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STOCK ACQUISITION AGREEMENT
BY AND BETWEEN
NHS, INC.
AND
SUNLINK HEALTHCARE CORP.
DATED AS OF JANUARY 31, 2001
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TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS...................................................................................1
ARTICLE 2. ACQUISITION OF STOCK; CONSIDERATION...........................................................6
Section 2.1 Acquisition of Stock..........................................................................6
Section 2.2 Purchase Price and Payment....................................................................6
Section 2.3 Purchase Price Adjustment.....................................................................7
Section 2.4 Amount of Purchase Price Adjustment...........................................................8
Section 2.5 Dispute of Adjustments........................................................................8
Section 2.6 Closing.......................................................................................9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.................................................9
Section 3.1 Organization of the Companies.................................................................9
Section 3.2 Authority.....................................................................................9
Section 3.3 Capitalization of Companies..................................................................10
Section 3.4 Subsidiaries.................................................................................10
Section 3.5 Capitalization of the Company Subsidiaries...................................................11
Section 3.6 Financial Statements.........................................................................11
Section 3.7 Undisclosed Liabilities......................................................................12
Section 3.8 Absence of Certain Changes or Events.........................................................12
Section 3.9 Litigation...................................................................................12
Section 3.10 Compliance with Law; Governmental Approvals; Licenses........................................12
Section 3.11 Medicare Participation/Accreditation.........................................................13
Section 3.12 Employee Benefit Plans.......................................................................13
Section 3.13 Environmental Matters........................................................................15
Section 3.14 Taxes........................................................................................16
Section 3.15 Insurance....................................................................................17
Section 3.16 Labor Relations and Employment...............................................................17
Section 3.17 Medical Staff Matters........................................................................17
Section 3.18 Third Party Payor Cost Reports...............................................................17
Section 3.19 Brokers or Finders...........................................................................18
Section 3.20 Hospital Facilities..........................................................................18
Section 3.21 Personal Property............................................................................19
Section 3.22 Contracts....................................................................................19
Section 3.23 Corporate Books and Records..................................................................21
Section 3.24 Title and Condition of Assets................................................................21
Section 3.25 Accounts Receivable..........................................................................21
Section 3.26 Inventory....................................................................................22
Section 3.27 Disclosure...................................................................................22
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................................................22
Section 4.1 Organization of Acquiror.....................................................................22
Section 4.2 Authority....................................................................................22
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Section 4.3 Litigation...................................................................................23
Section 4.4 Compliance with Law; Governmental Approvals; Licenses........................................23
Section 4.5 Funding......................................................................................24
Section 4.6 Brokers or Finders...........................................................................24
ARTICLE 5. CERTAIN UNDERSTANDINGS AND AGREEMENTS........................................................24
Section 5.1 Intentionally Omitted........................................................................24
Section 5.2 Confidentiality..............................................................................24
Section 5.3 Post-Closing Access to Records...............................................................24
Section 5.4 Benefits.....................................................................................24
Section 5.5 Implied Warranties...........................................................................26
Section 5.6 Intentionally Omitted........................................................................26
Section 5.7 Retention and Severance Benefits.............................................................26
Section 5.8 Records Held or Maintained by Stockholders or Its Affiliates.................................27
Section 5.9 Certain Post Closing Obligations of Acquiror.................................................27
Section 5.10 Home Office Reports and Cooperation on Reimbursement.........................................27
ARTICLE 6. TAX MATTERS..................................................................................27
Section 6.1 Tax Periods Ending on or Before the Closing Date.............................................27
Section 6.2 Tax Periods Beginning Before and Ending After the Closing Date...............................28
Section 6.3 Refunds and Tax Benefits.....................................................................28
Section 6.4 Cooperation on Tax Matters...................................................................28
Section 6.5 Tax Sharing Agreements.......................................................................29
Section 6.6 Section 338 Election.........................................................................29
Section 6.7 Taxes of Other Persons.......................................................................29
ARTICLE 7. INTENTIONALLY OMITTED........................................................................30
ARTICLE 8. INTENTIONALLY OMITTED........................................................................30
ARTICLE 9. INTENTIONALLY OMITTED........................................................................30
ARTICLE 10. INDEMNIFICATION..............................................................................30
Section 10.1 Indemnification by Stockholder...............................................................30
Section 10.2 Indemnification by Acquiror..................................................................30
Section 10.3 Notice and Control of Litigation.............................................................31
Section 10.4 Duration.....................................................................................32
Section 10.5 Limitations on Indemnification; Limited Recourse.............................................32
ARTICLE 11. MISCELLANEOUS................................................................................33
Section 11.1 Notices......................................................................................33
Section 11.2 Assignability; Parties in Interest...........................................................34
Section 11.3 Governing Law................................................................................35
Section 11.4 Counterparts.................................................................................35
Section 11.5 Publicity....................................................................................35
Section 11.6 Complete Agreement...........................................................................35
Section 11.7 Amendments and Waivers.......................................................................35
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Section 11.8 Expenses....................................................................................35
Section 11.9 Interpretation..............................................................................36
Section 11.10 Severability................................................................................36
Section 11.11 Further Assurances..........................................................................36
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STOCK ACQUISITION AGREEMENT
This Agreement is made as of the 31st day of January 2001, by and
between SUNLINK HEALTHCARE CORP., a Delaware corporation ("Acquiror"), and NHS,
INC., a Delaware corporation ("Stockholder").
RECITALS
WHEREAS, Southern Health Corporation ("Southern"), ▇▇▇▇▇▇▇ Hospital,
Inc. ("▇▇▇▇▇▇▇") and Dexter Hospital, Inc. ("Dexter", together with "Southern"
and "▇▇▇▇▇▇▇", the "Companies" and, each a "Company") are engaged in the
business of operating general acute care hospitals and related healthcare
services in Georgia, Mississippi, Missouri and Alabama;
WHEREAS, Stockholder owns of record and beneficially, directly or
indirectly, all of the issued and outstanding Stock (as defined below); and
WHEREAS, Stockholder desires to sell all of the Stock and Acquiror
desires to acquire all of the Stock, pursuant to the terms of this Agreement;
NOW, THEREFORE, in order to consummate said transactions and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS.
Definitions. As used in this Agreement, unless otherwise defined herein
or unless the context otherwise requires, the following terms shall have the
following meanings:
"Accounting Principles" means those accounting principles that are
described on SCHEDULE A to this Agreement.
"Acquiror" has the meaning specified in the Introduction.
"Acquiror Closing Documents" has the meaning specified in SECTION
4.2(A).
"Acquiror Subsidiaries" has the meaning specified in SECTION 4.2(B).
"Acquiror Welfare Plan" has the meaning specified in SECTION 5.4(B).
"Affiliate" of a specified Person means a Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities or by contract.
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"Agreement" means this Stock Acquisition Agreement, all Schedules
hereto and all amendments, modifications and supplements hereto and thereto.
"Allocable Amount" has the meaning specified in SECTION 6.6(B).
"Assignment and Assumption Agreements" means all of the following: (i)
the Assignment, Assumption and Indemnification Agreement in the form annexed to
this Agreement as Exhibit A-1, (ii) the Assignment and Assumption Agreement
concerning contracts with The Delta Group, Inc. in the form annexed to this
Agreement as Exhibit A-2, (iii) the Assignment and Assumption Agreement
concerning contracts with Shared Medical Services in the form annexed to this
Agreement as Exhibit A-3, and (iv) the Assignment and Assumption Agreement
concerning contracts with Medical Manager in the form annexed to this Agreement
as Exhibit A-4.
"Balloon Notes" has the meaning set forth in the Loan Agreement.
"Business" means the business of the Companies as currently conducted.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. 9601 et seq., as amended and in effect on the date
hereof.
"▇▇▇▇▇▇▇" has the meaning specified in the Recitals.
"▇▇▇▇▇▇▇ Stock" means the common stock, par value $0.01 per share, of
▇▇▇▇▇▇▇.
"Closing" has the meaning specified IN SECTION 2.7.
"Closing Balance Sheet" has the meaning specified in SECTION 2.5.
"Closing Date" has the meaning specified in SECTION 2.7.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect on the date hereof.
"Companies" has the meaning specified in the Recitals.
"Companies' 2000 Balance Sheets" has the meaning specified in SECTION
3.6.
"Companies' 2000 Balance Sheets Date" has the meaning specified in
SECTION 3.6.
"Companies' Group" has the meaning specified in SECTION 3.14(C).
"Company" has the meaning specified in the Recitals.
"Company Employee Plans" has the meaning specified in SECTION 3.12(A).
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"Company Employees" has the meaning specified in SECTION 5.4(A).
"Company ERISA Affiliate" has the meaning specified in Section 3.12(C).
"Company Subsidiaries" has the meaning specified in SECTION 3.2(B).
"Company Subsidiary Shares" has the meaning specified in SECTION
3.5(B).
"Confidentiality Agreement" has the meaning specified in SECTION 5.2.
"Dexter" has the meaning specified in the Recitals.
"Dexter Stock" means the common stock, par value $0.01 per share, of
Dexter.
"Encumbrance" means any mortgage, claim, lien, pledge, option, charge,
security interest or other similar interest, easement, judgment or imperfection
of title of any nature whatsoever.
"Environment" means soil, surface waters, groundwater, land, surface or
subsurface strata and air.
"Environmental Laws" means any federal, state or local statute, law,
regulation, rule, ordinance or enforceable guideline (including consent decrees
and administrative orders) existing as of the date hereof which regulates,
establishes standards, or imposes liability with respect to the Hazardous
Substances in the Environment or public health.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles.
"Governmental Agency" means any federal, state, local or municipal,
foreign or other government or subdivision, branch, department or agency thereof
and any governmental or quasi-governmental authority of any nature, including
any court or other tribunal.
"Hazardous Substances" means any "hazardous waste," as defined in or
pursuant to RCRA, any "hazardous substance" or "pollutant or contaminant," as
defined in CERCLA, or any refined petroleum product, and any similar terms as
defined under applicable state or local Environmental Laws.
"Indemnified Party" has the meaning specified in SECTION 10.03.
"Indemnifying Party" has the meaning specified in SECTION 10.03.
"IRS" means the Internal Revenue Service.
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"Leased Real Property" has the meaning specified in SECTION 3.20(A).
"Licenses" mean licenses, permits, certificates of need and other
regulatory approvals.
"Loan Agreement" means the Loan Agreement, dated the date of this
Agreement between Acquiror, as borrower, its subsidiaries, and Stockholder, as
lender.
"Material Adverse Effect" means any change or effect that, individually
or in the aggregate, would or would reasonably be expected to materially and
adversely affect the financial condition, results of operations or assets of a
Person excluding in all cases: (i) events or conditions generally affecting the
industry in which the Person operates or arising from changes in general
business or economic conditions; (ii) any effect resulting from any change in
law or generally accepted accounting principles, which generally affects
entities such as the Person; (iii) events resulting from the execution and/or
announcement of this Agreement; and (iv) any effect resulting from compliance by
such Person with the terms of this Agreement.
