to Seller the
amount of such difference, or (B) if the Adjusted Net Working Capital of Buyer
as set forth on the Closing Statement is less than the Estimated Adjusted Net
Working
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Capital, Seller will promptly (but in no event more than five (5) days
thereafter) pay to Buyer the amount of such difference. Any such payment
pursuant to this Section 2.2 will be made by wire transfer of immediately
available funds.
2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
----------------------------
allocated among the Acquired Assets in the manner set forth in Schedule 2.3. The
parties agree that this allocation will be used by them for all purposes
including tax, reimbursement and other purposes. Each party hereto agrees that
it will report the transaction in accordance with such allocation, including
under Section 1060 of the Internal Revenue Code of 1986, as amended (the
"CODE"), and that it will not take a position inconsistent with such allocation
except with the written consent of the other party hereto.
2.4 HOLD-BACK FROM PURCHASE PRICE. On the date of the Closing Seller
-----------------------------
shall deposit Three Million Dollars ($3,000,000) from the Purchase Price (the
"ESCROW ACCOUNT") with a local Meridian bank mutually acceptable to Seller and
Buyer (the "ESCROW AGENT") to be drawn upon by Buyer to pay costs for
refurbishing and improving patient rooms within Riley Memorial Hospital (the
"IMPROVEMENTS," as hereinafter defined). The patient room Improvements shall
consist of the following: installing showers in patient rooms, converting
certain rooms to semi-private rooms, relocating ancillary facilities;
constructing replacement patient rooms; upgrading the equipment, mechanical and
electrical systems for the patient rooms; installation of overhead lights,
refurbishing and modifications to the nurse call station and Head Walls; and any
and all additional work associated therewith or required to comply with the
applicable safety and building codes. Before making any draw on the Escrow
Account, Buyer will provide Seller with copies of final architectural drawings
and specifications for the Improvements. Following receipt of Seller's comments
to the architectural drawings and specifications, Buyer will consider making
changes reasonably suggested by Seller (but is not bound by these comments) and
thereafter Buyer may commence construction of the Improvements and make draws on
the Escrow Account. Payments for the Improvements shall be made by the Escrow
Agent from the Escrow Account upon receipt of a requisition in the form attached
hereto as Exhibit H, including as part thereof a statement by an authorized
officer of Buyer that the requisition is for Improvements as set forth in this
Agreement and the architectural drawings and specifications contemplated
hereunder and an Architect's Certificate reflecting satisfactory completion of
the work for which the requisition is submitted. Any fees payable to the Escrow
Agent shall be deducted from interest earnings on amounts on deposit in the
Escrow Account and all remaining earnings shall be disbursed to Seller at least
quarterly. No portion of the interest earnings on the Escrow Account shall be
used to pay for Improvements. If the interest earnings in any quarter shall be
insufficient to pay the fees of the Escrow Agent, Buyer and Seller shall pay the
deficit equally.
The Escrow Agent shall continue to make disbursements from the Escrow
Account until the earlier to occur of (a) the completion of the Improvements, or
(b) the date on which the funds on deposit in the Escrow Account are exhausted.
All amounts remaining in the Escrow Account following completion of the
Improvements shall be released to Seller, free and clear of any and all claims
of Buyer. In the event that Buyer shall not have started construction of the
Improvements within three (3) years from the date of Closing, any amounts held
in the Escrow
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<PAGE>
Account shall be disbursed to Seller free and clear of any and all claims by
Buyer.
Seller shall have no responsibility for any deficiency in the Escrow
Account. Seller shall have no obligation to Buyer or to any contractor for the
Improvements for the cost of such Improvements, the architectural drawings and
specifications therefor or any action or inaction on the part of the Escrow
Agent. In addition, Seller shall have no liability to Buyer for any claims
related to the Improvements, whether by contractors or others, by virtue of
Seller's review and comment on the architectural drawings and specifications for
the Improvements, for the disbursement by the Escrow Agent of amounts on deposit
in the Escrow Account or for the failure of the Escrow Agent to disburse funds
on deposit in the Escrow Account.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
As inducements to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, each Seller hereby represents and warrants
to Buyer as follows (it being understood that each Seller makes the
representations and warranties set forth below solely with respect to itself and
its operations, assets and liabilities):
3.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Seller is a non-profit
------------------------------------------
corporation which is validly existing and in good standing under the laws of the
State of Mississippi. Seller is duly qualified to do business in the State of
Mississippi. Seller has full power and authority to own, lease and operate its
facilities and assets as presently owned, leased and operated and to carry on
its business as it is now being conducted, and at Closing will have the
requisite power and authority to enter into and perform its obligations under
this Agreement without the consent, approval or authorization of, or obligation
to notify, any person, entity or governmental agency. Seller has the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated on
the part of Seller hereby. This Agreement and all other agreements and documents
executed in connection herewith by Seller, upon due execution and delivery
thereof, shall constitute valid and binding obligations of Seller, enforceable
in accordance with their respective terms, upon receipt of the consents, if any,
specified in Schedule 3.2.
3.2 ABSENCE OF DEFAULT. To Seller's knowledge, upon receipt of the
------------------
consents, if any, specified in Schedule 3.2, the execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith by Seller will not constitute a violation of, or be in
conflict with, and will not, with or without the giving of notice or the passage
of time, or both, result in a breach of, constitute a default under, or create
(or cause the acceleration of the maturity of) any debt, indenture, obligation
or liability affecting the Acquired Assets pursuant to, or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Acquired Assets under: (a) any term or provision of
the Articles of Incorporation or Bylaws of Seller; (b) any material contract,
lease, purchase order, agreement, indenture, mortgage, pledge, assignment,
permit, license, approval or other
9
<PAGE>
contract to which Seller is a party or by which Seller is bound; or (c) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Seller is
subject, if any, except for any such breach, default, debt, indenture,
obligation or liability that would not reasonably be expected to have a material
adverse effect on the Acquired Assets.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) Attached as Schedule 3.3 are true and correct copies of the
audited Financial Statements of Seller for the fiscal years ended September 30,
1997, September 30, 1996 and September 30, 1995 (the "FINANCIAL STATEMENTS").
The Financial Statements present fairly, in all material respects, the financial
position of Seller for such periods and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles consistently applied for the periods specified. The Financial
Statements are true, complete and correct and have been prepared in conformity
with generally accepted accounting principles on an accrual basis, applied
consistently for the periods involved.
(b) Seller shall cause to be prepared interim unaudited quarterly
financial statements of Seller for each quarter since September 30, 1996 (the
"INTERIM FINANCIAL STATEMENTS"), which shall be delivered to Buyer within forty-
five (45) days after the date hereof. The Interim Financial Statements, upon
delivery, shall present fairly, in all material respects, the financial position
of Seller and the result of its operations for the periods then ended, in
conformity with generally accepted accounting principles applied consistently
for the period specified. All such interim financial statements shall reflect
all adjustments (which consist only of normal recurring adjustments not material
in amount and include estimated provisions for year-end adjustments) necessary
for a fair presentation.
(c) After Closing, Seller shall make the books and records of Seller
available to Buyer and Buyer's auditors at reasonable times and in a manner so
as not to unduly interfere with Seller's operations, and otherwise cooperate
with Buyer in order to permit Buyer to conduct an audit of Seller's financial
statements for any period prior to Closing. Such audit, if any, shall be at
Buyer's expense.
3.4 OPERATIONS SINCE SEPTEMBER 30, 1996. Except as set forth in
-----------------------------------
Schedule 3.4, since September 30, 1996, Seller has conducted its business only
in the ordinary course and there was no material adverse change in the condition
(financial or otherwise) of the Acquired Assets, the business of, or in the
results of operations of, the Hospital, the Related Assets or Seller.
3.5 TAXES. All taxes, including income, property, sales, use,
-----
franchise, value added, employees' income withholding and social security taxes,
license fees and taxes, deposits and fees for waste disposal, pharmaceutical,
and nursing facilities, which are due or payable by Seller, and all interests
and penalties thereof have been paid in full and all tax returns, if any,
required to be filed in connection therewith have been accurately prepared and
timely filed, except
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<PAGE>
for such failures to pay or failures to file as would not have a material
adverse effect on the Acquired Assets. All deposits required to be made by
Seller with respect to employees' withholding taxes have been duly made. Seller
has not been delinquent in the payment of any tax, assessment or governmental
charge or deposit, and to Seller's knowledge, there is no tax deficiency or
claim outstanding, proposed or assessed against it.
3.6 EMPLOYMENT AND EMPLOYEE BENEFIT PLANS.
-------------------------------------
(a) Except as disclosed in Schedule 3.6(a), to the knowledge of
Seller, no person or entity (including any governmental agency) has made any
claim against Seller arising out of any statute, ordinance or regulation
relating to wages, collective bargaining, discrimination in employment or
employment practices or occupational safety and health standards (including, but
not limited to, the Fair Labor Standards Act, Title VII of the Civil Rights Act
of 1964, as amended, the Occupational Safety and Health Act, or the Age
Discrimination in Employment Act of 1967, as amended, or the Americans With
Disabilities Act of 1990), except for any such claim that would not reasonably
be expected to have a material adverse effect on the Acquired Assets.
(b) Except as described in Schedule 1.2(i) and as provided in
Schedule 3.6(b), Seller does not maintain or contribute to, or have any
obligation with respect to, and none of the employees of Seller are covered by,
any bonus, deferred compensation, severance pay, pension, profit-sharing,
retirement, insurance, stock purchase, stock option or other fringe benefit
plan, arrangement or practice, written or otherwise, or any other "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether formal or informal
("EMPLOYEE BENEFIT PLAN").
(c) Except as specified in Section 1.3 and as set forth on Schedule
3.6(c), Buyer will not be liable and will not be responsible for any debt,
obligation, contribution, responsibility, withdrawal liability or other
liability of Seller under any Employee Benefit Plans, including any penalty, fee
or funding obligation related to the termination of any plan pursuant to Section
5.15. Seller will be responsible for processing and paying claims incurred at
or prior to Closing in accordance with the terms of the applicable Employee
Benefit Plan and for any liabilities arising from any failure before or after
the Closing to comply with the requirements of ERISA, the Code, the Mississippi
Code or regulations thereunder.
(d) Seller has delivered to Buyer correct and complete copies of the
plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all material related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
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3.7 LICENSES AND PERMITS.
