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Exhibit 10.29
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ASSET PURCHASE AGREEMENT
BETWEEN
THE DOLLY V L.C.
AS SELLER
AND
ITS MEMBERS
AND
NAHC II OF TEXAS, INC.
AS BUYER
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TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE.....................................................................................1
1.1 Purchase and Sale...........................................................................1
1.2 Excluded Assets.............................................................................4
1.3 Assumed Contracts, Leases and Liabilities...................................................4
1.4 Excluded Liabilities........................................................................4
1.5 Additional Real Estate......................................................................5
ARTICLE II. ACCOUNTS RECEIVABLE..................................................................................6
2.1 Seller's Accounts Receivable................................................................6
ARTICLE III. PURCHASE PRICE......................................................................................6
3.1 Purchase Price..............................................................................6
3.2 Taxes and Assessments; Prorations; Adjustments..............................................7
3.3 Closing Statements..........................................................................8
3.4 Allocation of Purchase Price. ..............................................................8
3.5 Escrow Agreement............................................................................8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................9
4.1 Organization, Qualification and Authority...................................................9
4.2 Absence of Default..........................................................................9
4.3 Financial Statements.......................................................................10
4.4 Operations Since December 31, 1996.........................................................11
4.5 Taxes......................................................................................12
4.6 Employment.................................................................................13
4.7 Licenses and Permits.......................................................................13
4.8 JCAHO and Accreditations...................................................................13
4.9 Medicare, Medicaid, and Other Third-Party Payors...........................................14
4.10 Peer Review................................................................................15
4.11 Compliance with Zoning, Land Use and Other Laws............................................15
4.12 Easements..................................................................................15
4.13 Title to Assets............................................................................15
4.14 Leases and Contracts.......................................................................16
4.15 Environmental Matters......................................................................18
4.16 Miscellaneous Representations Relating to Real Estate......................................20
4.17 Conditions of Assets.......................................................................21
4.18 Capital Expenditure and Construction.......................................................22
4.19 Future Construction........................................................................22
4.20 Litigation.................................................................................22
4.21 Seller's Employees.........................................................................23
4.22 Labor Relations............................................................................23
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4.23 Insurance..................................................................................24
4.24 Broker's or Finder's Fee...................................................................24
4.25 Medical Staff..............................................................................24
4.26 Conflicts of Interest......................................................................25
4.27 Xxxx-Xxxxxx and Other Liens................................................................25
4.28 Experimental Procedures....................................................................25
4.29 Intellectual Property; Computer Software...................................................25
4.30 Inventories................................................................................25
4.31 Motor Vehicles.............................................................................26
4.32 Employee Benefit Plans.....................................................................26
4.33 Compliance with Laws.......................................................................27
4.34 No Omissions or Misstatements..............................................................28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................28
5.1 Organization, Qualification and Authority..................................................28
5.2 Absence of Default.........................................................................29
ARTICLE VI. COVENANTS OF PARTIES................................................................................29
6.1 Preservation of Business and Assets........................................................29
6.2 Absence of Material Change.................................................................29
6.3 Access to Books and Records................................................................30
6.4 Consents...................................................................................31
6.5 Risk of Loss...............................................................................32
6.6 Condemnation...............................................................................32
6.7 Good Faith.................................................................................33
6.8 Preserve Accuracy of Representations and Warranties........................................33
6.9 Maintain Books and Accounting Practices....................................................33
6.10 Indebtedness; Liens........................................................................33
6.11 Compliance with Laws and Regulatory Consents...............................................33
6.12 No Sale, Merger or Consolidation...........................................................34
6.13 Maintain Insurance Coverage................................................................34
6.14 Medicare and Medicaid Reporting............................................................34
6.15 Current Return Filing......................................................................35
6.16 Performance................................................................................35
6.17 WARN Act...................................................................................35
6.18 Termination of Employee Plans..............................................................35
6.19 Power to Endorse Checks....................................................................36
6.20 Phase I Environmental Assessment; Additional Environmental
Inspections................................................................................36
ARTICLE VII. TITLE AND SURVEY...................................................................................37
7.1 Title Report and Policy....................................................................37
7.2 Survey.....................................................................................38
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7.3 U.C.C. Searches...........................................................................38
7.4 Defects and Cure...........................................................................38
ARTICLE VIII. CLOSING...........................................................................................39
8.1 Closing....................................................................................39
8.2 Termination................................................................................39
ARTICLE IX. SELLER'S AND MEMBERS' CONDITIONS TO CLOSE...........................................................40
9.1 Representations and Warranties True at Closing; Compliance with
Agreement..................................................................................40
9.2 Regulatory Approvals.......................................................................40
9.3 No Action/Proceeding.......................................................................40
9.4 Compliance with Article XII................................................................40
9.5 Approval by Counsel........................................................................41
9.6 Order Prohibiting Transaction..............................................................41
9.7 Completion of Exhibits.....................................................................41
ARTICLE X. BUYER'S CONDITIONS TO CLOSE..........................................................................41
10.1 Representations and Warranties True at Closing; Compliance with
Agreement..................................................................................41
10.2 No Loss, Damage or Destruction.............................................................41
10.3 No Material Adverse Change.................................................................41
10.4 Regulatory Approvals.......................................................................42
10.5 No Action/Proceeding.......................................................................42
10.6 Compliance with Articles VII and XI........................................................42
10.7 Inspection of Assets; U.C.C. Searches, etc.................................................42
10.8 Approval by Counsel........................................................................42
10.9 Order Prohibiting Transaction..............................................................43
10.10 Repayment of Loans.........................................................................43
10.11 Consents...................................................................................43
10.12 Tail Insurance.............................................................................43
10.13 Approvals..................................................................................43
10.14 Completion of Exhibits.....................................................................43
ARTICLE XI. OBLIGATIONS OF SELLER AND MEMBERS AT CLOSING........................................................43
11.1 Documents Relating to Title................................................................43
11.2 Possession.................................................................................44
11.3 Opinion of Seller's Counsel................................................................44
11.4 Good Standing and Resolutions..............................................................45
11.5 Closing Certificate........................................................................45
11.6 Third Party Consents.......................................................................45
11.7 Taxes and Other Payments...................................................................45
11.8 Releases and Other Matters.................................................................46
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11.9 Notice to Third-Party Payors...............................................................46
11.10 Additionally Requested Documents; Post Closing Assistance..................................46
ARTICLE XII. OBLIGATIONS OF BUYER AT CLOSING....................................................................47
12.1 Purchase Price.............................................................................47
12.2 Corporate Good Standing and Certified Board Resolutions....................................47
12.3 Opinion of Buyer's Counsel.................................................................47
12.4 Assumption of Liabilities..................................................................47
12.5 Closing Certificate........................................................................47
12.6 Seller's Employees.........................................................................47
12.7 Health Insurance...........................................................................47
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION........................................................47
13.1 Survival...................................................................................47
13.2 Indemnification by Seller..................................................................48
13.3 Indemnification by Buyer...................................................................48