"Medicare" refers to the programs and other matters set out in Title
XVIII of the Social Security Act, and successor programs.
"Medicaid" refers to the programs and other matters set out in Title
XIX of the Social Security Act, including related state programs, and successor
programs.
"Net Working Capital" has the meaning set forth on SCHEDULE B to this
Agreement, which Schedule also sets forth Net Working Capital as of November 30,
2000 and December 31, 2000.
"Net Working Capital Calculation" has the meaning specified in SECTION
2.5.
"Non-Solicitation Agreement" means an agreement in the form annexed to
this Agreement as Exhibit B.
"Original Balloon Note" means the promissory note of Acquiror defined
as such in the Loan Agreement in the original principal amount of $17,000,000.
"Original Zero Coupon Note" means the promissory note of Acquiror
defined as such in the Loan Agreement in the original principal amount of
$2,000,000.
"Owned Real Property" has the meaning specified in Section 3.20(A).
"Permitted Encumbrances" means Encumbrances consisting of any claim,
charge, easement or imperfection in title that (A) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit or
non-payment of taxes and (B) do not in the aggregate detract from the value of
the property in any material respect or impair the use thereof in the operation
of business by the Companies and the Company Subsidiaries in any material
respect.
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ Health Care Association, Inc.
"Purchase Price" has the meaning specified in SECTION 2.2.
"Purchase Price Adjustment" has the meaning specified in SECTION 2.3.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. 6901
et seq., as amended and in effect on the date hereof.
"Real Property Leases" has the meaning specified in Section 3.20(a).
"Responsible Officer" means the president, chief executive, chief
financial, chief accounting and/or chief legal officer of a party hereto.
"Section 338 Elections" has the meaning specified in SECTION 6.6.
"Section 338 Forms" has the meaning specified in SECTION 6.6.
"Southeastern" means Southeastern HealthCare Alliance, Inc.
"Southern" has the meaning specified in the Recitals.
"Southern Stock" means the Class A common stock, par value $1.00 per
share, of Southern. "Stock" means all of the issued and outstanding ▇▇▇▇▇▇▇
Stock, Dexter Stock and Southern Stock, collectively.
"Stock Acquisition" has the meaning specified in SECTION 2.1.
"Stockholder" has the meaning specified in the Introduction.
"Stockholder Closing Documents" has the meaning specified in 3.2(A).
"Subsidiary" means, when used with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which such Person directly or indirectly owns or controls at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization, or any
organization of which such Person is a general partner.
"Tax" and "Taxes" means any income, gross receipts, license,
employment, excise, stamp, customs, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, property,
sales, use, transfer, registration, value added, estimated or other tax, fee,
impost, fine, penalty or other charge of any kind whatsoever,
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including any interest, penalties and additions to tax, imposed by any
governmental authority.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transaction Documents" has the meaning ascribed thereto in the Loan
Agreement.
"TRICARE" means the program which is the successor to the Civilian
Health and Medical Programs of the Uniformed Services (CHAMPUS).
"Zero Coupon Note" has the meaning ascribed thereto in the Loan
Agreement.
ARTICLE 2. ACQUISITION OF STOCK; CONSIDERATION.
Section 2.1 Acquisition of Stock. On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, Stockholder shall
sell, transfer and deliver to Acquiror, and Acquiror shall purchase, the Stock
(collectively, the "Stock Acquisition").
Section 2.2 Purchase Price and Payment. (a) The total purchase
price (the "Purchase Price") to be paid by Acquiror for the Stock shall consist
of the following:
(i) $7,500,000 in cash;
(ii) the Original Balloon Note;
(iii) the Original Zero Coupon Note;
(iv) the assumption of certain liabilities pursuant to the
Assignment and Assumption Agreements; and
(v) Acquiror's agreement to perform certain post-closing
obligations and assume certain liabilities pursuant to SECTION 5.9.
(b) On the Closing Date, Stockholder shall deliver to Acquiror:
(i) certificates representing the Stock, either duly
endorsed for transfer or accompanied by appropriate stock powers;
(ii) a certificate of the Secretary of Stockholder in the
form annexed to this Agreement as Exhibit C;
(iii) a certificate of an officer of Stockholder in the
form annexed hereto as Exhibit D;
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(iv) a General Release Agreement in the form annexed
hereto as Exhibit E;
(v) a copy of each Assignment and Assumption Agreement
duly executed on its behalf;
(vi) one or more opinions of counsel to Stockholder in the
form annexed to this Agreement as Exhibit F;
(vii) a Non-Solicitation Agreement, duly executed on behalf
of HCA - The Healthcare Company; and
(viii) evidence reasonably satisfactory to Acquiror that the
persons listed on SCHEDULE 2.2(B)(VIII) are no longer officers or directors of
the Companies or any Company Subsidiary or Southeastern or ▇▇▇▇▇▇▇, and that
directors selected by Acquiror have been elected as directors of ▇▇▇▇▇▇▇.
(c) On the Closing Date, Acquiror shall deliver to Stockholder:
(i) the sum of $7,500,000 in cash, by wire transfer of
immediately available funds to an account designated in writing by Stockholder
on the Closing;
(ii) the Original Balloon Note, the Original Zero Coupon
Note and the other Transaction Documents duly executed on its behalf;
(iii) a certificate of the Secretary of Acquiror in the
form annexed to this Agreement as Exhibit G;
(iv) a certificate of an officer of Acquiror in the form
annexed hereto as Exhibit H;
(v) a General Release Agreement in the form annexed
hereto as Exhibit I duly executed on behalf of Acquiror, the Companies and the
Company Subsidiaries;
(vi) a copy of each Assignment and Assumption Agreement
duly executed on its behalf; and
(vii) one or more opinions of counsel to Acquiror in the
form annexed to this Agreement as Exhibit J.
Section 2.3 Purchase Price Adjustment. The Purchase Price shall
be adjusted following the Closing Date in accordance with the provisions of
SECTION 2.5 (the "Purchase Price Adjustment"). Any dispute relating to the final
determination of such adjustment in the Purchase Price shall be resolved in
accordance with the dispute resolution procedure set forth in SECTION 2.6
hereof.
Section 2.4 Intentionally Omitted.
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Section 2.5 Amount of Purchase Price Adjustment. Not more than
sixty (60) days after the Closing Date, Acquiror shall deliver to Stockholder a
consolidating and consolidated balance sheet of the Companies as of the Closing
Date (the "Closing Balance Sheet"). The Closing Balance Sheet shall (i) be
prepared in accordance with GAAP, applied on a basis consistent with the
Companies' 2000 Balance Sheets and utilizing the Accounting Principles and (ii)
fairly present (subject to the exceptions set forth in SCHEDULE 3.6) in all
material respects the financial condition of the Companies as of the Closing
Date. The Closing Balance Sheet shall set forth the calculation of the Net
Working Capital as of the Closing Date which shall be calculated in accordance
with the calculation schedule set forth as Exhibit K to this Agreement (the "Net
Working Capital Calculation") and based upon the Closing Balance Sheet. If and
to the extent the Net Working Capital on the Closing Balance Sheet is less than
$2,745,109, then the Purchase Price shall be adjusted (effective as of the
Closing Date) by such amount by means of a reduction of the aggregate principal
amount of the Original Balloon Notes then outstanding. If the Net Working
Capital on the Closing Balance Sheet is greater than $2,745,109 then the
Purchase Price shall be adjusted (effective as of the Closing Date) by such
amount by means of an increase of the aggregate principal amount of the Original
Balloon Notes then outstanding.
Section 2.6 Dispute of Adjustments. Within forty-five (45) days
after Acquiror's delivery of the Closing Balance Sheet and the Net Working
Capital Calculation, Stockholder shall, in a written notice to Acquiror, either
accept or describe in reasonable detail any objections to the proposed Purchase
Price Adjustment and the reasons therefor, and shall include pertinent
calculations. If Stockholder fails to deliver notice of its acceptance or
objection to the proposed Purchase Price Adjustment within such forty-five (45)
day period, Stockholder shall be deemed to have accepted it. In the event that
Acquiror and Stockholder are not able to agree on the Purchase Price Adjustment
within forty-five (45) days from and after the receipt by Acquiror of any
objections raised by Stockholder, Acquiror and Stockholder shall each have the
right to require that such disputed determination be submitted to a certified
public accounting firm, which shall be selected by Stockholder from a list of
three independent certified public accounting firms previously submitted to
Stockholder in writing by Acquiror. Any such independent certified public
accounting firm shall be a nationally recognized accounting firm with recognized
expertise in the healthcare industry and shall not have been engaged by
Stockholder, Charterhouse Equity Partners II, L.P., HCA-The Healthcare Company
or any of their respective Affiliates, on the one hand, or Acquiror, ▇▇▇▇
International Corp. or any of their respective Affiliates, on the other, during
the preceding three years. The results of such accounting firm's report shall be
final and binding upon Acquiror and Stockholder, and such accounting firm's fees
and expenses for such disputed determination shall be borne equally by the
parties. Each of the parties agrees upon request of the other to execute such
amendments and/or replacement Balloon Notes promptly upon agreement of
Stockholder and Acquiror or as determined by such accounting firm's report, in
the case of a dispute, in the amount of the Purchase Price Adjustment. At all
reasonable times following delivery by Acquiror to Stockholder of the proposed
Closing Balance Sheet as provided in Section 2.5, Acquiror shall upon request
make available for inspection by Stockholder and its agents (including its
accountants) all books and records of the Companies and the Company Subsidiaries
related to the determination of Net Working Capital, including all accounting
work papers and journal entries underlying the Closing Balance Sheet.
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Section 2.7 Closing. The closing of the Stock Acquisition (the
"Closing") is taking place simultaneously with the execution and delivery of
this Agreement at the offices of Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇. The date of the Closing is referred to herein as the "Closing Date."
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.
Stockholder hereby represents and warrants to Acquiror as
follows:
Section 3.1 Organization of the Companies.
(a) Each of Stockholder, the Companies, ▇▇▇▇▇▇▇ and
Southeastern is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation with requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business (or non-profit purpose, in the case of ▇▇▇▇▇▇▇ and
Southeastern) as now being conducted therein, and is duly qualified to do
business as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on any Company.
(b) True and complete copies of the certificates of
incorporation and the by-laws of each of the Companies, ▇▇▇▇▇▇▇ and
Southeastern, as in effect on the date hereof have been furnished to Acquiror.
Section 3.2 Authority.
(a) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Stockholder (including, without limitation, the execution, delivery and
performance of the agreements, instruments and other documents to be executed by
it pursuant to this Agreement (collectively, "Stockholder Closing Documents"))
has been duly authorized by requisite corporate action, and no other acts or
other proceedings on the part of Stockholder are necessary to authorize this
Agreement or the transactions contemplated hereby by Stockholder. This Agreement
and the other Stockholder Closing Documents have been duly executed and
delivered by Stockholder and (assuming the due authorization, execution and
delivery hereof by Acquiror and the other parties thereto) each of this
Agreement and the other Stockholder Closing Documents constitute the legal,
valid and binding obligation of Stockholder, enforceable against Stockholder in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights in general, or by general principles
of equity.
