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Exhibit 10.2
ASSET PURCHASE AGREEMENT
AMONG
▇▇▇▇▇ DEVELOPMENT SYSTEMS, INC.
AND OTHERS
AS SELLER
AND
MERIDIAN HMA,INC.
AND MERIDIAN HMA NURSING HOME, INC.
AS BUYER
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TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE 2
1.1 Purchase and Sale............................................................................ 2
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1.2 Excluded Assets.............................................................................. 4
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1.3 Assumed Leases, Contracts and Liabilities.................................................... 5
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1.4 Excluded Liabilities......................................................................... 5
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1.5 Omitted Items................................................................................ 6
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ARTICLE II. PURCHASE PRICE ................................................................................ 6
2.1 Purchase Price............................................................................... 6
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2.2 Working Capital Adjustments.................................................................. 7
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2.3 Allocation of Purchase Price................................................................. 8
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2.4 Hold-back from Purchase Price................................................................ 8
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER ..................................................... 9
3.1 Organization, Qualification and Authority.................................................... 9
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3.2 Absence of Default........................................................................... 9
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3.3 Financial Statements......................................................................... 10
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3.4 Operations Since September 30, 1996.......................................................... 10
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3.5 Taxes........................................................................................ 10
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3.6 Employment and Employee Benefit Plans........................................................ 11
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3.7 Licenses and Permits......................................................................... 12
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3.8 JCAHO and Accreditations..................................................................... 12
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3.9 Medicare, Medicaid, and Other Third-Party Payors............................................. 12
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3.10 Peer Review.................................................................................. 13
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3.11 Title to Assets.............................................................................. 13
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3.12 Leases and Contracts......................................................................... 14
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3.13 Environmental Matters........................................................................ 15
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3.14 Miscellaneous Representations Relating to Real Estate........................................ 16
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3.15 Construction................................................................................. 17
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3.16 Litigation................................................................................... 17
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3.17 Seller's Employees........................................................................... 17
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3.18 Labor Relations.............................................................................. 17
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3.19 Insurance.................................................................................... 18
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3.20 Medical Staff................................................................................ 18
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3.21 Conflicts of Interest........................................................................ 18
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3.22 Intellectual Property; Computer Software..................................................... 19
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3.23 Inventories.................................................................................. 19
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3.24 Compliance with Laws......................................................................... 19
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3.25 Broker's or Finder's Fee..................................................................... 19
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER 20
4.1 Organization, Qualification and Authority.................................................... 20
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4.2 Absence of Default........................................................................... 20
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4.3 Broker's or Finder's Fee..................................................................... 20
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4.4 Buyer's Cash on Hand......................................................................... 21
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4.5 WARN Act..................................................................................... 21
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ARTICLE V. COVENANTS OF PARTIES ........................................................................... 21
5.1 Preservation of Business and Assets.......................................................... 21
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5.2 Absence of Material Change................................................................... 21
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5.3 Access to Books and Records.................................................................. 21
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5.4 Consents to Assignments...................................................................... 22
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5.5 Good Faith................................................................................... 22
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5.6 Commercially Reasonable Efforts; Further Assurances.......................................... 22
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5.7 Preserve Accuracy of Representations and Warranties.......................................... 23
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5.8 Maintain Books and Accounting Practices...................................................... 23
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5.9 Indebtedness; Liens.......................................................................... 23
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5.10 Compliance with Laws and Regulatory Consents................................................. 23
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5.11 Maintain Insurance Coverage.................................................................. 24
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5.12 Medicare and Medicaid Reporting.............................................................. 24
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5.13 Current Return Filing........................................................................ 24
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5.14 Performance.................................................................................. 24
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5.15 WARN Act..................................................................................... 24
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5.16 Termination of Employee Plans................................................................ 25
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5.17 Charity Care................................................................................. 25
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5.18 Nursing Scholarships......................................................................... 25
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5.19 Winding up Seller's Business................................................................. 25
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5.20 Affiliations and Education Programs.......................................................... 26
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5.21 Use of Name.................................................................................. 26
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ARTICLE VI. TITLE AND SURVEY .............................................................................. 26
6.1 Title Report and Policy...................................................................... 26
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6.2 Survey....................................................................................... 26
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6.3 UCC Searches................................................................................. 27
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6.4 Defects and Cure............................................................................. 27
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ARTICLE VII. CLOSING ...................................................................................... 27
7.1 Closing...................................................................................... 27
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7.2 Termination.................................................................................. 28
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ARTICLE VIII. SELLER'S CONDITIONS TO CLOSE ................................................................. 28
8.1 Representations and Warranties True at Closing; Compliance with Agreement.................... 28
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8.2 Regulatory Approvals......................................................................... 29
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8.3 No Material Adverse Change................................................................... 29
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8.4 No Action/Proceeding......................................................................... 29
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8.5 Compliance with Article XI................................................................... 29
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8.6 Order Prohibiting Transactions............................................................... 29
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ARTICLE IX. BUYER'S CONDITIONS TO CLOSE .................................................................. 30
9.1 Representations and Warranties True at Closing; Compliance with Agreement.................... 30
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9.2 No Material Adverse Change................................................................... 30
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9.3 Regulatory Approvals......................................................................... 30
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9.4 No Action/Proceeding......................................................................... 30
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9.5 Compliance with Article X.................................................................... 30
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9.6 Order Prohibiting Transaction................................................................ 30
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9.7 Defeasance of Bonds.......................................................................... 31
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9.8 Consents..................................................................................... 31
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ARTICLE X. OBLIGATIONS OF SELLER AT CLOSING ............................................................... 31
10.1 Documents Relating to Title.................................................................. 31
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10.2 Possession................................................................................... 32
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10.3 Opinion of Seller's Counsel.................................................................. 32
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10.4 Corporate Existence and Corporate Resolution................................................. 32
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10.5 Closing Certificate.......................................................................... 32
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10.6 Third Party Consents......................................................................... 32
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10.7 Taxes and Other Payments..................................................................... 33
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10.8 Notice to Third-Party Payors and Others...................................................... 33
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10.9 Evidence of Tail Insurance................................................................... 33
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10.10 Additionally Requested Documents; Post Closing Assistance................................... 33
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING ............................................................ 33
11.1 Purchase Price.............................................................................. 33
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11.2 Corporate Good Standing or Existence and Certified Board Resolutions........................ 33
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11.3 Opinion of Buyer's Counsel.................................................................. 33
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11.4 Assumption of Liabilities................................................................... 34
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11.5 Closing Certificate......................................................................... 34
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11.6 Seller's Employees.......................................................................... 34
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11.7 Health Insurance............................................................................ 34
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11.8 Employment of Key Executives................................................................ 35
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ARTICLE XII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION ................................................. 35
12.1 Survival.................................................................................... 35
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12.2 Indemnification by Seller................................................................... 35
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12.3 Indemnification by Buyer.................................................................... 36
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12.4 Procedure for Indemnification............................................................... 36
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12.5 Minimum Net Worth........................................................................... 38
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ARTICLE XIII. MISCELLANEOUS................................................................................ 38
13.1 No Assignment............................................................................... 38
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13.2 Other Expenses.............................................................................. 38
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13.3 Notices..................................................................................... 38
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13.4 Controlling Law............................................................................. 39
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13.5 Headings.................................................................................... 39
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13.6 Benefit..................................................................................... 39
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13.7 Partial Invalidity.......................................................................... 40
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13.8 Waiver...................................................................................... 40
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13.9 Counterparts................................................................................ 40
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13.10 Interpretation.............................................................................. 40
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13.11 Entire Agreement............................................................................ 40
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13.12 Legal Fees and Costs........................................................................ 40
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13.13 Knowledge................................................................................... 40
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13.14 Parties in Interest......................................................................... 40
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13.15 No Consequential Damages.................................................................... 41
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EXHIBITS
Exhibit No. Subject Matter
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A ▇▇▇▇ of Sale and Assignment
B Form of Opinion of Seller's Counsel
C Form of Notice to Third-Party Payors
D Form of Opinion of Buyer's Counsel
E License Agreement
F Audited Financial Statements Marked for "Adjusted Net Working
Capital"
G Consent to Assignment and Transfer of Right of First Refusal
H Form of Requisition from Escrow Account
SCHEDULES
Schedule Subject Matter
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B Clinics
1.1(d) Real Estate (including legal description and street addresses)
1.1(e) Excluded Equipment and Furnishings
1.2(d) Excluded Contracts
1.2(i) Deferred Compensation Plan
1.3(a) Assumed Contracts, Purchase Orders and Operating Leases
1.3(b) Adjusted Net Working Capital Liabilities
1.3(c) Capital Leases
1.3(d) Labor and Employment-Related Liabilities
1.3(g) Liabilities and Commitments
1.3(h) Medicare, Blue Cross and Medicaid Liabilities
1.4 Notes
2.2 Agreed Accounting Procedures
2.3 Purchase Price Allocation
3.2 Consents
3.3 Financial Statements
3.4 Changes in Operations Since 9/30/96
3.6(a) Employment Matters
3.6(b) Employee Benefit Plans
3.6(c) Assumed Employee Benefit Plan Obligations
3.7(a) Licenses and Permits
3.8 JCAHO and Accreditations
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3.9(a) Program Agreements
3.9(b) Statement of Deficiencies and Plan of Correction (Form HCFA-2567)
3.9(c) Pending Decertification or Participation
3.9(d) Third Party Payor Agreements
3.9(f) Violation of Fraud and Abuse or Self Referral Laws
3.10 Peer Review Agreement
3.11(a) Non-reflected Assets
3.11(b) Tradenames
3.11(c) Addresses for Receivables
3.12(a) Leases and Contracts
3.12(c) Default or Breach
3.13(b) Hazardous Materials
3.13(e) Property Excluded from Section 3.13
3.15 Construction
3.16 Litigation
3.17 Employees
3.18 Labor Relations
3.19 Insurance
3.20 Disciplinary Actions with Medical Staff
3.21 Conflicts of Interest
3.22 Intellectual Property
3.25 Brokers and Finders
5.11 Maintain Insurance Coverage
5.18 Nursing Scholarships
5.19 Post-Closing Activities
6.1 Permitted Exceptions
11.6 Employees Within Five Years of Retirement
13.13 List of Certain Seller Employees
GLOSSARY OF DEFINED TERMS
Defined Term Section
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Acquired Assets 1.1
Adjusted Net Working Capital 2.1
Affiliates 3.13(b)
Agents 3.13(b)
Agreed Accounting Procedures 2.2(b)
Assumed Liabilities 1.3
Blue Cross 3.9(d)
Bonds 1.4(a)
Buyer Page 1
Buyer's Objection 6.4
CERCLA 3.13(a)
Claim 12.4(a)
Clinics Recital B
Closing 7.1
Closing Statement 2.2(b)
COBRA coverage 1.3(g)
Code 2.3
Commitment 6.1
control 3.13(b)
Defects 6.4
Employee Benefit Plan 3.6(b)
Equipment and Furnishings 1.1(e)
ERISA 3.6(b)
Escrow Account 2.4
Escrow Agent 2.4
Estimated Adjusted Net 2.1
Working Capital
Excluded Assets 1.2
Excluded Liabilities 1.4
Financial Statements 3.3(a)
Hazardous Substances 3.13(a)
HMA 5.1
Home Care Agency Recital B
Hospital Recital B
Improvements 2.4
Indemnitee 12.4(a)
Indemnitor 12.4(a)
Intellectual Property 3.22
Interim Financial Statements 3.3(b)
Inventory 1.1(f)
JCAHO 3.8(a)
Leases and Contracts 3.12(a)
Licenses and Permits 3.7(a)
Minority Interests Recital C
MRI Recital C
Non-material Conflicts 3.21
Non-material Contracts 3.12(a)
Notes 1.4(a)
Notice 12.4(a)
Nursing Home Recital B
part-time employee 3.17
Pension Plan 5.16(a)
Permitted Exceptions 6.1
Program Agreements 3.9(a)
Programs 3.9(a)
Property Recital B
Purchase Price 2.1
Rate 12.4
RCC Page ▇
▇▇▇▇ ▇.▇▇(▇)
▇▇▇ ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇ 1.1(d)
Receivables 1.1(g)
Related Assets Recital B
RHHS Page 1
RMH Page 1
RPHC Page 1
Seller Page 1
Sowashee Parcel 3.13(e)
Seller's Election 6.4
Survey 6.2
Third Party Claims 12.1
Title Evidence 6.4
Title Policy 6.1
Transferred Employees 11.6
UCC Searches 6.3
WARN 4.5
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 7th day of January, 1998, by and among
▇▇▇▇▇ DEVELOPMENT SYSTEMS, INC., a Mississippi non-profit corporation ("RDS"),
THE ▇▇▇▇▇ HOSPITAL & BENEVOLENT ASSOCIATION D/B/A ▇▇▇▇▇ MEMORIAL HOSPITAL, a
Mississippi non-profit corporation ("RMH"), ▇▇▇▇▇ CARE CENTER, INC., a
Mississippi non-profit corporation ("RCC"), ▇▇▇▇▇ HOME HEALTH SERVICES, INC., a
Mississippi non-profit corporation ("RHHS"), and ▇▇▇▇▇ PROPERTY HOLDING COMPANY,
a Mississippi non-profit corporation ("RPHC"), and MERIDIAN HMA, INC., a
Mississippi corporation ("MERIDIAN HMA"), and MERIDIAN HMA NURSING HOME, INC., a
Mississippi corporation ("MERIDIAN HMA NURSING"). RDS, RMH, RCC, RHHS and RPHC
are collectively referred to herein as "SELLER." Meridian HMA and Meridian HMA
Nursing are collectively referred to herein as "BUYER."
R E C I T A L S:
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K. RDS is the sole member of RMH, which has entered into management
contracts with RCC and RHHS.