13.5 Procedure for Indemnification..............................................................49
13.6 Assignment by Buyer. .....................................................................51
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS.............................................................................52
14.1 Covenant Not to Compete....................................................................52
14.2 Enforceability.............................................................................52
ARTICLE XV. MISCELLANEOUS.......................................................................................53
15.1 Assignment.................................................................................53
15.2 Other Expenses.............................................................................53
15.3 Notices....................................................................................53
15.4 Controlling Law............................................................................54
15.5 Headings...................................................................................54
15.6 Benefit....................................................................................54
15.7 Partial Invalidity.........................................................................54
15.8 Waiver.....................................................................................54
15.9 Counterparts...............................................................................55
15.10 Interpretation; Knowledge..................................................................55
15.11 Entire Agreement...........................................................................55
15.12 Legal Fees and Costs.......................................................................55
15.13 Exclusivity................................................................................55
15.14 Completion of Exhibits.....................................................................56
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EXHIBIT INDEX
Exhibit No. Exhibit Matter
----------- --------------
1.1(1) Real Estate
1.1(2) Equipment and Furnishings
1.2 Excluded Assets
1.3 Assumed Liabilities
1.4(1) Long Term Notes Payable
3.1(5) Escrow Agreement
3.4 Purchase Price Allocation
3.5 Escrow Agreement
4.2 Absence of Default; Consents
4.3 Financial Statements
4.4 Operations since December 31, 1996
4.5 Tax Payment Delinquencies
4.6 Employment Matters
4.7 Licenses and Permits
4.8 JCAHO and Other Accreditations
4.9 Program Agreements
4.10 Peer Review Memorandum of Understanding
4.11 Exceptions to Zoning, Land Use and Other Laws
4.13(2) Permitted Exceptions
4.13(3) Transferred Assets
4.13(4) Trade names and Fictitious Names
4.13(5) Addresses for Accounts Receivable
4.14 Leases and Contracts
4.15 Hazardous Materials
4.19 Future Construction
4.20 Litigation
4.21(a) Employees, Fringe Benefits and Personnel Policies
4.21(b) Terminated Employees
4.23 Insurance
4.26 Conflicts of Interest
4.29 Intellectual Property
4.32 Employee Benefit Plans
4.32(2) Employee Benefit Plans - Prohibited Transactions
4.32(3) Employee Benefit Plans - Noncompliance
4.32(4) Employee Benefit Plan Obligations being assumed by Buyer
11.6(3) Estoppel and attornment letters from tenants
11.9 Form of Notice to Third Party Payors
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GLOSSARY
Section Defined Term
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13.1 Absolute Covenants
3.3 Accountants
4.8(3) ACR
4.15(2) Affiliates
4.15(2) Agents
1.1 Assets
4.14(1) Assumed Contracts
1.3 Assumed Liabilities
4.33 Bulk Sales Law
Page 1 Buyer
13.2 Buyer Indemnified Parties
4.8(2) CAP
4.15(1) CERCLA
13.5(1) Claim
8.1 Closing
3.1(2) Closing Net Working Capital
1.4(6) COBRA coverage
3.4 Code
7.1 Commitment
4.15(2) control
14.1 Xxxxx
7.4 Defects
4.32(1) Employee Plan
1.1(2) Equipment and Furnishings
4.32(1) ERISA
3.1(5) Escrow Agreement
1.2 Excluded Assets
1.4 Excluded Liabilities
3.3 Final Closing Statement
4.3(1) Financial Statements
13.4 Foundation
4.15(1) Hazardous Substances
Recital A Hospital
13.5(1) Indemnitee
13.5(1) Indemnitor
4.29 Intellectual Property
1.1(3) Inventory
4.8(1) JCAHO
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Page 1 Seller
4.14(1) Leases and Contracts
4.7 Licenses and Permits
13.2 Loss
Page 1 Member
Page 1 Members
3.1(2) Net Working Capital
14.1 Noncompete Area
14.1 Noncompete Period
13.5(1) Notice
4.21 part-time employee
4.13(2) Permitted Exceptions
3.3 Preliminary Closing Statement
13.4 Prior Period Loss
4.9(1) Program Agreements
4.9(1) Programs
1.3(2) PTO
3.1 Purchase Price
13.2 Rate
4.15(1) RCRA
1.1(1) Real Estate
1.1(4) Receivables
Page 1 Seller
7.2 Survey
13.6 Tangible Net Worth
7.4 Title Evidence
7.1 Title Policy
7.3 U.C.C. Searches
4.3(1) Unaudited Financial Statements
4.21 WARN
14.1 Xxxxxx
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, is made the 31st day of July, 1997, by
and among THE DOLLY V L.C., a Texas limited liability company ("SELLER"),
XXXXXXX XXXXXXXX, M.D., XXX X. XXXXX, XXX XXXXXXXX, M.D., XXXX XXXXX, HEJAR,
LTD., XXXXX XXXXXXX, M.D., XXXXXX XXXXXXX, M.D., XXXXX XXXXX, R. XXXXXXX XXXXXX,
XXXXXX X. XXXX, XXXX XXXXX and L. XXXXXX XXXXXXX (collectively, the "MEMBERS,"
and individually, a "MEMBER") (the Members are party to this Agreement to
evidence their consent to the transaction described herein and to affirm their
specific representations, covenants and agreements herein, and not to guaranty
the obligations of Seller hereunder), and NAHC II OF TEXAS, INC., a Tennessee
corporation ("BUYER").
R E C I T A L S:
A. Seller owns and operates Xxxxx Xxxxxxx Memorial Hospital, located on
approximately 7.498 acres of land and with a building consisting of 49,589
square feet at 000 Xxxx Xxxxxxx 00, Xxx Xxxxxx, Xxxxx 00000, including a
hospital comprised of 81 licensed beds, and other inpatient and outpatient
hospital and health care related businesses and programs (the "HOSPITAL"); and
B. Members own 100% of the equity (including both financial and
governance rights) in Seller; and
C. Except for the Excluded Assets described in Section 1.2, Seller and
Members desire to sell and transfer to Buyer or its designee the Hospital and
the Assets (as defined in Section 1.1), and Buyer or its designee desires to
purchase the same from Seller and the Members, 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, the undersigned agree as
follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale. Except as provided in Section 1.2, Seller agrees
to sell, transfer, assign, convey and deliver to Buyer (or Buyer's designee) and
Buyer (or Buyer's designee) shall purchase from Seller all right, title and
interest in all of the following assets (collectively, the "ASSETS"):
(1) Good and indefeasible fee simple (or leasehold with
respect to items noted as such on the exhibit, as the case may be), right, title
and interest in all of the
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Hospital's interests in real property, as described in Exhibit 1.1(1);
including, leaseholds, easements and improvements thereon, plants, fixed assets,
buildings, structures, fixtures (including fixed machinery and fixed equipment)
situated thereon or forming a part thereof and all appurtenances, easements and
rights-of-way, and air, mineral or other rights related thereto (collectively,
the "REAL ESTATE");
(2) All tangible business and 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, wherever located, including but not limited to the items listed on
Exhibit 1.1(2) (collectively, the "EQUIPMENT AND FURNISHINGS");
(3) All inventory of goods and supplies used or maintained in
connection with or located in the Hospital, including, but not limited to, food,
cleaning materials, disposables, linens, consumables, office supplies, drugs and
medical supplies (collectively, the "INVENTORY");
(4) All Seller's patient accounts, notes and other
receivables, including those from third party payors, whether or not written off
(collectively, the "RECEIVABLES");
(5) All patient, medical, personnel, clinical and other
records of the Hospital (including both hard and microfiche copies), and all
manuals, books and records used in operating the Hospital, including personnel
policies and manuals, and computer software;
(6) 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, together with assignments thereof, if required, and
all waivers which Seller currently has, if any, pertaining thereto;
(7) All plans and surveys, including "as-built" plans, all
plats, specifications, engineers' drawings, and architectural renderings and
similar items relating to the Assets (including, without limitation, those
relating to utilities, easements and roads), in Seller's possession or
obtainable by Seller (without unreasonable cost and if it is unreasonable,
Seller will provide notice to Buyer prior to Closing);
(8) All goodwill associated with the Hospital and other
intangible assets including, but not limited to, the exclusive rights to use the
name "Xxxxx Xxxxxxx Memorial Hospital" and all derivations thereof and the other
trade names listed on Exhibit 4.13(4)
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and, to the extent assignable by Seller, all warranties (express or implied) and
rights and claims assertable by (but not against Seller) related to the
operation of the Hospital and all telephone and facsimile numbers as currently
used in the operation of the Hospital;
(9) All prepaid assets;
(10) Seller's contract and leasehold rights and interests
pursuant to contracts for purchase or lease of real and personal property,
rights of first refusal, options, construction contracts, contracts for
purchase, sale or lease of equipment, goods or services currently furnished or
to be furnished at or to the Hospital which are identified as Assumed Contracts
on Exhibit 4.14;
(11) All assets reflected on the Financial Statements, as
defined in Section 4.3(1), and any additions thereto up through the Closing less
deletions therefrom sold or consumed in the ordinary course of business;
(12) Seller's interest in all property used in connection with
or for the benefit of the Hospital, other than Excluded Assets, as defined in
Section 1.2, whether real, personal or mixed, tangible or intangible, arising or
acquired after the date of this Agreement and prior to Closing;
(13) All insurance proceeds (including deductibles,
co-payments or self insured requirements) arising in connection with damage to
the Assets occurring after the date of this Agreement and prior to Closing, to
the extent not expended for repair and restoration of the Assets;
(14) Any claims of Seller against third parties relating to
the Assets, xxxxxx or inchoate, known or unknown, contingent or otherwise;
(15) All security or other deposits and prepayments made by
tenants of Seller pursuant to leases or subleases;
(16) Seller's 45% interest in San Xxxxxx Medical Associates
After Hours Clinic (the "Night Clinic"); and
(17) All other property, other than Excluded Assets, of every
kind or description owned by Seller and used or held for use in the business of
the Hospital, whether or not reflected on the Financial Statements, wherever
located and whether or not similar to the items specifically set forth above,
and all other businesses and ventures directly or indirectly owned by Seller in
connection with the operations of the Hospital.
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1.2 Excluded Assets. Seller is not selling and Buyer is not purchasing
or assuming obligations with respect to those items identified on Exhibit 1.2
(collectively, the "EXCLUDED ASSETS"). All tangible Excluded Assets owned by
Seller shall be removed from the Assets by Seller prior to Closing without
damage or defacement to the Assets.
1.3 Assumed Contracts, Leases and Liabilities. At Closing, Buyer will
assume all of the following (collectively, the "ASSUMED LIABILITIES"):
(1) All obligations accruing after Closing with respect to
those contracts, purchase orders and leases which are identified as Assumed
Contracts on Exhibit 1.3 hereto, and the obligation to administer the COBRA
coverage (as defined below) with respect to those individuals listed on Exhibit
4.21(a) (but excluding any obligations to give notice, or other liabilities or
obligations related to COBRA).
(2) All accrued compensation, vacation time and paid time off
("PTO") and build up of sick leave for periods of employment with Seller and
Seller's predecessor, together with all related taxes, for Seller's employees
who become employees of Buyer, which time accrued prior to Closing; provided,
however, that Buyer shall assume (or pay, if applicable) the same only to the
extent that the same is included in the calculation of Net Working Capital, as
defined in Section 3.1, or Buyer has received a credit therefor under Section
3.1(5). Notwithstanding the preceding, Buyer will assume all taxes with respect
to PTO and such taxes will not be included in the computation of Net Working
Capital.
(3) All amounts payable under the Medicare and Medicaid
Programs applicable to cost reports filed for services rendered through the
Closing.
(4) Seller's current liabilities, but only to the extent
included in the calculation of Net Working Capital.