(b) Neither the execution and delivery by Stockholder of
this Agreement or any Stockholder Closing Document nor the consummation by
Stockholder of the transactions contemplated hereby or thereby nor compliance by
Stockholder with any of the provisions hereof or thereof will, except as set
forth on SCHEDULE 3.2, (i) violate or conflict with any provision of the
certificate of incorporation or the by-laws of Stockholder, (ii)
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violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the assets of any Company or any of the direct or
indirect Subsidiaries of any Company (the "Company Subsidiaries") under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, sublease, option, agreement or other instrument or
obligation existing immediately prior to the Closing to which any Company or any
of the Company Subsidiaries is a party or by which any of them or any of their
respective assets may be bound or affected, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Stockholder, any
Company, any of the Company Subsidiaries or any of their respective assets
immediately prior to the Closing. Except as set forth on SCHEDULE 3.2, no
consent or approval by, notice to or registration with any Governmental Agency
is required on the part of Stockholder prior to the Closing Date in connection
with the execution and delivery of this Agreement or the other Stockholder
Closing Documents or the consummation of the transactions contemplated hereby or
thereby.
Section 3.3 Capitalization of Companies. The authorized capital
stock of Southern consists of 1,000,000 shares of common stock designated as
Class A Common Stock, par value $1.00 per share, and 1,000,000 shares of common
stock designated as Class B Common Stock, par value $1.00 per share, of which
6,745 shares of Class A Common Stock are outstanding. The authorized capital
stock of ▇▇▇▇▇▇▇ consists of 1,000 shares of common stock, par value $0.01 per
share, all of which are outstanding. The authorized capital stock of Dexter
consists of 100 shares of common stock, par value $0.01 per share, all of which
are outstanding. Except as set forth on SCHEDULE 3.3, all of the outstanding
equity securities and other securities of each Company are owned of record and
beneficially by Stockholder, free and clear of any Encumbrances. All of the
outstanding shares of Stock have been duly authorized and are validly issued,
fully paid and non-assessable and have not been issued in violation of federal
or state securities laws, the certificate of incorporation or the by-laws of the
Companies. Except as set forth on SCHEDULE 3.3, there is no existing option,
warrant, call, commitment or other agreement to which any Company or any of the
Company Subsidiaries is a party requiring, and there are no convertible
securities of any Company or any of the Company Subsidiaries outstanding which
upon conversion would require, the issuance of any additional shares of capital
stock or other securities convertible into shares of capital stock of any
Company or any of the Company Subsidiaries.
Section 3.4 Subsidiaries.
(a) SCHEDULE 3.4(A) contains a true and complete list of all of
the Company Subsidiaries and the respective ownership interest of the Companies
and other Persons in each such Company Subsidiary. The Subsidiaries listed on
such schedule constitute all the Subsidiaries of the Companies. Except as set
forth on SCHEDULE 3.4(A), the Companies do not own, directly or indirectly, any
capital stock, equity securities or other equity interests of any Person. Except
as set forth on SCHEDULE 3.4(A), the Companies are not a party to any agreement
to own or control, nor do the Companies have the direct or indirect right to
acquire, any Subsidiary or ownership interest in any other Person.
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(b) Each of the Company Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation with requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted
therein, and is duly qualified to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on any Company.
(c) True and complete copies of the certificate of incorporation
and the by-laws as in effect on the date hereof for each of the Company
Subsidiaries have been furnished to Acquiror.
Section 3.5 Capitalization of the Company Subsidiaries.
(a) SCHEDULE 3.5(A) sets forth a true and correct statement of the
authorized capital and issued and outstanding shares of the Company
Subsidiaries, including a statement of the record ownership of all such shares.
All such shares have been duly authorized, and offered, issued and sold in
compliance with applicable law, and are fully paid and non-assessable.
(b) The Companies or one of the Company Subsidiaries has good and
marketable title to all shares of the Company Subsidiaries (the "Company
Subsidiary Shares") and all the Company Subsidiary Shares are owned directly by
the Companies or one of the Company Subsidiaries, beneficially and of record,
free and clear of all Encumbrances. The Companies directly have full voting
power over the Company Subsidiary Shares, subject to no proxy, stockholders'
agreement, voting trust or other agreement relating to the voting of any Company
Subsidiary Shares.
(c) No Person has any preemptive right to purchase any shares of a
Company Subsidiary. There are no outstanding securities or other instruments of
any Company Subsidiary which are convertible into or exchangeable for any shares
of its capital stock. There is no existing option, warrant, right, call or
commitment of any character granted or issued by any Company Subsidiary
governing the issuance of shares of its respective capital stock.
Section 3.6 Financial Statements. Annexed to this Agreement as
part of SCHEDULE 3.6 are true and complete copies of (i) the unaudited balance
sheet of each Company, and the Companies (on a consolidated and consolidating
basis), as of December 31, 1999 and the related statements of income, cash flows
and changes in shareholders' equity for the fiscal year ended December 31, 1999
and (ii) the unaudited balance sheet of each Company and the Companies (on a
consolidated and consolidating basis) (such balance sheet only being the
"Companies' 2000 Balance Sheets") as of December 31, 2000 (the "Companies' 2000
Balance Sheets Date") and the related statements of income, cash flows and
changes in shareholders' equity for the fiscal year then ended. The financial
statements referred to in the preceding sentence have been prepared in
accordance with GAAP consistently applied (except for (i) the absence of
footnotes, (ii) with respect to the Companies' 2000 Balance Sheets, normal
year-end adjustments which in the aggregate shall not be material, and (iii) the
other matters set forth on SCHEDULE 3.6), and present fairly, in
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all material respects, the financial position of the Companies and the results
of their operations as of the respective dates and for the respective periods
indicated therein.
Section 3.7 Undisclosed Liabilities. Except (a) as and to the
extent reflected or adequately reserved against in the Companies' 2000 Balance
Sheets, (b) liabilities which have been incurred since the Companies' 2000
Balance Sheets Date in the ordinary course of business and (c) as set forth on
SCHEDULE 3.7, the Companies and the Companies Subsidiaries have no liabilities
or obligations (whether absolute, accrued, contingent, secured or unsecured,
matured or unmatured or otherwise and without regard to whether such liabilities
or obligations are required to be included in financial statements under GAAP).
Section 3.8 Absence of Certain Changes or Events. Except as set
forth on SCHEDULE 3.8, since the Companies' 2000 Balance Sheets Date there has
not been:
(a) any damage, destruction, loss or change in or effect on the
business of any Company and any of the Company Subsidiaries (whether or not
covered by insurance) involving a loss in excess of $10,000 in the aggregate;
(b) any labor dispute, violation of labor law or regulation or any
adverse event or condition of any character relating to labor matters, which
could reasonably be expected to result in a cost, expense or loss to the
Companies or the Company Subsidiaries in excess of $10,000 in the aggregate;
(c) any sale, assignment, transfer, or disposition of any material
item of property, plant or equipment owned by any Company or any of the Company
Subsidiaries, except in the ordinary course of business with comparable
replacement thereof;
(d) any material change from current practice of any Company or
any of the Company Subsidiaries in any accounting principle or practice other
than changes required by law or as a result of changes in GAAP;
(e) any agreement to do any of the foregoing.
Section 3.9 Litigation. Except as set forth on SCHEDULE 3.9
(other than with respect to Taxes, which are governed by SECTION 3.14, or with
respect to Company Employee Plans, which are governed by SECTION 3.12), there
are no actions, suits, claims, proceedings or investigations which have been
served and are pending or, to the knowledge of Stockholder, are threatened
against any Company or any of the Company Subsidiaries, nor are there any
outstanding judgments, orders, writs, injunctions or decrees of any Governmental
Agency against any Company or any of the Company Subsidiaries.
Section 3.10 Compliance with Law; Governmental Approvals;
Licenses.
(a) Except as set forth on SCHEDULE 3.10(A), each Company and each
of the Company Subsidiaries are in compliance in all material respects with all
applicable statutes, rules, regulations and requirements of all federal, state
and local commissions, boards, bureaus and agencies having jurisdiction over
each Company and each of the Company Subsidiaries and their respective
operations. To the knowledge of Stockholder, each Company and each of the
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Company Subsidiaries have timely filed all material reports, data and other
information required to be filed with such commissions, boards, bureaus and
agencies.
(b) SCHEDULE 3.10(B) contains a true and complete list of all
Licenses including, without limitation, hospital and ancillary department
licenses, owned or held by each of the Companies and each of the Company
Subsidiaries relating to the ownership, development or operations thereof in
each case which are material to the operation of such Company or Company
Subsidiary or any hospital or healthcare facility owned or operated by the
Companies or any Company Subsidiary. Each Company and each of the Company
Subsidiaries holds all material Licenses which are needed or required by law
with respect to the operation of the Business as it is currently conducted. All
such Licenses are in full force and effect, and each Company and each of the
Company Subsidiaries is in compliance in all material respects with all
conditions and requirements of such Licenses and with all rules and regulations
relating thereto.
Section 3.11 Medicare Participation/Accreditation. Except as set
forth on SCHEDULE 3.11(A), each Company and each of the Company Subsidiaries is
qualified for participation in the Medicare, Medicaid and TRICARE programs, has
current and valid provider contracts with such programs and is in compliance in
all material respects with the conditions of participation in such programs and
has received all approvals or qualifications necessary for capital reimbursement
with respect to the assets and properties of each of the Companies and each
Company Subsidiary. Except as set forth on SCHEDULE 3.11(B), neither any Company
nor any Company Subsidiary has received any notices from any of the Medicare,
Medicaid or TRICARE programs, of any pending or threatened investigations or
surveys, and no Company nor any Company Subsidiary has reason to believe that
any such investigations or surveys are pending, threatened or imminent.
Stockholder has provided to Acquiror complete and correct copies of the
Companies' cost reports and its home office reports under the Medicare, Medicaid
and Tricare programs for the Companies' fiscal years ended on December 31, 1997,
1998, 1999 and 2000. Except as set forth on SCHEDULE 3.11(C), each of the
Companies and each Company Subsidiary owning or operating a hospital or other
healthcare facility has been duly and currently is accredited by the Joint
Commission of Accreditation of Healthcare Organizations and by each Governmental
Agency that requires such accreditation for its business.
Section 3.12 Employee Benefit Plans.
(a) SCHEDULE 3.12(A) sets forth a true and correct list of each
deferred compensation plan, incentive compensation plan, equity compensation
plan, "welfare plan" (within the meaning of Section 3(1) of ERISA), "pension
plan" (within the meaning of Section 3(2) of ERISA), and each other material
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by each Company or any of the Company Subsidiaries for the benefit of any
employee or former employee of each Company or any of the Company Subsidiaries.