--------------------
(a) Seller has all local, state and federal licenses, permits,
registrations, certificates, contracts, consents, accreditations and approvals
(collectively, "LICENSES AND PERMITS") necessary for Seller to occupy, operate
and conduct its business at the Hospital and the Related Assets, except for any
of the above, the absence of which would not reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, Seller
is not in default under any of such Licenses and Permits. To Seller's
knowledge, there exist no grounds for revocation, suspension or limitation of
such License or Permits. Copies of these Licenses and Permits are attached to
and listed on Schedule 3.7(a). Except as described in Schedule 3.7(a), no
written notices have been received by Seller with respect to complaints lodged
with any regulatory authority or agency or with respect to threatened, pending
or possible revocation, termination, suspension or limitation of any of the
Licenses and Permits, except for any such notices that have been or are being
addressed by Seller. To the knowledge of Seller, there are no grounds for
revocation, suspension or limitation of any of the Licenses and Permits.
(b) Seller has all certificates of need, exemptions or non-review
letters from the State of Mississippi necessary to operate its business with
respect to the Acquired Assets as it has been historically and is currently
conducted by Seller. To the knowledge of Seller, Seller has complied fully with
the requirements and conditions thereof.
3.8 JCAHO AND ACCREDITATIONS.
------------------------
(a) Set forth on Schedule 3.8 are each Certificate of Accreditation
and copies of the most recent accreditation survey report issued by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"), and a list of
material deficiencies, if any, relating to the operations of Seller.
(b) Except as described in Schedule 3.8, Seller has received no
written notice with respect to any threatened, pending or possible revocation,
early termination, suspension or limitation of any of the accreditations listed
in this Section 3.8.
3.9 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYORS.
------------------------------------------------
(a) The Hospital and (to the extent applicable) the Related Assets
are duly certified to participate, and do participate in the Medicare and
Medicaid programs (the "PROGRAMS"). Copies of their existing Medicare and
Medicaid contracts (the "PROGRAM AGREEMENTS") are included in Schedule 3.9(a).
To Seller's knowledge, the Hospital and (to the extent applicable) the Related
Assets are in material compliance with all of the terms, conditions, and
provisions of such contracts, as well as state and federal laws related thereto.
(b) Attached as part of Schedule 3.9(b) is a copy of the Hospital's
and (to the extent applicable) the Related Assets' most recent Statement of
Deficiencies and Plan of Correction (Form HCFA-2567).
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(c) Except as set forth in Schedule 3.9(c), no written notice of any
offsets against future reimbursement has been received by Seller nor, to
Seller's knowledge, is there any basis therefor, and there are no pending
appeals, adjustments, challenges, audits, litigation or notices of intent to
reopen or open cost reports with respect to the Programs. To Seller's knowledge,
the Hospital and (to the extent applicable), the Related Assets have not been
subject to or threatened with loss of waiver of liability for utilization review
denials with respect to the Programs during the past twelve (12) months, nor has
Seller received notice of pending, threatened or possible decertification or
other loss of participation in any of the Programs, except as set forth in
Schedule 3.9(c).
(d) The Hospital and (to the extent applicable) the Related Assets
currently have contractual arrangements with Blue Cross of Alabama, Blue Cross
of Mississippi (together, "BLUE CROSS") and other third party payors. Copies of
all existing Blue Cross contracts and other third party payor contract(s) are
included in Schedule 3.9(d). The Hospital and (to the extent applicable) the
Related Assets are in material compliance with all of the terms, conditions and
provisions of such contract(s).
(e) Seller has previously furnished Buyer the Medicare and Medicaid
cost reports of Seller for the years of 1996, 1995 and 1994. The cost reports
are complete and accurate in all material respects for the periods indicated.
All liabilities and contractual adjustments of the Hospital and Related Assets
under any third party payor or reimbursement programs have been properly
reflected and adequately reserved for in the Financial Statements, in each case
in all material respects.
(f) Seller has received no written notice of any violation of federal
or state fraud and abuse or self-referral laws, except as set forth in Schedule
3.9(f) and Seller is not aware of any such violations in connection with the
operation of its business.
3.10 PEER REVIEW. The Hospital has entered into one or more valid
-----------
memorandums of understanding with the Hospital's peer review organizations. A
copy of each memorandum of understanding is included in Schedule 3.10.
3.11 TITLE TO ASSETS.
---------------
(a) All assets owned or leased by Seller are reflected on the
Financial Statements. Seller is transferring all assets necessary to the
operation of the Hospital and the Related Assets, except as set forth on
Schedule 3.11(a).
(b) The only names, tradenames or fictitious names under which the
business of the Hospital and Related Assets of Seller have been operated for the
last two (2) years are listed on Schedule 3.11(b). To Seller's knowledge, Seller
has complied with all applicable fictitious name filing statutes.
(c) Schedule 3.11(c) lists all post office boxes and addresses where
Receivables
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purchased by Buyer hereunder are to be paid and all names under which payment is
to be received. Seller hereby grants to Buyer irrevocable power of attorney to
execute and endorse any checks or receive any payments with respect to any
Receivables purchased by Buyer hereunder.
3.12 LEASES AND CONTRACTS.
---------------------
(a) Except for Non-material Contracts (as defined below), Schedule
3.12(a) hereto sets forth a complete and accurate list of all material written
contracts, agreements, leases and commitments, and all assignments and
amendments thereof relating to the Hospital or the Related Assets, to which
Seller is a party, including service contracts, management agreements, equipment
leases and leases of space and all oral agreements of Seller pursuant to which
Seller is currently expending money, but excluding any agreement recorded
against all or any part of the Real Estate (collectively, the "LEASES AND
CONTRACTS"). "NON-MATERIAL CONTRACTS" means contracts which no party thereto is
a referral source (including physicians) to Seller and either (i) involves an
expenditure of less than $50,000 in the aggregate for such contract per year, or
(ii) is cancelable on behalf of Seller (and Buyer as its assignee) upon no more
than thirty (30) days' notice and without penalty or payment. Prior to Closing,
Seller will provide Buyer a copy of all written Leases and Contracts, and a
detailed summary of the provisions of all oral Leases and Contracts.
(b) None of the Leases and Contracts has been modified, amended,
assigned or transferred, except as noted on Schedule 3.12, and each is in full
force and effect and is valid, binding and enforceable in accordance with its
respective terms except for such failures to be in full force and effect or
validly binding and enforceable as would not reasonably be expected to have a
material adverse effect on the Acquired Assets.
(c) Except as disclosed on Schedule 3.12(c), to Seller's knowledge,
no event or condition has happened or presently exists which constitutes a
default or breach on the part of Seller or after notice or lapse of time or
both, would constitute a default or breach by any party under any of the Leases
and Contracts. There are no pending or, to Seller's knowledge, threatened
counterclaims or offsets which have been asserted in writing under any of the
Leases and Contracts. With respect to any options or rights of first refusal
affecting or relating to any of the Acquired Assets or any interest therein to
which Seller is a party, to Seller's knowledge: (i) there has been no exercise
or attempted exercise of the same, and (ii) no event has happened or presently
exists which would require the same to be exercised. If any such event happens
or occurs prior to Closing, Seller will take all necessary, commercially
reasonable action to preserve Seller's rights under and with respect to the same
and prevent the expiration or lapse thereof.
(d) None of the Leases and Contracts shall be amended between the
date hereof and Closing without the prior written consent of Buyer.
(e) Except as expressly identified on Schedule 3.12, Seller has no
Lease or Contract which is a capitalized lease within the meaning of generally
accepted accounting principles.
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3.13 ENVIRONMENTAL MATTERS.
---------------------
(a) As used in this Section, the term "HAZARDOUS SUBSTANCES" means any
hazardous or toxic substances, pollutants, contaminants, materials or wastes,
including those substances, pollutants, contaminants, materials, and wastes
listed in the United States Department of Transportation Table (49 CFR 172.101)
or by the Environmental Protection Agency as hazardous substances pursuant to 40
CFR Part 302, or such substances, materials and wastes which are regulated under
any federal environmental law or any applicable local or state environmental
law, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") as supplemented and amended or the Resource
Conservation and Recovery Act, as amended ("RCRA"). 42 U.S.C (S)(S) 6901 et seq;
------
or toxic substances as defined under the Toxic Substance Control Act, 15 U.S.C.
2601 et seq.
------
(b) To the knowledge of Seller, all operations or activities upon, or
any use or occupancy of the Real Estate by Seller and any Affiliates of Seller
(for purposes of this Section 3.13, the term "AFFILIATES" shall mean any person
or entity controlling, controlled by or under common control with Seller, and
the term "CONTROL" shall mean the exercise of power to direct the management of
such person or entity) and any agent or employee of Seller or its Affiliates
("AGENTS"), are as of the date hereof in all respects in substantial compliance
with any and all environmental laws, regulations or orders relating to Hazardous
Substances, including, but not limited to, the storage, discharge, removal and
transportation of Hazardous Substances. Except as disclosed on Schedule 3.13(b)
and except for the manufacture, use, generation, discharge, disposal, spillage,
leakage, storage or presence of Hazardous Substances associated with the
customary operation of a hospital, nursing home, home health care agency or
physician clinic:
(i) To the knowledge of Seller, neither Seller, nor its
Affiliates or Agents have allowed the manufacture, use, generation, storage
or presence of any Hazardous Substances over, in or upon the Real Estate;
(ii) To the knowledge of Seller, neither Seller, nor its
Affiliates or Agents, have installed or permitted to be installed, in or on
the Real Estate friable asbestos or any substance containing asbestos or
any other Hazardous Substances not customarily associated with the
operation of a hospital, nursing home, home health care agency or physician
clinic;
(iii) To the knowledge of Seller, neither Seller nor its Agents
or Affiliates has engaged in any material dumping, discharge, disposal,
spillage or leakage (whether legal or illegal, accidental or intentional)
of such Hazardous Substances, at, on, in or about the Real Estate, or any
portion thereof; and
(iv) To the knowledge of Seller, no substantial work, repairs,
construction or capital expenditures are required as of the date hereof by
any environmental or land use laws or regulations with respect to the Real
Estate for the continued lawful use of the Real Estate.
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<PAGE>
(c) To the knowledge of Seller, the Real Estate is not subject to any
existing, pending, or threatened investigation or inquiry by any governmental
authority or any remedial or removal obligations under any applicable rules,
regulations or orders pertaining to the environment.
(d) To Seller's knowledge, except as disclosed on Schedule 3.13(b),
including matters disclosed in any environmental audits or reports set forth on
Schedule 3.13 (b), there are no underground storage tanks on any portion of the
Real Estate, and no portion of the Real Estate has ever been used as a landfill.
Seller has furnished to Buyer a copy of any environmental audit or report on the
Real Estate which Seller or its Affiliates obtained or were furnished.