1.4 Excluded Liabilities. Seller shall remain responsible for all
liabilities and obligations not expressly assumed by Buyer (collectively, the
"EXCLUDED LIABILITIES"), including but not limited to the following:
(1) All of the Seller's long-term debt, including but not
limited to all obligations pursuant to or related to the long term notes payable
listed on the attached Exhibit 1.4(1).
(2) Obligations or liabilities to any donor with respect to
any and all gifts, devises, bequeaths or donations in any way related to the
Hospital;
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(3) Liabilities or obligations with respect to the ownership
or operation of any assets owned or operated by Seller other than the Assets
(including the Excluded Assets);
(4) The assets and liabilities of all employee benefit plans
except with respect to the vacation/PTO and sick leave assumed pursuant to
Section 1.3(2);
(5) All current liabilities up to and through Closing except
those which are included in the calculation of Net Working Capital;
(6) All liabilities and commitments relating to the time
periods prior to and including Closing for all of the following: suits, claims,
indemnities, mortgages, contingent liabilities and other obligations of Seller
(including, without limitation, malpractice claims or suits and other forms of
liability for acts and omissions or events whether scheduled or unscheduled);
any and all investment tax credit recapture; all impositions of income tax and
other taxes; Xxxx-Xxxxxx liabilities; violation or liabilities under
environmental laws; except pursuant to Section 1.3(2), all employee (and former
employee) wages, salaries and benefits (other than as assumed pursuant to
Section 1.3(2)), including, without limitation, any claims (including penalties
and interest) under ERISA, and any COBRA liabilities and obligations, including
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 of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (hereinafter
referred to as "COBRA COVERAGE"); provided, that after Closing, Buyer shall
provide COBRA coverage (with costs paid by COBRA recipients), and administer
COBRA coverage for those employees of Seller identified as being entitled to
COBRA coverage on Exhibit 4.21(a);
(7) Any intercompany receivables;
(8) All amounts now or hereafter payable under the Medicare or
Medicaid programs with respect to periods through the Closing, including any
amount payable if any gain occurs as a result of the sale of the Hospital,
except for amounts included in the Net Working Capital computation; and
(9) Any other liabilities or obligations of Seller not
specifically assumed by Buyer pursuant to this Agreement.
1.5 Additional Real Estate. Other than the Excluded Assets, Seller and
Buyer acknowledge and agree that it is their intent to transfer to Buyer all
real estate used in or related to the operation of the Hospital that is owned or
leased directly by the Seller or by an affiliate of the Seller. If any tract or
parcel of real estate (or buildings, improvements and fixtures thereon or any
easement, appurtenances, rights of way or other rights related
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thereto), whether owned or leased which should have been identified on Exhibit
1.1(1) is inadvertently not included on Exhibit 1.1(1) and such errors are
discovered after execution of this Agreement, the parties agree that Exhibit
1.1(1) shall be amended prior to Closing to correct such errors and such amended
Exhibit shall then be controlling. In the event that any such errors are
discovered subsequent to the Closing, to the extent necessary to effect the
intent of this Agreement, the parties agree that Exhibit 1.1(1) shall be amended
to correct such errors and such amended Exhibit 1.1(1) shall be controlling, and
the Seller shall execute and deliver or cause to be executed and delivered,
deeds, instruments of correction, or such other instruments, and to take or
cause to be taken, such other steps as may be necessary to correctly vest or
convey the right title to any such real estate to Buyer in accordance with the
terms and provisions of this Agreement. The obligations pursuant to this Section
shall survive Closing.
ARTICLE II. ACCOUNTS RECEIVABLE
2.1 Seller's Accounts Receivable. Buyer is purchasing all of Seller's
accounts receivable, including patient accounts receivable, long-term patient
accounts receivable, income guarantee advances, amounts receivable from third
party payor programs (governmental or commercial), notes, other receivables,
whether or not written off. After the Closing, Seller shall remit to Buyer any
payments received by Seller with respect to the accounts receivable sold to
Buyer. Any funds so collected will be remitted to the Buyer within 5 days
following receipt of such payments.
ARTICLE III. PURCHASE PRICE
3.1 Purchase Price. Subject to the terms and conditions hereof
(including Section 3.5), the purchase price payable by Buyer to Seller for the
Assets shall be an amount derived in the following manner (the "PURCHASE
PRICE"):
(1) Seven Million Seven Hundred Fifty Thousand and No/100
Dollars ($7,750,000.00);
(2) PLUS or MINUS the amount of the Closing Net Working
Capital. The term "CLOSING NET WORKING CAPITAL" shall mean the Net Working
Capital calculated as of Closing. The term "NET WORKING CAPITAL" shall mean the
value of the following asset accounts less the value of the following liability
accounts as those terms are used in the Financial Statements, all recorded and
valued in accordance with generally accepted accounting principles, consistently
applied: Assets - cash, accounts receivable (less allowances for
uncollectibles), inventories and prepaid expenses; Liabilities - accounts
payable, accrued expenses payable, and short-term and long-term portions of
leases
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payable. If there are any third-party cost report estimates or payables/
receivables, they are specifically included in the definition of Net Working
Capital.
(3) LESS the amount of any credit for accrued compensation,
vacation/holiday, sick leave (whether or not recognized on the Financial
Statements) and related taxes assumed by Buyer pursuant to Section 1.3(2) (but
not otherwise included in the calculation of Net Working Capital);
(4) PLUS or MINUS, as appropriate, the proration of property
taxes, utilities, rentals and payments under Assumed Contracts (as more clearly
detailed in Section 3.2), except to the extent already included in the
calculation of Net Working Capital;
(5) PLUS $150,000 as payment in full for all long-term patient
pay receivables written off by Seller prior to Closing.
Buyer and Seller will work together to agree on adjustments to the Net
Working Capital by making a good faith estimate at Closing and to agree as to
the final amount within ninety (90) days after Closing as set forth in Section
3.3 hereof.
The Purchase Price will be payable in immediately available funds as
provided in Section 8.1.
3.2 Taxes and Assessments; Prorations; Adjustments. Seller shall pay or
credit against the Purchase Price the amount of all delinquent real estate and
personal property taxes, including penalties and interest, and all special
assessments that are a lien as of the day of Closing, both current and
reassessed. Seller shall also credit on the Purchase Price all unpaid real
estate and personal property taxes and assessments not yet due for the years
prior to the Closing and a portion of such taxes for the year of Closing
prorated through the date of Closing not already included in the calculation of
Net Working Capital. The proration of the undetermined taxes and assessments
shall be based upon a 365-day year and on the most recently available tax rate
and valuation. It is the intention of the parties in making the tax proration to
allow Buyer a credit as close in amount as possible to the amount which Buyer
will be required to pay, giving effect to applicable exemptions, discounts,
recently voted millage, changes in valuation or other similar matters which may
have an effect on the amount of the real estate and personal property taxes,
whether or not they have been certified.
To the extent not included in the calculation of Net Working Capital,
Seller shall prorate rentals received from tenants and subtenants with respect
to leased facilities covering the period from and after Closing, none of which
may be applied by Seller to delinquent rents by credit against the Purchase
Price. Rents collected by Seller for the
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month in which Closing occurs shall be prorated to the Closing. Rents collected
by Buyer after Closing shall be attributed to current rent first and then to
delinquent rent in reverse chronological order. Any deposits (including any
capital occupancy fee or occupancy deposit) from tenants or the like, which are
refundable shall be a credit towards any purchase price and the obligation to
refund the same shall be an assumed obligation of Buyer and entitle Buyer to a
credit.
Utilities and payments under Assumed Contracts, as defined in Section
4.14(1), shall be prorated at Closing.
3.3 Closing Statements. The adjustments specified in Sections 3.1 and
3.2 shall be estimated by the parties hereto in good faith at the Closing based
on the most current interim financial statements with provisional adjustments as
shall be mutually agreed at Closing and shall be called the "PRELIMINARY CLOSING
STATEMENT." No later than ninety (90) days after the Closing, the parties hereto
shall prepare the "FINAL CLOSING STATEMENT" reflecting the items listed above
determined in accordance with generally accepted accounting principles on an
accrual basis applied consistently with prior periods. Adjustments made after
the Closing based on the Final Closing Statement shall be payable in cash, on or
before the tenth day following the day the Final Closing Statement is agreed
upon, with interest on any adjustments at the Rate (as defined in Section 13.2)
commencing at Closing. If Buyer and Seller are unable to agree on the Final
Closing Statement within ninety (90) days after the Closing, they shall appoint
Deloitte & Touche (the "ACCOUNTANTS"), to make such determination which
determination shall be final and binding on the parties hereto for the purpose
of this Agreement, and Buyer and Seller shall each pay one-half the cost of the
Accountants.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in the manner set forth in Exhibit 3.4, which Exhibit shall be
provided by Buyer at or before the Closing. 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.