Such plans are referred to collectively herein as the "Company Employee Plans."
No Company is the sponsor or administrator of any Company Employee Plan.
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(b) Each Company has furnished or made available to Acquiror with
respect to each of the Company Employee Plans true and correct copies of each of
the following documents if applicable: (i) the Company Employee Plan document;
(ii) the most recent determination letter from the IRS for such Company Employee
Plan; (iii) the most recent summary plan description and related summaries of
material modifications; (iv) all insurance and annuity contracts related to the
Company Employee Plans; and (v) the most recently available Form 5500 Annual
Reports, certified financial statements and actuarial reports relating to the
Company Employee Plans. Except as set forth in SCHEDULE 3.12(B), since the date
those documents were furnished to Acquiror, no amendments to the Company
Employee Plans have been adopted.
(c) Except as set forth on SCHEDULE 3.12(C), each of the Company
Employee Plans is in compliance in all material respects with its terms, all
applicable state and federal securities laws, collective bargaining agreements,
the applicable provisions of the Code and ERISA and each of the Company Employee
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code has received a current determination letter from the IRS (which may be a
favorable determination letter issued to a prototype sponsor) that such Company
Employee Plan is qualified (or has submitted or is within the remedial amendment
period for submitting an application for a determination letter with the IRS)
and each Company knows of no condition or event that could reasonably be
expected to adversely affect such status. None of the Companies nor any trade or
business, whether or not incorporated, which together with the Companies would
be deemed a "single employer" within the meaning of Section 4001 of ERISA or
Section 414(b), (c), (m) or (o) of the Code (a "Company ERISA Affiliate") has
any liability, contingent or otherwise, has at the present, or at any time
within six years prior to the Closing Date, sponsored or participated in an
employee benefit plan subject to Title IV of ERISA or Section 412 of the Code.
Except as set forth on SCHEDULE 3.12(C), there are no pending, or to the best
knowledge of Stockholder, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Company Employee
Plans or any trusts related thereto.
(d) Except as set forth on SCHEDULE 3.12(D), none of the Companies
nor any of the Company Subsidiaries has any current or projected liability in
respect of post-employment or post-retirement health or medical or life
insurance benefits for retired, former or current employees of any Company,
except as required to avoid excise tax under Section 4980B of the Code and to
comply with Sections 601 through 608 of ERISA or the health continuation
requirements of state law.
(e) Except as described on SCHEDULE 3.12(E), the execution of, and
performance of the transactions contemplated in this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any Company Employee Plan, trust or loan that will or may result
in any material payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any current or former employee,
executive or director of any Company or any of the Company Subsidiaries.
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(f) Except as set forth in SCHEDULE 3.12(F), none of the Company
Employee Plans is a "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) To the knowledge of Stockholder, each Company's records
accurately reflect its employees' employment histories, including their hours of
service, years of eligibility, vesting and benefit accrual service if
applicable, and any service that is relevant under the particular Company
Employee Plan for purposes of this Agreement.
(h) None of the Companies nor any Company Subsidiary has engaged
in any transaction or acted or failed to act in any manner that could reasonably
be expected to subject a Company to any direct or indirect liability (by
indemnity or otherwise) for a breach of any fiduciary or co-fiduciary duty under
ERISA. None of the Companies nor any Company Subsidiary has engaged in any
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code.
Section 3.13 Environmental Matters. Except as set forth on
SCHEDULE 3.13:
(a) each Company and each of the Company Subsidiaries are in
compliance with all applicable Environmental Laws;
(b) no Hazardous Substances are present at or have been disposed
on or released or discharged from, onto or under any of the properties currently
owned, leased or operated by each Company or each of the Company Subsidiaries
except in substantial compliance with applicable Environmental Laws or an
environmental permit or as is would not result in liability under applicable
Environmental Laws;
(c) no Hazardous Substances were present at or disposed on or
released or discharged from, onto or under any of the properties formerly owned,
leased or operated by each Company or each of the Company Subsidiaries during
the period of ownership, leasing or operation by each Company or each of the
Company Subsidiaries except in substantial compliance with applicable
Environmental Laws or an environmental permit or as is would not result in
liability under applicable Environmental Laws;
(d) none of the Companies nor any of the Company Subsidiaries are
subject to any liability or obligation in connection with Hazardous Substances
present at any location owned, leased or operated by any third party;
(e) none of the Companies nor any of the Company Subsidiaries has
received any written notice, demand, letter, claim or request for information
alleging that any Company or any of the Company Subsidiaries is or may be in
violation of or liable under any Environmental Law with respect to environmental
matters that remains outstanding or unresolved; and
(f) none of the Companies nor any of the Company Subsidiaries is
subject to any order, decree, injunction or other directive of any Governmental
Agency with respect to environmental matters that remains outstanding or
unresolved.
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The representations and warranties set forth in this SECTION
3.13 constitute the sole and exclusive representations of Stockholder with
respect to the subject matter of this SECTION 3.13.
Section 3.14 Taxes.
(a) Except as set forth on SCHEDULE 3.14(A): (i) Each material Tax
Return required to be filed (taking into account extensions) by or on behalf of
or including any Company or any of the Company Subsidiaries has been timely
filed and all such Tax Returns were true, correct and complete, (ii) all Taxes
owed by any Company or any of the Company Subsidiaries (whether or not shown on
any Tax Return) have been timely paid, (iii) none of the Companies nor any of
the Company Subsidiaries is currently the beneficiary of any extension of time
within which to file any Tax Return, (iv) with respect to Taxes of, or Tax
Returns filed by or on behalf of, or including, any Company or any of the
Company Subsidiaries, no statute of limitations on assessment has been waived
and no extension of time with respect to assessment has been requested or
received, and (v) none of the Companies nor any of the Company Subsidiaries is
under, or has received notification of any threatened or pending, audit,
investigation or similar proceedings relating to Taxes and none of the Companies
nor any of the Company Subsidiaries is a party to any litigation or pending
litigation relating to Taxes. Each Companies' Group has filed all income Tax
Returns that it was required to file for each taxable period during which any of
the Companies or any of the Company Subsidiaries was a member of the group. All
such Tax Returns were correct and complete (A) in all respects in so far as they
relate to any of the Companies or any of the Company Subsidiaries, (B) in all
material respects in so far as they do not relate to the Company and Companies
Subsidiaries. All income Taxes owed by any Companies' Group (whether or not
shown on any Tax Return) have been paid for each taxable period during which any
of the Companies or any of the Company Subsidiaries was a member of the group
(b) Each Company and each of the Company Subsidiaries has complied
in all material respects with all legal requirements relating to the withholding
and payment of Taxes, including, without limitation, requirements relating to
employee wage withholding.
(c) Stockholder has furnished to Acquiror true, correct and
complete copies of all Tax Returns filed by or on behalf of or including any
Company or any of the Company Subsidiaries as requested by Acquiror. None of the
Companies nor any of the Company Subsidiaries (i) is a party to any agreement
(other than with another member of the Companies' federal consolidated return
group (the "Companies' Group")) providing for the sharing, allocation or
indemnification of Taxes, (ii) is or has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than the Companies'
Group) or (iii) has any liability for Taxes of any Person (other than itself and
the other members of the Companies' Group) under Treasury regulations Section
1.1502-6, as a transferee or successor, by contract or otherwise.
(d) No notice of a claim or pending investigation has been
received, or to the knowledge of Stockholder, has been threatened, by any state,
local or other jurisdiction with which any of the Companies or any of the
Company Subsidiaries does not currently
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file Tax Returns, alleging that any of them has a duty to file Tax Returns and
pay Taxes or is otherwise subject to the taxing authority of such jurisdiction.
(e) Except as set forth on SCHEDULE 3.14(E), none of the Companies
nor any of the Company Subsidiaries is a party to any agreement, contract, or
arrangement that could result, either directly or indirectly, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
Section 3.15 Insurance. Each Company and each of the Company
Subsidiaries carry insurance either directly or through one or more master
policies maintained by Stockholder covering their assets, business, equipment,
properties, operations, employees, officers and directors of the type and
amounts customarily carried by persons conducting business similar to that of
the Companies and the Company Subsidiaries. True and complete copies of all such
insurance policies and binders have been provided to Acquiror prior to the
Closing Date. The coverage under each such policy and binder is in full force
and effect, and no notice of cancellation or non-renewal has been received by
the Company.
Section 3.16 Labor Relations and Employment. Except as set forth
on SCHEDULE 3.16, (a) there is no labor strike, material labor dispute,
slowdown, stoppage or lockout pending, or to the knowledge of Stockholder,
threatened against or affecting any Company or any of the Company Subsidiaries
(b) to the knowledge of Stockholder, there are no union claims to represent the
employees of any Company or any of the Company Subsidiaries and there are no
current union organizing activities among the employees of any Company or any of
the Company Subsidiaries and (c) none of the Companies nor any of the Company
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association, applicable to employees of any
Company or any of the Company Subsidiaries.
Section 3.17 Medical Staff Matters. The Companies have provided to
Acquiror true, correct and complete copies of the by-laws and rules and
regulations of the medical staffs of any hospital operated by the Companies and
the Company Subsidiaries. Except as set out on SCHEDULE 3.17, there are no
adverse actions with respect to any medical staff members of any hospital
operated by the Companies or any of the Company Subsidiaries, nor has any
medical staff member or any applicant thereto requested a judicial review
hearing which has not been scheduled or has been scheduled but has not been
completed, and there are no pending or, to the knowledge of Stockholder,
threatened disputes with applicants or medical staff members, and all appeal
periods in respect of any medical staff member or applicant against whom an
adverse action has been taken have expired.
Section 3.18 Third Party Payor Cost Reports. Each cost report
required to be filed by or on behalf of each Company and each of the Company
Subsidiaries has been or will be timely filed and all amounts owed by each
Company and each of the Company Subsidiaries have been or will be paid timely.
All of such cost reports accurately reflect the
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information to be included thereon. Stockholder has provided to Acquiror each
such cost report and all documents that indicate which of such cost reports have
been audited and finally settled and a brief description of any and all notices
of program reimbursement, proposed or pending audit adjustments, disallowances,
appeals of disallowances, and any and all other unresolved claims or disputes in
respect of such cost reports. Each Company and each of the Company Subsidiaries
have established adequate reserves to cover any potential reimbursement
obligations that each Company and each of the Company Subsidiaries may have in
respect of any such third party cost reports, and such reserves are set forth in
the Companies' 2000 Balance Sheets. There is no basis for any claims against any
Company and any of the Company Subsidiaries by any third-party payors other than
routine Medicare and Medicaid audit adjustments. None of the Companies nor any
of the Company Subsidiaries have received any notice that Medicare or Medicaid
has any claims against it which could result in consolidated net offsets against
future reimbursement in excess of that provided for in the Companies' 2000
Balance Sheets.