L. Seller owns and operates (1) an acute care hospital in Meridian,
Mississippi, licensed by the Mississippi State Board of Health for 180
medical/surgical beds (the "HOSPITAL"); (2) an 82-bed nursing home (the "NURSING
HOME"); (3) a home health care agency (the "HOME CARE AGENCY"); (4) certain real
estate related to the Hospital, the Nursing Home and the Home Care Agency (the
"PROPERTY"); and (5) physician clinics in six buildings (one of which is vacant)
staffed by nine full-time physicians and one part-time physician as listed on
Schedule B hereto (collectively, the "CLINICS"). The Nursing Home, the Home
Care Agency, the Property and the Clinics are collectively referred to as the
"RELATED ASSETS."
M. Seller, either directly or indirectly, as a stockholder owns a
joint venture interest comprising less than 100% equity interest in the
following: (1) a one-third interest in Regional Medical Support Services, Inc.,
a for-profit magnetic resonance imaging ("MRI") center; (2) a one-third interest
in Meridian Heart Services, Inc., a for-profit heart catheterization center; and
(3) an investment in Mississippi Medical Supply Alliance, LLC, a Delaware
limited liability corporation. Seller's interests in the properties, operations
and facilities described in this paragraph C are collectively referred to as the
"MINORITY INTERESTS."
N. Except for Excluded Assets described in Section 1.2, Seller
desires to sell and transfer to Buyer the Acquired Assets (as defined in Section
1.1), including the Hospital, the Related Assets and the Minority Interests; and
Buyer desires to purchase the same from Seller, subject to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants,
agreements and conditions contained in this Agreement, acknowledged by each of
the undersigned, the undersigned agree as follows:
ARTICLE I. PURCHASE AND SALE
1.1 PURCHASE AND SALE. Except as provided in Section 1.2, Seller
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agrees to sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase from Seller all right, title and interest in all of the following
assets (collectively, the "ACQUIRED ASSETS"):
(a) The Hospital;
(b) The Related Assets;
(c) The Minority Interests;
(d) The Property as more particularly described in Schedule 1.1(d),
all leaseholds, easements, plants, fixed assets, improvements, buildings,
structures and fixtures (including fixed machinery and fixed equipment) situated
thereon or forming a part thereof and all appurtenances, easements and rights-
of-way related thereto and the right of first refusal granted to Seller to
purchase the remaining property owned by Sowashee Building Corporation in Block
56 of and according to ▇▇▇▇▇▇▇▇'▇ Survey of the City of Meridian, County of
Lauderdale, State of Mississippi, as more particularly described in and pursuant
to the Consent to Assignment and Transfer attached hereto as Exhibit G
(collectively, the "REAL ESTATE");
(e) All tangible personal property, medical and other equipment,
machinery, data processing hardware and software, furniture, furnishings,
appliances, vehicles and other tangible personal property of every description
and kind and all replacement parts therefor which are either owned by Seller or
used or maintained or operated by Seller in connection with the Hospital and the
Related Assets, wherever located, excluding the items listed on Schedule 1.1(e)
(collectively, the "EQUIPMENT AND FURNISHINGS");
(f) All inventories of goods and supplies used or maintained in
connection with or located in the Hospital or the Related Assets, including
food, cleaning materials, disposables, linens, consumables, office supplies,
drugs and medical supplies (collectively, the "INVENTORY");
(g) All Seller's patient accounts receivable, notes (other than
physician notes, if any) and long-term patient and other receivables, whether or
not written off (collectively, the "RECEIVABLES");
(h) All patient, medical, personnel and other records of the Hospital
and the Related Assets other than Excluded Assets (including both hard and
microfiche copies), and all manuals, books and records used in operating the
Hospital and the Related Assets, including personnel policies and manuals and
computer software;
(i) To the extent transferable, all licenses, permits, registrations,
certificates, consents, accreditations, approvals and franchises, and all
applications therefor, necessary to construct, operate and conduct the business
of the Hospital and the Related Assets, together with
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assignments thereof, if required, and all waivers which Seller currently has, if
any, of any requirements pertaining to such licenses, permits, registrations,
certificates, consents, accreditations, approvals and franchises;
(j) All plans and surveys, including "as-built" plans, all plats,
specifications, engineers' drawings, and architectural renderings and similar
items relating to the Acquired Assets in Seller's possession or obtainable by
Seller without unreasonable cost, including those relating to utilities,
easements and roads;
(k) All goodwill associated with the Hospital, the Related Assets and
other intangible assets including, to the extent assignable by Seller, all
warranties (express or implied) and rights and claims assertable by Seller
related to the operation of the Hospital and the Related Assets;
(l) Those prepaid assets selected by Buyer and identified, along with
the agreed value thereof based on generally accepted accounting principles, and
included on Exhibit F;
(m) Seller's contract and leasehold rights and interests pursuant to
contracts for purchase or lease of real and personal property, rights of first
refusal, construction contracts, contracts for purchase, sale or lease of
equipment, goods or services currently furnished or to be furnished at or to the
Hospital or the Related Assets;
(n) All assets, except the Excluded Assets (as defined in Section
1.2), reflected on the Financial Statements (as defined in Section 3.3(a)) and
any additions thereto up through the Closing less deletions therefrom sold or
consumed in the ordinary course of business;
(o) All patents and patent applications associated with the Hospital
or the Related Assets; and
(p) All other property, other than Excluded Assets, of every kind,
character or description owned by Seller and used or held for use in the
business of the Hospital or the Related Assets, whether or not reflected on the
Financial Statements, wherever located and whether or not similar to the items
specifically set forth above.
Meridian HMA Nursing is purchasing the Nursing Home and all of the
Property, Equipment and Furnishings, Inventory, Receivables and other assets
relating thereto. Meridian HMA is purchasing all other assets. The assets
purchased hereunder shall be allocated between Meridian HMA Nursing and Meridian
HMA as determined by agreement between Meridian HMA Nursing and Meridian HMA.
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NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER DOCUMENT TO
THE CONTRARY, ALL TANGIBLE AND INTANGIBLE ASSETS ARE SOLD IN THEIR CONDITION "AS
IS" WITH NO WARRANTIES OF HABITABILITY OR FITNESS FOR HABITATION OR WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
1.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not
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purchasing or assuming obligations with respect to the following (collectively,
the "EXCLUDED ASSETS"):
(a) Seller's cash, cash equivalents and investments in marketable
securities and all accrued interest earnings on such cash equivalents and
investments in marketable securities at Closing;
(b) All original corporate records and fiscal records of Seller and
all other records that Seller is required by law to retain in its possession as
described in Schedule 1.2(b);
(c) Seller's incidence of ownership in Primex Systems, Inc., a for-
profit company, all the stock of which is owned by RDS;
(d) Rights under any other agreements or contracts described on
Schedule 1.2(d);
(e) Seller's membership (and all liabilities related thereto) in the
following non-profit entities: the American Hospital Association and the
Mississippi Hospital Association;
(f) Any claims of Seller against third parties not relating to the
Acquired Assets, ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or otherwise;
(g) All of the tradenames of Seller;
(h) Seller's interest in or related to (i) The Mississippi Casualty
Insurance Company, (ii) the State of Mississippi Workers' Compensation Program,
and (iii) that certain unemployment trust established by the Mississippi
Hospital Association; and
(i) The Deferred Compensation Plan provided by Aetna Life Insurance
and Annuity Company and acquired by Seller for certain physicians employed by it
and the deposit arrangement made with Trustmark National Bank for the benefit of
▇▇▇▇ ▇▇▇▇, in each case as described on Schedule 1.2(i).
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1.3 ASSUMED LEASES, CONTRACTS AND LIABILITIES. At Closing, Buyer
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will assume and agree to pay or perform, as the case may be, all of the
following (collectively, the "ASSUMED LIABILITIES"):
(a) All obligations with respect to those contracts, purchase orders
and operating leases which are described on Schedule 1.3(a) hereto;
(b) All liabilities included in the calculation of Adjusted Net
Working Capital (as defined in Section 2.1), as set forth on Schedule 1.3(b)
hereto;
(c) All obligations with respect to capital leases for usable, non-
obsolete, movable equipment, as set forth on Schedule 1.3(c) hereto;
(d) All pre-Closing payroll and employee benefit expense, as set
forth on Schedule 1.3(d) hereto;
(e) All amounts receivable or payable under the Programs (as defined
in Section 3.9(a)) if any gain or loss occurs as a result of the sale of the
Hospital and the Related Assets pursuant to this Agreement;
(f) All liabilities arising out of or associated with Buyer's
obligations pursuant to Section 11.6;
(g) All liabilities and commitments arising out of or by reason of a
transaction or event occurring on and after Closing for all of the following:
suits, claims, indemnities, mortgages, contingent liabilities and other
obligations of the Hospital and the Related Assets (including malpractice or
discrimination claims or suits whether scheduled or unscheduled); all
impositions of income tax and other taxes relating to the Hospital and the
Related Assets and all obligations to give notice of and to provide continuation
health care coverage for employees, former employees, and their dependents or
any qualified beneficiary of such employees in accordance with the requirements
for the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(hereinafter referred to as "COBRA COVERAGE"), including the obligation to
continue COBRA coverage for all employees of Seller and their dependents
entitled thereto on the Closing Date as set forth in Schedule 1.3(g) hereto; and
(h) All liabilities and commitments (whether arising or existing
prior to, on or following the Closing) of Seller for recapture or prior period
adjustments under Medicare, Blue Cross (as defined in Section 3.9(d)) and
Medicaid as set forth in Schedule 1.3(h) hereto.
1.4 EXCLUDED LIABILITIES. Seller shall remain responsible for all
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liabilities, other than the Assumed Liabilities, arising or existing prior to
the Closing relating or related, directly or indirectly, to any one or more of
the Acquired Assets and Seller shall also remain liable for the following
liabilities whether arising or existing prior to, on or following the Closing
(collectively, the "EXCLUDED LIABILITIES"):
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(a) All obligations of Seller pursuant to or related to (i) the
$16,980,000 Mississippi Hospital Equipment and Facilities Authority Hospital
Revenue Bonds (▇▇▇▇▇ Memorial Hospital Project), Series 1992 A and Series 1992 B
(collectively, the "BONDS"), and (ii) the notes payable described in Schedule
1.4 (the "NOTES").
(b) Liabilities, obligations and responsibilities of Seller arising
from its operations or continued existence after Closing, but only to the extent
the same do not relate, directly or indirectly, to any one or more of the
Acquired Assets;
(c) Liabilities or obligations with respect to the ownership or
operation of any assets owned or operated by Seller other than the Acquired
Assets;
(d) Liabilities and obligations arising from or relating to the
Excluded Assets;
(e) All liabilities and commitments arising out of or by reason of a
transaction or event occurring prior to Closing for all of the following: suits,
claims, indemnities, mortgages, contingent liabilities and other obligations of
Seller (including malpractice or discrimination claims or suits whether
scheduled or unscheduled); any and all investment tax credit recapture;
depreciation recapture, except as provided in Section 1.3(c), (e), (f) or (h);
and all impositions of income tax and other taxes, except as provided in Section
1.3(d), (e), (f), (g) or (h); and
(f) All assets and liabilities of all employee
benefit plans of Seller.
1.5 OMITTED ITEMS. If at any time after the date of this Agreement,
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either Buyer or Seller discovers any item which such party believes should have
been included on one or more of the Schedules to this Agreement, the party
discovering such omission shall notify the other of the omission and of the
reason such party believes that the item in question should have been included
on one or more Schedules. The parties shall then confer in good faith regarding
the amendment of the Schedule or Schedules in question to include the item
omitted.
ARTICLE II. PURCHASE PRICE
2.1 PURCHASE PRICE. Subject to the terms and conditions hereof, the
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purchase price (the "PURCHASE PRICE") payable by Buyer to Seller for the
Acquired Assets will be $65,000,000 in cash for the Purchased Assets plus
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$7,736,009 in cash, representing the parties' estimate of the Adjusted Net
Working Capital (as defined below) at Closing (the "ESTIMATED ADJUSTED NET
WORKING CAPITAL") payable in immediately available funds by wire transfer as
provided in Section 7.1. Any necessary post-closing adjustments to the Purchase
Price shall be made in accordance with Section 2.2. "ADJUSTED NET WORKING
CAPITAL" means, with respect to Seller, the excess, if any, of (x) those current
assets marked as such on the financial statements as of November 30, 1997
attached hereto as Exhibit F over (y) those current liabilities marked as such
on the financial statements attached hereto as Exhibit F.
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2.2 WORKING CAPITAL ADJUSTMENTS. It is the intent of Buyer and
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Seller that Buyer purchase the Adjusted Net Working Capital of Seller as of
Closing. Therefore, Buyer and Seller agree to take the following actions:
(a) At the Closing, Buyer shall pay to Seller an amount equal to the
Estimated Adjusted Net Working Capital.
(b) Seller shall consult with Buyer in the course of preparing and,
within sixty (60) days after Closing, Seller will deliver or cause to be
delivered to Buyer, a statement as of Closing (the "CLOSING STATEMENT") that
sets forth in reasonable detail the Adjusted Net Working Capital of Seller as of
Closing. Buyer and Seller acknowledge and agree that the purpose of the
procedures and adjustments contemplated by this Section 2.2 is to reflect
accurately the Adjusted Net Working Capital of Seller at Closing using the
accounting procedures set forth on Schedule 2.2 (the "AGREED ACCOUNTING
PROCEDURES"). The Closing Statement shall be certified by Seller as having been
prepared using the Agreed Accounting Procedures. Buyer agrees that any
adjustments proposed in accordance with the following paragraph will not involve
changes in or challenges to any of the Agreed Accounting Procedures that have
been consistently applied.