3.5 Escrow Agreement. One Million Five Hundred Thousand and No/100
Dollars ($1,500,000.00) of the Purchase Price shall be deposited into an
interest bearing escrow account pursuant to the terms of an escrow agreement
(the "ESCROW AGREEMENT"), attached hereto as Exhibit 3.5, the purpose of which
is to (i) provide amounts to cover any adjustment in the Net Working Capital and
(ii) protect the Buyer from any breach of representations, warranties and
covenants contained herein.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
As inducements to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller hereby represents and warrants to
Buyer, which representations and warranties shall be true and correct on the
date hereof and on Closing, as if then restated, as follows:
4.1 Organization, Qualification and Authority. Seller is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Texas. Seller has full power and authority to (i) own,
lease and operate its facilities and assets as presently owned, leased and
operated, (ii) carry on its business as it is now being conducted, and (iii)
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 thereof without the
consent, approval or authorization of, or obligation to notify, any person,
entity or governmental agency (other than the notification required to be made
to the Texas Department of Health). Seller is in good standing in each state in
which its operations make it necessary to be so qualified. Except for Members,
no other person or entity owns or holds, has any interest in, whether legal,
equitable or beneficial, or has the right to purchase, any equity interest,
voting interest or financial interest or other security of Seller. Seller,
directly or indirectly, owns no capital stock, security, interest or other
right, or any option or warrant convertible into the same, of any corporation,
partnership, joint venture or other business enterprise and Seller has no
commitments to purchase any such interests, other than its forty-five percent
(45%) interest in the Night Clinic pursuant to the Letter of Agreement between
San Xxxxxx Medical Associates and Xxxxx Xxxxxxx Memorial Hospital. The
execution, delivery and consummation of this Agreement and all other agreements
and documents executed in connection herewith by Seller have been duly
authorized by all necessary action on the part of Seller. No other action,
consent or approval on the part of Seller, Members or any other person or entity
is necessary to authorize Seller's due and valid 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 Seller and/or Members, upon due execution and
delivery thereof, shall constitute valid and binding obligations of each of
Seller and/or Members, enforceable in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by general principles
of equity.
4.2 Absence of Default. Upon receipt of the consents specified in
Exhibit 4.2 and the payment in full by Seller of those obligations listed on
Exhibit 1.4(1), the execution, delivery and consummation of this Agreement and
all other agreements and documents executed in connection herewith by Seller
and/or the Members 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
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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 Assets pursuant to, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of the Assets under: (a) any term or provision of the organizational documents
of Seller or the Members; (b) any contract, lease, purchase order, agreement,
indenture, mortgage, pledge, assignment, permit, license, approval or other
commitment to which Seller and/or the Members are a party or by which Seller
and/or the Members or the Assets are bound (except for such consent requirements
with respect to the Assumed Contracts as are identified in Exhibit 4.14(1)); (c)
any judgment, decree, order, regulation or rule of any court or regulatory
authority, or (d) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Seller, Members and/or the Assets are subject that would have
a material adverse effect on Buyer or the Assets.
4.3 Financial Statements.
(1) Attached as Exhibit 4.3 are true and correct copies of the
unaudited Financial Statements of Seller for the fiscal years ended December 31,
1994, 1995 and 1996, along with the interim unaudited financial statements of
Seller for the five (5) month period ending May 31, 1997 (collectively, the
"UNAUDITED FINANCIAL STATEMENTS" together with the financial statements
described in Section 4.3(2) shall be the "FINANCIAL STATEMENTS"). The Financial
Statements accurately reflect the results of the Hospital. The Financial
Statements present fairly and accurately the financial position of Seller, the
results of its operations and all costs and expenses for the periods specified.
The Financial Statements are true, complete and correct, and have been prepared
in conformity with generally accepted accounting principles, applied
consistently for the periods involved; provided, that certain long term patient
pay receivables of Seller, and Seller's interest in the San Xxxxxx Medical
Associates Night Clinic (both as more particularly described in Exhibit 4.3) are
not reflected therein. The Financial Statements are in accordance with the books
and records of Seller. Except as set forth in the Financial Statements, or as
otherwise specified on Exhibit 4.3, Seller has no known contingent liabilities
or obligations.
(2) Seller shall cause to be prepared interim unaudited
monthly financial statements for each month after the most recent delivered
Unaudited Financial Statements, which shall be delivered to Buyer within two (2)
business days after they are created (but the delivery shall be no later than
twenty (20) days after the end of the month which the Unaudited Financial
Statements relates to), and after delivery shall be deemed a part of the
Unaudited Financial Statements.
(3) After Closing, Seller shall make its books and records
available to Buyer and Buyer's auditors at reasonable times and in a manner so
as to not unduly interfere with Seller's operations, and otherwise cooperate
with Buyer in order to permit
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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. The books and
records of Seller are in such order and completeness so that an unqualified
audit may be performed for such periods. Seller agrees to cooperate, at Buyer's
expense, with Buyer in Buyer's preparation of financial statements relating to
such periods and Buyer's filing in a timely manner registration statements,
private placement memoranda and periodic reports, if any, pursuant to applicable
federal and state securities laws. Seller intends to leave Seller's books and
records (other than corporate records) with Buyer after the Closing.
4.4 Operations Since December 31, 1996. Except as set forth on Exhibit
4.4 since December 31, 1996, Seller has conducted its business only in the
ordinary course and there have been no:
(1) material adverse changes in the condition, financial or
otherwise, of the Assets, the business or prospects of, or in the results of
operations of the Hospital or Seller;
(2) terminations of any contract, lease or other agreement to
which Seller is a party except by Seller, or damage or destruction to the Assets
(other than related to current renovation projects), whether or not covered by
insurance;
(3) sales, leases, transfers or other dispositions by Seller
of any of the Assets, mortgages or pledges of or the imposition of any liens,
charges or encumbrances in excess of, in the aggregate Five Thousand and No/100
Dollars ($5,000.00) on any of the Assets or removal of any of the Assets from
the Real Estate, other than those made in the ordinary course of business;
(4) increases in the compensation payable by Seller to any
Members, employees, directors, managers, governors, independent contractors or
agents, or any increase in, or institution of, any bonus, insurance, pension,
profit-sharing or other employee benefit plan, remuneration or arrangements made
to, for or with such persons;
(5) changes in the composition of the medical staff of the
Hospital, other than normal turnover;
(6) changes in the rates charged by the Hospital for its
service;
(7) any net operating losses incurred in the operation of the
Hospital;
(8) any dividends, distributions or extraordinary payments by
Seller;
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(9) capital expenditures, additions or betterments to the
Hospital in excess of, in the aggregate Ten Thousand and No/100 Dollars
($10,000.00);
(10) discharges or satisfactions of, or unscheduled payments
against, any lien, charge or encumbrance, other than current liabilities shown
on the Financial Statements or incurred since December 31, 1996, and paid
consistent with past practice;
(11) Adjustments or write-offs of Receivables or reductions in
reserves for Receivables outside of the ordinary course of business;
(12) Changes in the accounting methods or practice employed by
Seller or change in depreciation or amortization policies;
(13) Issuance or sales by Seller, or contracts or other
commitments entered into by Seller, for the issuance or sales of any ownership
interest in or securities convertible into or exchangeable for any ownership
interest in Seller;
(14) Mergers, consolidations or similar transactions; or
solicitations therefor;
(15) Federal, state or local statutes, rules, regulations,
orders or cases adopted, promulgated or decided which, to the best knowledge of
Seller, adversely affect the Assets; or
(16) Strikes, work stoppages or other labor disputes adversely
affecting the Hospital.
4.5 Taxes. All taxes, including, without limitation, income, property,
sales, use, franchise, added value, employees' income withholding and social
security taxes, license fees and taxes, deposits and fees for waste disposal,
pharmaceutical, nursing facilities, and taxes on disproportionate share
hospitals imposed by the United States, by any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or any foreign
country, or by any other taxing authority, which are due or payable by Seller
and all predecessors and affiliates of Seller and all interests and penalties
thereon, whether disputed or not, have been paid in full and all tax returns
required to be filed in connection therewith have been accurately prepared and
timely filed. All deposits required to be made by Seller and all predecessors
and affiliates of Seller with respect to employees' withholding taxes have been
duly made. Except as set forth in Exhibit 4.5, Seller has not been delinquent in
the payment of any tax, assessment or governmental charge or deposit and has no
tax deficiency or claim outstanding, proposed or assessed against it, and there
is no basis therefor.
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4.6 Employment. Except as disclosed in Exhibit 4.6 hereto, to the best
of Seller's knowledge, no person or party (including, but not limited to, any
governmental agency) has any claim or basis for any action or proceeding,
against Seller (or any officer, director, employee, agent or the Members of
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 or the Americans With Disabilities Act of 1990). None of such claims
shall result in any liability to or obligation of Buyer, or lien or encumbrance
against the Assets.
4.7 Licenses and Permits. 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, all of which are listed
on Exhibit 4.7. There is no default under any of such Licenses and Permits. True
and correct copies of these Licenses and Permits have previously been provided
to Buyer. The most recent licensure surveys and deficiency reports related to
each of these items has also been included in Exhibit 4.7. Seller is and at the
Closing Date will have duly registered the following beds with the Texas
Department of Health as a general, acute care hospital authorized to operate 81
beds. Except as described in Exhibit 4.7, no notices have been received by
Seller or Members 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 nor are there any grounds for revocation, suspension or limitation.
4.8 JCAHO and Accreditations.
(1) The Hospital is duly accredited for operation of its
various beds by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO"). Included in Exhibit 4.8 are each Certificate of
Accreditation, copies of the most recent JCAHO accreditation survey report, and
a list of deficiencies, if any.
(2) The Hospital's laboratory is duly accredited by the
Commission on Laboratory Accreditation of the College of American Pathologists
("CAP"). Included in Exhibit 4.8 are copies of the most recent letter and list
of accredited services from CAP.