Section 3.19 Brokers or Finders. Except for Chase Securities Inc.,
of which the fees shall be paid by Stockholder, no broker, finder or investment
banker is entitled to any fee or commission from Stockholder or any Company for
services rendered on behalf of Stockholder or any Company in connection with the
transactions contemplated by this Agreement.
Section 3.20 Hospital Facilities.
(a) SCHEDULE 3.20(A) sets forth a complete list and brief
description of all hospitals, nursing homes and other medical facilities owned
or operated by the Companies or any of the Company Subsidiaries, including a
brief description of all real property and improvements and any real property
leases ("Real Property Leases") under which the Companies or any Company
Subsidiaries uses or occupies or has the right to use or occupy, any real
property (all such land, buildings and other improvements owned by the Companies
or any Company Subsidiaries being herein called the "Owned Real Property" and
all such land, buildings and other improvements leased by the Companies or any
Company Subsidiaries being herein called the "Leased Real Property"), together
with, in the case of Leased Real Property, a description of each lease or other
relevant instrument and all modifications, amendments and supplements thereto or
extensions thereof (including, without limitation, instruments exercising
options to extend the term of any lease), a brief description of the Leased Real
Property covered thereby, the applicable rental rate or license fee, expiration
date, renewal rights and assignment or change of control provisions.
(b) Except as indicated in SCHEDULE 3.20(B), with respect to all
such Owned Real Property, the Companies or a Company Subsidiary is the owner
and/or holder of all right, title and interest therein, free and clear of all
Encumbrances other than Permitted Encumbrances, and the premises described are
presently occupied and exclusively used by the Companies or a Company
Subsidiary.
(c) Except as indicated in SCHEDULE 3.20(C), with respect to each
of such Leased Real Property:
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(i) The Companies or a Company Subsidiaries is the owner
and/or holder of all the rights, licenses and/or
leasehold estates granted to it by the instruments
referred to in SCHEDULE 3.20(A) free and clear of all
Encumbrances other than Permitted Encumbrances, and
the premises described are presently occupied and
exclusively used by the Companies or a Company
Subsidiary; and
(ii) Neither the Companies, any Company Subsidiaries nor
any Shareholder has received notice from any landlord
or lessor of any Leased Real Property requiring the
Companies or any Company Subsidiaries to repair, or
to pay for the repair of, any facility located on
such Leased Real Property which repairs remain
unremedied and, to the best knowledge of Stockholder,
if any such leased facility were surrendered by the
Companies or any such Company Subsidiaries to the
landlord or lessor in its present condition, such
leased facility would be required to be accepted by
the landlord or lessor in such condition under the
terms of the applicable lease.
(d) Except as indicated in SCHEDULE 3.20(C), with respect to each
of the Real Property Leases described in SCHEDULE 3.20(A):
(i) All rentals due under said leases are current and
have been paid through the date shown on such
schedule, no notices of default have been received
which remain unremedied and there exists no event of
default on the part of any Company or Company
Subsidiary under the terms of any lease and, to the
best knowledge of Stockholder, no event has occurred
which, upon the passage of time or giving of notice,
or both, would result in any event of default or
prevent the Companies or any Company Subsidiaries
from exercising or obtaining the benefits of its
rights thereunder;
(ii) To the knowledge of Stockholder, each of said leases
is in full force and effect and constitutes a legal,
valid and binding obligation of the lessor,
enforceable in accordance with its terms except as
affected by bankruptcy, moratorium and similar laws
affecting the rights of lessors and creditors and
except for general equity principles.
Section 3.21 Personal Property. Except as set forth in SCHEDULE
3.21, each item of personal property owned by the Companies or any Company
Subsidiary is owned free and clear of any Encumbrances except for Permitted
Encumbrances.
Section 3.22 Contracts. SCHEDULE 3.22 contains a true and complete
list of all material written and oral contracts, commitments and similar
agreements to which the
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Companies and each Company Subsidiary is a party or by which it or any of its
properties are bound as of the date hereof, including, without limitation, the
following such agreements and contracts:
(a) Any Contract relating to any services provided which
involves or is reasonably likely to involve a current or future obligation on
the part of the Companies in excess of $50,000 per annum and which is not
terminable on 90 days' or less notice by a party thereto without penalty or
other financial obligation;
(b) Any Contract with health maintenance organizations,
preferred provider organizations or other alternative delivery systems or any
provider based physician agreement;
(c) Any Contract relating to any joint ventures,
strategic alliances, partnerships and investments;
(d) Any Contract with (i) any Affiliate of any of the
Companies or any Company Subsidiary or Stockholder, or (ii) any officer or
director of the Companies or any Company Subsidiary;
(e) Any Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability in respect of borrowed
money, including, without limitation, any loan agreement, indemnity, bonds,
mortgages, notes or letters of credit, or otherwise pledging, granting a
security interest in or placing an Encumbrance on any asset thereof;
(f) Any Contract relating to the lease or the holding or
operating of any property, real or personal, owned by any other party which
involves or is reasonably likely to involve a current or future obligation on
the part of the Companies in excess of $50,000 per annum and which is not
terminable on 90 days' or less notice by a party thereto without penalty or
other financial obligation;
(g) Any Contract relating to the lease or licensing to
any third party of any property, real or personal, owned by the Companies
involving in excess of $50,000 per annum and which is not terminable on 90 days'
or less notice by a party thereto without penalty or other financial obligation;
(h) Intentionally Omitted;
(i) Any Contract that prohibits, restricts or limits in
any way the payment of dividends or distributions by the Companies;
(j) Any Contract for the purchase, acquisition or supply
of inventory and other property and assets, whether for resale or otherwise
which involves or is reasonably likely to involve a current or future obligation
on the part of any party thereto in excess of in excess of $50,000 per annum and
which is not terminable on 90 days' or less notice by a party thereto without
penalty or other financial obligation; or
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(k) Any other Contract which is material to the
Companies' operations or business prospects, except those which (x) were made in
the ordinary course of business, and (y) are terminable on 90 days' or less
notice by a party thereto without penalty or other financial obligation.
Except as set forth on SCHEDULE 3.22, no consent of any party
to any Contract identified or required to be identified in SCHEDULE 3.22 is
required in connection with the execution, delivery or performance of this
Agreement, or the consummation of the transactions contemplated hereby. Except
as set forth on SCHEDULE 3.22, each Contract identified or required to be
identified in SCHEDULE 3.22 hereof is in full force and effect and is valid and
enforceable in accordance with its terms as against the Companies or Company
Subsidiaries that are a party thereto and, to the knowledge of Stockholder, is
in full force and effect and is valid and enforceable in accordance with its
terms as against the other parties thereto. Each Company and Company Subsidiary
has performed in all material respects all obligations required to be performed
by it, and is not in default in any material respect under or in breach of nor
in receipt of any claim of default or breach, under any Contract listed on
SCHEDULE 3.22. No event has occurred which with the passage of time or the
giving of notice or both would result in a material default, breach or event of
non-compliance on the part of any Company or Company Subsidiary under any
Contract identified or required to be identified in SCHEDULE 3.22 (including,
without limitation, all performance bonds, warranty obligations or otherwise).
No Company or Company Subsidiary has any present expectation or intention of not
fully performing all such obligations. No Company or Company Subsidiary has any
knowledge of any breach or anticipated breach by the other parties to any such
Contract to which it is a party. The Stockholder has delivered to Acquiror true,
correct and complete copies of all Contracts listed on SCHEDULE 3.22.
Section 3.23 Corporate Books and Records. The corporate records,
including, without limitation, the minute books and the stock records of each
Company and each Company Subsidiary have been provided to Acquiror and are true
and correct and, contain all of the proceedings of, and material actions taken
by, the stockholders and directors of each such company. The stock records,
reflect accurately all record transfers of the capital stock of each Company and
each Company Subsidiary prior to the execution of this Agreement.
Section 3.24 Title and Condition of Assets. Each Company and each
Company Subsidiary is in possession of, holds good title to, or has valid
leasehold interests in or valid rights under a Contract to use, all tangible
assets, real, personal or mixed and all intangible assets used in and necessary
for the conduct of the Business. All such tangible personal property is in good
working order and condition, ordinary wear and tear excepted, and its use
complies in all material respects with all applicable laws.
Section 3.25 Accounts Receivable. Except as set forth in SCHEDULE
3.25, the accounts and notes receivable of each Company and each Company
Subsidiary reflected on the Companies' 2000 Balance Sheets, and all accounts and
notes receivable arising subsequent to the Companies' 2000 Balance Sheets Date,
(i) arose from bona fide transactions in the ordinary course of Business and are
payable on ordinary trade terms, (ii)
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are legal, valid and binding obligations of the respective debtors enforceable
in accordance with their terms, (iii) are not subject to any valid set-off or
counterclaim, (iv) do not represent obligations for goods sold on consignment,
on approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement, (v) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the Companies' 2000 Balance Sheets, and (vi)
are not the subject of any actions or proceedings brought by or on behalf of any
Company or any Company Subsidiary. SCHEDULE 3.25 sets forth a description of any
security arrangements and collateral securing the repayment or other
satisfaction of receivables of any Company or any Company Subsidiary. All steps
necessary to render all such security arrangements legal, valid, binding and
enforceable, and to give and maintain for such company a perfected security
interest in the related collateral, have been taken.
Section 3.26 Inventory. All inventory of each Company and each
Company Subsidiary reflected on the Companies' 2000 Balance Sheets and all such
inventory acquired after the date of the Companies' 2000 Balance Sheet consists,
of a quality and quantity usable and salable in the ordinary course of business
consistent with past practice, subject to normal and customary allowances in the
industry for spoilage, damage and outdated items. Except as disclosed in the
notes, if any, to the Companies' 2000 Balance Sheets or on SCHEDULE 3.26, all
items included in the inventory of the Companies and the Company Subsidiaries
are the property of such company, free and clear of any Encumbrances, except for
Permitted Encumbrances, are not held on consignment from others and conform to
all standards applicable to such inventory or its use or sale imposed by
governmental law.
Section 3.27 Disclosure. No representation or warranty contained
in this Agreement, and no statement contained in any certificate furnished to
Acquiror pursuant to any provision of this Agreement, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR.
Acquiror hereby represents and warrants to Stockholder as follows:
Section 4.1 Organization of Acquiror. Acquiror is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation with requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted therein, and is duly qualified to do business as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have Material
Adverse Effect on Acquiror.
Section 4.2 Authority.
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including, without
limitation, the execution, delivery and performance of the agreements,
instruments or other documents to be executed by it pursuant to this Agreement
(collectively, "Acquiror Closing Documents"))
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by Acquiror have been duly authorized by requisite corporate action, and no
other acts or other proceedings on the part of Acquiror are necessary to
authorize this Agreement or the transactions contemplated hereby by Acquiror.