(c) Following the delivery of the Closing Statement to Buyer, Buyer
will have the right to review the Closing Statement to determine whether it was
prepared in accordance with the Agreed Accounting Procedures. Seller will
permit Buyer and its independent accountants access at all reasonable times to
all of the working papers, analyses and schedules of Seller utilized or prepared
in connection with the preparation of the Closing Statement. Within the 30-day
period after receipt of the Closing Statement, Buyer will, in a written notice
to Seller, either accept the Closing Statement or describe in reasonable detail
any proposed adjustments to such Closing Statement and the reasons therefor. If
Seller has not received such notice of proposed adjustments within such 30-day
period, Buyer will be deemed irrevocably to have accepted the Closing Statement.
(d) Buyer and Seller will negotiate in good faith to resolve any
disputes over any proposed adjustments to the Closing Statement. However, if
any such dispute is not resolved within thirty (30) days following the receipt
by Seller of the proposed adjustments, Buyer and Seller jointly will select an
independent public accounting firm that is nationally recognized in the United
States to resolve such disputes, which resolution will be final and binding.
The fees and expenses of such accounting firm will be shared by Buyer and Seller
in proportion to the relative amounts of the disputed amount determined to be
for the account of Buyer and Seller, respectively.
(e) Upon the acceptance of the Closing Statement by Buyer or the
resolution in writing of any disputes arising out of any proposed adjustments,
(A) if the Adjusted Net Working Capital of Buyer as set forth on the Closing
Statement is greater than the Estimated Adjusted Net Working Capital, Buyer will
promptly (but in no event more than five (5) days thereafter) pay to Seller the
amount of such difference, or (B) if the Adjusted Net Working Capital of Buyer
as set forth on the Closing Statement is less than the Estimated Adjusted Net
Working
7
Capital, Seller will promptly (but in no event more than five (5) days
thereafter) pay to Buyer the amount of such difference. Any such payment
pursuant to this Section 2.2 will be made by wire transfer of immediately
available funds.
2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
----------------------------
allocated among the Acquired Assets in the manner set forth in Schedule 2.3. The
parties agree that this allocation will be used by them for all purposes
including tax, reimbursement and other purposes. Each party hereto agrees that
it will report the transaction in accordance with such allocation, including
under Section 1060 of the Internal Revenue Code of 1986, as amended (the
"CODE"), and that it will not take a position inconsistent with such allocation
except with the written consent of the other party hereto.
2.4 HOLD-BACK FROM PURCHASE PRICE. On the date of the Closing Seller
-----------------------------
shall deposit Three Million Dollars ($3,000,000) from the Purchase Price (the
"ESCROW ACCOUNT") with a local Meridian bank mutually acceptable to Seller and
Buyer (the "ESCROW AGENT") to be drawn upon by Buyer to pay costs for
refurbishing and improving patient rooms within ▇▇▇▇▇ Memorial Hospital (the
"IMPROVEMENTS," as hereinafter defined). The patient room Improvements shall
consist of the following: installing showers in patient rooms, converting
certain rooms to semi-private rooms, relocating ancillary facilities;
constructing replacement patient rooms; upgrading the equipment, mechanical and
electrical systems for the patient rooms; installation of overhead lights,
refurbishing and modifications to the nurse call station and Head Walls; and any
and all additional work associated therewith or required to comply with the
applicable safety and building codes. Before making any draw on the Escrow
Account, Buyer will provide Seller with copies of final architectural drawings
and specifications for the Improvements. Following receipt of Seller's comments
to the architectural drawings and specifications, Buyer will consider making
changes reasonably suggested by Seller (but is not bound by these comments) and
thereafter Buyer may commence construction of the Improvements and make draws on
the Escrow Account. Payments for the Improvements shall be made by the Escrow
Agent from the Escrow Account upon receipt of a requisition in the form attached
hereto as Exhibit H, including as part thereof a statement by an authorized
officer of Buyer that the requisition is for Improvements as set forth in this
Agreement and the architectural drawings and specifications contemplated
hereunder and an Architect's Certificate reflecting satisfactory completion of
the work for which the requisition is submitted. Any fees payable to the Escrow
Agent shall be deducted from interest earnings on amounts on deposit in the
Escrow Account and all remaining earnings shall be disbursed to Seller at least
quarterly. No portion of the interest earnings on the Escrow Account shall be
used to pay for Improvements. If the interest earnings in any quarter shall be
insufficient to pay the fees of the Escrow Agent, Buyer and Seller shall pay the
deficit equally.
The Escrow Agent shall continue to make disbursements from the Escrow
Account until the earlier to occur of (a) the completion of the Improvements, or
(b) the date on which the funds on deposit in the Escrow Account are exhausted.
All amounts remaining in the Escrow Account following completion of the
Improvements shall be released to Seller, free and clear of any and all claims
of Buyer. In the event that Buyer shall not have started construction of the
Improvements within three (3) years from the date of Closing, any amounts held
in the Escrow
8
Account shall be disbursed to Seller free and clear of any and all claims by
Buyer.
Seller shall have no responsibility for any deficiency in the Escrow
Account. Seller shall have no obligation to Buyer or to any contractor for the
Improvements for the cost of such Improvements, the architectural drawings and
specifications therefor or any action or inaction on the part of the Escrow
Agent. In addition, Seller shall have no liability to Buyer for any claims
related to the Improvements, whether by contractors or others, by virtue of
Seller's review and comment on the architectural drawings and specifications for
the Improvements, for the disbursement by the Escrow Agent of amounts on deposit
in the Escrow Account or for the failure of the Escrow Agent to disburse funds
on deposit in the Escrow Account.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
As inducements to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, each Seller hereby represents and warrants
to Buyer as follows (it being understood that each Seller makes the
representations and warranties set forth below solely with respect to itself and
its operations, assets and liabilities):
3.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Seller is a non-profit
------------------------------------------
corporation which is validly existing and in good standing under the laws of the
State of Mississippi. Seller is duly qualified to do business in the State of
Mississippi. Seller has full power and authority to own, lease and operate its
facilities and assets as presently owned, leased and operated and to carry on
its business as it is now being conducted, and at Closing will have the
requisite power and authority to enter into and perform its obligations under
this Agreement without the consent, approval or authorization of, or obligation
to notify, any person, entity or governmental agency. Seller has the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated on
the part of Seller hereby. This Agreement and all other agreements and documents
executed in connection herewith by Seller, upon due execution and delivery
thereof, shall constitute valid and binding obligations of Seller, enforceable
in accordance with their respective terms, upon receipt of the consents, if any,
specified in Schedule 3.2.
3.2 ABSENCE OF DEFAULT. To Seller's knowledge, upon receipt of the
------------------
consents, if any, specified in Schedule 3.2, the execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith by Seller will not constitute a violation of, or be in
conflict with, and will not, with or without the giving of notice or the passage
of time, or both, result in a breach of, constitute a default under, or create
(or cause the acceleration of the maturity of) any debt, indenture, obligation
or liability affecting the Acquired Assets pursuant to, or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Acquired Assets under: (a) any term or provision of
the Articles of Incorporation or Bylaws of Seller; (b) any material contract,
lease, purchase order, agreement, indenture, mortgage, pledge, assignment,
permit, license, approval or other
9
contract to which Seller is a party or by which Seller is bound; or (c) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Seller is
subject, if any, except for any such breach, default, debt, indenture,
obligation or liability that would not reasonably be expected to have a material
adverse effect on the Acquired Assets.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) Attached as Schedule 3.3 are true and correct copies of the
audited Financial Statements of Seller for the fiscal years ended September 30,
1997, September 30, 1996 and September 30, 1995 (the "FINANCIAL STATEMENTS").
The Financial Statements present fairly, in all material respects, the financial
position of Seller for such periods and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles consistently applied for the periods specified. The Financial
Statements are true, complete and correct and have been prepared in conformity
with generally accepted accounting principles on an accrual basis, applied
consistently for the periods involved.
(b) Seller shall cause to be prepared interim unaudited quarterly
financial statements of Seller for each quarter since September 30, 1996 (the
"INTERIM FINANCIAL STATEMENTS"), which shall be delivered to Buyer within forty-
five (45) days after the date hereof. The Interim Financial Statements, upon
delivery, shall present fairly, in all material respects, the financial position
of Seller and the result of its operations for the periods then ended, in
conformity with generally accepted accounting principles applied consistently
for the period specified. All such interim financial statements shall reflect
all adjustments (which consist only of normal recurring adjustments not material
in amount and include estimated provisions for year-end adjustments) necessary
for a fair presentation.
(c) After Closing, Seller shall make the books and records of Seller
available to Buyer and Buyer's auditors at reasonable times and in a manner so
as not to unduly interfere with Seller's operations, and otherwise cooperate
with Buyer in order to permit Buyer to conduct an audit of Seller's financial
statements for any period prior to Closing. Such audit, if any, shall be at
Buyer's expense.
3.4 OPERATIONS SINCE SEPTEMBER 30, 1996. Except as set forth in
-----------------------------------
Schedule 3.4, since September 30, 1996, Seller has conducted its business only
in the ordinary course and there was no material adverse change in the condition
(financial or otherwise) of the Acquired Assets, the business of, or in the
results of operations of, the Hospital, the Related Assets or Seller.
3.5 TAXES. All taxes, including income, property, sales, use,
-----
franchise, value added, employees' income withholding and social security taxes,
license fees and taxes, deposits and fees for waste disposal, pharmaceutical,
and nursing facilities, which are due or payable by Seller, and all interests
and penalties thereof have been paid in full and all tax returns, if any,
required to be filed in connection therewith have been accurately prepared and
timely filed, except
10
for such failures to pay or failures to file as would not have a material
adverse effect on the Acquired Assets. All deposits required to be made by
Seller with respect to employees' withholding taxes have been duly made. Seller
has not been delinquent in the payment of any tax, assessment or governmental
charge or deposit, and to Seller's knowledge, there is no tax deficiency or
claim outstanding, proposed or assessed against it.
3.6 EMPLOYMENT AND EMPLOYEE BENEFIT PLANS.
-------------------------------------
(a) Except as disclosed in Schedule 3.6(a), to the knowledge of
Seller, no person or entity (including any governmental agency) has made any
claim against Seller arising out of any statute, ordinance or regulation
relating to wages, collective bargaining, discrimination in employment or
employment practices or occupational safety and health standards (including, but
not limited to, the Fair Labor Standards Act, Title VII of the Civil Rights Act
of 1964, as amended, the Occupational Safety and Health Act, or the Age
Discrimination in Employment Act of 1967, as amended, or the Americans With
Disabilities Act of 1990), except for any such claim that would not reasonably
be expected to have a material adverse effect on the Acquired Assets.
(b) Except as described in Schedule 1.2(i) and as provided in
Schedule 3.6(b), Seller does not maintain or contribute to, or have any
obligation with respect to, and none of the employees of Seller are covered by,
any bonus, deferred compensation, severance pay, pension, profit-sharing,
retirement, insurance, stock purchase, stock option or other fringe benefit
plan, arrangement or practice, written or otherwise, or any other "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether formal or informal
("EMPLOYEE BENEFIT PLAN").
(c) Except as specified in Section 1.3 and as set forth on Schedule
3.6(c), Buyer will not be liable and will not be responsible for any debt,
obligation, contribution, responsibility, withdrawal liability or other
liability of Seller under any Employee Benefit Plans, including any penalty, fee
or funding obligation related to the termination of any plan pursuant to Section
5.15. Seller will be responsible for processing and paying claims incurred at
or prior to Closing in accordance with the terms of the applicable Employee
Benefit Plan and for any liabilities arising from any failure before or after
the Closing to comply with the requirements of ERISA, the Code, the Mississippi
Code or regulations thereunder.
(d) Seller has delivered to Buyer correct and complete copies of the
plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all material related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
11
3.7 LICENSES AND PERMITS.
--------------------
(a) Seller has all local, state and federal licenses, permits,
registrations, certificates, contracts, consents, accreditations and approvals
(collectively, "LICENSES AND PERMITS") necessary for Seller to occupy, operate
and conduct its business at the Hospital and the Related Assets, except for any
of the above, the absence of which would not reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, Seller
is not in default under any of such Licenses and Permits. To Seller's
knowledge, there exist no grounds for revocation, suspension or limitation of
such License or Permits. Copies of these Licenses and Permits are attached to
and listed on Schedule 3.7(a). Except as described in Schedule 3.7(a), no
written notices have been received by Seller with respect to complaints lodged
with any regulatory authority or agency or with respect to threatened, pending
or possible revocation, termination, suspension or limitation of any of the
Licenses and Permits, except for any such notices that have been or are being
addressed by Seller. To the knowledge of Seller, there are no grounds for
revocation, suspension or limitation of any of the Licenses and Permits.
(b) Seller has all certificates of need, exemptions or non-review
letters from the State of Mississippi necessary to operate its business with
respect to the Acquired Assets as it has been historically and is currently
conducted by Seller. To the knowledge of Seller, Seller has complied fully with
the requirements and conditions thereof.
3.8 JCAHO AND ACCREDITATIONS.
------------------------
(a) Set forth on Schedule 3.8 are each Certificate of Accreditation
and copies of the most recent accreditation survey report issued by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"), and a list of
material deficiencies, if any, relating to the operations of Seller.
(b) Except as described in Schedule 3.8, Seller has received no
written notice with respect to any threatened, pending or possible revocation,
early termination, suspension or limitation of any of the accreditations listed
in this Section 3.8.
3.9 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYORS.
------------------------------------------------
(a) The Hospital and (to the extent applicable) the Related Assets
are duly certified to participate, and do participate in the Medicare and
Medicaid programs (the "PROGRAMS"). Copies of their existing Medicare and
Medicaid contracts (the "PROGRAM AGREEMENTS") are included in Schedule 3.9(a).
To Seller's knowledge, the Hospital and (to the extent applicable) the Related
Assets are in material compliance with all of the terms, conditions, and
provisions of such contracts, as well as state and federal laws related thereto.
(b) Attached as part of Schedule 3.9(b) is a copy of the Hospital's
and (to the extent applicable) the Related Assets' most recent Statement of
Deficiencies and Plan of Correction (Form HCFA-2567).