(3) The Hospital has a certificate from the American College
of Radiology ("ACR") for mammography. Included in Exhibit 4.8 is a copy of the
most recent certificate from ACR.
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(4) Seller has received no notice with respect to any
threatened, pending or possible revocation, early termination, suspension or
limitation of any of the accreditations listed in this Section 4.8 nor are there
any grounds for such action.
4.9 Medicare, Medicaid, and Other Third-Party Payors.
(1) The Hospital is duly certified to participate, and does
participate in the Medicare Program and the Medicaid Programs in the State of
Texas (the "PROGRAMS"). Copies of the Hospital's existing Medicare and Medicaid
contracts (the "PROGRAM AGREEMENTS") are included in Exhibit 4.9. The Hospital
is in full compliance with all of the terms, conditions and provisions of such
contracts, as well as state and federal laws related thereto.
(2) Attached as part of Exhibit 4.9 is a copy of the
Hospital's most recent Statement of Deficiencies and Plan of Correction (Form
HCFA-2567).
(3) No notice of any offsets against future reimbursement has
been received by Seller or the Members nor is there any basis therefor. There
are no pending appeals, adjustments, challenges, audits, litigation, notices of
intent to reopen or open cost reports with respect to the Programs except as set
forth in Exhibit 4.9. The Hospital has 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 it received notice of
pending, threatened or possible decertification or other loss of participation
in, any of the Programs, except as set forth in Exhibit 4.9.
(4) The Hospital currently has contractual arrangements with
Blue Cross and other third party payors. Copies of all existing Blue Cross
contracts are included in Exhibit 4.9. The Hospital is in full compliance with
all of the terms, conditions and provisions of such contract(s).
(5) Seller has previously furnished Buyer the Medicare and
Medicaid cost reports of Seller for the years of 1994, 1995 and 1996. The cost
reports are complete and accurate for the periods indicated. All liabilities and
contractual adjustments of the Hospital under any third party payor or
reimbursement programs have been properly reflected and adequately reserved for
in the Financial Statements.
(6) Seller has received no notice of any violation of federal
or state fraud and abuse or self-referral laws, nor are Seller and Members aware
of any such violations in connection with the operation of its business.
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4.10 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 attached as Exhibit 4.10.
4.11 Compliance with Zoning, Land Use and Other Laws. Except as
disclosed in Exhibit 4.11 hereto, the Hospital has received no notice of any,
and to the best of Seller's knowledge, there exists no, violation of any zoning,
land use, public health, building code or other similar laws, ordinances and
regulations applicable thereto and there does not exist any variances,
conditional use permits, waivers or exemptions relating to the Real Estate with
respect to such matters. There is presently located within the Real Estate an
adequate number of parking spaces to satisfy the requirements of all applicable
zoning and land use ordinances and regulations for the Hospital's current
operations. Final, permanent and unconditional certificates of occupancy and/or
use have been duly issued by the applicable governmental authority having
jurisdiction for all buildings located on the Real Estate.
4.12 Easements. The Hospital has all easements and rights necessary to
continue operation of the business of the Hospital as currently conducted.
4.13 Title to Assets.
(1) Seller is the only record, legal and beneficial owner of
and has, and at Closing will have, good indefeasible and insurable fee simple or
leasehold, as the case may be, absolute title to all the Assets, free and clear
of all mortgages, security interests, liens, leases, covenants, assessments,
easements, options, rights of refusal, restrictions, reservations, defects in
the title, encroachments, adverse claims and other encumbrances, except for the
Permitted Exceptions (as defined below).
(2) The Real Estate is accurately described in Exhibit 1.1(1)
and includes all real estate owned by Seller set forth on the Financial
Statements and used in connection with the Hospital. Seller is the sole and
exclusive record, legal and equitable owner of all right, title and interest in
and has good, indefeasible and insurable title in fee simple or leasehold, as
the case may be, to, and at Closing will be in possession of, all the Real
Estate including the buildings, structures and improvements situated thereon and
appurtenances thereto, in each case free and clear of all mortgages, liens,
leases, assessments, easements, covenants, options, rights of refusal,
restrictions, reservations, defects in title, encroachments and other
encumbrances, whether or not the same render the title to such Real Estate
uninsurable or unmarketable, except for the items listed on Exhibit 4.13(2) (the
"PERMITTED EXCEPTIONS").
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(3) The Seller has not sold, exchanged or transferred any
material assets outside the ordinary course of business which were used by the
Hospital within the last five years, except as listed on Exhibit 4.13(3).
(4) The only names, trade names or fictitious names under
which the business of the Hospital has been operated for the last five years are
listed on Exhibit 4.13(4). Seller has complied with all fictitious name filing
statutes.
(5) Exhibit 4.13(5) lists all post office boxes and addresses
where accounts receivable sold to Buyer are to be paid and all names under which
payment is to be received. Seller hereby grants to Buyer the irrevocable power
of attorney to execute and endorse any checks or receive any payments with
respect to any accounts receivable which are sold to Buyer.
4.14 Leases and Contracts.
(1) Exhibit 4.14 hereto sets forth a complete and accurate
list of all contracts, agreements, purchase orders, service contracts,
management agreements, equipment leases, leases of space, and ground leases,
leases, subleases, options and commitments, oral or written, and all
assignments, amendments, schedules, exhibits and appendices thereof, affecting
or relating to any Asset or any interest therein, to which Seller is a party or
by which Seller, the Hospital or the Assets are bound or affected (collectively,
the "LEASES AND CONTRACTS"). Said Exhibit also indicates which of the Leases and
Contracts are to be assumed by Buyer (herein, the "ASSUMED CONTRACTS") and
whether the assignment and assumption of such Assumed Contracts require the
consent of any third party. Seller will provide or cause to be provided to Buyer
a copy of all written Leases and Contracts, and detailed summary of the
provisions of all oral Leases and Contracts, prior to Closing. Except for
Assumed Contracts, all Leases and Contracts and all other obligations relating
to the Assets and the business of Seller shall be retained and paid or performed
by Seller.
(2) None of the Leases and Contracts has been modified,
amended, assigned or transferred, except as noted on Exhibit 4.14, and each is
in full force and effect and is valid, binding and enforceable in accordance
with its respective terms;
(3) No event or condition has happened or presently exists
which constitutes a default or breach 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 (other than with respect to those notes payable listed on Exhibit
1.4(1) which shall be paid in full by Seller at Closing), and Seller shall do no
act nor omit to do any act which would cause such a default or breach. There are
no counterclaims or offsets under any of the Leases and Contracts which are part
of the Assumed Liabilities;
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(4) There does not exist any security interest, lien,
encumbrance or claim of others created or suffered to exist on any interest
created under any of the Leases and Contracts;
(5) No purchase commitment by Seller is in excess of Seller's
ordinary business requirements;
(6) Except as expressly identified on Exhibit 4.14, none of
the Leases and Contracts is: (i) a capitalized lease within the meaning of
generally accepted accounting principles; or (ii) a lease with a remaining term
of one (1) year or more from Closing and which cannot be canceled within thirty
(30) days at the option of Seller without penalty; or (iii) a lease containing
an option to purchase.
(7) Except as specifically set forth on Exhibit 4.14, the
assignment to Buyer of the Assumed Contracts will not default, alter or
terminate any of the Assumed Contracts, and such assignment will confer all
Seller's rights thereunder to Buyer, without resulting penalty, premium or
variation.
(8) Seller has no outstanding obligations to make any repairs
or improvements or renovations under any leases of office space or other space
included in the Leases and Contracts, including without limitation any
obligations other than normal repairs and maintenance. There are no outstanding
negotiations with any such lessees regarding any matter relating to the leased
space. Except for those tenants in possession of the Real Estate under Leases
and Contracts, there are no parties in possession of, or claiming any
possession, adverse or not, to or other interest in, any portion of the Real
Estate as lessees, tenants at sufferance, trespassers or otherwise. No tenant is
entitled to any rebate, concession or free rent, other than as set forth in the
Lease or Contract with such tenant. No rents due under any of the Leases and
Contracts have been assigned or hypothecated to, or encumbered by, any person.
(9) Except as identified on Exhibit 4.14:
(a) There are no contracts, agreements or
arrangements, direct or indirect, providing for payments based in any manner on
the revenues, purchases or profits of Seller or the Hospital; and
(b) There are no contracts, agreements or
arrangements, direct or indirect, with referral sources to the Hospital.
(10) The performance after Closing of obligations under the
Leases and Contracts will not violate any law, rule, regulation or judgment
applicable to the business of the Hospital or to the subject matter of or
parties to the Leases and Contracts.
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4.15 Environmental Matters.
(1) Hazardous Substances. As used in this Section, the term
"HAZARDOUS SUBSTANCES" means any hazardous or toxic substances, pollutants,
contaminants, materials or wastes, including but not limited to 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, but not limited to, 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.
ss.6901 et seq.; toxic substances as defined under the Toxic Substance Control
Act, 15 U.S.C. 2601 et seq; or any of the following: hydrocarbons, petroleum and
petroleum products, asbestos, polychlorinated biphenyls, formaldehyde,
radioactive substances, flammables and explosives.
(2) Compliance with Laws and Regulations.