(e) For purposes of this Section 3.13, the term "Real Estate" shall
not include the parcel of property purchased by Riley Property Holding Company
from Sowashee Building Corporation on December 12, 1995 and more particularly
described in Schedule 3.13(e) hereto (the "SOWASHEE PARCEL"). With respect to
the Sowashee Parcel, Buyer acknowledges and agrees that it is purchasing the
Sowashee Parcel on an "as is" basis, in its existing condition without any
representation or warranty by Seller as to the condition of the Sowashee Parcel
except as expressly set forth in this Agreement. Buyer further acknowledges that
Buyer has made adequate inquiry into the condition and operation of the Sowashee
Parcel and that Buyer is not relying on any representation or warranty of Seller
except as expressly set forth in this Agreement.
(f) Effective on the date of Closing, and except as expressly set
forth herein, Buyer hereby releases Seller from and waives all claims against
Seller, at law or in equity, whether known or unknown, suspected or unsuspected,
which Buyer has or may have, arising out of or related to the physical condition
of the Sowashee Parcel. Buyer also releases Seller from and waives all claims
against Seller under any and all federal environmental laws or any applicable
local or state environmental law, including CERCLA and RCRA, including without
limitation, any and all rights of contribution to pay for or reimburse Buyer for
the cost of remediating any Hazardous Substances from the Sowashee Parcel or
from real property surrounding the Sowashee Parcel.
(g) With respect to the Sowashee Parcel, Seller represents that to
the knowledge of Seller, neither Seller nor its Affiliates or Agents has taken
any affirmative action during the period of Seller's ownership of the Sowashee
Parcel to cause any of the items set forth in subparagraph (b) above to exist on
the Sowashee Parcel.
3.14 MISCELLANEOUS REPRESENTATIONS RELATING TO REAL ESTATE.
-----------------------------------------------------
(a) Seller has not received any written notice of any pending
condemnation of all or any part of the Real Estate. To Seller's knowledge, there
are no public improvements which may result in special assessments against the
Real Estate.
(b) To Seller's knowledge, Seller has furnished to Buyer copies of
all mechanical and structural studies or reports or assessments, engineering
plans, architectural
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<PAGE>
drawings, soil studies, surveys and other documents which have been prepared by
or at the direction of Seller or its Affiliates within the last three (3) years
relating to any of the Acquired Assets.
(c) All utilities serving the Real Estate are, and shall be at
Closing adequate to operate the Real Estate in the manner it is currently
operated. Any so-called hook-up fees or other associated charges accrued to date
have been fully paid with respect to all potable and industrial water and all
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and systems and other similar systems serving the Hospital and the
Related Assets.
(d) From and after the date of this Agreement until Closing, Seller
and any party in possession of all or any part of the Acquired Assets will
maintain and keep the Acquired Assets in a sanitary, well-maintained condition
and in good order and repair.
3.15 CONSTRUCTION. Except as described on Schedule 3.15, Seller has
------------
not entered into any written agreements regarding the development of future
facilities in connection with the Hospital or any of the Related Assets.
3.16 LITIGATION. Except as set forth in Schedule 3.16 hereto, Seller
----------
has not received written notice of any violation of any law, rule, regulation,
ordinance or order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including legislation and regulations applicable to the Medicare and Medicaid
programs, environmental protection, civil rights and public health and safety
and occupational health) that, if adversely determined, would reasonably be
expected to have a material adverse effect on the Acquired Assets. Except as set
forth in Schedule 3.16, there are no lawsuits, proceedings, actions,
arbitrations, governmental investigations, claims, inquires or proceedings
pending or, to the knowledge of Seller, threatened against Seller or the
Acquired Assets that, if adversely determined, would reasonably be expected to
have a material adverse effect on the Acquired Assets.
3.17 SELLER'S EMPLOYEES. Schedule 3.17 hereto sets forth: (a) a
------------------
complete list of all of Seller's officers and employees, and rates of pay,
together with true and correct copies of any and all employment contracts, (b)
the employment dates and job titles of each such person, and (c) categorization
of each such person as a full-time or part-time employee of Seller. Prior to
Closing, Seller shall provide true and accurate copies of any fringe benefit
plan or personnel polices to Buyer. For purposes of this paragraph, "PART-TIME
EMPLOYEE" means an employee who is employed for an average of fewer than thirty-
six (36) hours per week or less than seventy-two (72) hours per two (2) week pay
period. Except as provided in Schedule 3.17, Seller has no employment agreements
with its employees and all such employees are employed on an at "at will" basis.
Schedule 3.17 sets forth a complete list of all of Seller's full and part-time
employees who have been terminated within ninety (90) days before Closing.
3.18 LABOR RELATIONS. Seller is not a party to any labor contract,
---------------
collective bargaining agreement, contract, letter of understanding (or to
Seller's knowledge, any other arrangement, formal or informal) with any labor
union or organization which obligates Seller to
17
<PAGE>
compensate its employees at prevailing rates or union scale, nor are any of
Seller's employees represented by any labor union or organization. Except as
set forth on Schedule 3.18, there is no pending, or to Seller's knowledge,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Seller and any
present or former employees of Seller that might reasonably be expected to have
a material adverse effect on Seller. Except as set forth on Schedule 3.18,
there is no pending, or to Seller's knowledge, threatened suit, action,
investigation or claim between Seller and any present or former employees of
Seller that, if adversely determined, would reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, there
has not been any labor union organizing activity at the Hospital or any of the
Related Assets with respect to employees of the Hospital or any of the Related
Assets within the past year.
3.19 INSURANCE. Seller has in effect and has continuously maintained
---------
insurance coverage for its operations, personnel and assets. Schedule 3.19 sets
forth a summary of Seller's current insurance coverage, and includes a list of
any pending insurance claims relating to Seller. To the knowledge of Seller,
Seller is not in default or breach with respect to any provision contained in
any such insurance policies, nor has Seller failed to give any notice or to
present any claim thereunder in due and timely fashion. Seller will continue to
maintain all its insurance policies and coverage amounts in full force and
effect until the Closing. All of such policies are valid, outstanding, in full
force and effect and enforceable in accordance with their terms with no premium
arrearages. Complete genuine copies of all policies and endorsements thereto
have been provided to Buyer. At no time has Seller been denied or reduced, or
requested a reduction in, the scope or amount of any insurance or indemnity bond
coverage with respect to the Acquired Assets. No insurance carrier has cancelled
or reduced, or given notice of its intention to cancel or reduce, any insurance
coverage with respect to the Acquired Assets and, to Seller's knowledge, there
exists no grounds to cancel any such policies or the coverage provided thereby.
Seller has received no written recommendation from any insurer to repair or
replace any of the Acquired Assets with which Seller has not complied.
3.20 MEDICAL STAFF. Seller has previously delivered to Buyer a true
-------------
and correct copy of medical staff privilege and membership application forms, a
description of medical staff privileges, all current medical staff bylaws, rules
and regulations and amendments thereto, all credentials and appeals procedures
not incorporated therein, the name of each member of the medical staff of the
Hospital and the Related Assets, the specialty, if any, of each medical staff
member, and all contracts with physicians, physician groups, or other members of
the medical staff of the Hospital and the Related Assets. Except as set forth on
Schedule 3.20, there are no pending or, to Seller's knowledge, threatened
appeals, challenges, disciplinary or corrective actions, or disputes involving
applicants, staff members or health professionals.
3.21 CONFLICTS OF INTEREST. Except as disclosed in Schedule 3.21 and
---------------------
except as to Non-material Conflicts (as defined below), no director and no
employee listed on Schedule 13.13 hereto is either a supplier of goods or
services to Seller pursuant to an Assumed Liability, or directly or indirectly
controls or is a director, officer, shareholder, employee or agent of any
corporation, firm, association, partnership or other business entity (other than
any corporation, firm, association, partnership or other business entity the
stock of which is publicly traded) which
18
<PAGE>
is a supplier of goods or services to Seller pursuant to an Assumed Liability or
a party to any contract or other agreement with Seller pursuant to an Assumed
Liability. "NON-MATERIAL CONFLICTS" shall mean items which otherwise should have
been disclosed on Schedule 3.21, but (a) the annual aggregate amount involved
relating to each such person or each such entity does not exceed $10,000, and
(b) the contract or agreement is cancelable upon no more than 90 days' notice.
3.22 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE. Seller owns (or
----------------------------------------
possesses adequate and enforceable licenses or other rights to use) all
Intellectual Property (as defined below) and all computer software programs and
similar systems used in the conduct of its business. All trademarks, service
marks, tradenames, patents, copyrights, inventions, processes and applications
therefor (whether registered or common law) owned by Seller are listed and
described in Schedule 3.22 (collectively the "INTELLECTUAL PROPERTY"). No
proceedings have been instituted or, to Seller's knowledge, threatened, which
challenge the ownership by Seller of such Intellectual Property. Seller has not
licensed anyone to use such Intellectual Property and Seller has no knowledge of
the use or the infringement of any such Intellectual Property by any other
person.
3.23 INVENTORIES. The Inventory is, and on Closing will be, of a
-----------
quality and quantity presently usable in the ordinary course of business at the
Hospital and the Related Assets, determined and valued consistent with generally
accepted accounting principles. Since the date of the Financial Statements,
Seller has not decreased or substituted items of Inventory other than in the
ordinary course of business.
3.24 COMPLIANCE WITH LAWS. To the knowledge of Seller, Seller has
--------------------
complied with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees applicable to the Hospital or the Related Assets, except
for such failures to comply as would not reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, Seller
has made no kickback, bribe or payment to any person or entity, directly or
indirectly, for referring, recommending or arranging business or patients with,
to or for Seller. To Seller's knowledge, none of the Assumed Liabilities and no
activity of Seller violates Section 1877 of the Social Security Act or any
similar provision of applicable state law. To Seller's knowledge, none of the
Assumed Liabilities and no activity of Seller violates provisions of applicable
state law relating to the corporate practice of medicine.
3.25 BROKER'S OR FINDER'S FEE. Except as set forth in Schedule 3.25,
------------------------
Seller has not employed and is not liable for the payment of any fee to any
finder, broker or similar person in connection with the transactions
contemplated by this Agreement.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer represents and warrants
to Seller as follows:
4.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Buyer is a corporation
-----------------------------------------
which is validly existing and in good standing under the laws of the State of
Mississippi and is a wholly owned subsidiary of Health Management Associates,
Inc., a Delaware corporation ("HMA"). Buyer is duly qualified to conduct
business in the State of Mississippi and is in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary. Buyer has full power and authority to own, lease and operate its
properties and assets as presently owned, leased and operated and to carry on
its business as it is now being conducted, and at Closing will have the
requisite power and authority to enter into and perform its obligations under
this Agreement without the consent, approval or authorization of, or obligation
to notify, any person, entity or governmental agency. Buyer has the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated on
the part of Buyer hereby. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Buyer has been duly authorized by all necessary action on the part of Buyer.