12
(c) Except as set forth in Schedule 3.9(c), no written notice of any
offsets against future reimbursement has been received by Seller nor, to
Seller's knowledge, is there any basis therefor, and there are no pending
appeals, adjustments, challenges, audits, litigation or notices of intent to
reopen or open cost reports with respect to the Programs. To Seller's knowledge,
the Hospital and (to the extent applicable), the Related Assets have not been
subject to or threatened with loss of waiver of liability for utilization review
denials with respect to the Programs during the past twelve (12) months, nor has
Seller received notice of pending, threatened or possible decertification or
other loss of participation in any of the Programs, except as set forth in
Schedule 3.9(c).
(d) The Hospital and (to the extent applicable) the Related Assets
currently have contractual arrangements with Blue Cross of Alabama, Blue Cross
of Mississippi (together, "BLUE CROSS") and other third party payors. Copies of
all existing Blue Cross contracts and other third party payor contract(s) are
included in Schedule 3.9(d). The Hospital and (to the extent applicable) the
Related Assets are in material compliance with all of the terms, conditions and
provisions of such contract(s).
(e) Seller has previously furnished Buyer the Medicare and Medicaid
cost reports of Seller for the years of 1996, 1995 and 1994. The cost reports
are complete and accurate in all material respects for the periods indicated.
All liabilities and contractual adjustments of the Hospital and Related Assets
under any third party payor or reimbursement programs have been properly
reflected and adequately reserved for in the Financial Statements, in each case
in all material respects.
(f) Seller has received no written notice of any violation of federal
or state fraud and abuse or self-referral laws, except as set forth in Schedule
3.9(f) and Seller is not aware of any such violations in connection with the
operation of its business.
3.10 PEER REVIEW. The Hospital has entered into one or more valid
-----------
memorandums of understanding with the Hospital's peer review organizations. A
copy of each memorandum of understanding is included in Schedule 3.10.
3.11 TITLE TO ASSETS.
---------------
(a) All assets owned or leased by Seller are reflected on the
Financial Statements. Seller is transferring all assets necessary to the
operation of the Hospital and the Related Assets, except as set forth on
Schedule 3.11(a).
(b) The only names, tradenames or fictitious names under which the
business of the Hospital and Related Assets of Seller have been operated for the
last two (2) years are listed on Schedule 3.11(b). To Seller's knowledge, Seller
has complied with all applicable fictitious name filing statutes.
(c) Schedule 3.11(c) lists all post office boxes and addresses where
Receivables
13
purchased by Buyer hereunder are to be paid and all names under which payment is
to be received. Seller hereby grants to Buyer irrevocable power of attorney to
execute and endorse any checks or receive any payments with respect to any
Receivables purchased by Buyer hereunder.
3.12 LEASES AND CONTRACTS.
---------------------
(a) Except for Non-material Contracts (as defined below), Schedule
3.12(a) hereto sets forth a complete and accurate list of all material written
contracts, agreements, leases and commitments, and all assignments and
amendments thereof relating to the Hospital or the Related Assets, to which
Seller is a party, including service contracts, management agreements, equipment
leases and leases of space and all oral agreements of Seller pursuant to which
Seller is currently expending money, but excluding any agreement recorded
against all or any part of the Real Estate (collectively, the "LEASES AND
CONTRACTS"). "NON-MATERIAL CONTRACTS" means contracts which no party thereto is
a referral source (including physicians) to Seller and either (i) involves an
expenditure of less than $50,000 in the aggregate for such contract per year, or
(ii) is cancelable on behalf of Seller (and Buyer as its assignee) upon no more
than thirty (30) days' notice and without penalty or payment. Prior to Closing,
Seller will provide Buyer a copy of all written Leases and Contracts, and a
detailed summary of the provisions of all oral Leases and Contracts.
(b) None of the Leases and Contracts has been modified, amended,
assigned or transferred, except as noted on Schedule 3.12, and each is in full
force and effect and is valid, binding and enforceable in accordance with its
respective terms except for such failures to be in full force and effect or
validly binding and enforceable as would not reasonably be expected to have a
material adverse effect on the Acquired Assets.
(c) Except as disclosed on Schedule 3.12(c), to Seller's knowledge,
no event or condition has happened or presently exists which constitutes a
default or breach on the part of Seller or after notice or lapse of time or
both, would constitute a default or breach by any party under any of the Leases
and Contracts. There are no pending or, to Seller's knowledge, threatened
counterclaims or offsets which have been asserted in writing under any of the
Leases and Contracts. With respect to any options or rights of first refusal
affecting or relating to any of the Acquired Assets or any interest therein to
which Seller is a party, to Seller's knowledge: (i) there has been no exercise
or attempted exercise of the same, and (ii) no event has happened or presently
exists which would require the same to be exercised. If any such event happens
or occurs prior to Closing, Seller will take all necessary, commercially
reasonable action to preserve Seller's rights under and with respect to the same
and prevent the expiration or lapse thereof.
(d) None of the Leases and Contracts shall be amended between the
date hereof and Closing without the prior written consent of Buyer.
(e) Except as expressly identified on Schedule 3.12, Seller has no
Lease or Contract which is a capitalized lease within the meaning of generally
accepted accounting principles.
14
3.13 ENVIRONMENTAL MATTERS.
---------------------
(a) As used in this Section, the term "HAZARDOUS SUBSTANCES" means any
hazardous or toxic substances, pollutants, contaminants, materials or wastes,
including those substances, pollutants, contaminants, materials, and wastes
listed in the United States Department of Transportation Table (49 CFR 172.101)
or by the Environmental Protection Agency as hazardous substances pursuant to 40
CFR Part 302, or such substances, materials and wastes which are regulated under
any federal environmental law or any applicable local or state environmental
law, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") as supplemented and amended or the Resource
Conservation and Recovery Act, as amended ("RCRA"). 42 U.S.C (S)(S) 6901 et seq;
------
or toxic substances as defined under the Toxic Substance Control Act, 15 U.S.C.
2601 et seq.
------
(b) To the knowledge of Seller, all operations or activities upon, or
any use or occupancy of the Real Estate by Seller and any Affiliates of Seller
(for purposes of this Section 3.13, the term "AFFILIATES" shall mean any person
or entity controlling, controlled by or under common control with Seller, and
the term "CONTROL" shall mean the exercise of power to direct the management of
such person or entity) and any agent or employee of Seller or its Affiliates
("AGENTS"), are as of the date hereof in all respects in substantial compliance
with any and all environmental laws, regulations or orders relating to Hazardous
Substances, including, but not limited to, the storage, discharge, removal and
transportation of Hazardous Substances. Except as disclosed on Schedule 3.13(b)
and except for the manufacture, use, generation, discharge, disposal, spillage,
leakage, storage or presence of Hazardous Substances associated with the
customary operation of a hospital, nursing home, home health care agency or
physician clinic:
(i) To the knowledge of Seller, neither Seller, nor its
Affiliates or Agents have allowed the manufacture, use, generation, storage
or presence of any Hazardous Substances over, in or upon the Real Estate;
(ii) To the knowledge of Seller, neither Seller, nor its
Affiliates or Agents, have installed or permitted to be installed, in or on
the Real Estate friable asbestos or any substance containing asbestos or
any other Hazardous Substances not customarily associated with the
operation of a hospital, nursing home, home health care agency or physician
clinic;
(iii) To the knowledge of Seller, neither Seller nor its Agents
or Affiliates has engaged in any material dumping, discharge, disposal,
spillage or leakage (whether legal or illegal, accidental or intentional)
of such Hazardous Substances, at, on, in or about the Real Estate, or any
portion thereof; and
(iv) To the knowledge of Seller, no substantial work, repairs,
construction or capital expenditures are required as of the date hereof by
any environmental or land use laws or regulations with respect to the Real
Estate for the continued lawful use of the Real Estate.
15
(c) To the knowledge of Seller, the Real Estate is not subject to any
existing, pending, or threatened investigation or inquiry by any governmental
authority or any remedial or removal obligations under any applicable rules,
regulations or orders pertaining to the environment.
(d) To Seller's knowledge, except as disclosed on Schedule 3.13(b),
including matters disclosed in any environmental audits or reports set forth on
Schedule 3.13 (b), there are no underground storage tanks on any portion of the
Real Estate, and no portion of the Real Estate has ever been used as a landfill.
Seller has furnished to Buyer a copy of any environmental audit or report on the
Real Estate which Seller or its Affiliates obtained or were furnished.
(e) For purposes of this Section 3.13, the term "Real Estate" shall
not include the parcel of property purchased by ▇▇▇▇▇ Property Holding Company
from Sowashee Building Corporation on December 12, 1995 and more particularly
described in Schedule 3.13(e) hereto (the "SOWASHEE PARCEL"). With respect to
the Sowashee Parcel, Buyer acknowledges and agrees that it is purchasing the
Sowashee Parcel on an "as is" basis, in its existing condition without any
representation or warranty by Seller as to the condition of the Sowashee Parcel
except as expressly set forth in this Agreement. Buyer further acknowledges that
Buyer has made adequate inquiry into the condition and operation of the Sowashee
Parcel and that Buyer is not relying on any representation or warranty of Seller
except as expressly set forth in this Agreement.
(f) Effective on the date of Closing, and except as expressly set
forth herein, Buyer hereby releases Seller from and waives all claims against
Seller, at law or in equity, whether known or unknown, suspected or unsuspected,
which Buyer has or may have, arising out of or related to the physical condition
of the Sowashee Parcel. Buyer also releases Seller from and waives all claims
against Seller under any and all federal environmental laws or any applicable
local or state environmental law, including CERCLA and RCRA, including without
limitation, any and all rights of contribution to pay for or reimburse Buyer for
the cost of remediating any Hazardous Substances from the Sowashee Parcel or
from real property surrounding the Sowashee Parcel.
(g) With respect to the Sowashee Parcel, Seller represents that to
the knowledge of Seller, neither Seller nor its Affiliates or Agents has taken
any affirmative action during the period of Seller's ownership of the Sowashee
Parcel to cause any of the items set forth in subparagraph (b) above to exist on
the Sowashee Parcel.
3.14 MISCELLANEOUS REPRESENTATIONS RELATING TO REAL ESTATE.
-----------------------------------------------------
(a) Seller has not received any written notice of any pending
condemnation of all or any part of the Real Estate. To Seller's knowledge, there
are no public improvements which may result in special assessments against the
Real Estate.
(b) To Seller's knowledge, Seller has furnished to Buyer copies of
all mechanical and structural studies or reports or assessments, engineering
plans, architectural
16
drawings, soil studies, surveys and other documents which have been prepared by
or at the direction of Seller or its Affiliates within the last three (3) years
relating to any of the Acquired Assets.
(c) All utilities serving the Real Estate are, and shall be at
Closing adequate to operate the Real Estate in the manner it is currently
operated. Any so-called hook-up fees or other associated charges accrued to date
have been fully paid with respect to all potable and industrial water and all
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and systems and other similar systems serving the Hospital and the
Related Assets.
(d) From and after the date of this Agreement until Closing, Seller
and any party in possession of all or any part of the Acquired Assets will
maintain and keep the Acquired Assets in a sanitary, well-maintained condition
and in good order and repair.
3.15 CONSTRUCTION. Except as described on Schedule 3.15, Seller has
------------
not entered into any written agreements regarding the development of future
facilities in connection with the Hospital or any of the Related Assets.
3.16 LITIGATION. Except as set forth in Schedule 3.16 hereto, Seller
----------
has not received written notice of any violation of any law, rule, regulation,
ordinance or order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including legislation and regulations applicable to the Medicare and Medicaid
programs, environmental protection, civil rights and public health and safety
and occupational health) that, if adversely determined, would reasonably be
expected to have a material adverse effect on the Acquired Assets. Except as set
forth in Schedule 3.16, there are no lawsuits, proceedings, actions,
arbitrations, governmental investigations, claims, inquires or proceedings
pending or, to the knowledge of Seller, threatened against Seller or the
Acquired Assets that, if adversely determined, would reasonably be expected to
have a material adverse effect on the Acquired Assets.
3.17 SELLER'S EMPLOYEES. Schedule 3.17 hereto sets forth: (a) a
------------------
complete list of all of Seller's officers and employees, and rates of pay,
together with true and correct copies of any and all employment contracts, (b)
the employment dates and job titles of each such person, and (c) categorization
of each such person as a full-time or part-time employee of Seller. Prior to
Closing, Seller shall provide true and accurate copies of any fringe benefit
plan or personnel polices to Buyer. For purposes of this paragraph, "PART-TIME
EMPLOYEE" means an employee who is employed for an average of fewer than thirty-
six (36) hours per week or less than seventy-two (72) hours per two (2) week pay
period. Except as provided in Schedule 3.17, Seller has no employment agreements
with its employees and all such employees are employed on an at "at will" basis.
Schedule 3.17 sets forth a complete list of all of Seller's full and part-time
employees who have been terminated within ninety (90) days before Closing.
3.18 LABOR RELATIONS. Seller is not a party to any labor contract,
---------------
collective bargaining agreement, contract, letter of understanding (or to
Seller's knowledge, any other arrangement, formal or informal) with any labor
union or organization which obligates Seller to
17
compensate its employees at prevailing rates or union scale, nor are any of
Seller's employees represented by any labor union or organization. Except as
set forth on Schedule 3.18, there is no pending, or to Seller's knowledge,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Seller and any
present or former employees of Seller that might reasonably be expected to have
a material adverse effect on Seller. Except as set forth on Schedule 3.18,
there is no pending, or to Seller's knowledge, threatened suit, action,
investigation or claim between Seller and any present or former employees of
Seller that, if adversely determined, would reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, there
has not been any labor union organizing activity at the Hospital or any of the
Related Assets with respect to employees of the Hospital or any of the Related
Assets within the past year.