(a) To the best of Seller's knowledge, all operations
or activities upon, or any use or occupancy of the Real Estate, or any portion
thereof, by Seller, any Affiliates of Seller (the term "AFFILIATES" shall mean
any person or entity controlling, controlled by or under common control with
Seller or a predecessor of Seller, and the term "CONTROL" shall mean the power,
directly or indirectly to direct the management or policies of such person or
entity), and any agent, contractor or employee of Seller or its Affiliates
("AGENTS"), or any tenant or subtenant of Seller of any part of the Real Estate,
are and have been in all respects in compliance with all laws, regulations or
orders relating to Hazardous Substances.
(b) Seller, Affiliates and Agents have kept the Real
Estate free of any lien imposed pursuant to any laws, regulations or orders
relating to Hazardous Substances.
(c) To the best of Seller's knowledge, except for
uses and temporary storage of Hazardous Substances reasonably necessary to the
customary operation of a hospital and in compliance with all applicable federal,
state and local laws, statutes, ordinances, codes, rules, regulations, orders,
decrees, and other applicable requirements of governmental authorities, neither
Seller, Affiliates nor Agents nor any prior owners, operators, or occupants of
the Real Estate have allowed the manufacture, use, generation, voluntary
transmission, storage or presence of any Hazardous Substances over, in or upon
the Real Estate. Seller has obtained all environmental permits necessary for the
operation of a hospital and related activities, all such permits are in good
standing and Seller is in compliance with all terms and conditions of its
environmental permits.
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(d) Neither Seller, Affiliates nor Agents have
received any communication (written or oral) that alleges that Seller is not or
was not in compliance with all applicable environmental laws (including CERCLA
or any comparable state or local law). None of the Real Estate, nor any part
thereof, nor Seller, nor Affiliates, nor any present owner or operator of the
Real Estate is subject to any 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 health, safety or the
environment.
(e) To the best of Seller's knowledge, neither
Seller, Affiliates nor Agents have installed or permitted to be installed or
have knowledge of friable asbestos or any substance containing asbestos or any
other substance deemed hazardous by federal or state laws or regulations
respecting such material in or on the Real Estate except as disclosed on Exhibit
4.15.
(f) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, Seller, its Agents and Affiliates have not at any
time engaged in, permitted or have knowledge of, nor to the best knowledge of
Seller, after due inquiry, has any tenant or subtenant engaged in or permitted
any dumping, discharge, disposal, spillage, or leakage (whether legal or
illegal, accidental or intentional) of Hazardous Substances, at, on, in or about
the Real Estate. No portion of the Real Estate has ever been used as a landfill,
garbage or refuse dump site, waste disposal facility, transfer station or other
type of facility for the processing, treatment or disposal of waste materials.
(g) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, no work, repairs, remedy, construction or capital
expenditures is required by any environmental or land use laws or regulations
with respect to the Real Estate in order for the continued lawful use of the
Real Estate as a hospital.
(h) The Real Estate is not currently nor has it ever
been listed on the National Priorities List or the Comprehensive Environmental
Response, Compensation and Liability Information System, both promulgated under
CERCLA, or any comparable state list and no off-site location at which Seller
has disposed or arranged for the disposal of any waste is listed on the National
Priorities List or on any comparable state list.
(i) To the best of Seller's knowledge, except as
disclosed on Exhibit 4.15, no petroleum hydrocarbons have migrated on or below
the surface of any portion of the Real Estate, and there are no underground
storage tanks, or related pipes on any portion of the Real Estate. To the extent
there is an underground storage tank on the Real Estate (including any diesel
storage tank associated with the medical office building complex), Seller shall
provide evidence satisfactory to Buyer that such tank has been tightness tested
with all related lines, within the past six months, that such tank and lines are
currently leak-free and that any prior leaks have been remediated or cleaned up
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in compliance with all federal, state and local laws. There has been no release
of hydrocarbons or other Hazardous Substances from or rupture of such tank or
line, including without limitation, any release from or in connection with the
filling or emptying of such tank. Seller shall provide evidence satisfactory to
Buyer that such tank(s) is registered with the State of Texas and that Seller is
in full compliance with all underground storage tank laws and regulations. For
any underground storage tanks which were formerly located on the Real Estate, or
which were closed in place, Seller shall provide evidence satisfactory to Buyer
that such tanks were removed, or closed, in full compliance with all federal,
state and local laws, and that any reportable hydrocarbons in the Real Estate
were properly removed or treated. At or before Closing, Seller will provide
Buyer with a certificate, letter or other evidence from the appropriate agency
of the State of Texas that Seller's current use of any underground storage tanks
is in full compliance with all state requirements.
(j) To the best of Seller's knowledge, the Real
Estate is free of dangerous levels of naturally-emitted radon.
(3) Seller shall promptly notify Buyer in writing of any order
of which it is aware, receipt of any notice of violation or noncompliance with
any applicable law, rule, regulation, standard or order, any threatened or
pending action of which it is aware by any regulatory agency or their
governmental authority, or any claims made by any third party of which it is
aware relating to Hazardous Substances on, emanations on or from, releases on or
from, or threats or threats of releases on or from any of the Real Estate which
relate to the period prior to Closing; and shall promptly furnish Buyer with
copies of any correspondence, notices, or legal pleadings in connection
therewith. Buyer shall have the right, but shall not be obligated, to notify any
governmental authority of any state of facts which may come to its attention
with respect to Hazardous Substances, on, released from or emanating from any
part of the Real Estate.
(4) Seller shall prior to Closing provide Buyer with a copy of
all Phase I environmental audits or reports, and any other engineering reports
or inspections which have been prepared relating to the Real Estate.
4.16 Miscellaneous Representations Relating to Real Estate.
(1) No part of the Real Estate is currently subject to
condemnation proceedings, and no condemnation or taking is threatened or known
by Seller or the Members to be contemplated. There are no public improvements
which may result in special assessments against or otherwise affect the Real
Estate.
(2) Seller has furnished to Buyer complete copies of all
appraisals, mechanical and structural studies or reports or assessments,
engineering plans,
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architectural drawings, soil studies, surveys and other documents which have
been prepared by or at the direction of Seller or its Affiliates within the last
ten years relating to any of the Assets.
(3) From and after the date hereof until Closing, Seller will
not perform or permit any material grading or excavation, construction or
removal of any improvement, or make any other material change or improvement
upon or about the Real Estate.
(4) All utilities serving the Hospital are, and shall be at
Closing adequate to operate the Real Estate in the manner it is currently
operated and all utility lines, pipes, hook-ups and wires serving the Hospital
are located within the Real Estate or recorded easements for the benefit of the
Real Estate. Any so-called tap fees, 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. There are no encroachments upon the Real Estate or upon any
dominant easement appurtenant thereto and no encroachment of any improvements to
the Real Estate onto adjacent property, except as shown on the Survey (as
defined in Section 7.2). None of the improvements to the Real Estate violate
set-back, building or side lines, nor do they encroach on any easements located
on the Real Estate, except as shown on the Survey.
(5) Any division of the Real Estate has been done in full
compliance with all applicable subdivision, zoning or other land use laws,
regulations, ordinances or other requirements.
(6) No portion of the Real Estate constitutes wetlands and no
portions of the Real Estate has been or is used as a cemetery, burial ground or
other site for the internment, burial or location of the remains of any deceased
person or persons.
4.17 Conditions of Assets. To the best knowledge of Seller, except as
set forth on Exhibit 4.17, all material components of all of the Assets (a) are
free from material structural (including electrical and mechanical) defects, and
(b) are in good working order sufficient for current operations of the Hospital.
Seller has no knowledge of any physical condition of the Real Estate and
improvements which Seller is aware could have a material adverse effect on Buyer
or Buyer's operation of the Hospital, consistent with its current operations.
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 Real Estate are installed and operating and are sufficient
currently to enable the Real Estate to be used and operated in the manner
currently being used and operated, and any so-called hook-up fees or other
associated charges accrued to date have been fully paid. Seller has received no
written recommendation from any insurer to repair or replace any of the Assets
with which Seller has not complied. The Assets together
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with the Excluded Assets comprise all of the following: all assets owned by
Seller and all assets used in connection with the Hospital and its related
businesses.
4.18 Capital Expenditure and Construction. Seller shall pursue the
completion of all current capital expenditures and construction with reasonable
diligence from the date hereof until the Closing pursuant to the capital
expenditure budget and construction schedule currently in effect. All current
construction has been constructed to the date hereof in a good workmanship
manner, in accord with good construction practice and in accordance with the
appropriate plans, specifications and architectural renderings, applicable
requirements, restrictions, and limitations of federal, state, county and local
statutes, laws, ordinances and regulations, including, but not limited to, those
related to zoning, building, fire, health and safety and environmental control
and protection. All bills for labor, services and materials previously rendered
with respect to construction projects have been paid in full by Seller. Such
construction-in-progress has been and will be completed within budget. All
building permits and licenses necessary to complete construction in accordance
with the plans, specifications and architectural renderings have been obtained.
When the construction-in-progress is completed in accordance with the plans and
specifications, such construction will comply with zoning, public health,
building code and similar laws applicable thereto including ownership, occupancy
and operation. All contracts and agreements necessary in order to complete the
construction in accordance with the plans and specifications have been entered
into and are included in Exhibit 4.14.
4.19 Future Construction. Except as described on Exhibit 4.19, Seller
has entered into no agreements, including oral agreements or understandings
regarding the development of future or pending construction of facilities in
connection with the Hospital.