No other action on the part of Buyer or any other person or entity is necessary
to authorize the execution, delivery and consummation of this Agreement and all
other agreements and documents executed in connection herewith. This Agreement
and all other agreements and documents executed in connection herewith by Buyer,
upon due execution and delivery thereof shall constitute valid binding
obligations of Buyer, enforceable in accordance with their respective terms.
4.2 ABSENCE OF DEFAULT. The execution, delivery and consummation of
------------------
this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
without the giving of notice or the passage of time, or both, result in a breach
of, constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Acquired Assets under: (a) any term or provision of
the Articles of Incorporation or Bylaws of Buyer, (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval or
other commitment to which Buyer is a party or by which Buyer is bound; (c) any
judgment, decree, order, regulation or rule of any court or regulatory
authority; or (d) any law, statute, rule, regulation, order, with, injunction,
judgment or decree of any court of any court or governmental authority or
arbitration tribunal to which Buyer is subject.
4.3 BROKER'S OR FINDER'S FEE. Buyer has not employed and is not
------------------------
liable for the payment of any fee to any finder, broker or similar person in
connection with the transactions contemplated by this Agreement.
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4.4 BUYER'S CASH ON HAND. Buyer has, and at the Closing will have,
--------------------
sufficient cash on hand to pay the Purchase Price at the Closing.
4.5 WARN ACT. Buyer has no plans to engage in any activities or take
--------
any actions which could trigger the obligation for notice as required by the
"Worker Adjustment and Retraining Notification Act" ("WARN") or any similar
applicable state statute.
ARTICLE V. COVENANTS OF PARTIES
5.1 PRESERVATION OF BUSINESS AND ASSETS. From the date hereof until
-----------------------------------
the Closing, Seller shall use commercially reasonable efforts (i) to preserve,
protect and maintain intact the Acquired Assets, and the business and operation
of the Hospital and the Related Assets as going concerns in the ordinary course
of business consistent with prior practice, and (ii) to preserve, protect and
maintain for Buyer the good will of the Hospital's and the Related Assets'
medical staff, suppliers, employees, clientele, patients, and others having
business relations with Seller. From and after the date of this Agreement until
Closing, Seller will maintain and keep the Acquired Assets in a well-maintained
condition and in good order and repair. Other than in the ordinary course of
business, Seller will not sell, discard, dispose of or move any of the Acquired
Assets and shall make no dividend, distribution or extraordinary payment to any
Affiliate. From the date hereof until the Closing, Seller shall continue in its
ordinary course of business consistent with past practices, in completing its
capital expenditures as to its replacements and additions and any construction
improvements and paying therefor.
5.2 ABSENCE OF MATERIAL CHANGE. From the date hereof until the
--------------------------
Closing, Seller shall make no material change in the business and operation of
the Hospital and the Related Assets and in the utilization of the Acquired
Assets.
5.3 ACCESS TO BOOKS AND RECORDS.
---------------------------
(a) From the date hereof until the Closing, Seller shall give to
Buyer and to Buyer's counsel, accountants, and other representatives, full
access during normal business hours to all of Seller's offices, properties,
books, contracts, commitments, records and affairs relating to the Acquired
Assets so that Buyer may inspect and audit them and shall furnish to Buyer
information concerning the Acquired Assets as Buyer may reasonably request. If
any such books, records and materials are in the custody of third parties who
are subject to Seller's direction, Seller shall direct such third parties to
promptly provide them to Buyer. Copies of documents furnished to Buyer by Seller
will be returned by Buyer upon request if the transaction is not consummated.
Seller shall provide Buyer promptly with Interim Financial Statements of Seller
in accordance with Section 3.3(b), the audited financial statements of Seller
for the fiscal year ended September 30, 1997 and any other management reports as
and when they are available. Additionally, from the date hereof until Closing,
Seller grants Buyer reasonable access to Seller's personnel and computers to
assist Buyer's preparation for the ownership change.
(b) Following the Closing, Buyer shall permit Seller and its
representatives
21
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(including its counsel and auditors), during normal business hours, to have
reasonable access to, and examine and make copies of all books and records of
the Hospital and the Related Assets, including all medical records and medical
charts of any patient admitted to the Hospital or any of the Related Assets,
which are transferred to Buyer hereunder and which relate to transactions or
events occurring prior to the Closing, to the extent permitted by law. Buyer
agrees that it shall make such books and records available to Seller, and shall
not destroy or dispose of any of such books and records for a period of seven
(7) years after the Closing.
(c) Following the Closing, Seller shall permit Buyer and its
representatives (including its counsel and auditors), during normal business
hours, to have reasonable access to, and examine and make copies of, all books
and records of Seller and its Affiliates relating to the Hospital, the Related
Assets or the other Assets which are retained by Seller and which relate to
transactions or events contemplated by this Agreement occurring prior to the
Closing, to the extent permitted by law. Seller agrees that it shall make such
books and records available to Buyer, and shall not destroy or dispose of any of
such books and records for a period of seven (7) years after the Closing.
5.4 CONSENTS TO ASSIGNMENTS. Anything in this Agreement to the
-----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or transfer to Buyer any Acquired Asset if an attempted assignment
thereof, without the consent of a third party, would constitute a breach thereof
or a breach of any applicable law or in any way adversely affect the rights of
Buyer with respect thereto. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would affect the rights with respect
thereto so that Buyer would not receive all such rights, Seller will cooperate
with Buyer, in all commercially reasonable respects, to provide to Buyer the
benefits with respect to any such Acquired Asset, including enforcement for the
benefit of Buyer of any and all rights of Seller against a third party arising
out of the breach or cancellation by such third party or otherwise.
5.5 GOOD FAITH. All parties shall act in good faith and use their
----------
commercially reasonable efforts to satisfy all conditions to their respective
obligations to close.
5.6 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES.
---------------------------------------------------
(a) Each party will use its commercially reasonable efforts to cause
all conditions to its obligations, including the obtaining of all requisite
Licenses and Permits, to be timely satisfied and to perform and fulfill all
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement shall be effected
in accordance with its terms as soon as reasonably practicable. The parties
shall cooperate with each other in such actions and in securing requisite
Licenses and Permits. Each party shall execute and deliver both before and
after the Closing such further certificates, agreements and other documents and
take such other actions as may be necessary or appropriate to consummate or
implement the transactions contemplated hereby or to evidence such events or
matters.
(b) As used in this Agreement, the term "commercially reasonable
efforts" shall
22
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not mean efforts which require the performing party to do any act that is
unreasonable under the circumstances, to make any capital contribution or to
expend any funds other than in payment of reasonable out-of-pocket expenses
incurred in satisfying obligations hereunder, including but not limited to the
fees, expenses and disbursements of its accountants, actuaries, counsel and
other professional advisers.
5.7 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Seller shall
---------------------------------------------------
refrain from taking any action which would render any representation and
warranty contained in Article IV hereof inaccurate in any respect as of Closing.
Seller promptly will notify Buyer of any material lawsuits, claims,
administrative actions or other proceedings commenced against Seller, its
directors, officers or Affiliates, involving or affecting in any way the
Acquired Assets or the business and operation of the Acquired Assets. Seller
shall promptly notify Buyer of any facts or circumstances which come to Seller's
attention and which cause, or through the passage of time may cause, any of
Seller's representations and warranties to be untrue or misleading in any
material respect at any time from the date hereof to Closing. Buyer shall
promptly notify Seller of any facts or circumstances which come to Buyer's
attention and which cause, or through the passage of time may cause, any of
Buyer's representations and warranties to be untrue or misleading in any
material respect at any time from the date hereof to Closing.
5.8 MAINTAIN BOOKS AND ACCOUNTING PRACTICES. From the date hereof
---------------------------------------
until Closing, Seller shall maintain its books of account in the usual, regular
and ordinary manner in accordance with generally accepted accounting principles
consistently applied and on a basis consistent with prior years and shall make
no change in its accounting methods or practices or the accounting principles so
applied.
5.9 INDEBTEDNESS; LIENS. Until Closing, Seller shall make all
-------------------
payments required with respect to its long-term debt, including the Bonds and
the Notes, and comply in all material respects with and satisfy all its
obligations with respect thereto. Seller shall take all action necessary to
defease fully the Bonds and cause all collateral and obligations and security
against the Acquired Assets to be fully released to Buyer's satisfaction as
contemplated hereunder, and Buyer will cooperate with Seller in this regard.
5.10 COMPLIANCE WITH LAWS AND REGULATORY CONSENTS. From the date
--------------------------------------------
hereof until the Closing, Seller shall (i) comply in all material respects with
all applicable statutes, laws, ordinances and regulations; (ii) keep, hold and
maintain all material certificates, certificates of need, certificates of
exemption, accreditations, participations, licenses, and other permits necessary
for the business and operation of the Acquired Assets; (iii) use its
commercially reasonable efforts to obtain all consents, approvals, exemptions
and authorizations of third parties, whether governmental or private, necessary
to consummate the transactions contemplated by this Agreement; (iv) make and
cause to be made all filings and give and cause to be given all notices which
may be necessary or desirable on its part under all applicable laws and under
its contracts, agreements and commitments in order to consummate the
transactions contemplated by this Agreement; and (v) use its commercially
reasonable efforts to consummate the transactions contemplated by this Agreement
and the agreements and documents to be executed in connection with this
Agreement.
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5.11 MAINTAIN INSURANCE COVERAGE. From the date hereof until the
---------------------------
Closing, Seller shall maintain and cause to be maintained in full force and
effect, without change of coverage or insurance carrier unless approved of in
writing by Buyer (which approval shall not be unreasonably withheld), the
existing insurance on the Acquired Assets and the operations of the Hospital and
the Related Assets and shall provide, upon request by Buyer, evidence
satisfactory to Buyer that such insurance continues to be in effect and that all
premiums due have been paid. From and after the Closing, Seller shall have the
professional insurance policies listed on Schedule 5.11 amended or endorsed to
name Buyer and all employed physicians as an additional insured and to provide
Buyer evidence thereof. From the Closing and continuing for a period of seven
(7) years thereafter, Seller shall have the general comprehensive liability
insurance policies listed on Schedule 5.11 amended or endorsed to name Buyer as
an additional insured and to provide Buyer evidence thereof.