3.19 INSURANCE. Seller has in effect and has continuously maintained
---------
insurance coverage for its operations, personnel and assets. Schedule 3.19 sets
forth a summary of Seller's current insurance coverage, and includes a list of
any pending insurance claims relating to Seller. To the knowledge of Seller,
Seller is not in default or breach with respect to any provision contained in
any such insurance policies, nor has Seller failed to give any notice or to
present any claim thereunder in due and timely fashion. Seller will continue to
maintain all its insurance policies and coverage amounts in full force and
effect until the Closing. All of such policies are valid, outstanding, in full
force and effect and enforceable in accordance with their terms with no premium
arrearages. Complete genuine copies of all policies and endorsements thereto
have been provided to Buyer. At no time has Seller been denied or reduced, or
requested a reduction in, the scope or amount of any insurance or indemnity bond
coverage with respect to the Acquired Assets. No insurance carrier has cancelled
or reduced, or given notice of its intention to cancel or reduce, any insurance
coverage with respect to the Acquired Assets and, to Seller's knowledge, there
exists no grounds to cancel any such policies or the coverage provided thereby.
Seller has received no written recommendation from any insurer to repair or
replace any of the Acquired Assets with which Seller has not complied.
3.20 MEDICAL STAFF. Seller has previously delivered to Buyer a true
-------------
and correct copy of medical staff privilege and membership application forms, a
description of medical staff privileges, all current medical staff bylaws, rules
and regulations and amendments thereto, all credentials and appeals procedures
not incorporated therein, the name of each member of the medical staff of the
Hospital and the Related Assets, the specialty, if any, of each medical staff
member, and all contracts with physicians, physician groups, or other members of
the medical staff of the Hospital and the Related Assets. Except as set forth on
Schedule 3.20, there are no pending or, to Seller's knowledge, threatened
appeals, challenges, disciplinary or corrective actions, or disputes involving
applicants, staff members or health professionals.
3.21 CONFLICTS OF INTEREST. Except as disclosed in Schedule 3.21 and
---------------------
except as to Non-material Conflicts (as defined below), no director and no
employee listed on Schedule 13.13 hereto is either a supplier of goods or
services to Seller pursuant to an Assumed Liability, or directly or indirectly
controls or is a director, officer, shareholder, employee or agent of any
corporation, firm, association, partnership or other business entity (other than
any corporation, firm, association, partnership or other business entity the
stock of which is publicly traded) which
18
is a supplier of goods or services to Seller pursuant to an Assumed Liability or
a party to any contract or other agreement with Seller pursuant to an Assumed
Liability. "NON-MATERIAL CONFLICTS" shall mean items which otherwise should have
been disclosed on Schedule 3.21, but (a) the annual aggregate amount involved
relating to each such person or each such entity does not exceed $10,000, and
(b) the contract or agreement is cancelable upon no more than 90 days' notice.
3.22 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE. Seller owns (or
----------------------------------------
possesses adequate and enforceable licenses or other rights to use) all
Intellectual Property (as defined below) and all computer software programs and
similar systems used in the conduct of its business. All trademarks, service
marks, tradenames, patents, copyrights, inventions, processes and applications
therefor (whether registered or common law) owned by Seller are listed and
described in Schedule 3.22 (collectively the "INTELLECTUAL PROPERTY"). No
proceedings have been instituted or, to Seller's knowledge, threatened, which
challenge the ownership by Seller of such Intellectual Property. Seller has not
licensed anyone to use such Intellectual Property and Seller has no knowledge of
the use or the infringement of any such Intellectual Property by any other
person.
3.23 INVENTORIES. The Inventory is, and on Closing will be, of a
-----------
quality and quantity presently usable in the ordinary course of business at the
Hospital and the Related Assets, determined and valued consistent with generally
accepted accounting principles. Since the date of the Financial Statements,
Seller has not decreased or substituted items of Inventory other than in the
ordinary course of business.
3.24 COMPLIANCE WITH LAWS. To the knowledge of Seller, Seller has
--------------------
complied with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees applicable to the Hospital or the Related Assets, except
for such failures to comply as would not reasonably be expected to have a
material adverse effect on the Acquired Assets. To Seller's knowledge, Seller
has made no kickback, bribe or payment to any person or entity, directly or
indirectly, for referring, recommending or arranging business or patients with,
to or for Seller. To Seller's knowledge, none of the Assumed Liabilities and no
activity of Seller violates Section 1877 of the Social Security Act or any
similar provision of applicable state law. To Seller's knowledge, none of the
Assumed Liabilities and no activity of Seller violates provisions of applicable
state law relating to the corporate practice of medicine.
3.25 BROKER'S OR FINDER'S FEE. Except as set forth in Schedule 3.25,
------------------------
Seller has not employed and is not liable for the payment of any fee to any
finder, broker or similar person in connection with the transactions
contemplated by this Agreement.
19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer represents and warrants
to Seller as follows:
4.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Buyer is a corporation
-----------------------------------------
which is validly existing and in good standing under the laws of the State of
Mississippi and is a wholly owned subsidiary of Health Management Associates,
Inc., a Delaware corporation ("HMA"). Buyer is duly qualified to conduct
business in the State of Mississippi and is in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary. Buyer has full power and authority to own, lease and operate its
properties and assets as presently owned, leased and operated and to carry on
its business as it is now being conducted, and at Closing will have the
requisite power and authority to enter into and perform its obligations under
this Agreement without the consent, approval or authorization of, or obligation
to notify, any person, entity or governmental agency. Buyer has the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated on
the part of Buyer hereby. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Buyer has been duly authorized by all necessary action on the part of Buyer.
No other action on the part of Buyer or any other person or entity is necessary
to authorize the execution, delivery and consummation of this Agreement and all
other agreements and documents executed in connection herewith. This Agreement
and all other agreements and documents executed in connection herewith by Buyer,
upon due execution and delivery thereof shall constitute valid binding
obligations of Buyer, enforceable in accordance with their respective terms.
4.2 ABSENCE OF DEFAULT. The execution, delivery and consummation of
------------------
this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
without the giving of notice or the passage of time, or both, result in a breach
of, constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Acquired Assets under: (a) any term or provision of
the Articles of Incorporation or Bylaws of Buyer, (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval or
other commitment to which Buyer is a party or by which Buyer is bound; (c) any
judgment, decree, order, regulation or rule of any court or regulatory
authority; or (d) any law, statute, rule, regulation, order, with, injunction,
judgment or decree of any court of any court or governmental authority or
arbitration tribunal to which Buyer is subject.
4.3 BROKER'S OR FINDER'S FEE. Buyer has not employed and is not
------------------------
liable for the payment of any fee to any finder, broker or similar person in
connection with the transactions contemplated by this Agreement.
20
4.4 BUYER'S CASH ON HAND. Buyer has, and at the Closing will have,
--------------------
sufficient cash on hand to pay the Purchase Price at the Closing.
4.5 WARN ACT. Buyer has no plans to engage in any activities or take
--------
any actions which could trigger the obligation for notice as required by the
"Worker Adjustment and Retraining Notification Act" ("WARN") or any similar
applicable state statute.
ARTICLE V. COVENANTS OF PARTIES
5.1 PRESERVATION OF BUSINESS AND ASSETS. From the date hereof until
-----------------------------------
the Closing, Seller shall use commercially reasonable efforts (i) to preserve,
protect and maintain intact the Acquired Assets, and the business and operation
of the Hospital and the Related Assets as going concerns in the ordinary course
of business consistent with prior practice, and (ii) to preserve, protect and
maintain for Buyer the good will of the Hospital's and the Related Assets'
medical staff, suppliers, employees, clientele, patients, and others having
business relations with Seller. From and after the date of this Agreement until
Closing, Seller will maintain and keep the Acquired Assets in a well-maintained
condition and in good order and repair. Other than in the ordinary course of
business, Seller will not sell, discard, dispose of or move any of the Acquired
Assets and shall make no dividend, distribution or extraordinary payment to any
Affiliate. From the date hereof until the Closing, Seller shall continue in its
ordinary course of business consistent with past practices, in completing its
capital expenditures as to its replacements and additions and any construction
improvements and paying therefor.
5.2 ABSENCE OF MATERIAL CHANGE. From the date hereof until the
--------------------------
Closing, Seller shall make no material change in the business and operation of
the Hospital and the Related Assets and in the utilization of the Acquired
Assets.
5.3 ACCESS TO BOOKS AND RECORDS.
---------------------------
(a) From the date hereof until the Closing, Seller shall give to
Buyer and to Buyer's counsel, accountants, and other representatives, full
access during normal business hours to all of Seller's offices, properties,
books, contracts, commitments, records and affairs relating to the Acquired
Assets so that Buyer may inspect and audit them and shall furnish to Buyer
information concerning the Acquired Assets as Buyer may reasonably request. If
any such books, records and materials are in the custody of third parties who
are subject to Seller's direction, Seller shall direct such third parties to
promptly provide them to Buyer. Copies of documents furnished to Buyer by Seller
will be returned by Buyer upon request if the transaction is not consummated.
Seller shall provide Buyer promptly with Interim Financial Statements of Seller
in accordance with Section 3.3(b), the audited financial statements of Seller
for the fiscal year ended September 30, 1997 and any other management reports as
and when they are available. Additionally, from the date hereof until Closing,
Seller grants Buyer reasonable access to Seller's personnel and computers to
assist Buyer's preparation for the ownership change.
(b) Following the Closing, Buyer shall permit Seller and its
representatives
21
(including its counsel and auditors), during normal business hours, to have
reasonable access to, and examine and make copies of all books and records of
the Hospital and the Related Assets, including all medical records and medical
charts of any patient admitted to the Hospital or any of the Related Assets,
which are transferred to Buyer hereunder and which relate to transactions or
events occurring prior to the Closing, to the extent permitted by law. Buyer
agrees that it shall make such books and records available to Seller, and shall
not destroy or dispose of any of such books and records for a period of seven
(7) years after the Closing.
(c) Following the Closing, Seller shall permit Buyer and its
representatives (including its counsel and auditors), during normal business
hours, to have reasonable access to, and examine and make copies of, all books
and records of Seller and its Affiliates relating to the Hospital, the Related
Assets or the other Assets which are retained by Seller and which relate to
transactions or events contemplated by this Agreement occurring prior to the
Closing, to the extent permitted by law. Seller agrees that it shall make such
books and records available to Buyer, and shall not destroy or dispose of any of
such books and records for a period of seven (7) years after the Closing.
5.4 CONSENTS TO ASSIGNMENTS. Anything in this Agreement to the
-----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or transfer to Buyer any Acquired Asset if an attempted assignment
thereof, without the consent of a third party, would constitute a breach thereof
or a breach of any applicable law or in any way adversely affect the rights of
Buyer with respect thereto. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would affect the rights with respect
thereto so that Buyer would not receive all such rights, Seller will cooperate
with Buyer, in all commercially reasonable respects, to provide to Buyer the
benefits with respect to any such Acquired Asset, including enforcement for the
benefit of Buyer of any and all rights of Seller against a third party arising
out of the breach or cancellation by such third party or otherwise.
5.5 GOOD FAITH. All parties shall act in good faith and use their
----------
commercially reasonable efforts to satisfy all conditions to their respective
obligations to close.
5.6 COMMERCIALLY REASONABLE EFFORTS; FURTHER ASSURANCES.
---------------------------------------------------
(a) Each party will use its commercially reasonable efforts to cause
all conditions to its obligations, including the obtaining of all requisite
Licenses and Permits, to be timely satisfied and to perform and fulfill all
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement shall be effected
in accordance with its terms as soon as reasonably practicable. The parties
shall cooperate with each other in such actions and in securing requisite
Licenses and Permits. Each party shall execute and deliver both before and
after the Closing such further certificates, agreements and other documents and
take such other actions as may be necessary or appropriate to consummate or
implement the transactions contemplated hereby or to evidence such events or
matters.
(b) As used in this Agreement, the term "commercially reasonable
efforts" shall
22
not mean efforts which require the performing party to do any act that is
unreasonable under the circumstances, to make any capital contribution or to
expend any funds other than in payment of reasonable out-of-pocket expenses
incurred in satisfying obligations hereunder, including but not limited to the
fees, expenses and disbursements of its accountants, actuaries, counsel and
other professional advisers.
5.7 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Seller shall
---------------------------------------------------
refrain from taking any action which would render any representation and
warranty contained in Article IV hereof inaccurate in any respect as of Closing.
Seller promptly will notify Buyer of any material lawsuits, claims,
administrative actions or other proceedings commenced against Seller, its
directors, officers or Affiliates, involving or affecting in any way the
Acquired Assets or the business and operation of the Acquired Assets. Seller
shall promptly notify Buyer of any facts or circumstances which come to Seller's
attention and which cause, or through the passage of time may cause, any of
Seller's representations and warranties to be untrue or misleading in any
material respect at any time from the date hereof to Closing. Buyer shall
promptly notify Seller of any facts or circumstances which come to Buyer's
attention and which cause, or through the passage of time may cause, any of
Buyer's representations and warranties to be untrue or misleading in any
material respect at any time from the date hereof to Closing.
5.8 MAINTAIN BOOKS AND ACCOUNTING PRACTICES. From the date hereof
---------------------------------------
until Closing, Seller shall maintain its books of account in the usual, regular
and ordinary manner in accordance with generally accepted accounting principles
consistently applied and on a basis consistent with prior years and shall make
no change in its accounting methods or practices or the accounting principles so
applied.
5.9 INDEBTEDNESS; LIENS. Until Closing, Seller shall make all
-------------------
payments required with respect to its long-term debt, including the Bonds and
the Notes, and comply in all material respects with and satisfy all its
obligations with respect thereto. Seller shall take all action necessary to
defease fully the Bonds and cause all collateral and obligations and security
against the Acquired Assets to be fully released to Buyer's satisfaction as
contemplated hereunder, and Buyer will cooperate with Seller in this regard.