4.20 Litigation. Except as set forth in Exhibit 4.20 hereto, neither
Seller nor the Members have received 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, without limitation, legislation and regulations
applicable to the Medicare and Medicaid programs, environmental protection,
civil rights and public health and safety and occupational health). Except as
set forth in Exhibit 4.20, there are no lawsuits, proceedings, actions,
arbitrations, governmental investigations, claims, inquiries or proceedings
pending or, to the best knowledge of Seller, threatened, involving or related to
the Seller, the Hospital or the Assets, and Seller knows of no basis therefore.
Whether or not listed on Exhibit 4.20, Seller shall indemnify Buyer with respect
to such matters in accordance with the provisions of Article XIII, subject to
the limitations on indemnification contained in said Article XIII.
4.21 Seller's Employees. Exhibit 4.21(a) hereto sets forth: (a) a
complete list of all of Seller's employees and rates of pay, together with true
and correct copies of any and
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all employment contracts, fringe benefits and personnel policies, (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. Buyer shall
have no obligation to hire Seller's employees and has made and will make no
promise or representation to any of Seller's employees with respect to
employment by Buyer. Seller shall be solely responsible for any notice which may
be required under WARN, as hereinafter defined, and any similar state laws, and
shall indemnify Buyer therefrom. For purposes of this paragraph, "PART-TIME
EMPLOYEE" means an employee who is employed for an average of fewer than twenty
(20) hours per week or who has been employed for fewer than six (6) of the
twelve (12) months preceding the date on which notice is required pursuant to
the "Worker Adjustment and Retraining Notification Act" ("WARN"), 29 U.S.C.
ss.2102 et seq., and any similar state laws. Except as provided in Exhibit
4.21(a), Seller has no employment agreements and all such employees are employed
on an "at will" basis. Exhibit 4.21(a) lists all ex-employees of Seller
utilizing or eligible to use COBRA (health insurance). Exhibit 4.21(b) shall be
attached at Closing and shall set forth a complete list of all of Seller's full
and part time employees who have been terminated within ninety (90) days before
Closing.
Seller and Buyer agree that the unemployment experience of the Seller
will be transferred to the Buyer if such a transfer of unemployment experience
is allowed by law and elected by the Buyer. If the payroll of the Hospital is
reported in an unemployment insurance account with other payroll prior to the
Closing, the portion of the unemployment experience transferred to the Buyer
shall be the same portion as the Hospital's state unemployment taxable payroll
bears to the total state unemployment taxable payroll of the Seller's
unemployment insurance account. Funds which are in group accounts for the
purpose of paying reimbursable unemployment benefits will be transferred to the
Buyer if the Buyer elects such transfer. Obligations to reimburse the state for
unemployment benefits relating to persons who do not become employees of Buyer
at Closing shall continue to be the obligations of Seller.
Seller agrees to make available to the Buyer the records of individual
wages of all employees, as well as copies of state unemployment tax returns, to
the extent necessary for the Buyer to verify future unemployment tax rates and
to calculate the correct taxable payroll for the remainder of the calendar year
in which the transaction occurs.
4.22 Labor Relations. Seller is not a party to any labor contract,
collective bargaining agreement, contract, Letter of Understanding or any other
arrangement, formal or informal, with any labor union or organization which
obligates Seller to compensate its employees at prevailing rates or union scale,
nor are any of Seller's employees represented by any labor union or
organization. There is no pending, or to the best knowledge of Seller,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Seller and any
present or former employees (or a union) of Seller, and Seller knows of no basis
therefore.
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There is no pending, or to the knowledge of Seller, threatened suit, action,
investigation or claim between Seller and any present or former employees (or a
union) of Seller and Seller knows of no basis therefore. There has not been any
labor union organizing activity at the Hospital or elsewhere with respect to
employees of the Hospital within the last three (3) years.
4.23 Insurance. Seller has in effect and has continuously, for at least
the last five (5) years, maintained insurance coverage for its operations,
personnel and assets. Exhibit 4.23 sets forth a summary of the Seller's current
insurance coverage (listing type, carrier and limits). Exhibit 4.23 also
includes a list of any pending insurance claims relating to 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. Such insurance is adequate to cover
all business risks normally insured against by owners and operators of health
care facilities. 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 with insurers
unaffiliated with Seller, and enforceable 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 of amount of, any insurance or indemnity bond coverage with respect to
the Assets. No insurance carrier has canceled or reduced, or given notice of its
intention to cancel or reduce, any insurance coverage with respect to the
Hospital, and there exist no grounds to cancel or avoid any such policies or the
coverage provided thereby.
4.24 Broker's or Finder's Fee. Neither Seller nor Members has engaged
any finder, broker or similar person in connection with the transactions
contemplated by this Agreement.
4.25 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 current member of the medical staff
of the Hospital, the age of each medical staff member, 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. There are no pending or,
to the knowledge of Seller, any threatened appeals, challenges, disciplinary or
corrective actions, or disputes involving applicants, staff members, or health
professionals and Seller knows of no basis therefor.
4.26 Conflicts of Interest. Except as disclosed in Exhibit 4.26, no
members, director, officer, employee or agent of Seller or any Affiliates is
either a supplier of goods or services to Seller, or directly or indirectly
controls or is a shareholder, officer, director,
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employee or agent of any corporation, firm, association, partnership or other
business entity which is a supplier of goods or services to Seller or a party to
any contract or other agreement with Seller.
4.27 Xxxx-Xxxxxx and Other Liens. Neither Seller nor any of its
predecessors have received any loans, grants or loan guarantees pursuant to the
Xxxx-Xxxxxx Act program, the Health Professions Educational Assistance Act, the
Nurse Training Act, the National Health Pharmacy and Resources Development Act,
and the Community Mental Health Centers Act, as amended, or other, similar laws
or acts providing for the recovery of any public funds advanced under the
provisions of such laws or acts relating to health care facilities for which
Seller has any outstanding obligations. Seller and Members, jointly and
severally, promise to pay all amounts owing with respect to any such loans,
grants or loan guarantees, if any, and shall hold harmless and indemnify the
Buyer from any liability therefor.
4.28 Experimental Procedures. Seller has not performed or permitted the
performance of any experimental or research procedures or studies involving
patients in the Hospital.
4.29 Intellectual Property; Computer Software. All trademarks, service
marks, trade names, patents, copyrights, inventions, processes and applications
therefor (whether registered or common law) owned by Seller are listed and
described in Exhibit 4.29 (collectively the "INTELLECTUAL PROPERTY"). No
proceedings have been instituted or pending or, to the knowledge of Seller,
threatened which challenge the validity of the ownership by Seller of such
Intellectual Property, and Seller knows of no basis therefore. Seller has not
licensed anyone to use such Intellectual Property and Seller has no knowledge of
the use or the infringement of any of such Intellectual Property by any other
person. Seller owns (or possesses adequate and enforceable licenses or other
rights to use) all Intellectual Property, and all computer software programs and
similar systems used in the conduct of its business.
4.30 Inventories. The Inventory is of a quality and quantity presently
usable in the ordinary course of business at the Hospital determined and valued
consistent with generally accepted accounting principles. The Inventory is
maintained at normal levels for medical/surgical general acute care hospitals of
its size. Since the date of the most recent Financial Statements, Seller has not
decreased or substituted its items of Inventory other than in the ordinary
course of business.
4.31 Motor Vehicles. All motor vehicles used in the business of Seller,
identified as owned or leased, are listed in Exhibit 1.1(2) hereto. All such
vehicles are properly licensed and registered in accordance with applicable law.
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4.32 Employee Benefit Plans.
(1) Except as set forth in Exhibit 4.32, Seller does not
maintain, and is not required to contribute to or otherwise participate in an
"employee benefit plan" or a "multi-employer plan" (as such terms are defined in
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including without limitation, any pension, profit-sharing, retirement, stock
purchase or stock option plan, or any other retirement, compensation, welfare or
fringe benefit plan, program or arrangement of any kind whatsoever, whether
formal or informal, providing for benefits for, or for the welfare of, any or
all of the employees of Seller, any member of a group defined in Section 414(b),
(c), (e), (m) or (o) of the Code to which Seller belongs or has belonged, or any
predecessor of Seller, or for the welfare of the beneficiaries of such employees
(each an "EMPLOYEE PLAN"). Seller shall be liable for any withdrawal liability
with regard to such employees under the Multi-Employer Pension Plan Amendments
Act of 1980. Seller has no liability for unpaid compensation or fringe benefits,
including without limitation accrued vacation, sick leave, post retirement
medical or other benefits, severance pay, "parachutes," or vacation pay, not
disclosed on Exhibit 4.32.
(2) Except as set forth in Exhibit 4.32(2), no "party in
interest" (as such term is defined in Section 3(14) of ERISA) or "disqualified
person" (as such term is defined in Section 4975(e) of the Code) with respect to
any of the Employee Plans has engaged in any "prohibited transaction" (as such
term is defined in ERISA or the Code) which could subject any of the Employee
Plans, any trusts thereunder, any trustee, custodian or administrator thereof,
any person or entity holding or controlling assets of any of the Employee Plans,
any party in interest or disqualified person or any other person or entity
dealing with such Employee Plans to any tax, penalty or other cost or liability
of any kind. No "reportable events" (as such term is defined in Section 4043 of
ERISA) have occurred by reason of any act or omission of Seller or any other
person with respect to any of the Employee Plans.