This Agreement and the other Acquiror Closing Documents have been duly executed
and delivered by Acquiror and (assuming the due authorization, execution and
delivery hereof by Stockholder and the other parties thereto) this Agreement and
the other Acquiror Closing Documents constitute, the legal, valid and binding
obligation of Acquiror, enforceable against Acquiror in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights in general, or by general principles of equity.
(b) Neither the execution and delivery by Acquiror of
this Agreement or the other Acquiror Closing Documents nor the consummation of
the transactions contemplated hereby and thereby nor compliance by Acquiror with
any of the provisions hereof or thereof will (i) violate or conflict with any
provision of the certificate of incorporation of Acquiror or by-laws of
Acquiror, (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the assets of Acquiror or any of the direct or indirect
Subsidiaries of Acquiror, as determined immediately prior to the Closing Date,
(the "Acquiror Subsidiaries") under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, sublease,
option, agreement or other instrument or obligation to which Acquiror or any of
Acquiror Subsidiaries is a party, or by which any of them or any of their
respective assets may be bound or affected, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Acquiror, any of
the Acquiror Subsidiaries or any of their respective assets except, in the case
of clauses (ii) and (iii) above, which would not have a Material Adverse Effect
on Acquiror or materially and adversely affect the consummation of the
transactions contemplated hereby. Except as set forth on SCHEDULE 4.2 or has
been made or obtained, no consent or approval by, notice to or registration with
any Governmental Authority is required on the part of Acquiror prior to the
Closing Date in connection with the execution and delivery of this Agreement or
the other Acquiror Closing Documents or the consummation by Acquiror of the
transactions contemplated hereby or thereby.
Section 4.3 Litigation. Except as set forth on SCHEDULE 4.3, as
of the date of this Agreement, there are no actions, suits, claims, proceedings
or investigations which have been served and are pending or, to the knowledge of
Acquiror, are threatened against Acquiror or the Acquiror Subsidiaries, nor any
outstanding judgments, orders, writs, injunctions or decrees of any Governmental
Agency against Acquiror or the Acquiror Subsidiaries, which (a) would have a
Material Adverse Effect on Acquiror, (b) seek to prevent or materially restrict
or delay the consummation of the transactions contemplated hereby or (c) would
materially and adversely affect the ability of Acquiror to consummate any of the
transactions contemplated hereby.
Section 4.4 Compliance with Law; Governmental Approvals;
Licenses. Except as set forth on SCHEDULE 4.4, Acquiror and the Acquiror
Subsidiaries
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are in compliance in all material respects with all applicable statutes, rules,
regulations and requirements of all federal, state and local commissions,
boards, bureaus and agencies having jurisdiction over Acquiror and the Acquiror
Subsidiaries and their respective operations.
Section 4.5 Funding. Acquiror will have available on the Closing
Date sufficient funds and financial capability to enable it to consummate the
Stock Purchase and will, from time to time, provide such assurances and
information to Stockholder as shall reasonably be requested by Stockholder that
it will have such financial capability on the Closing Date.
Section 4.6 Brokers or Finders. Except for KPMG LLP, of which the
fees shall be paid by Acquiror, no broker, finder or investment banker is
entitled to any fee or commission from Acquiror for services rendered on behalf
of Acquiror in connection with the transactions contemplated by this Agreement.
ARTICLE 5. CERTAIN UNDERSTANDINGS AND AGREEMENTS.
Section 5.1 Intentionally Omitted.
Section 5.2 Confidentiality. Nothing contained in this Agreement
shall affect any confidentiality agreement between Stockholder and any of its
Affiliates, on the one hand, and Acquiror and any of its Affiliates, on the
other (each a "Confidentiality Agreement"); provided, however, that nothing
shall preclude Acquiror from disclosing the fact that the transaction
contemplated by this Agreement has occurred and Acquiror, the Companies and the
Company Subsidiaries from disclosing their own proprietary information in the
ordinary course of business or as Acquiror's counsel may advise it is otherwise
required by law.
Section 5.3 Post-Closing Access to Records. Acquiror agrees to
preserve all records delivered by or on behalf of Stockholder pursuant to this
Agreement (including, without limitation, all records of the Companies and the
Company Subsidiaries) for a period of at least seven years from the Closing
Date. Thereafter, Acquiror will not voluntarily dispose of, alter or destroy any
such records without giving thirty (30) days' prior written notice to
Stockholder to permit it, at its expense, to examine, duplicate or take
possession of such records. During the period such records are so required to be
preserved and kept, duly authorized representatives of Stockholder shall, upon
reasonable prior notice, have access thereto during normal business hours to
examine, inspect and copy such records.
Section 5.4 Benefits.
(a) Except as otherwise provided in this Section 5.4, for a period
of one year following the Closing Date, Acquiror will use commercially
reasonable efforts to provide or cause benefits to be provided to the employees
and officers of the Companies and the Company Subsidiaries who are employed by
Acquiror or any of the Acquiror Subsidiaries immediately after the Closing Date
(the "Company Employees") that are substantially comparable in the aggregate to
the benefits currently provided to the Company Employees, and thereafter will
provide the Company Employees with benefits substantially
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comparable to those provided to similarly-situated employees of Acquiror.
Notwithstanding the foregoing, Acquiror shall have no obligation to maintain or
establish any severance or retention plan or benefits. Stockholder shall use
commercially reasonable efforts to assist Acquiror in establishing Acquiror
employee benefit plans that will provide such benefits to the Company Employees,
such cooperation to include the furnishing to Acquiror or its representatives of
census data for the Company Employees and reasonable access to service providers
to the Company Employee Plans, including trustees, custodians, brokers and third
party administrators.
(b) Acquiror shall not be obligated to grant credit for any
service or employment with, or recognized by, Stockholder, the Companies and the
Company Subsidiaries except as required by applicable law or except for purposes
of eligibility with respect to any employee pension benefit plan, as defined in
Section 3(2) of ERISA and any vacation program or employee welfare benefit plan,
as defined in Section 3(1) of ERISA ("Acquiror Welfare Plan"), including any
sick plan, but excluding any severance plan.
(c) As of the Closing Date, Acquiror shall cause any Acquiror
Welfare Plan to credit such Company Employee (and dependents and beneficiaries)
with creditable service toward meeting any pre-existing condition exclusions and
waiting periods (except to the extent that such exclusions would have then
applied or waiting periods were not satisfied under Stockholders', the
Companies' or the Company Subsidiaries' medical plans) with respect to Company
Employees (and their dependents or other beneficiaries). For purposes of
computing deductible amounts, co-pays or other maximums under any Acquiror
Welfare Plan, expenses and claims recognized prior to the Closing Date for
similar purposes under the applicable welfare plan of Stockholder, the Companies
and the Company Subsidiaries shall be credited or recognized under Acquiror's
Welfare Plan.
(d) On the Closing Date, or as soon as practicable thereafter,
Acquiror or the Acquiror Subsidiaries shall establish or designate a 401(k) plan
(the "Acquiror 401(k) Plan") and shall in accordance with the Treasury
Regulations issued under Section 401(a)(31) of the Code use commercially
reasonable efforts to provide that the Acquiror 401(k) Plan will accept a
"direct rollover" of "eligible rollover distributions" (as such terms are
defined in the Code) of the account balances consisting of cash and/or loans
that are not in default but are in compliance with the requirements of Section
72(p) of the Code from a Company Employee Plan which is a defined contribution
plan intended to be "qualified" under Section 401(a) of the Code in which the
Company Employees participate. Acquiror shall cause the Acquiror 401(k) Plan to
accept such direct rollovers without regard to the satisfaction by the Company
Employees of the Plan's waiting period for participation, provided the foregoing
is permitted by the Acquiror 401(k) Plan in the event it is in the form of a
prototype.
(e) Each Company shall, effective as of the Closing Date, take all
actions and execute and deliver all documents and furnish all notices that are
necessary to terminate its participation in each Company Employee Plan in which
it participates as a participating employer, it being the intention of the
parties that Acquiror shall not assume any Company Employee Plan on the Closing
Date. Stockholder and each Company shall cause to become 100% vested the account
balances of all Company Employees under a tax-qualified
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Company Employee Plan. Stockholder shall retain all obligations, including
liability for penalties imposed by the I.R.S. or by the U.S. Department of
Labor, and including liability for and attorneys' fees related to, any claim,
lawsuit, cause of action, dispute or damages with respect to or in connection
with any employee benefit plan paid or payable up to 11:59 p.m. E.S.T. on the
Closing Date, regardless of whether any disputed benefit is properly payable
under a Company Employee Plan. These obligations of Stockholder shall include
(but not be limited to) the matter set forth on Schedule 5.4(e), all life
insurance and disability insurance claims and incurred but not reported claims
and run-out claims under any Company Employee Plan which is a group health plan.
In the event Acquiror's group health plan pays health claims incurred prior to
the Closing Date under any Company Employee Plan which is a group health plan,
Stockholder shall promptly reimburse Acquiror when Acquiror furnishes
Stockholder reasonable evidence that such claim was incurred prior to the
Closing Date.
(f) Stockholder shall have full responsibility and liability for
offering and providing "continuation coverage" to any "qualified beneficiary"
who was covered by a "group health plan" sponsored or contributed to by
Stockholder and who experienced a "qualifying event" prior to the Closing Date
and Acquiror shall have full responsibility and liability for offering and
providing "continuation coverage" to any Company Employee who experiences a
"qualifying event" on or after the Closing Date. "Continuation coverage,"
"qualified beneficiary," "qualifying event" and "group health plan" have the
meanings given such terms under Section 4980B of the Code and Part 6 of Subtitle
B, Title I of ERISA.
Section 5.5 Implied Warranties. Except as expressly provided in
this Agreement, no party hereto has made or is making any representation or
warranty whatsoever regarding such party or such party's business to another
party. Without limiting the foregoing, each party acknowledges that it is not
relying on any implied warranties (whether of merchantability or fitness for a
particular purpose or otherwise), or upon any representation or warranty
whatsoever as to the prospects (financial or otherwise), or the viability or
likelihood of success, of the Business conducted after the Closing Date, except
as expressly provided in this Agreement. In addition, Acquiror acknowledges that
it is not relying upon the information contained in the Confidential Memorandum
of November 1999 furnished by Chase Securities, Inc. on behalf of Stockholder,
or in any subsequent or supplemental materials provided by the Companies or
Stockholder.
Section 5.6 Intentionally Omitted.
Section 5.7 Retention and Severance Benefits. Stockholder shall
pay or provide retention or severance benefits to employees and officers of the
Company or the Company Subsidiaries (i) which arise solely as a result of the
occurrence of the transactions contemplated by this Agreement, or (ii) which
arise as a result of an employee or officer of the Company or the Company
Subsidiaries ceasing to be an employee or officer of the Company or the Company
Subsidiaries on or before the forty-fifth (45th) day after the Closing Date;
provided, however, that if any employee or officer referred in clause (ii) of
this sentence is employed or engaged by Acquiror or any of its Affiliates within
90 days thereafter, Acquiror shall reimburse Stockholder for the amount of any
severance paid to such employee or officer pursuant to clause (ii) of this
sentence. In the event that any
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employee or officer of the Company or the Company Subsidiaries ceases to be an
employee or officer of the Companies or the Company Subsidiaries after the
forty-fifth (45th) day after the Closing Date, Acquiror shall make payments to
such employee or officer in a manner consistent with (i) Stockholder's salary
continuation and severance practices in effect immediately prior to the Closing
if such employee or officer is entitled to make a claim thereunder or (ii) if
the preceding clause (i) is not applicable, in a manner consistent with such
employee's or officer's agreement, as then in effect.