5.10 COMPLIANCE WITH LAWS AND REGULATORY CONSENTS. From the date
--------------------------------------------
hereof until the Closing, Seller shall (i) comply in all material respects with
all applicable statutes, laws, ordinances and regulations; (ii) keep, hold and
maintain all material certificates, certificates of need, certificates of
exemption, accreditations, participations, licenses, and other permits necessary
for the business and operation of the Acquired Assets; (iii) use its
commercially reasonable efforts to obtain all consents, approvals, exemptions
and authorizations of third parties, whether governmental or private, necessary
to consummate the transactions contemplated by this Agreement; (iv) make and
cause to be made all filings and give and cause to be given all notices which
may be necessary or desirable on its part under all applicable laws and under
its contracts, agreements and commitments in order to consummate the
transactions contemplated by this Agreement; and (v) use its commercially
reasonable efforts to consummate the transactions contemplated by this Agreement
and the agreements and documents to be executed in connection with this
Agreement.
23
5.11 MAINTAIN INSURANCE COVERAGE. From the date hereof until the
---------------------------
Closing, Seller shall maintain and cause to be maintained in full force and
effect, without change of coverage or insurance carrier unless approved of in
writing by Buyer (which approval shall not be unreasonably withheld), the
existing insurance on the Acquired Assets and the operations of the Hospital and
the Related Assets and shall provide, upon request by Buyer, evidence
satisfactory to Buyer that such insurance continues to be in effect and that all
premiums due have been paid. From and after the Closing, Seller shall have the
professional insurance policies listed on Schedule 5.11 amended or endorsed to
name Buyer and all employed physicians as an additional insured and to provide
Buyer evidence thereof. From the Closing and continuing for a period of seven
(7) years thereafter, Seller shall have the general comprehensive liability
insurance policies listed on Schedule 5.11 amended or endorsed to name Buyer as
an additional insured and to provide Buyer evidence thereof.
5.12 MEDICARE AND MEDICAID REPORTING. From the date hereof until the
-------------------------------
Closing, on behalf of the Hospital and (to the extent applicable) the Related
Assets, Seller shall timely file or cause to be filed all cost reports and other
reports of every kind, nature or description required by law or by written or
oral contract to be filed with respect to the purchase of services by third
party payors, including Medicare, Medicaid and Blue Cross prior to Closing.
Buyer and Seller will jointly prepare the terminating cost reports for the
Hospital and (to the extent applicable) the Related Assets.
5.13 CURRENT RETURN FILING. Seller shall be responsible for the
---------------------
preparation and filing of the federal, state and local income tax returns for
all of the tax periods of Seller ending on or before the Closing, including
returns for organizations exempt from income tax.
5.14 PERFORMANCE. Seller and Buyer shall take appropriate steps to
-----------
satisfy their respective obligations, and the conditions to Closing, including
the filing of ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ notices, if any, the obtaining of necessary
consents and the making of applications for necessary licenses and permits.
5.15 WARN ACT. Prior to Closing, Seller will not engage in any
--------
activities or take any actions which would impose upon Seller, or upon Buyer
solely as a result of Seller's actions, the obligation for notice as required
WARN or any similar applicable state statute. Upon the Closing, and for at least
ninety (90) days thereafter, Buyer will not engage in any activities or take any
actions which would impose upon Seller any WARN requirements or liabilities. If
any of Buyer's activities or actions trigger WARN requirements, Buyer will
comply in full with the requirements of WARN.
24
5.16 TERMINATION OF EMPLOYEE PLANS.
-----------------------------
(a) At or as soon as possible after Closing, Seller will take such
steps as are necessary to freeze and terminate the ▇▇▇▇▇ Memorial Hospital Tax
Deferred Annuity Plan (the "PENSION PLAN"), as a result of which the interest of
all participants shall become fully vested in accordance with the Pension Plan.
(b) Buyer agrees for one hundred-twenty (120) days after Closing that
it will at no cost to Seller make its on-site personnel reasonably available
during normal business hours to assist Seller in gathering information necessary
to terminate the Pension Plan, so long as such cooperation with Seller does not
unreasonably interfere with the normal job responsibilities of such employees.
(c) At or immediately after Closing, Seller will give notice to all
Transferred Employees with Section 125 daycare spending accounts of a 60-day
time limit for submitting valid claims against the balance at Closing in each
employee's respective Section 125 daycare spending account.
5.17 CHARITY CARE. Buyer shall offer the same type and level of
------------
charity care as offered by HMA and its Affiliates at the other hospitals
operated by HMA and its Affiliates.
5.18 NURSING SCHOLARSHIPS. Buyer shall adhere to Seller's policy, as
--------------------
administered as of the date of the Closing, with respect to the maintenance of
those certain Meridian Community College nursing scholarships awarded prior to
the Closing Date, as described in Schedule 5.18. After the date of the Closing,
Buyer shall make available to all employees of the Hospital, the Nursing Home,
the Home Care Agency and the Clinics the tuition reimbursement program offered
to employees of the other hospitals operated by HMA and its Affiliates, which
includes nursing, and shall consider new applicants for the Meridian Community
College nursing scholarship program described in Schedule 5.18.
5.19 WINDING UP SELLER'S BUSINESS. Following Closing, the following
----------------------------
provisions will apply to facilitate the winding up of Seller's business at the
Hospital and the Related Assets:
(a) Buyer will allow Seller reasonable access to the computer systems
of the Hospital and the Related Assets without charge for up to one hundred
eighty (180) days after Closing for:
(i) Closing out the financial affairs of Seller for the period
through Closing and producing financial statements.
(ii) Processing Seller's final payroll and related reports,
including W-2's, if necessary.
(iii) Processing and paying Seller's accounts payable, if
necessary.
25
(b) Buyer will provide sufficient office space to Seller without
charge to conduct the activities described in Section 5.18(a) above.
(c) Buyer agrees to make a reasonable number of its employees
available to Seller to perform those activities of a post-closing nature set
forth on Schedule 5.19 for a period of one hundred eighty (180) days after
Closing at no cost to Seller.
Notwithstanding Buyer's agreement to assist with the above activities,
it is expressly acknowledged and agreed that Seller shall remain solely liable
and responsible for the timely completion and accuracy of activities relating to
the winding up of Seller's business at the Hospital and Related Assets.
5.20 AFFILIATIONS AND EDUCATION PROGRAMS. Prior to Closing, the
-----------------------------------
parties shall enter into an agreement relating to Buyer's willingness to provide
access to its facilities in connection with the Hospital's affiliations with the
University of Southern Mississippi, ▇▇▇▇▇▇▇▇▇▇ University, Meridian Community
College and the University of Mississippi Medical Center, for the purpose of
providing a clinical educational resource for nursing and other educational
programs.
5.21 USE OF NAME. At Closing, Seller shall enter into the license
-----------
agreement attached hereto as Exhibit E with Buyer and shall quitclaim to Buyer
all rights of Seller in the trade names listed on Schedule 3.22 other than those
covered in the License Agreement.
ARTICLE VI. TITLE AND SURVEY
6.1 TITLE REPORT AND POLICY. At least ten (10) days prior to Closing,
-----------------------
Seller shall deliver to Buyer, at Seller's expense, a current ALTA preliminary
title commitment issued by a nationally recognized title company of the
condition of title to each tract of Real Estate (the "COMMITMENT") for a title
insurance policy, ALTA Owner's Policy Form 1992 (the "TITLE POLICY"). The title
company shall provide when delivering the Commitment one (1) copy of all
recorded documents relating to exceptions, conditions or reservations described
in the Commitment to Buyer. The exceptions, conditions and reservations set
forth in Schedule 6.1 hereto shall constitute permitted exceptions, conditions
and reservations (the "PERMITTED EXCEPTIONS"). At Closing, there shall be
issued to Buyer, at Seller's expense, a signed commitment on the part of the
title company to issue the Title Policy attached to such commitment in the
amount of the Purchase Price which is allocated to the Real Estate as improved.
6.2 SURVEY. At least ten (10) days prior to Closing, Seller shall
------
furnish to Buyer a certified ALTA survey of the Real Estate dated no earlier
than thirty (30) days prior to the date of this Agreement (the "SURVEY"). The
cost of the survey shall be borne by Buyer to the extent such cost is not
greater than $20,000. Any amount of the cost of the survey in excess of $20,000
shall be paid by Seller.
26
6.3 UCC SEARCHES. UCC Financing Statement searches, local and
------------
central, including fixtures, and federal and state tax lien and judgment
searches with respect to Seller, its affiliates and predecessors, including all
"DBA's," tradenames and fictitious names of Seller (including, but not limited
to, all names set forth in Schedule 3.11(b)), from each of the jurisdictions in
which such entity does business or has done business within the preceding three
(3) years (the "UCC SEARCHES"), shall be obtained by Seller and delivered to
Buyer at least ten (10) days prior to Closing. The results shall be updated
within a reasonable period of time after the date of Closing to reflect Closing
and the release of all financing statement liens other than any Permitted
Exceptions. The cost of the UCC Searches shall be borne equally by Seller and
Buyer.
6.4 DEFECTS AND CURE. The Title Commitment and Policy and the Survey
----------------
and UCC Searches described in this Article are collectively referred to as
"TITLE EVIDENCE." Buyer shall notify Seller (such notice, "BUYER'S OBJECTION"),
within ten (10) business days of Buyer's receipt of the Title Evidence, of any
liens, claims, encroachments, exceptions or defects disclosed in the Title
Evidence which do not constitute Permitted Exceptions and materially adversely
impact any of the Acquired Assets or the financeability thereof in the
reasonable opinion of Buyer (collectively, "DEFECTS"). Seller shall use its
commercially reasonable efforts to cure any Defect; provided, however, that
Seller shall not be obligated to expend an amount greater than $100,000 in
curing all Defects. Seller shall give written notice to Buyer of its election
not to cure any Defect not covered in the preceding sentence or of its inability
to cure any Defect in accordance with the prior sentence (such notice, "SELLER'S
ELECTION") within ten (10) business days of its receipt of Buyer's Objection of
its decision whereupon Buyer may (a) waive its objection and such Defect and
close (in which case, such Defect shall be deemed to be a Permitted Exception),
or (b) terminate this Agreement, which election shall be made within five (5)
business days of receipt of Seller's Election. If Seller fails to timely give
Seller's Election, Seller shall be deemed to have elected not to cure the
Defect, whereupon Buyer may (a) waive its objection and such Defect and close,
or (b) terminate this Agreement, which election by Buyer shall be made within
fifteen (15) business days following notice of its objection to Seller. Upon
termination of this Agreement under the terms of this Section 6.4, no party to
this Agreement shall have any further claims under this Agreement against any
other party.
ARTICLE VII. CLOSING
7.1 CLOSING. If all the conditions to closing set forth in Articles
-------
IX and X hereof are satisfied and all consents and approvals necessary to
consummate the closing of the transactions described herein (the "CLOSING") have
been obtained or waived, the Closing shall occur on or about January 27, 1998 to
be effective as of 12:01 a.m. (Central Standard time) on the date of Closing and
the Hospital's Cost Reporting Period will end at that time. The parties agree,
however, that the transfer and sale of the Acquired Assets shall be calculated
and made effective as of 12:01 a.m. (Central Standard time) on January 2, 1998
(for accounting purposes) except that Adjusted Net Working Capital shall be
calculated, pursuant to Section 2.2 hereof, as of the date of the Closing. The
Closing shall occur at the offices of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time or place as the
27
parties may mutually agree. At the Closing, Seller shall receive federal or
other immediately available funds in the amount of the Purchase Price by wire
transfer.
7.2 TERMINATION. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the obligations of the parties hereunder may be
terminated on or prior to Closing as follows:
(a) By Seller (i) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; or (ii) in the event
Buyer breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by Buyer under the
terms of this Agreement, and Seller has provided written notice thereof to Buyer
giving reasonable specificity and Buyer has not cured same within thirty (30)
days and such breach is not waived by Seller in writing.
(b) By Buyer (i) in the event the transactions contemplated by this
Agreement have been prohibited or enjoined by reason of any final judgment,
decree or order entered or issued by a court of competent jurisdiction in
litigation or proceedings involving either Buyer or Seller; or (ii) in the event
Seller breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by Seller under the
terms of this Agreement and Buyer has provided written notice thereof to Seller
giving reasonable specificity and Seller has not cured same within thirty (30)
days and such breach is not waived by Buyer in writing.
(c) By Buyer or Seller if the Closing hereunder shall not have taken
place by December 31, 1998, or, by such later date as shall be agreed upon by an
appropriate amendment to this Agreement if the parties agree in writing to an
extension; provided, however, that a party shall not have the right to terminate
under this Section 7.2(c) if the conditions precedent to such party's obligation
to close have been fully satisfied and such party has failed or refused to close
after being requested in writing to close by the other party.
ARTICLE VIII. SELLER'S CONDITIONS TO CLOSE
The obligations of Seller under Article XI of this Agreement are
subject to the satisfaction, on or prior to Closing, of the following conditions
(which may be waived specifically in writing by Seller in whole or in part):
8.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
---------------------------------------------------------------
AGREEMENT. The representations and warranties of Buyer contained in this
---------
Agreement or in any certificate or document delivered to Seller pursuant hereto,
shall be deemed to have been made again at the Closing and shall then be true in
all respects, except for such failures to be true as would not reasonably be
expected to have a material adverse effect on the Acquired Assets; and Buyer
shall have performed and complied in all material respects with all covenants,
agreements
28
and conditions required by this Agreement to be performed or complied with by it
prior to or at Closing.
8.2 REGULATORY APPROVALS. Buyer shall have obtained (at its own cost)
--------------------
(a) all consents, licenses, permits, approvals, provider contracts,
determinations or certificates of need from the Mississippi State Board of
Health, (b) any certification for participation in the Medicaid program of the
State of Mississippi, and (c) any certification from the appropriate agency of
the federal government for participation in the federal Medicare program,
required for Buyer to acquire and operate the Acquired Assets as contemplated
hereunder. Any applicable waiting period required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act shall have expired and no other review, approval or
other action of the Federal Trade Commission or the Antitrust Division of the
United States Department of Justice, or state counterpart, shall be required in
order to consummate the transactions contemplated hereby.