5.12 MEDICARE AND MEDICAID REPORTING. From the date hereof until the
-------------------------------
Closing, on behalf of the Hospital and (to the extent applicable) the Related
Assets, Seller shall timely file or cause to be filed all cost reports and other
reports of every kind, nature or description required by law or by written or
oral contract to be filed with respect to the purchase of services by third
party payors, including Medicare, Medicaid and Blue Cross prior to Closing.
Buyer and Seller will jointly prepare the terminating cost reports for the
Hospital and (to the extent applicable) the Related Assets.
5.13 CURRENT RETURN FILING. Seller shall be responsible for the
---------------------
preparation and filing of the federal, state and local income tax returns for
all of the tax periods of Seller ending on or before the Closing, including
returns for organizations exempt from income tax.
5.14 PERFORMANCE. Seller and Buyer shall take appropriate steps to
-----------
satisfy their respective obligations, and the conditions to Closing, including
the filing of Hart-Scott-Rodino notices, if any, the obtaining of necessary
consents and the making of applications for necessary licenses and permits.
5.15 WARN ACT. Prior to Closing, Seller will not engage in any
--------
activities or take any actions which would impose upon Seller, or upon Buyer
solely as a result of Seller's actions, the obligation for notice as required
WARN or any similar applicable state statute. Upon the Closing, and for at least
ninety (90) days thereafter, Buyer will not engage in any activities or take any
actions which would impose upon Seller any WARN requirements or liabilities. If
any of Buyer's activities or actions trigger WARN requirements, Buyer will
comply in full with the requirements of WARN.
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5.16 TERMINATION OF EMPLOYEE PLANS.
-----------------------------
(a) At or as soon as possible after Closing, Seller will take such
steps as are necessary to freeze and terminate the Riley Memorial Hospital Tax
Deferred Annuity Plan (the "PENSION PLAN"), as a result of which the interest of
all participants shall become fully vested in accordance with the Pension Plan.
(b) Buyer agrees for one hundred-twenty (120) days after Closing that
it will at no cost to Seller make its on-site personnel reasonably available
during normal business hours to assist Seller in gathering information necessary
to terminate the Pension Plan, so long as such cooperation with Seller does not
unreasonably interfere with the normal job responsibilities of such employees.
(c) At or immediately after Closing, Seller will give notice to all
Transferred Employees with Section 125 daycare spending accounts of a 60-day
time limit for submitting valid claims against the balance at Closing in each
employee's respective Section 125 daycare spending account.
5.17 CHARITY CARE. Buyer shall offer the same type and level of
------------
charity care as offered by HMA and its Affiliates at the other hospitals
operated by HMA and its Affiliates.
5.18 NURSING SCHOLARSHIPS. Buyer shall adhere to Seller's policy, as
--------------------
administered as of the date of the Closing, with respect to the maintenance of
those certain Meridian Community College nursing scholarships awarded prior to
the Closing Date, as described in Schedule 5.18. After the date of the Closing,
Buyer shall make available to all employees of the Hospital, the Nursing Home,
the Home Care Agency and the Clinics the tuition reimbursement program offered
to employees of the other hospitals operated by HMA and its Affiliates, which
includes nursing, and shall consider new applicants for the Meridian Community
College nursing scholarship program described in Schedule 5.18.
5.19 WINDING UP SELLER'S BUSINESS. Following Closing, the following
----------------------------
provisions will apply to facilitate the winding up of Seller's business at the
Hospital and the Related Assets:
(a) Buyer will allow Seller reasonable access to the computer systems
of the Hospital and the Related Assets without charge for up to one hundred
eighty (180) days after Closing for:
(i) Closing out the financial affairs of Seller for the period
through Closing and producing financial statements.
(ii) Processing Seller's final payroll and related reports,
including W-2's, if necessary.
(iii) Processing and paying Seller's accounts payable, if
necessary.
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(b) Buyer will provide sufficient office space to Seller without
charge to conduct the activities described in Section 5.18(a) above.
(c) Buyer agrees to make a reasonable number of its employees
available to Seller to perform those activities of a post-closing nature set
forth on Schedule 5.19 for a period of one hundred eighty (180) days after
Closing at no cost to Seller.
Notwithstanding Buyer's agreement to assist with the above activities,
it is expressly acknowledged and agreed that Seller shall remain solely liable
and responsible for the timely completion and accuracy of activities relating to
the winding up of Seller's business at the Hospital and Related Assets.
5.20 AFFILIATIONS AND EDUCATION PROGRAMS. Prior to Closing, the
-----------------------------------
parties shall enter into an agreement relating to Buyer's willingness to provide
access to its facilities in connection with the Hospital's affiliations with the
University of Southern Mississippi, Livingston University, Meridian Community
College and the University of Mississippi Medical Center, for the purpose of
providing a clinical educational resource for nursing and other educational
programs.
5.21 USE OF NAME. At Closing, Seller shall enter into the license
-----------
agreement attached hereto as Exhibit E with Buyer and shall quitclaim to Buyer
all rights of Seller in the trade names listed on Schedule 3.22 other than those
covered in the License Agreement.
ARTICLE VI. TITLE AND SURVEY
6.1 TITLE REPORT AND POLICY. At least ten (10) days prior to Closing,
-----------------------
Seller shall deliver to Buyer, at Seller's expense, a current ALTA preliminary
title commitment issued by a nationally recognized title company of the
condition of title to each tract of Real Estate (the "COMMITMENT") for a title
insurance policy, ALTA Owner's Policy Form 1992 (the "TITLE POLICY"). The title
company shall provide when delivering the Commitment one (1) copy of all
recorded documents relating to exceptions, conditions or reservations described
in the Commitment to Buyer. The exceptions, conditions and reservations set
forth in Schedule 6.1 hereto shall constitute permitted exceptions, conditions
and reservations (the "PERMITTED EXCEPTIONS"). At Closing, there shall be
issued to Buyer, at Seller's expense, a signed commitment on the part of the
title company to issue the Title Policy attached to such commitment in the
amount of the Purchase Price which is allocated to the Real Estate as improved.
6.2 SURVEY. At least ten (10) days prior to Closing, Seller shall
------
furnish to Buyer a certified ALTA survey of the Real Estate dated no earlier
than thirty (30) days prior to the date of this Agreement (the "SURVEY"). The
cost of the survey shall be borne by Buyer to the extent such cost is not
greater than $20,000. Any amount of the cost of the survey in excess of $20,000
shall be paid by Seller.
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<PAGE>
6.3 UCC SEARCHES. UCC Financing Statement searches, local and
------------
central, including fixtures, and federal and state tax lien and judgment
searches with respect to Seller, its affiliates and predecessors, including all
"DBA's," tradenames and fictitious names of Seller (including, but not limited
to, all names set forth in Schedule 3.11(b)), from each of the jurisdictions in
which such entity does business or has done business within the preceding three
(3) years (the "UCC SEARCHES"), shall be obtained by Seller and delivered to
Buyer at least ten (10) days prior to Closing. The results shall be updated
within a reasonable period of time after the date of Closing to reflect Closing
and the release of all financing statement liens other than any Permitted
Exceptions. The cost of the UCC Searches shall be borne equally by Seller and
Buyer.
6.4 DEFECTS AND CURE. The Title Commitment and Policy and the Survey
----------------
and UCC Searches described in this Article are collectively referred to as
"TITLE EVIDENCE." Buyer shall notify Seller (such notice, "BUYER'S OBJECTION"),
within ten (10) business days of Buyer's receipt of the Title Evidence, of any
liens, claims, encroachments, exceptions or defects disclosed in the Title
Evidence which do not constitute Permitted Exceptions and materially adversely
impact any of the Acquired Assets or the financeability thereof in the
reasonable opinion of Buyer (collectively, "DEFECTS"). Seller shall use its
commercially reasonable efforts to cure any Defect; provided, however, that
Seller shall not be obligated to expend an amount greater than $100,000 in
curing all Defects. Seller shall give written notice to Buyer of its election
not to cure any Defect not covered in the preceding sentence or of its inability
to cure any Defect in accordance with the prior sentence (such notice, "SELLER'S
ELECTION") within ten (10) business days of its receipt of Buyer's Objection of
its decision whereupon Buyer may (a) waive its objection and such Defect and
close (in which case, such Defect shall be deemed to be a Permitted Exception),
or (b) terminate this Agreement, which election shall be made within five (5)
business days of receipt of Seller's Election. If Seller fails to timely give
Seller's Election, Seller shall be deemed to have elected not to cure the
Defect, whereupon Buyer may (a) waive its objection and such Defect and close,
or (b) terminate this Agreement, which election by Buyer shall be made within
fifteen (15) business days following notice of its objection to Seller. Upon
termination of this Agreement under the terms of this Section 6.4, no party to
this Agreement shall have any further claims under this Agreement against any
other party.
ARTICLE VII. CLOSING
7.1 CLOSING. If all the conditions to closing set forth in Articles
-------
IX and X hereof are satisfied and all consents and approvals necessary to
consummate the closing of the transactions described herein (the "CLOSING") have
been obtained or waived, the Closing shall occur on or about January 27, 1998 to
be effective as of 12:01 a.m. (Central Standard time) on the date of Closing and
the Hospital's Cost Reporting Period will end at that time. The parties agree,
however, that the transfer and sale of the Acquired Assets shall be calculated
and made effective as of 12:01 a.m. (Central Standard time) on January 2, 1998
(for accounting purposes) except that Adjusted Net Working Capital shall be
calculated, pursuant to Section 2.2 hereof, as of the date of the Closing. The
Closing shall occur at the offices of O'Melveny & Myers LLP, 153 East 53rd
Street, 54th Floor, New York, New York or at such other time or place as the
27
<PAGE>
parties may mutually agree. At the Closing, Seller shall receive federal or
other immediately available funds in the amount of the Purchase Price by wire
transfer.
7.2 TERMINATION. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the obligations of the parties hereunder may be
terminated on or prior to Closing as follows:
(a) By Seller (i) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; or (ii) in the event
Buyer breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by Buyer under the
terms of this Agreement, and Seller has provided written notice thereof to Buyer
giving reasonable specificity and Buyer has not cured same within thirty (30)
days and such breach is not waived by Seller in writing.
(b) By Buyer (i) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; or (ii) in the event
Seller breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by Seller under the
terms of this Agreement and Buyer has provided written notice thereof to Seller
giving reasonable specificity and Seller has not cured same within thirty (30)
days and such breach is not waived by Buyer in writing.