Section 5.8 Records Held or Maintained by Stockholders or Its
Affiliates. At the Closing, Stockholder shall deliver to Acquiror possession of
all facility development plans, hospital operating manuals, information and data
processing documentation, environmental reports, costs reports and home office
cost reports, insurance loss information and any other records in its possession
reasonably requested by Acquiror which relate to the Companies or any Company
Subsidiary or to the status or operation of any hospital owned or operated by
the Companies or any Company Subsidiary. Stockholder shall grant access to its
offices to Acquiror to permit Acquiror to obtain possession of all documents,
records and agreements and other materials referred to in Sections 3.23 and 5.8
that are located there at reasonable times during normal business hours and upon
reasonable notice.
Section 5.9 Certain Post Closing Obligations of Acquiror. After
the Closing, Acquiror shall perform those obligations of Acquiror set out on
SCHEDULE 5.9.
Section 5.10 Home Office Reports and Cooperation on Reimbursement.
Stockholder shall not voluntarily amend, modify or supplement any home office
cost report so as to cause an adverse financial or other effect on any of the
Companies unless in the good faith opinion of Stockholder such amendment is
required to be in compliance with applicable Medicare/Medicaid rules and
regulations. Acquiror, the Companies and the Company Subsidiaries and
Stockholder shall cooperate fully and as to the extent reasonably requested by
any of them, in connection with Medicare, Medicaid and TRICARE reimbursement
matters.
ARTICLE 6. TAX MATTERS.
The following provisions shall govern certain tax matters relating to
the Companies and the Company Subsidiaries:
Section 6.1 Tax Periods Ending on or Before the Closing Date.
Stockholder shall prepare or cause to be prepared, and file or cause to be
filed, all income Tax Returns for the Companies and the Company Subsidiaries for
all periods ending on or prior to the Closing Date that are filed after the
Closing Date. Notwithstanding anything to the contrary in this Agreement,
Stockholder shall pay and shall indemnify and hold Acquiror and its Subsidiaries
harmless from and against any and all income Taxes with respect to the Companies
and the Company Subsidiaries that relate to all periods through the Closing
Date.
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Section 6.2 Tax Periods Beginning Before and Ending After the
Closing Date. Acquiror shall prepare or cause to be prepared, and file or cause
to be filed, any income Tax Returns of the Companies and the Company
Subsidiaries for tax periods that begin before the Closing Date and end after
the Closing Date. Stockholder shall pay to Acquiror within ten (10) days after
the date on which income Taxes are paid with respect to such periods an amount
equal to the portion of such income Taxes which relates to the portion of such
taxable period ending on the Closing Date.
Section 6.3 Refunds and Tax Benefits. Any income Tax refunds that
are received by Acquiror or the Companies and the Company Subsidiaries, and any
amounts credited against income Tax to which Acquiror or the Companies and the
Company Subsidiaries become entitled, that relate to tax periods ending on or
before the Closing Date, or to the portion ending on the Closing Date of the
period ending after the Closing Date, shall be for the account of Stockholder,
and Acquiror shall pay over to Stockholder any such refund or the amount of any
such credit within fifteen (15) days after receipt thereof. In addition, to the
extent that a claim for refund or a proceeding results in a payment or credit
against income Taxes by a taxing authority to Acquiror, the Companies or the
Company Subsidiaries of any amount accrued on the Companies Balance Sheets,
Acquiror shall pay such amount to Stockholder within fifteen (15) days after
receipt or entitlement thereto.
Section 6.4 Cooperation on Tax Matters.
(a) Acquiror, the Companies and the Company Subsidiaries and
Stockholder shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Companies and the Company Subsidiaries
and Stockholder agree (A) to retain all books and records with respect to Tax
matters pertinent to the Companies and the Company Subsidiaries relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Acquiror or Stockholder,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Companies and the Company Subsidiaries or Stockholder, as the case may be,
shall allow the other party to take possession of such books and records.
(b) Acquiror and Stockholder further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
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(c) Acquiror and Stockholder further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to ss.6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
Section 6.5 Tax Sharing Agreements. All tax sharing agreements
or similar agreements with respect to or involving the Companies and the Company
Subsidiaries shall be terminated as of the Closing Date and, after the Closing
Date, the Companies and the Company Subsidiaries shall not be bound thereby or
have any liability thereunder.
Section 6.6 Section 338 Election.
(a) At Stockholder's option, Acquiror will join with Stockholder
in making an election under Section 338 of the Code, as in effect form time to
time, and any corresponding elections under state, local or foreign tax law
(collectively, the "Section 338 Elections"), with respect to the purchase and
sale of the Shares of ▇▇▇▇▇▇▇ and Dexter. The parties understand and agree that,
to the extent that such Section 338 Elections are made, the sale of the Shares
of each applicable Company will be treated for federal income tax purposes as if
the applicable Company had sold all of its assets to a new corporation. At the
Closing, Acquiror shall deliver to Stockholder Internal Revenue Service Form
8023 and any other state or local forms required for the Section 338(h)(10)
Elections (collectively, the "Section 338 Forms"), each of the Section 338 Forms
having been signed by Acquiror. Each of the Section 338 Forms shall to the
extent possible be completed by Stockholder at or prior to the Closing. To the
extent that any item on a form has not been so completed, the parties shall
agree at the Closing on the manner in which the item is to be determined, and
the accountants for Stockholder shall make the determination and complete the
form; provided that the accountants for Stockholder shall prepare the purchase
price allocation to be used in completing the form in a manner consistent with
paragraph (b) below. Acquiror shall at any time and from time to time after the
Closing cooperate with Stockholder in connection with the Section 338 Elections,
including the signing by it of any other forms in order to accomplish the
Section 338 Elections. Acquiror and Stockholder agree to report the transfers of
the Shares under this Agreement consistent with the Section 338 Elections, and
shall take no positions contrary thereto.
(b) Acquiror and Stockholder agree that the allocation for tax
purposes of the Purchase Price among the Shares of each of the Companies, and
the allocation for tax purposes of the amount of that purchase price and the
amount of the liabilities of that Company (plus other relevant items) (the
"Allocable Amount") to the categories of assets of that Company, shall be as
shown on SCHEDULE 6.6(B). Acquiror, the Companies, the Company Subsidiaries and
Stockholder shall file all tax returns (including amended returns and claims for
refund) and information reports in a manner consistent with such allocation.
Section 6.7 Taxes of Other Persons. Stockholder agrees to
indemnify Acquiror from and against the entirety of any and all losses,
liabilities, damages, costs (including, without limitation, court costs and
costs of appeal) and expenses (including, without limitation, reasonable
attorney's fees) Acquiror may incur resulting from, arising out of, relating to,
in the nature of, or caused by any Liability of any of the Companies or any of
the Companies' Subsidiaries for Taxes of any Person in the Companies Group other
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than any of the Companies or any of the Company Subsidiaries (i) under Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law) or (ii) as
a transferee or successor.
ARTICLE 7. INTENTIONALLY OMITTED.
ARTICLE 8. INTENTIONALLY OMITTED.
ARTICLE 9. INTENTIONALLY OMITTED.
ARTICLE 10. INDEMNIFICATION.
Section 10.1 Indemnification by Stockholder. From and after the
Closing, Stockholder shall defend and indemnify and, without duplication, hold
wholly harmless Acquiror, the Companies, the Company Subsidiaries and their
Affiliates from and against any and all losses, liabilities, damages, costs
(including, without limitation, court costs and costs of appeal) and expenses
(including, without limitation, reasonable attorney's fees) that Acquiror, any
Company, any Company Subsidiary or any Affiliate thereof incurs as a result of
(i) Stockholder's nonfulfillment of, or failure to perform, (A) its covenants or
obligations under Section 2.3, Section 2.4, Section 2.5, Section 5.4, Section
5.7, Section 5.10 and/or Article 6, or (B) any of its other covenants or
obligations under this Agreement, (ii) any misrepresentation or breach of
warranty by Stockholder under (A) Sections 3.3 and/or 3.5 of this Agreement, or
(B) any other provision of this Agreement, (iii) any loss, liability, damage,
cost or expense of, or incurred by, Stockholder or any entity which after the
Closing is or remains an Affiliate of Stockholder and which, in any such case,
is not expressly assumed or indemnified against by Acquiror, the Companies or
any Company Subsidiary hereunder or under any other document or agreement
between Acquiror and Stockholder pursuant hereto or in connection with the
transactions contemplated hereby, and (iv) the matter described in item C of
Schedule 3.22 (which matter shall, without limiting the provisions of Section
10.3, remain under the sole and exclusive control of Stockholder).
Section 10.2 Indemnification by Acquiror. From and after the
Closing, Acquiror shall defend and indemnify and, without duplication, hold
wholly harmless Stockholder and its Affiliates from and against any and all
losses, liabilities, damages, costs (including, without limitation, court costs
and costs of appeal) and expenses (including, without limitation, reasonable
attorney's fees) that Stockholder or any of its Affiliates incurs as a result of
(i) Acquiror's nonfulfillment of, or failure to perform (A) its covenants or
obligations under Section 2.2, Section 2.3, Section 2.4, Section 2.5, Section
5.3, Section 5.4, Section 5.7, Section 5.9 and/or Article 6, or (B) any of its
other covenants or obligations under this Agreement, (ii) any misrepresentation
or breach of warranty by Acquiror under this Agreement, and (iii) any loss,
liability, damage, cost or expense of, or incurred by, Acquiror (including,
without limitation, liabilities assumed by the Acquiror under the Assignment and
Assumption Agreements), the Companies, any Company Subsidiary or any Affiliate
of any thereof, which, in any such case, is not expressly assumed or indemnified
against by Stockholder hereunder under any other document or agreement between
Stockholder and Acquiror pursuant hereto or in connection with the transactions
contemplated hereby.
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Section 10.3 Notice and Control of Litigation.