8.3 NO MATERIAL ADVERSE CHANGE. No violations or alleged violations of
--------------------------
law by Buyer or its Affiliates, including those arising from patterns or
practices engaged in by Buyer or its Affiliates, other than matters which have
been previously publicly disclosed, shall have (a) resulted in any material
adverse change in Buyer's hospital business, or (b) materially adversely
affected Buyer's ability to consummate the transactions contemplated by this
Agreement.
8.4 NO ACTION/PROCEEDING. No action or proceeding before a court or
--------------------
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit the transaction herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Seller reasonably and in good ▇▇▇▇▇ ▇▇▇▇▇ that to
proceed with the transactions hereunder may constitute a violation of law or
otherwise subject Seller to any material liability.
8.5 COMPLIANCE WITH ARTICLE XI. Buyer shall have made to Seller the
--------------------------
deliveries required by Article XI hereof.
8.6 ORDER PROHIBITING TRANSACTIONS. No order shall have been entered
------------------------------
in any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
(c) imposing material limitations on the ability of Buyer effectively to acquire
and hold the Acquired Assets, or, in either case, to exercise rights of
ownership pursuant thereto, or (d) subjecting Seller to any material liability.
There shall have been no United States federal or state statute, rule or
regulation enacted or promulgated after the date of this Agreement that would
reasonably, directly or indirectly, result in any of the consequences referred
to in this Section.
29
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under Article XII of this Agreement are
subject to the satisfaction, on or prior to Closing, of the following conditions
(which may be waived in writing by Buyer in whole or in part):
9.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
---------------------------------------------------------------
AGREEMENT. The representations and warranties of Seller contained in this
---------
Agreement or in any certificate or document delivered to Buyer pursuant hereto,
shall be deemed to have been made again at the Closing and shall then be true in
all respects, except for such failures to be true as would not reasonably be
expected to have a material adverse effect on the Acquired Assets; and Seller
shall have performed and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at Closing.
9.2 NO MATERIAL ADVERSE CHANGE. There shall have been no material
--------------------------
adverse change in the condition, financial or otherwise, of the Hospital or the
Related Assets after September 30, 1997.
9.3 REGULATORY APPROVALS. Buyer shall have obtained (at its own cost)
--------------------
(a) certification for participation in the Medicaid program of the State of
Mississippi, (b) certification from the appropriate agency of the federal
government for participation in the federal Medicare program, and (c) all other
consents, licenses, permits, approvals, provider contracts, determinations or
certificates of need necessary in the reasonable judgment of Buyer. Any
applicable waiting period required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act shall have expired, and no other review, approval or other
action of the Federal Trade Commission or the Antitrust Division of the United
States Department of Justice, or state counterpart, shall be required in order
to consummate the transactions contemplated hereby.
9.4 NO ACTION/PROCEEDING. No action or proceeding before a court or
--------------------
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit the transaction herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Buyer reasonably and in good ▇▇▇▇▇ ▇▇▇▇▇ that to
proceed with the transactions hereunder may constitute a violation of law or
otherwise subject Buyer to any liability.
9.5 COMPLIANCE WITH ARTICLE X. Seller shall have made to Buyer the
-------------------------
deliveries required by Article X hereof.
9.6 ORDER PROHIBITING TRANSACTION. No order shall have been entered in
-----------------------------
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court shall have been issued which
would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
(c) imposing material limitations on the ability of Buyer effectively to acquire
and hold the Acquired Assets, or, in either case, to exercise rights of
ownership pursuant thereto,
30
or (d) subject Buyer to any liability. There shall have been no federal or
state statute, rule or, regulation enacted or promulgated after the date of this
Agreement that would reasonably result, directly or indirectly, in any of the
consequences referred to in this Section.
9.7 DEFEASANCE OF BONDS. The Bonds and Notes will be fully defeased
-------------------
and all collateral and obligations and security against the Acquired Assets will
be fully released to Buyer's reasonable satisfaction. Seller shall use the
amounts designated as "funded depreciation" in its audited financial statements
as the first source of funds for the defeasance of the Bonds and Notes.
9.8 CONSENTS. Seller shall have obtained substantially all of the
--------
consents described in Section 5.4 or in the event any such consents are not
obtained, the terms of Section 5.4 hereof shall have been complied with to the
reasonable satisfaction of Buyer.
ARTICLE X. OBLIGATIONS OF SELLER AT CLOSING
At Closing, Seller shall deliver or cause to be delivered to Buyer the
following in a form and substance reasonably satisfactory to Buyer:
10.1 DOCUMENTS RELATING TO TITLE. Seller shall execute, acknowledge,
---------------------------
deliver and cause to be executed, acknowledged and delivered to Buyer:
(a) General warranty deeds, in form satisfactory to Buyer and the
title insurer, with all recording, stamp tax, other transfer fees or gross
income taxes, if any, paid by Buyer, and conveying to Buyer good, valid and
marketable title in fee simple to the Real Estate free and clear of all liens,
mortgages, pledges, encumbrances, security interests, covenants, easements,
rights or way, equities, options, rights of first refusal, restrictions, special
tax or governmental assessments, defects in title, encroachments and other
burdens, except for Permitted Exceptions.
(b) General warranty bills of sales and assignments, in the form of
Exhibit A hereto, warranting and conveying to Buyer good, fee simple or
leasehold, as the case may be, valid and marketable title to all assets free and
clear of all liens, mortgages, pledges, encumbrances, security interests,
covenants, easements, rights of way, equities, options, rights of first refusal,
restrictions, special tax or governmental assessments, defects in title,
encroachments and other burdens, except for Permitted Exceptions, including
recordable assignments of any leases, options, rights of first refusal or other
interests or rights in any of the Acquired Assets necessary in order to provide
record notice of the assignment and conveyance of such rights and interests to
Buyer.
(c) Certificates of title to all vehicles which constitute assets and
certificates of stock of any Minority Interests which are incorporated or
endorsed by Seller, together with completed originals of any forms required by
the State of Mississippi to transfer the same, free and clear of liens and
payment by Seller of any sales tax, registration fee, exercise tax, surtax,
conveyance taxes or other fees related thereto.
31
(d) An assignment to Buyer of each Lease and Contract constituting an
Assumed Liability.
(e) The commitment to issue the Title Policy as specified in Section
6.1 hereof.
(f) Survey as specified in Section 6.2 hereof.
(g) Evidence satisfactory to Buyer of full defeasance of the Bonds
and release of all collateral and obligations related to the Acquired Assets.
10.2 POSSESSION. Seller shall deliver to Buyer full possession and
---------
control of the Acquired Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, encumbrances, and burdens of any kind
whatsoever, including limitations on use and rights of reclamation by donees,
except for Permitted Exceptions.
10.3 OPINION OF SELLER'S COUNSEL. Seller shall deliver to Buyer the
---------------------------
opinion of counsel for Seller, dated as of Closing, in form and substance
substantially similar to that which is attached hereto as Exhibit B.
10.4 CORPORATE EXISTENCE AND CORPORATE RESOLUTION. Seller shall
--------------------------------------------
deliver to Buyer a good standing certificate from the Secretary of State of the
State of Mississippi for each entity constituting Seller dated the most recent
practical date prior to Closing, together with a certified copy of the
resolutions of the Board of Directors of Seller authorizing the execution,
delivery and consummation of this Agreement and the execution, delivery and
consummation of all other agreements and documents executed in connection
herewith by them, including all deeds, bills of sale and other instruments
required hereunder and certified by officers of Seller to be validly adopted and
in full force and effect and unamended as of Closing.
10.5 CLOSING CERTIFICATE. Seller shall deliver to Buyer a certificate
-------------------
of an officer of Seller, dated as of Closing, certifying that (a) each covenant
and obligation of Seller has been complied with by Seller in all material
respects, and (b) each representation and warranty of Seller is true and correct
in all material respects on the Closing as if made on and as of the Closing
except for such failures to comply or failures to be true as would not
reasonably be expected to have a material adverse effect on the Acquired Assets.
10.6 THIRD PARTY CONSENTS. Seller shall deliver to Buyer any consents,
--------------------
approvals and authorizations of third parties which are necessary (in form
reasonably acceptable to Buyer) for the execution, delivery and consummation of
this Agreement, including those necessary for the assignment of the Leases and
Contracts.
32
10.7 TAXES AND OTHER PAYMENTS. Seller shall deliver to Buyer a
------------------------
certificate of non-foreign status signed by the appropriate party and sufficient
in form and substance to relieve Buyer of all withholding obligations under
Section 1445 of the Code.
10.8 NOTICE TO THIRD-PARTY PAYORS AND OTHERS. Seller shall deliver
---------------------------------------
executed notices of the sale of the Hospital and the Related Assets, to be
furnished to all third-party payors including the Programs, in the form of
Exhibit C hereto, and shall comply with all notice requirements imposed upon
sellers under the Uniform Commercial Code - Bulk Transfers adopted in the State
of Mississippi, if applicable.
10.9 EVIDENCE OF TAIL INSURANCE. Seller shall deliver to Buyer
--------------------------
evidence of insurance as provided in Section 5.11.
10.10 ADDITIONALLY REQUESTED DOCUMENTS; POST CLOSING ASSISTANCE. At
---------------------------------------------------------
the reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Seller shall cooperate with Buyer to put Buyer in actual possession
and operating control of the Acquired Assets, execute and deliver such further
instruments of sale, conveyance, transfer and assignment, as Buyer may
reasonably request in order to effectively sell, convey, transfer and assign the
Acquired Assets to Buyer, to execute and deliver such further instruments and to
take such other actions as Buyer may reasonably request to release Buyer from
all obligation and liability with regard to any obligation or liability retained
by Seller and to execute and deliver such further instruments and to cooperate
with Buyer as may be required or reasonably needed to enable Buyer to obtain all
necessary health care or regulatory certifications, approvals, consents,
licenses, accreditations or permits.
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
11.1 PURCHASE PRICE. Buyer shall deliver to Seller federal or other
--------------
immediately available funds in the aggregate amount of the Purchase Price
specified herein.
11.2 CORPORATE GOOD STANDING OR EXISTENCE AND CERTIFIED BOARD
--------------------------------------------------------
RESOLUTIONS. Buyer shall deliver to Seller a good standing certificate from the
-----------
Secretary of State of the State of Mississippi for Buyer dated the most recent
practical date prior to Closing and a certified copy of the resolutions of the
Board of Directors of Buyer approving this Agreement and consummation of the
transactions intended hereby .
11.3 OPINION OF BUYER'S COUNSEL. Buyer shall deliver to Seller an
--------------------------
opinion of counsel for Buyer, dated as of Closing, in form and substance
substantially similar to that which is attached hereto as Exhibit D.
33
11.4 ASSUMPTION OF LIABILITIES. Buyer shall assume and covenant to
-------------------------
fully perform and comply with all of the Assumed Liabilities by instruments
reasonably acceptable to Seller and Seller's counsel.
11.5 CLOSING CERTIFICATE. Buyer shall deliver to Seller a certificate
-------------------
of an officer of Buyer, dated as of Closing, certifying that (a) each covenant
and condition precedent of Buyer has been complied with by Buyer in all material
respects and (b) each representation and warranty of Buyer is true and correct
in all material respects on the Closing as if made on and as of the Closing
except for such failures to comply or failures to be true as would not
reasonably be expected to have a material adverse effect on the Acquired Assets.
11.6 SELLER'S EMPLOYEES. Buyer agrees to offer employment, at levels
------------------
of compensation not less than their current compensation, to all persons who
were employees of Seller as of Closing, including all former employees of Seller
who are eligible for reinstatement as of the Closing (collectively, the
"TRANSFERRED EMPLOYEES"). In addition, Buyer agrees to offer all Transferred
Employees the same basic benefit package, on the same terms, as that which is
offered to HMA's and its Affiliates' employees. Such offers will remain open for
at least ten (10) business days. For employees who accept Buyer's offer of
employment, Buyer shall (a) recognize the employees' length of service with
Seller for eligibility (including waiting periods) and vesting under all of
Buyer's employee benefit programs, including vacation and pension, (b) assume
accrued and unused vacation days, sick days and personal days, and (c) allow
participation in Buyer's 401K pension plan. Subject to the foregoing, special
waiting periods contained in Buyer's employee benefit plans will not apply to
Seller employees or covered dependents to the extent that such periods do not
apply to similarly situated new employees of Buyer. Buyer will not effect any
reductions in force for a period of twelve (12) months after Closing other than
reductions through attrition, flexible staffing for seasonal adjustments or
decreases in patient census. Buyer agrees to extend the aforesaid offers of
employment and benefits for an additional four (4) years for all current full-
time employees of Seller who are within five (5) years of retirement, and Buyer
agrees that, except for cause, it will not terminate any such employee until the
day following the date on which such employee qualifies for retirement. The
names of such employees and the respective dates on which they will qualify for
retirement are listed on Schedule 11.6 hereto, and Buyer and Seller hereby agree
that each such employee shall be a third party beneficiary of this Section 11.6.
11.7 HEALTH INSURANCE. Buyer covenants to offer open enrollment in its
----------------
group medical plan, without a limitation with respect to pre-existing
conditions, to any Seller employee or covered dependent who is not subject to
any pre-existing condition limitation under Seller's group medical plan (any
Seller employee or dependent who is subject to any pre-existing condition
limitation under Seller's plan at Closing shall not be subject to a longer
period than existed under Seller's plan had he or she continued to participate
in the same); provided, however, that it shall only be granted to all persons
who meet all of the following criteria: (i) were actively employed by Seller
immediately prior to Closing or were dependents of such employees, (ii) were
enrolled in Seller's group medical plan immediately prior to Closing, and (iii)
are employed by Buyer or are dependents of persons employed by Buyer after the
Closing. Special waiting periods or pre-existing condition limitations contained
in Buyer's group medical plan will not apply to Seller employees or covered
dependents to the extent that such periods or limitations do not apply to
34
similarly situated new employees of Buyer.