(c) By Buyer or Seller if the Closing hereunder shall not have taken
place by December 31, 1998, or, by such later date as shall be agreed upon by an
appropriate amendment to this Agreement if the parties agree in writing to an
extension; provided, however, that a party shall not have the right to terminate
under this Section 7.2(c) if the conditions precedent to such party's obligation
to close have been fully satisfied and such party has failed or refused to close
after being requested in writing to close by the other party.
ARTICLE VIII. SELLER'S CONDITIONS TO CLOSE
The obligations of Seller under Article XI of this Agreement are
subject to the satisfaction, on or prior to Closing, of the following conditions
(which may be waived specifically in writing by Seller in whole or in part):
8.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
---------------------------------------------------------------
AGREEMENT. The representations and warranties of Buyer contained in this
- ---------
Agreement or in any certificate or document delivered to Seller pursuant hereto,
shall be deemed to have been made again at the Closing and shall then be true in
all respects, except for such failures to be true as would not reasonably be
expected to have a material adverse effect on the Acquired Assets; and Buyer
shall have performed and complied in all material respects with all covenants,
agreements
28
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and conditions required by this Agreement to be performed or complied with by it
prior to or at Closing.
8.2 REGULATORY APPROVALS. Buyer shall have obtained (at its own cost)
--------------------
(a) all consents, licenses, permits, approvals, provider contracts,
determinations or certificates of need from the Mississippi State Board of
Health, (b) any certification for participation in the Medicaid program of the
State of Mississippi, and (c) any certification from the appropriate agency of
the federal government for participation in the federal Medicare program,
required for Buyer to acquire and operate the Acquired Assets as contemplated
hereunder. Any applicable waiting period required by the Hart-Scott-Rodino
Antitrust Improvements Act shall have expired and no other review, approval or
other action of the Federal Trade Commission or the Antitrust Division of the
United States Department of Justice, or state counterpart, shall be required in
order to consummate the transactions contemplated hereby.
8.3 NO MATERIAL ADVERSE CHANGE. No violations or alleged violations of
--------------------------
law by Buyer or its Affiliates, including those arising from patterns or
practices engaged in by Buyer or its Affiliates, other than matters which have
been previously publicly disclosed, shall have (a) resulted in any material
adverse change in Buyer's hospital business, or (b) materially adversely
affected Buyer's ability to consummate the transactions contemplated by this
Agreement.
8.4 NO 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 transaction herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Seller reasonably and in good faith deems that to
proceed with the transactions hereunder may constitute a violation of law or
otherwise subject Seller to any material liability.
8.5 COMPLIANCE WITH ARTICLE XI. Buyer shall have made to Seller the
--------------------------
deliveries required by Article XI hereof.
8.6 ORDER PROHIBITING TRANSACTIONS. No order shall have been entered
------------------------------
in any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
(c) imposing material limitations on the ability of Buyer effectively to acquire
and hold the Acquired Assets, or, in either case, to exercise rights of
ownership pursuant thereto, or (d) subjecting Seller to any material liability.
There shall have been no United States federal or state statute, rule or
regulation enacted or promulgated after the date of this Agreement that would
reasonably, directly or indirectly, result in any of the consequences referred
to in this Section.
29
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ARTICLE IX. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under Article XII of this Agreement are
subject to the satisfaction, on or prior to Closing, of the following conditions
(which may be waived in writing by Buyer in whole or in part):
9.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
---------------------------------------------------------------
AGREEMENT. The representations and warranties of Seller contained in this
- ---------
Agreement or in any certificate or document delivered to Buyer pursuant hereto,
shall be deemed to have been made again at the Closing and shall then be true in
all respects, except for such failures to be true as would not reasonably be
expected to have a material adverse effect on the Acquired Assets; and Seller
shall have performed and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at Closing.
9.2 NO MATERIAL ADVERSE CHANGE. There shall have been no material
--------------------------
adverse change in the condition, financial or otherwise, of the Hospital or the
Related Assets after September 30, 1997.
9.3 REGULATORY APPROVALS. Buyer shall have obtained (at its own cost)
--------------------
(a) certification for participation in the Medicaid program of the State of
Mississippi, (b) certification from the appropriate agency of the federal
government for participation in the federal Medicare program, and (c) all other
consents, licenses, permits, approvals, provider contracts, determinations or
certificates of need necessary in the reasonable judgment of Buyer. Any
applicable waiting period required by the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired, and no other review, approval or other
action of the Federal Trade Commission or the Antitrust Division of the United
States Department of Justice, or state counterpart, shall be required in order
to consummate the transactions contemplated hereby.
9.4 NO 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 transaction herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Buyer reasonably and in good faith deems that to
proceed with the transactions hereunder may constitute a violation of law or
otherwise subject Buyer to any liability.
9.5 COMPLIANCE WITH ARTICLE X. Seller shall have made to Buyer the
-------------------------
deliveries required by Article X hereof.
9.6 ORDER PROHIBITING TRANSACTION. No order shall have been entered in
-----------------------------
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
(c) imposing material limitations on the ability of Buyer effectively to acquire
and hold the Acquired Assets, or, in either case, to exercise rights of
ownership pursuant thereto,
30
<PAGE>
or (d) subject Buyer to any liability. There shall have been no federal or
state statute, rule or, regulation enacted or promulgated after the date of this
Agreement that would reasonably result, directly or indirectly, in any of the
consequences referred to in this Section.
9.7 DEFEASANCE OF BONDS. The Bonds and Notes will be fully defeased
-------------------
and all collateral and obligations and security against the Acquired Assets will
be fully released to Buyer's reasonable satisfaction. Seller shall use the
amounts designated as "funded depreciation" in its audited financial statements
as the first source of funds for the defeasance of the Bonds and Notes.
9.8 CONSENTS. Seller shall have obtained substantially all of the
--------
consents described in Section 5.4 or in the event any such consents are not
obtained, the terms of Section 5.4 hereof shall have been complied with to the
reasonable satisfaction of Buyer.
ARTICLE X. OBLIGATIONS OF SELLER AT CLOSING
At Closing, Seller shall deliver or cause to be delivered to Buyer the
following in a form and substance reasonably satisfactory to Buyer:
10.1 DOCUMENTS RELATING TO TITLE. Seller shall execute, acknowledge,
---------------------------
deliver and cause to be executed, acknowledged and delivered to Buyer:
(a) General warranty deeds, in form satisfactory to Buyer and the
title insurer, with all recording, stamp tax, other transfer fees or gross
income taxes, if any, paid by Buyer, and conveying to Buyer good, valid and
marketable title in fee simple to the Real Estate free and clear of all liens,
mortgages, pledges, encumbrances, security interests, covenants, easements,
rights or way, equities, options, rights of first refusal, restrictions, special
tax or governmental assessments, defects in title, encroachments and other
burdens, except for Permitted Exceptions.
(b) General warranty bills of sales and assignments, in the form of
Exhibit A hereto, warranting and conveying to Buyer good, fee simple or
leasehold, as the case may be, valid and marketable title to all assets free and
clear of all liens, mortgages, pledges, encumbrances, security interests,
covenants, easements, rights of way, equities, options, rights of first refusal,
restrictions, special tax or governmental assessments, defects in title,
encroachments and other burdens, except for Permitted Exceptions, including
recordable assignments of any leases, options, rights of first refusal or other
interests or rights in any of the Acquired Assets necessary in order to provide
record notice of the assignment and conveyance of such rights and interests to
Buyer.
(c) Certificates of title to all vehicles which constitute assets and
certificates of stock of any Minority Interests which are incorporated or
endorsed by Seller, together with completed originals of any forms required by
the State of Mississippi to transfer the same, free and clear of liens and
payment by Seller of any sales tax, registration fee, exercise tax, surtax,
conveyance taxes or other fees related thereto.
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(d) An assignment to Buyer of each Lease and Contract constituting an
Assumed Liability.
(e) The commitment to issue the Title Policy as specified in Section
6.1 hereof.
(f) Survey as specified in Section 6.2 hereof.
(g) Evidence satisfactory to Buyer of full defeasance of the Bonds
and release of all collateral and obligations related to the Acquired Assets.
10.2 POSSESSION. Seller shall deliver to Buyer full possession and
---------
control of the Acquired Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, encumbrances, and burdens of any kind
whatsoever, including limitations on use and rights of reclamation by donees,
except for Permitted Exceptions.
10.3 OPINION OF SELLER'S COUNSEL. Seller shall deliver to Buyer the
---------------------------
opinion of counsel for Seller, dated as of Closing, in form and substance
substantially similar to that which is attached hereto as Exhibit B.
10.4 CORPORATE EXISTENCE AND CORPORATE RESOLUTION. Seller shall
--------------------------------------------
deliver to Buyer a good standing certificate from the Secretary of State of the
State of Mississippi for each entity constituting Seller dated the most recent
practical date prior to Closing, together with a certified copy of the
resolutions of the Board of Directors of Seller authorizing the execution,
delivery and consummation of this Agreement and the execution, delivery and
consummation of all other agreements and documents executed in connection
herewith by them, including all deeds, bills of sale and other instruments
required hereunder and certified by officers of Seller to be validly adopted and
in full force and effect and unamended as of Closing.
10.5 CLOSING CERTIFICATE. Seller shall deliver to Buyer a certificate
-------------------
of an officer of Seller, dated as of Closing, certifying that (a) each covenant
and obligation of Seller has been complied with by Seller in all material
respects, and (b) each representation and warranty of Seller is true and correct
in all material respects on the Closing as if made on and as of the Closing
except for such failures to comply or failures to be true as would not
reasonably be expected to have a material adverse effect on the Acquired Assets.
10.6 THIRD PARTY CONSENTS. Seller shall deliver to Buyer any consents,
--------------------
approvals and authorizations of third parties which are necessary (in form
reasonably acceptable to Buyer) for the execution, delivery and consummation of
this Agreement, including those necessary for the assignment of the Leases and
Contracts.
32
<PAGE>
10.7 TAXES AND OTHER PAYMENTS. Seller shall deliver to Buyer a
------------------------
certificate of non-foreign status signed by the appropriate party and sufficient
in form and substance to relieve Buyer of all withholding obligations under
Section 1445 of the Code.
10.8 NOTICE TO THIRD-PARTY PAYORS AND OTHERS. Seller shall deliver
---------------------------------------
executed notices of the sale of the Hospital and the Related Assets, to be
furnished to all third-party payors including the Programs, in the form of
Exhibit C hereto, and shall comply with all notice requirements imposed upon
sellers under the Uniform Commercial Code - Bulk Transfers adopted in the State
of Mississippi, if applicable.