(a) If any claim or liability is asserted in writing against a
party in respect of which such party would be entitled to indemnification under
this Article 10 (the "Indemnified Party"), the Indemnified Party shall notify
the person giving the indemnity ("Indemnifying Party") in writing of the same as
soon as practicable but in no event later than twenty (20) days of receipt by a
Responsible Officer of the Indemnified Party of such assertion of a claim or
liability. The Indemnifying Party shall have the right to defend a claim and
control the defense, settlement and prosecution of any litigation provided such
party shall unconditionally acknowledge in writing to the Indemnified Party that
it is obligated to indemnify the Indemnified Party fully therefor. If the
Indemnifying Party, within fifteen (15) business days after notice of such
claim, fails to undertake the defense of any such claim, the Indemnified Party
will (upon further notice to the Indemnifying Party) have the right, to
undertake the defense of such claim. Anything to the contrary contained in this
Section 10.3 notwithstanding, the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant to the Indemnified Party a release from
all liability in respect to such claim. All parties agree to use reasonable
efforts to cooperate in the defense of such matters as reasonably requested by
the other to keep the amount of such claim or liability and the costs of the
defense thereof at the lowest practicable amount consistent with the realization
by the Indemnified Party of the benefits intended to be derived herefrom. This
indemnity shall terminate and be of no further force and effect with respect to
any matter if and to the extent, but only to the extent, the Indemnified Party's
failure to notify in the time required above materially adversely affects the
Indemnifying Party's ability to defend such matter.
(b) No party shall enter into a settlement or other compromise or
consent to a judgment with respect to any claim or liability without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided that the payment of an amount to which a claim or
liability relates when legally compelled to do so by a government entity of
competent jurisdiction after which a request for a refund of such amount is
pursued in good faith by appropriate procedures in accordance with the terms of
this Article 10 will not be considered a settlement, compromise or consent to
judgment requiring the Indemnifying Party's prior consent.
(c) In the event the Indemnifying Party shall have paid any
indemnity to any Indemnified Party pursuant to this Article 10, the Indemnifying
Party shall be subrogated (but without warranty and on a subordinated basis to
any unindemnified claims of the Indemnified Party with respect to the matter as
to which the indemnity was paid) by the Indemnified Party) to the rights of such
Indemnified Party in respect of the matter as to which the indemnity was paid
and may pursue the same at the Indemnifying Party's expense. If any Indemnified
Party shall obtain a recovery of all or any party of any amount which the
Indemnifying Party shall have paid to such Indemnified Party pursuant to this
Article 10, such Indemnified Party shall promptly pay or cause to be paid to the
Indemnifying Party an amount of such recovery, not exceeding the amount paid by
the Indemnifying Party to the Indemnified Party in respect to such claims or
liabilities.
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Section 10.4 Duration. The representations and warranties
contained in Articles 3 and 4 of this Agreement shall survive the Closing but
shall expire and be of no further force or effect with respect to any claim or
liability notice of which shall not have been given to the Indemnifying Party in
writing (referring expressly to this Article 10) on or prior to the third
anniversary of the Closing Date.
Section 10.5 Limitations on Indemnification; Limited Recourse.
Notwithstanding anything to the contrary contained in this Agreement or any
other agreement, instrument or other document executed in connection herewith:
(a) the aggregate liability of Stockholder under Article 10 shall
not, at any time, exceed $2,000,000, except that the aggregate liability of
Stockholder under Sections 10.1(i)(A), 10.1(ii)(A), 10.1(iii) and 10.1(iv) shall
not be so limited;
(b) no indemnification shall be due from Stockholder under this
Article 10 (except for indemnification due under Sections 10.1(i)(A),
10.1(ii)(A), 10.1(iii) and/or 10.1(iv)): (i) until the aggregate amount of all
claims or liabilities as to which indemnification would otherwise be due from
Stockholder under this Article 10 exceeds the aggregate sum of $500,000 and (ii)
thereafter, with respect to any individual claim or liability (or group of
claims or liabilities arising out of similar or related causes) that is for an
amount less than $10,000 (it being agreed that the parties do not intend that
this amount be deemed to be a definition of what is "material");
(c) the sole and exclusive remedy of a party to this Agreement for
any claim arising under or relating to this Agreement shall be the
indemnification provisions of this Article 10 and each party agrees that it will
not pursue any other remedy for damages; provided, however, the foregoing shall
in no event (i) limit or restrict the right of any party to seek specific
performance to enforce the covenants of any other party hereto or (ii) limit or
restrict the availability of or right to seek any remedy for fraud. In addition,
each of the parties acknowledges and agrees that it will not pursue any remedies
under this Agreement against any officer, director, agent or representative, or
any direct or indirect stockholder of the other or any officer, director, agent
or representative of any such direct or indirect stockholder in respect of this
Agreement (provided, however, that the foregoing shall not prevent Acquiror from
pursuing the reduction in the principal amount of the Zero Coupon Notes,
adjustments to the Balloon Notes pursuant to Section 2.5 or any remedy for
fraud; provided, further however, that Acquiror shall have a right of offset
against any Balloon Note which has been assigned or transferred by Stockholder
with respect to a breach of this Section 10.4(c) if the then holder of such
Balloon Note induced or caused such breach). By way of clarification and not
limitation, Acquiror acknowledges that it is contemplated that Stockholder and
certain of its direct and indirect stockholders may, in the future, be
dissolved; provided, however, no such dissolution shall be effected at any time
unless and until Stockholder shall have fully performed its obligations to
Acquiror under Sections 10.1(i)(A), 10.1(ii)(A), 10.1(iii) and 10.1(iv) or shall
have made provision for such performance satisfactory to Acquiror. The foregoing
provision shall not prohibit the payment of any dividends by Stockholder out of
the accumulated earnings and net profits of stockholder or any liquidating
dividend subject to the same qualifications as applicable to dissolution.
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(d) subject to the proviso to this clause (d), under no
circumstance shall Stockholder be obliged to pay Acquiror the amount of any
indemnification under this Article 10, other than by means of a reduction of the
principal amount of the Zero Coupon Notes, it being agreed and understood by
Acquiror that its sole recourse against Stockholder for indemnification under
this Section 10 shall be limited to such a reduction in the principal amount for
the Zero Coupon Notes; provided, however, that the amount of any indemnification
owing under Sections 10.1(i)(A), 10.1(ii)(A), 10.1(iii) and/or 10.1(iv) shall
not be so limited and shall be paid to Acquiror in cash; and
(e) no indemnification shall be due from Acquiror under this
Article 10 (except for indemnification under Section 10.2(i)(A) or 10.2(iii))
until the aggregate amount of all such costs and expenses as to which
indemnification would otherwise be due from Acquiror under this Article 10
exceeds the aggregate sum of $500,000 and in no event shall the aggregate
liability of Acquiror exceed $2,000,000 under this Article 10 in respect of such
costs and expenses.
ARTICLE 11. MISCELLANEOUS.
Section 11.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
If to Acquiror:
SunLink Healthcare Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
Suite 3100, Promenade II
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Companies:
NetCare Health Systems, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Stockholder:
c/o Charterhouse Group International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
c/o HCA-The Healthcare Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President of Development
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or telecopy number and with such other copies as such
party may hereafter specify for the purpose of notice to the other party. Each
such notice, request, demand or other communication shall be effective (a) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and evidence of receipt is received or (b) if given by
any other means, upon delivery or refusal of delivery during regular business
hours at the address specified in this Section.
Section 11.2 Assignability; Parties in Interest. This Agreement shall
not be assignable by any of the parties hereto without the prior written consent
of the other parties hereto. Subject to the preceding sentence, this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as specifically referred to
herein, this Agreement is for the sole and exclusive benefit of the parties to
this Agreement and their successors and assigns and nothing in this
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Agreement is intended to confer, expressly or by implication, upon any other
person any legal or equitable rights, remedies or claims under or by reason of
this Agreement.
Section 11.3 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to principles of conflicts of laws.
Section 11.4 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party shall
have received a counterpart signed by the other parties.
Section 11.5 Publicity. Stockholder and Acquiror agree that press
releases and other announcements with respect to the transactions contemplated
hereby shall be subject to mutual agreement; provided, however, that either
party may make such announcements as, in the written opinion of its counsel,
such party is required to make pursuant to applicable law or the requirements of
a stock exchange or other applicable self-regulatory organization, but in such
event such party shall, to the extent practicable, give the other party
reasonable prior notice and an opportunity to comment on the proposed
announcement.
Section 11.6 Complete Agreement. This Agreement, the exhibits hereto,
the schedules and documents delivered pursuant hereto or referred to herein and
the Confidentiality Agreements contain the entire agreement between the parties
hereto with respect to the transactions contemplated herein and supersede all
previous negotiations, commitments and writings.
Section 11.7 Amendments and Waivers. The parties hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any or documents delivered pursuant hereto,
(c) waive compliance with any of the covenants or agreements contained in this
Agreement or (d) amend this Agreement, if and only, in the case of an extension
or amendment, if such action is set forth in a written agreement signed by each
party hereto affected by the extension or amendment or, in the case of a waiver,
if such waiver is signed by each party against whom the waiver is to be
effective.
Section 11.8 Expenses. Except as specifically provided in this
Agreement, each party shall be responsible for its own expenses in connection
with their Agreement and the parties shall split the fees incurred in connection
with any filing made pursuant to the HSR Act and as may be reasonably incurred
with respect to state licensing. Stockholder shall also bear the expenses
incurred by the Companies in connection with the transactions contemplated by
this Agreement.
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Section 11.9 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.10 Severability. Any portion or provision of the Agreement
which is invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining portions or
provisions hereof in such jurisdiction or, to the extent permitted by law,
rendering that or any other portion or provision of the Agreement invalid,
illegal or unenforceable in any other jurisdiction.
Section 11.11 Further Assurances. Each party hereto agrees to execute
any and all documents and to perform such other acts as may be necessary or
expedient to further the purposes of this Agreement and the transactions
contemplated hereby.
Section 11.12 Arbitration
(a) Any and all disputes, controversies or claims arising out of
or relating to this Agreement or any Transaction Documents executed in
connection herewith, or the rights or interests of the Stockholder or Acquiror
or the breach or alleged breach of this Agreement or any such Transaction
Documents, whether arising during or at or after the termination of this
Agreement, shall be settled exclusively by arbitration to be held in Washington,
D.C. in accordance with the commercial rules of the American Arbitration
Association then in effect. There shall be one arbitrator appointed in
accordance with those rules. As part of his award, the arbitrator shall make a
fair allocation between the parties of the fee and expenses of the American
Arbitration Association and the cost of any transcript, taking into account the
merits of their claims and defenses. The arbitrator shall render his award on an
expedited basis. Failure of any party hereto to submit to arbitration under this
Section shall result in arbitrator ruling in favor of the other party if such
other party has submitted to arbitration under this Section. Judgment may be
entered on the arbitrator's award in any court having jurisdiction, and the
parties irrevocably consent to the non-exclusive jurisdiction in District of
Columbia courts, New York courts sitting in New York county and Georgia courts
sitting in ▇▇▇▇▇▇ County for that purpose. The arbitrator may grant injunctive
or other relief.
(b) The prevailing party shall be entitled to recover from the
other party reasonable attorney fees and charges in any action, suit or
proceeding arising out of or relating to this Agreement or any such Transaction
Document.
[END OF TEXT]
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[EXECUTION PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
NHS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
SUNLINK HEALTHCARE CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
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