11.8 EMPLOYMENT OF KEY EXECUTIVES. Buyer shall continue the employment
----------------------------
of ▇▇▇▇ ▇. ▇▇▇▇ after the date of the Closing as set forth in Section 11.6 and
Section 11.7 and further agrees that if it terminates, without cause, the
employment of ▇▇▇▇ ▇. ▇▇▇▇ at any time within one (1) year of the date of
Closing, it shall pay to such employee a severance payment equal to (i) six (6)
months salary if the effective date of termination occurs after six (6) months
of the date of Closing, or (ii) if the effective date of the termination is
earlier than six (6) months of the date of the Closing, payment shall be equal
to the product of (x) one month's salary for such employee, and (y) the number
of months remaining from the effective date of such employee's termination to
the date which is one (1) year from the date of the Closing (less applicable
payroll withholding taxes, etc.). If ▇▇▇▇ ▇▇▇▇ is terminated after the first
anniversary of the date of Closing, the severance package for such employee
shall be discretionary and shall be the same as that given to other employees of
HMA or its Affiliates in similar positions and circumstances. Buyer and Seller
hereby agree that ▇▇▇▇ ▇. ▇▇▇▇ shall be a third party beneficiary of this
Section 11.8.
ARTICLE XII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
12.1 SURVIVAL. The covenants, obligations, representations and
--------
warranties of Buyer and Seller contained in this Agreement or any certificate or
document delivered pursuant hereto shall survive the date of Closing for a
period of four (4) years from the date of Closing; provided, however, Buyer's
obligations to employees listed on Schedule 11.6 hereto shall survive for a
period of five (5) years from the date of Closing; and, provided further, that
the following matters shall survive until the earlier of the date which is four
(4) years from the date of Closing and the date on which any applicable statute
of limitations has run: claims by third parties whether founded on negligence,
malpractice or other forms of alleged liability for acts, omissions or events,
adjustments under any third party payor or reimbursement programs, including
cost reports with respect to periods prior to and including the Closing
(collectively, "THIRD PARTY CLAIMS").
12.2 INDEMNIFICATION BY SELLER. Subject to the limitations set forth
-------------------------
herein, Seller promptly shall indemnify, defend and hold harmless Buyer and the
directors, officers, shareholders, employees and agents of Buyer (and with
respect to the COBRA coverage, Buyer and all affiliated corporations within a
controlled group relationship with Buyer (as determined under Section 414 of the
Internal Revenue Code)), and their employees against any and all claims, losses,
costs, and expenses (including reasonable costs of investigation, court costs
and legal fees) and other damages resulting from any Third Party Claim against
Buyer arising out of Seller's ownership, licensing or operation of the Acquired
Assets or the action, inaction or conduct of Seller, or any of Seller's
employees, agents, or independent contractors, in each instance relating only to
all periods of time prior to Closing, except the Assumed Liabilities.
(b) The indemnification set forth in this Section 12.2 shall survive
the Closing and shall remain in effect for a period of four (4) years after the
Closing Date. Any matter as to which a claim has been asserted by notice to
Seller that is pending or unresolved at the end of any
35
applicable limitation period shall continue to be covered by this Section 12.2
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid.
(c) Seller shall not be required to indemnify any person or entity
under this Section 12.2 unless the aggregate of all amounts for which indemnity
would otherwise by payable by Seller in the aggregate exceeds $100,000, and, in
such event, Seller collectively shall be responsible for only the amount in
excess of such $100,000.
12.3 INDEMNIFICATION BY BUYER.
------------------------
(a) Buyer shall promptly indemnify, defend, and hold harmless Seller,
the directors, officers, shareholders, employees, and agents of Seller against
any and all claims, losses, costs, and expenses (including reasonable costs of
investigation, court costs and legal fees) and other damages resulting from (i)
the post-Closing operation of the Acquired Assets; (ii) the Assumed Liabilities
and (iii) any failure of Buyer to comply with any applicable WARN obligations.
Any indemnification payment pursuant to the foregoing shall include interest at
the Rate from the date losses, costs, expenses or damages are incurred until the
date of payment.
(b) The indemnification set forth in this Section 12.3 shall survive
the Closing and shall remain in effect after the Closing Date. Any matter as to
which a claim has been asserted by notice to Buyer that is pending or unresolved
at the end of any applicable limitation period shall continue to be covered by
this Section 12.3 notwithstanding any applicable statute of limitations (which
the parties hereby waive) until such matter is finally terminated or otherwise
resolved by the parties under this Agreement or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
12.4 PROCEDURE FOR INDEMNIFICATION.
-----------------------------
(a) Notice. Promptly after receipt of written or actual notice of any
------
action or claim (the "CLAIM") as to which it asserts a right to indemnification,
the party seeking indemnification hereunder (the "INDEMNITEE") shall give
written notice thereof (the "NOTICE") to the person from whom indemnification is
sought (the "INDEMNITOR"), provided, however, that the failure of the Indemnitee
to give the Indemnitor prompt notice shall not relieve the Indemnitor of any of
its obligations hereunder, but may create a cause of action for breach for
damages directly attributable to such delay.
(b) Third Party Claims (i) If any claim for indemnification by
------------------
Indemnitee arises out of a Third Party Claim, the Indemnitor shall be entitled
to assume the defense thereof, by written notice to the Indemnitee within
fifteen (15) days after receipt of the Notice. Indemnitor shall thereupon
undertake to take all steps or proceedings to defeat or compromise any such
Claim, including retaining counsel reasonably satisfactory to the Indemnitee.
Except as otherwise provided herein, all costs, fees and expenses with respect
to any such claim shall be borne by Indemnitor. If the Indemnitor assumes the
defense of a Claim, it shall not settle such Claim unless
36
such settlement includes as an unconditional term thereof a release by the
claimant of the Indemnitee, reasonably satisfactory to the Indemnitee and except
that Indemnitor shall not, without the prior written consent of Indemnitee,
directly or indirectly require Indemnitee to take or refrain from taking any
action, or make any public statement, or consent to any settlement, which it
reasonably considers to be against its interest. Indemnitee shall have the right
to participate at its own expense in such proceedings, but control of such
proceedings shall remain exclusively with Indemnitor.
(ii) If the Indemnitor shall fail to notify the Indemnitee of
its desire to assume the defense of any such claim or action within the
prescribed period of time, then the Indemnitee may assume such defense in such
manner as it may deem appropriate, and the Indemnitor shall be bound by any
determinations made or any settlements thereof effected by the Indemnitee. The
Indemnitor shall be permitted, at its own expense, to join in such defense and
to employ its own counsel but control of such proceedings shall remain
exclusively with Indemnitee.
(iii) Indemnitor and Indemnitee agree to make available to each
other, their counsel and other representatives, all information and documents
reasonably available to them reasonably requested by the other which relate to
any such Claim or action, and to render to each other such reasonable assistance
as may be reasonably requested in order to insure the proper and adequate
defense of such Claim or action, but any costs or expenses related thereto shall
be borne by Indemnitor and provided that any failure (after written notice with
specificity and an opportunity to cure) shall not relieve the Indemnitor of any
of its obligations hereunder but may create a cause of action for breach for
damages directly attributable to such failure.
(c) Payment of Claims. Amounts payable by the Indemnitor to the
-----------------
Indemnitee under this Section 12.4 shall be payable by the Indemnitor as
incurred by the Indemnitee. In the event Indemnitor fails to pay, timely and
fully, any such amounts, Indemnitee may pay such Claim. In such event the
Indemnitee may recover from the Indemnitor, in an addition to the amount so
paid, (i) interest on the amount claimed at a floating rate equal to two points
over the rate published by Citibank N.A. as its "prime rate," as the same shall
be adjusted from time to time (the "RATE"), and (ii) reasonably attorneys' fees
in connection with the enforcement of payment under this Section 12.4.
(b) No Set-Off. The Indemnitee's right to indemnification under this
----------
Section 12.4 shall not be subject to set-off for any Claim by the Indemnitor
against the Indemnitee.
(e) Claims by a Straddle Patient. Any Claim by a patient relating to
----------------------------
professional negligence or similar matters involving a patient of the Hospital
or any of the Related Assets served both prior to Closing and subsequent to
Closing will be the responsibility of either Buyer or Seller in accordance with
the following guidelines; (i) if it is a Claim in which the incident giving
rise to liability clearly arose prior to Closing, Seller shall respond to the
loss and defense expenses; (ii) if it is a Claim in which the incident giving
rise to liability clearly arose subsequent to Closing, Buyer shall respond to
the loss and defense expenses; and (iii) in the event that it is not clear when
the incident giving rise to liability arose, Seller and Buyer will jointly
37
defend the case and each will fully cooperate with the other in such defense.
Once the case is closed, if Buyer and Seller cannot agree to the allocation of
either indemnity or expenses, then the matter shall be submitted to binding
arbitration in the State of Mississippi in accordance with the rules and
procedures of the American Arbitration Association.
12.5 MINIMUM NET WORTH. Seller hereby covenants that it shall, for a
-----------------
period of four (4) years from the date of the Closing, maintain a net worth of
at least $7,500,000 as set forth in its audited financial statements for each
fiscal year during such four (4) year period. At the end of each such fiscal
year, upon Buyer's written request, Seller shall deliver to Buyer a copy of its
audited financial statements for such fiscal year promptly upon the same
becoming available.
ARTICLE XIII. MISCELLANEOUS
13.1 NO ASSIGNMENT. Buyer may not assign all or any portion of its
-------------
rights or obligations under this Agreement.
13.2 OTHER EXPENSES. Except as otherwise provided in this Agreement,
--------------
Seller shall pay all of its own expenses in connection with the negotiation,
execution, and implementation of the transactions contemplated by this Agreement
and Buyer shall pay all of its own expenses in connection with the negotiation,
execution, and implementation of the transactions contemplated by this
Agreement. Any state and local sales taxes shall be borne by Buyer.
13.3 NOTICES. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five (5) days
after mailing with postage prepaid. Any such notice shall be sent as follows:
To Seller:
▇▇▇▇▇ Development Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. I.A. ▇▇▇▇▇▇▇▇▇
38
With copies to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
And to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Esq.
Use for courier services:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Use for mail:
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To Buyer:
Meridian HMA, Inc.
c/o Health Management Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
13.4 CONTROLLING LAW. This Agreement shall be construed, interpreted
---------------
and enforced in accordance with the laws of the State of Mississippi, without
regard to conflict of law principles.
13.5 HEADINGS. Any table of contents and paragraph headings in this
--------
Agreement are for convenience of reference only and shall not be considered or
referred to in resolving questions of interpretation.
13.6 BENEFIT. This Agreement shall be binding upon and shall inure to
-------
the exclusive benefit of the respective legal representatives and successors of
the parties hereto. This Agreement is not intended to, nor shall it, create any
rights in any other party.
39
13.7 PARTIAL INVALIDITY. The invalidity or unenforceability of any
------------------
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
13.8 WAIVER. Neither the failure nor any delay on the part of any
------
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall any
single or partial exercise of any right, power or remedy preclude any further or
other exercise thereof, or the exercise of any other right, power or remedy.
13.9 COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13.10 INTERPRETATION. All pronouns and any variation thereof shall be
--------------
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or entity, or the context, may require. With respect to
any matter or thing, the terms "including" or "includes" mean including but not
limited to such matter or thing. Further, it is acknowledged by the parties
that this Agreement including the Exhibits and Schedules hereto has undergone
several drafts with the negotiated suggestions of both; and, therefore, no
presumptions shall arise favoring either party by virtue of the authorship of
any of its provisions or the changes made through revisions.
13.11 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
----------------
Schedules hereto, constitutes the entire agreement between the parties hereto
with regard to the matter contained herein and it is understood and agreed that
all previous undertakings, negotiations and agreements between the parties are
merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer and Seller. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the party against which it is sought to be
enforced.
13.12 LEGAL FEES AND COSTS. In the event any party hereto elects to
--------------------
incur legal expenses to enforce or interpret any provision of this Agreement,
the prevailing party will be entitled to recover such legal expenses, including
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which such party shall be entitled.
13.13 KNOWLEDGE. "To the knowledge," "to the best of knowledge," "to
---------
the best knowledge, information and belief," or any similar phrase shall be
deemed to refer to the actual knowledge of those certain employees of Seller
listed on Schedule 13.13, after making reasonable inquiry.
13.14 PARTIES IN INTEREST. This Agreement shall be binding upon and
-------------------
inure to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement is intended to relieve or discharge the obligation of any
40
third person to any party to this Agreement.
13.15 NO CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE
------------------------
CONTRARY ELSEWHERE IN THIS AGREEMENT, NO PARTY (OR ITS AFFILIATES) SHALL, IN ANY
EVENT, BE LIABLE TO ANY/THE OTHER PARTY (OR ITS AFFILIATES) FOR ANY
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF REVENUE OR INCOME, COST OF
CAPITAL, OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY RELATING TO THE BREACH OR
ALLEGED BREACH OF THIS AGREEMENT.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"BUYER":
MERIDIAN HMA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice Chairman
MERIDIAN HMA NURSING HOME, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice Chairman
"SELLER":
▇▇▇▇▇ DEVELOPMENT SYSTEMS, INC.
By: /s/ I.A. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: I.A. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
THE ▇▇▇▇▇ HOSPITAL & BENEVOLENT ASSOCIATION D/B/A
▇▇▇▇▇ MEMORIAL HOSPITAL
By: /s/ I.A. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: I.A. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
▇▇▇▇▇ CARE CENTER, INC.
By: /s/ I.A. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: I.A. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
S-1
▇▇▇▇▇ HOME HEALTH SERVICES, INC.
By: /s/ I.A. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: I.A. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
▇▇▇▇▇ PROPERTY HOLDING COMPANY
By: /s/ I.A. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: I.A. ▇▇▇▇▇▇▇▇▇
Title: Treasurer
S-2