10.9 EVIDENCE OF TAIL INSURANCE. Seller shall deliver to Buyer
--------------------------
evidence of insurance as provided in Section 5.11.
10.10 ADDITIONALLY REQUESTED DOCUMENTS; POST CLOSING ASSISTANCE. At
---------------------------------------------------------
the reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Seller shall cooperate with Buyer to put Buyer in actual possession
and operating control of the Acquired Assets, execute and deliver such further
instruments of sale, conveyance, transfer and assignment, as Buyer may
reasonably request in order to effectively sell, convey, transfer and assign the
Acquired Assets to Buyer, to execute and deliver such further instruments and to
take such other actions as Buyer may reasonably request to release Buyer from
all obligation and liability with regard to any obligation or liability retained
by Seller and to execute and deliver such further instruments and to cooperate
with Buyer as may be required or reasonably needed to enable Buyer to obtain all
necessary health care or regulatory certifications, approvals, consents,
licenses, accreditations or permits.
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
11.1 PURCHASE PRICE. Buyer shall deliver to Seller federal or other
--------------
immediately available funds in the aggregate amount of the Purchase Price
specified herein.
11.2 CORPORATE GOOD STANDING OR EXISTENCE AND CERTIFIED BOARD
--------------------------------------------------------
RESOLUTIONS. Buyer shall deliver to Seller a good standing certificate from the
- -----------
Secretary of State of the State of Mississippi for Buyer dated the most recent
practical date prior to Closing and a certified copy of the resolutions of the
Board of Directors of Buyer approving this Agreement and consummation of the
transactions intended hereby .
11.3 OPINION OF BUYER'S COUNSEL. Buyer shall deliver to Seller an
--------------------------
opinion of counsel for Buyer, dated as of Closing, in form and substance
substantially similar to that which is attached hereto as Exhibit D.
33
<PAGE>
11.4 ASSUMPTION OF LIABILITIES. Buyer shall assume and covenant to
-------------------------
fully perform and comply with all of the Assumed Liabilities by instruments
reasonably acceptable to Seller and Seller's counsel.
11.5 CLOSING CERTIFICATE. Buyer shall deliver to Seller a certificate
-------------------
of an officer of Buyer, dated as of Closing, certifying that (a) each covenant
and condition precedent of Buyer has been complied with by Buyer in all material
respects and (b) each representation and warranty of Buyer is true and correct
in all material respects on the Closing as if made on and as of the Closing
except for such failures to comply or failures to be true as would not
reasonably be expected to have a material adverse effect on the Acquired Assets.
11.6 SELLER'S EMPLOYEES. Buyer agrees to offer employment, at levels
------------------
of compensation not less than their current compensation, to all persons who
were employees of Seller as of Closing, including all former employees of Seller
who are eligible for reinstatement as of the Closing (collectively, the
"TRANSFERRED EMPLOYEES"). In addition, Buyer agrees to offer all Transferred
Employees the same basic benefit package, on the same terms, as that which is
offered to HMA's and its Affiliates' employees. Such offers will remain open for
at least ten (10) business days. For employees who accept Buyer's offer of
employment, Buyer shall (a) recognize the employees' length of service with
Seller for eligibility (including waiting periods) and vesting under all of
Buyer's employee benefit programs, including vacation and pension, (b) assume
accrued and unused vacation days, sick days and personal days, and (c) allow
participation in Buyer's 401K pension plan. Subject to the foregoing, special
waiting periods contained in Buyer's employee benefit plans will not apply to
Seller employees or covered dependents to the extent that such periods do not
apply to similarly situated new employees of Buyer. Buyer will not effect any
reductions in force for a period of twelve (12) months after Closing other than
reductions through attrition, flexible staffing for seasonal adjustments or
decreases in patient census. Buyer agrees to extend the aforesaid offers of
employment and benefits for an additional four (4) years for all current full-
time employees of Seller who are within five (5) years of retirement, and Buyer
agrees that, except for cause, it will not terminate any such employee until the
day following the date on which such employee qualifies for retirement. The
names of such employees and the respective dates on which they will qualify for
retirement are listed on Schedule 11.6 hereto, and Buyer and Seller hereby agree
that each such employee shall be a third party beneficiary of this Section 11.6.
11.7 HEALTH INSURANCE. Buyer covenants to offer open enrollment in its
----------------
group medical plan, without a limitation with respect to pre-existing
conditions, to any Seller employee or covered dependent who is not subject to
any pre-existing condition limitation under Seller's group medical plan (any
Seller employee or dependent who is subject to any pre-existing condition
limitation under Seller's plan at Closing shall not be subject to a longer
period than existed under Seller's plan had he or she continued to participate
in the same); provided, however, that it shall only be granted to all persons
who meet all of the following criteria: (i) were actively employed by Seller
immediately prior to Closing or were dependents of such employees, (ii) were
enrolled in Seller's group medical plan immediately prior to Closing, and (iii)
are employed by Buyer or are dependents of persons employed by Buyer after the
Closing. Special waiting periods or pre-existing condition limitations contained
in Buyer's group medical plan will not apply to Seller employees or covered
dependents to the extent that such periods or limitations do not apply to
34
<PAGE>
similarly situated new employees of Buyer.
11.8 EMPLOYMENT OF KEY EXECUTIVES. Buyer shall continue the employment
----------------------------
of Eric E. Weis after the date of the Closing as set forth in Section 11.6 and
Section 11.7 and further agrees that if it terminates, without cause, the
employment of Eric E. Weis at any time within one (1) year of the date of
Closing, it shall pay to such employee a severance payment equal to (i) six (6)
months salary if the effective date of termination occurs after six (6) months
of the date of Closing, or (ii) if the effective date of the termination is
earlier than six (6) months of the date of the Closing, payment shall be equal
to the product of (x) one month's salary for such employee, and (y) the number
of months remaining from the effective date of such employee's termination to
the date which is one (1) year from the date of the Closing (less applicable
payroll withholding taxes, etc.). If Eric Weis is terminated after the first
anniversary of the date of Closing, the severance package for such employee
shall be discretionary and shall be the same as that given to other employees of
HMA or its Affiliates in similar positions and circumstances. Buyer and Seller
hereby agree that Eric E. Weis shall be a third party beneficiary of this
Section 11.8.
ARTICLE XII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
12.1 SURVIVAL. The covenants, obligations, representations and
--------
warranties of Buyer and Seller contained in this Agreement or any certificate or
document delivered pursuant hereto shall survive the date of Closing for a
period of four (4) years from the date of Closing; provided, however, Buyer's
obligations to employees listed on Schedule 11.6 hereto shall survive for a
period of five (5) years from the date of Closing; and, provided further, that
the following matters shall survive until the earlier of the date which is four
(4) years from the date of Closing and the date on which any applicable statute
of limitations has run: claims by third parties whether founded on negligence,
malpractice or other forms of alleged liability for acts, omissions or events,
adjustments under any third party payor or reimbursement programs, including
cost reports with respect to periods prior to and including the Closing
(collectively, "THIRD PARTY CLAIMS").
12.2 INDEMNIFICATION BY SELLER. Subject to the limitations set forth
-------------------------
herein, Seller promptly shall indemnify, defend and hold harmless Buyer and the
directors, officers, shareholders, employees and agents of Buyer (and with
respect to the COBRA coverage, Buyer and all affiliated corporations within a
controlled group relationship with Buyer (as determined under Section 414 of the
Internal Revenue Code)), and their employees against any and all claims, losses,
costs, and expenses (including reasonable costs of investigation, court costs
and legal fees) and other damages resulting from any Third Party Claim against
Buyer arising out of Seller's ownership, licensing or operation of the Acquired
Assets or the action, inaction or conduct of Seller, or any of Seller's
employees, agents, or independent contractors, in each instance relating only to
all periods of time prior to Closing, except the Assumed Liabilities.
(b) The indemnification set forth in this Section 12.2 shall survive
the Closing and shall remain in effect for a period of four (4) years after the
Closing Date. Any matter as to which a claim has been asserted by notice to
Seller that is pending or unresolved at the end of any
35
<PAGE>
applicable limitation period shall continue to be covered by this Section 12.2
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid.
(c) Seller shall not be required to indemnify any person or entity
under this Section 12.2 unless the aggregate of all amounts for which indemnity
would otherwise by payable by Seller in the aggregate exceeds $100,000, and, in
such event, Seller collectively shall be responsible for only the amount in
excess of such $100,000.
12.3 INDEMNIFICATION BY BUYER.
------------------------
(a) Buyer shall promptly indemnify, defend, and hold harmless Seller,
the directors, officers, shareholders, employees, and agents of Seller against
any and all claims, losses, costs, and expenses (including reasonable costs of
investigation, court costs and legal fees) and other damages resulting from (i)
the post-Closing operation of the Acquired Assets; (ii) the Assumed Liabilities
and (iii) any failure of Buyer to comply with any applicable WARN obligations.
Any indemnification payment pursuant to the foregoing shall include interest at
the Rate from the date losses, costs, expenses or damages are incurred until the
date of payment.
(b) The indemnification set forth in this Section 12.3 shall survive
the Closing and shall remain in effect after the Closing Date. Any matter as to
which a claim has been asserted by notice to Buyer that is pending or unresolved
at the end of any applicable limitation period shall continue to be covered by
this Section 12.3 notwithstanding any applicable statute of limitations (which
the parties hereby waive) until such matter is finally terminated or otherwise
resolved by the parties under this Agreement or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
12.4 PROCEDURE FOR INDEMNIFICATION.
-----------------------------
(a) Notice. Promptly after receipt of written or actual notice of any
------
action or claim (the "CLAIM") as to which it asserts a right to indemnification,
the party seeking indemnification hereunder (the "INDEMNITEE") shall give
written notice thereof (the "NOTICE") to the person from whom indemnification is
sought (the "INDEMNITOR"), provided, however, that the failure of the Indemnitee
to give the Indemnitor prompt notice shall not relieve the Indemnitor of any of
its obligations hereunder, but may create a cause of action for breach for
damages directly attributable to such delay.
(b) Third Party Claims (i) If any claim for indemnification by
------------------
Indemnitee arises out of a Third Party Claim, the Indemnitor shall be entitled
to assume the defense thereof, by written notice to the Indemnitee within
fifteen (15) days after receipt of the Notice. Indemnitor shall thereupon
undertake to take all steps or proceedings to defeat or compromise any such
Claim, including retaining counsel reasonably satisfactory to the Indemnitee.
Except as otherwise provided herein, all costs, fees and expenses with respect
to any such claim shall be borne by Indemnitor. If the Indemnitor assumes the
defense of a Claim, it shall not settle such Claim unless
36
<PAGE>
such settlement includes as an unconditional term thereof a release by the
claimant of the Indemnitee, reasonably satisfactory to the Indemnitee and except
that Indemnitor shall not, without the prior written consent of Indemnitee,
directly or indirectly require Indemnitee to take or refrain from taking any
action, or make any public statement, or consent to any settlement, which it
reasonably considers to be against its interest. Indemnitee shall have the right
to participate at its own expense in such proceedings, but control of such
proceedings shall remain exclusively with Indemnitor.
(ii) If the Indemnitor shall fail to notify the Indemnitee of
its desire to assume the defense of any such claim or action within the
prescribed period of time, then the Indemnitee may assume such defense in such
manner as it may deem appropriate, and the Indemnitor shall be bound by any
determinations made or any settlements thereof effected by the Indemnitee. The
Indemnitor shall be permitted, at its own expense, to join in such defense and
to employ its own counsel but control of such proceedings shall remain
exclusively with Indemnitee.
(iii) Indemnitor and Indemnitee agree to make available to each
other, their counsel and other representatives, all information and documents
reasonably available to them reasonably requested by the other which relate to
any such Claim or action, and to render to each other such reasonable assistance
as may be reasonably requested in order to insure the proper and adequate
defense of such Claim or action, but any costs or expenses related thereto shall
be borne by Indemnitor and provided that any failure (after written notice with
specificity and an opportunity to cure) shall not relieve the Indemnitor of any
of its obligations hereunder but may create a cause of action for breach for
damages directly attributable to such failure.
(c) Payment of Claims. Amounts payable by the Indemnitor to the
-----------------
Indemnitee under this Section 12.4 shall be payable by the Indemnitor as
incurred by the Indemnitee. In the event Indemnitor fails to pay, timely and
fully, any such amounts, Indemnitee may pay such Claim. In such event the
Indemnitee may recover from the Indemnitor, in an addition to the amount so
paid, (i) interest on the amount claimed at a floating rate equal to two points
over the rate published by Citibank N.A. as its "prime rate," as the same shall
be adjusted from time to time (the "RATE"), and (ii) reasonably attorneys' fees
in connection with the enforcement of payment under this Section 12.4.
(b) No Set-Off. The Indemnitee's right to indemnification under this
----------
Section 12.4 shall not be subject to set-off for any Claim by the Indemnitor
against the Indemnitee.
(e) Claims by a Straddle Patient. Any Claim by a patient relating to
----------------------------
professional negligence or similar matters involving a patient of the Hospital
or any of the Related Assets served both prior to Closing and subsequent to
Closing will be the responsibility of either Buyer or Seller in accordance with
the following guidelines; (i) if it is a Claim in which the incident giving
rise to liability clearly arose prior to Closing, Seller shall respond to the
loss and defense expenses; (ii) if it is a Claim in which the incident giving
rise to liability clearly arose subsequent to Closing, Buyer shall respond to
the loss and defense expenses; and (iii) in the event that it is not clear when
the incident giving rise to liability arose, Seller and Buyer will jointly
37
<PAGE>
defend the case and each will fully cooperate with the other in such defense.
Once the case is closed, if Buyer and Seller cannot agree to the allocation of
either indemnity or expenses, then the matter shall be submitted to binding
arbitration in the State of Mississippi in accordance with the rules and
procedures of the American Arbitration Association.
12.5 MINIMUM NET WORTH. Seller hereby covenants that it shall, for a
-----------------
period of four (4) years from the date of the Closing, maintain a net worth of
at least $7,500,000 as set forth in its audited financial statements for each
fiscal year during such four (4) year period. At the end of each such fiscal
year, upon Buyer's written request, Seller shall deliver to Buyer a copy of its
audited financial statements for such fiscal year promptly upon the same
becoming available.
ARTICLE XIII. MISCELLANEOUS
13.1 NO ASSIGNMENT. Buyer may not assign all or any portion of its
-------------
rights or obligations under this Agreement.
13.2 OTHER EXPENSES. Except as otherwise provided in this Agreement,
--------------
Seller shall pay all of its own expenses in connection with the negotiation,
execution, and implementation of the transactions contemplated by this Agreement
and Buyer shall pay all of its own expenses in connection with the negotiation,
execution, and implementation of the transactions contemplated by this
Agreement. Any state and local sales taxes shall be borne by Buyer.
13.3 NOTICES. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five (5) days
after mailing with postage prepaid. Any such notice shall be sent as follows:
To Seller:
Riley Development Systems, Inc.
1215 25th Avenue
P.O. Box 1697
Meridian, Mississippi 39302
Attn: Mr. I.A. Rosenbaum
38
<PAGE>
With copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attn: Stanford G. Ladner, Esq.
And to:
Robert B. Deen, Jr., Esq.
Use for courier services:
2003 23rd Avenue
Meridian, Mississippi 39301
Use for mail:
P.O. Box 888
Meridian, Mississippi 39302
To Buyer:
Meridian HMA, Inc.
c/o Health Management Associates, Inc.
5811 Pelican Bay Blvd., Suite 500
Naples, Florida 34108
Attention: General Counsel
13.4 CONTROLLING LAW. This Agreement shall be construed, interpreted
---------------
and enforced in accordance with the laws of the State of Mississippi, without
regard to conflict of law principles.
13.5 HEADINGS. Any table of contents and paragraph headings in this
--------
Agreement are for convenience of reference only and shall not be considered or
referred to in resolving questions of interpretation.
13.6 BENEFIT. This Agreement shall be binding upon and shall inure to
-------
the exclusive benefit of the respective legal representatives and successors of
the parties hereto. This Agreement is not intended to, nor shall it, create any
rights in any other party.
39
<PAGE>
13.7 PARTIAL INVALIDITY. The invalidity or unenforceability of any
------------------
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
13.8 WAIVER. Neither the failure nor any delay on the part of any
------
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall any
single or partial exercise of any right, power or remedy preclude any further or
other exercise thereof, or the exercise of any other right, power or remedy.
13.9 COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13.10 INTERPRETATION. All pronouns and any variation thereof shall be
--------------
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or entity, or the context, may require. With respect to
any matter or thing, the terms "including" or "includes" mean including but not
limited to such matter or thing. Further, it is acknowledged by the parties
that this Agreement including the Exhibits and Schedules hereto has undergone
several drafts with the negotiated suggestions of both; and, therefore, no
presumptions shall arise favoring either party by virtue of the authorship of
any of its provisions or the changes made through revisions.
13.11 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
----------------
Schedules hereto, constitutes the entire agreement between the parties hereto
with regard to the matter contained herein and it is understood and agreed that
all previous undertakings, negotiations and agreements between the parties are
merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer and Seller. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the party against which it is sought to be
enforced.
13.12 LEGAL FEES AND COSTS. In the event any party hereto elects to
--------------------
incur legal expenses to enforce or interpret any provision of this Agreement,
the prevailing party will be entitled to recover such legal expenses, including
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which such party shall be entitled.
13.13 KNOWLEDGE. "To the knowledge," "to the best of knowledge," "to
---------
the best knowledge, information and belief," or any similar phrase shall be
deemed to refer to the actual knowledge of those certain employees of Seller
listed on Schedule 13.13, after making reasonable inquiry.
13.14 PARTIES IN INTEREST. This Agreement shall be binding upon and
-------------------
inure to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement is intended to relieve or discharge the obligation of any
40
<PAGE>
third person to any party to this Agreement.
13.15 NO CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE
------------------------
CONTRARY ELSEWHERE IN THIS AGREEMENT, NO PARTY (OR ITS AFFILIATES) SHALL, IN ANY
EVENT, BE LIABLE TO ANY/THE OTHER PARTY (OR ITS AFFILIATES) FOR ANY
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF REVENUE OR INCOME, COST OF
CAPITAL, OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY RELATING TO THE BREACH OR
ALLEGED BREACH OF THIS AGREEMENT.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"BUYER":
MERIDIAN HMA, INC.
By: /s/ Earl P. Holland
---------------------------------
Name: Earl P. Holland
Title: Vice Chairman
MERIDIAN HMA NURSING HOME, INC.
By: /s/ Earl P. Holland
---------------------------------
Name: Earl P. Holland
Title: Vice Chairman
"SELLER":
RILEY DEVELOPMENT SYSTEMS, INC.
By: /s/ I.A. Rosenbaum
---------------------------------
Name: I.A. Rosenbaum
Title: Treasurer
THE RILEY HOSPITAL & BENEVOLENT ASSOCIATION D/B/A
RILEY MEMORIAL HOSPITAL
By: /s/ I.A. Rosenbaum
---------------------------------
Name: I.A. Rosenbaum
Title: Treasurer
RILEY CARE CENTER, INC.
By: /s/ I.A. Rosenbaum
---------------------------------
Name: I.A. Rosenbaum
Title: Treasurer
S-1
<PAGE>
RILEY HOME HEALTH SERVICES, INC.
By: /s/ I.A. Rosenbaum
--------------------------------
Name: I.A. Rosenbaum
Title: Treasurer
RILEY PROPERTY HOLDING COMPANY
By: /s/ I.A. Rosenbaum
--------------------------------
Name: I.A. Rosenbaum
Title: Treasurer
S-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED WITHIN THE COMPANY'S MARCH 31, 1998 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> MAR-31-1998
<CASH> 4,460,000
<SECURITIES> 0
<RECEIVABLES> 265,230,000
<ALLOWANCES> 66,365,000
<INVENTORY> 21,120,000
<CURRENT-ASSETS> 249,734,000
<PP&E> 804,034,000
<DEPRECIATION> 162,063,000
<TOTAL-ASSETS> 954,735,000
<CURRENT-LIABILITIES> 127,176,000
<BONDS> 80,786,000
0
0
<COMMON> 1,672,000
<OTHER-SE> 708,994,000
<TOTAL-LIABILITY-AND-EQUITY> 954,735,000
<SALES> 0
<TOTAL-REVENUES> 537,492,000
<CGS> 0
<TOTAL-COSTS> 359,416,000
<OTHER-EXPENSES> 22,736,000
<LOSS-PROVISION> 45,719,000
<INTEREST-EXPENSE> 2,073,000
<INCOME-PRETAX> 107,548,000
<INCOME-TAX> 42,213,000
<INCOME-CONTINUING> 65,335,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,335,000
<EPS-PRIMARY> .40
<EPS-DILUTED> .39
</TABLE>