(3) Except as set forth in Exhibit 4.32(3), Seller and its
Affiliates have fully complied with all of its and their obligations under each
of the Employee Plans and all provisions of ERISA, the Code, and any and all
other laws, rules, regulations, releases and other official pronouncements
applicable to the Employee Plans, each Employee Plan that is intended to qualify
under Section 401(a) of the Code has, at all times, so qualified and each
Employee Plan has, at all times, been administered so as to comply with all
applicable law including, but not limited to, ERISA, the Code, applicable state
laws and any regulations thereunder.
(4) Except as specified in Section 1.3(2) relating to accrued
vacation, PTO and sick leave, and as set forth on Exhibit 4.32(4) Buyer will not
be liable and will not be responsible for any debt, obligation, contribution,
responsibility, withdrawal liability or other
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liability of Seller under any Employee Plans, including, without limitation, any
penalty, fee or funding obligation related to the termination of any plan
pursuant to Section 6.18. Seller will be liable under the Employee Plans for all
claims due and unpaid at or after Closing and for all claims incurred before or
after the Closing, whether or not paid or presented before Closing, and for any
liabilities arising from any failure before or after the Closing to comply with
the requirements of ERISA, the Code, applicable state laws or regulations
thereunder.
(5) Seller has provided or caused to be provided notice of the
availability of COBRA coverage for all of its present and former employees, and
their dependents entitled to such notice because of a qualifying event occurring
on or before the Closing. All COBRA coverage has been fully insured. The only
persons entitled to receive COBRA coverage or in the future elect COBRA coverage
as a result of a qualifying event occurring on or prior to Closing are persons
listed on Exhibit 4.21(a). Upon Closing, all of Seller's employees shall cease
participation in all Employee Plans maintained by Seller, except to the extent
provided herein or as to benefits owed such employees.
4.33 Compliance with Laws. To the best of Seller's knowledge, Seller
has complied with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees applicable to their businesses or the Assets in all ways
other than exceptions which in the aggregate have and will have only an
immaterial impact on the business and its operations and prospects. To the best
knowledge of Seller, there are no proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations or other
proceedings which could, before or after Closing, adversely affect the Hospital.
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 the best of Seller's knowledge, none of the Leases
and Contracts and no activity of Seller violates Section 1877 of the Social
Security Act or any similar provision of applicable state law. To the best of
Seller's knowledge, none of the Leases and Contracts and no activity of Seller
violates provisions of applicable state law relating to the corporate practice
of medicine. Seller shall pay when due all of its debts and obligations (other
than the Assumed Liabilities) including, but not limited to, any debt or
obligation which could give rise to transferee liability because of taxes,
penalties, interest, assessments, and deficiencies related thereto and related
to the period ending on the Closing Date. Seller hereby agrees that it will
remain responsible for the Excluded Liabilities and any other obligations for
which Buyer may otherwise be liable under any bulk sales laws, other than the
Assumed Liabilities and Seller will indemnify Buyer with respect to all such
liabilities.
4.34 No Omissions or Misstatements. There is no fact material to the
assets, liabilities, business or prospects of Seller or the Hospital which has
not been set forth or described in this Agreement or in the Exhibits hereto
which, to the best knowledge of Seller
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and Members, is material to the business, operations or financial condition of
the Hospital. To the best of Seller's knowledge, none of the information
included in this Agreement and Exhibits or other documents furnished or to be
furnished by Seller or any of its representatives contains any untrue statement
of a material fact or is misleading in any material respect or omits to state
any material fact necessary in order to make any of the statements herein or
therein not misleading. Copies of all documents referred to in any Exhibit
hereto have been delivered or made available to Buyer and constitute true,
correct and complete copies thereof and include all amendments, exhibits,
schedules, appendices, supplements or modifications thereto or waivers
thereunder. The representations and warranties of Seller and Members set forth
in this Agreement or in any document delivered pursuant hereto shall not be
affected or deemed waived by reason of the fact that the Buyer knew or should
have known that any such representation or warranty is, or might be, inaccurate
in any respect.
ARTICLE V. 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, which representations and warranties shall be true and correct on the
date hereof, and on Closing, as if then restated by it, and which shall survive
Closing, as follows:
5.1 Organization, Qualification and Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee. Buyer has the full corporate 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 is in
good standing in Texas and has the requisite corporate 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.
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5.2 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,
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 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, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
ARTICLE VI. COVENANTS OF PARTIES
6.1 Preservation of Business and Assets. From the date hereof until the
Closing, Seller shall use its best efforts and shall do or cause to be done all
such acts and things as may be necessary to preserve, protect and maintain
intact the Assets and the business and operation of the Hospital as a going
concern consistent with prior practice and not other than in the ordinary course
of business, and to preserve, protect and maintain for Buyer the goodwill of the
Hospital's medical staff, suppliers, employees, clientele, patients, tenants and
others having business relations with Seller. Seller shall use its best efforts
to retain its employees in their current positions up to Closing and shall use
its best efforts to obtain all documents called for by this Agreement. From and
after the date of this Agreement until Closing, Seller will maintain and keep
the Assets in a sanitary, well-maintained condition and in good order and
repair. Buyer, Seller and Members shall use their best efforts to facilitate the
consummation of the transactions contemplated by this Agreement. From and after
the date of this Agreement until Closing, Seller shall pay no dividend, and
shall make no distribution or extraordinary payment to any of the Members,
Affiliate or any third party or pay any intercompany payable and, other than in
the ordinary course of business. Seller will not sell, discard, dispose of or
move any of the Assets. None of the Leases and Contracts shall be amended
between the date hereof and Closing without the prior written consent of Buyer.
6.2 Absence of Material Change. From the date hereof until the Closing,
neither Seller nor Members shall make any material change in the business and
operation of the Hospital and shall not enter into any other significant
contract or commitment or any other transaction with respect thereto without the
prior written consent of Buyer, which shall not be unreasonably withheld.
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6.3 Access to Books and Records.
(1) 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 Assets so
that Buyer may inspect and audit them and shall furnish to Buyer a copy of all
documents and information concerning the properties and affairs of the Assets as
Buyer may reasonably request. If any such books, records and materials are in
the custody of third parties, 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 4.3, and any other management reports as and when they
are available. Additionally, from the date hereof until Closing, Seller grants
Buyer full access to Seller's personnel and computers as is reasonably necessary
to assist Buyer in the transition to be prepared for the ownership change.
(2) Buyer shall permit Seller's representatives (including,
without limitation, their counsel and auditors), during normal business hours
and upon appropriate advance notice, to (i) have reasonable access to, and
examine and make copies of all books and records of the Hospital, including all
medical records and medical charts of any patient admitted to the Hospital,
which are transferred to Buyer hereunder and (ii) have reasonable access to the
Hospital's employees, relating to transactions or events occurring prior to the
Closing, to the maximum extent permitted by law as long as such requests do not
unreasonably interfere with the operation of the Hospital. Buyer agrees to
maintain Seller's records in accordance with the record retention guidelines set
forth by the Texas Hospital Association. For a period of three (3) years after
the Closing, Buyer agrees that, prior to the destruction or disposition of any
such books or records, Buyer shall provide not less than forty-five (45) days',
nor more than ninety (90) days' prior written notice to Seller of such proposed
destruction or disposal. If Seller desires to obtain any of such documents, it
may do so by notifying Buyer in writing at any time prior to the date scheduled
for such destruction or disposal. In such event, Buyer shall not destroy such
documents and the parties shall then promptly arrange for the delivery of such
documents to Seller, its successors or assigns. All out-of-pocket costs
associated with the delivery of the requested documents shall be paid by Seller.
(3) Following the Closing, Seller shall permit Buyer and its
representatives (including, without limitation, their 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, which books and records, are retained by Seller and which relate to
transactions or events contemplated by this Agreement occurring prior to the
Closing, to the maximum extent permitted by law. For a period of three (3)
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years after the Closing, Seller agrees that, prior to the destruction or
disposition of any such books or records, Seller shall provide not less than
forty-five (45) days', nor more than ninety (90) days' prior written notice to
Buyer of such proposed destruction or disposal. If Buyer desires to obtain any
such documents, it may do so by notifying Seller in writing at any time prior to
the date scheduled for such destruction or disposal. In such event, Seller shall
not destroy such documents and the parties shall then promptly arrange for the
delivery of such documents to Buyer, its successors or assigns. All
out-of-pocket costs associated with the delivery of the requested documents
shall be paid by Buyer.
6.4 Consents. Seller shall use its best efforts to obtain all consents
required in form and substance reasonably acceptable to Buyer for the assignment
of the Assumed Contracts. In the event Seller is unable to obtain any one or
more consents required pursuant to this section, Buyer may elect either (i) if
the failure to obtain such consent materially adversely affects the anticipated
operations of the Assets, to terminate this Agreement in its entirety, or (ii)
whether or not the failure to obtain such consent materially adversely affects
the anticipated operations of the Assets by Buyer, to terminate this Agreement
but only with respect to the Assets for which no consent was obtained and
delivered by Closing with a reduction in the Purchase Price determined as
follows. The reduction in Purchase Price shall be determined based on the value
on the date of this Agreement of the underlying business for which no consent
was obtained and delivered by Closing multiplied by Seller's percentage
ownership of such business, the value of which shall be determined by agreement
of Seller and Buyer, and failing agreement by an MAI appraiser to be mutually
selected and paid equally by Seller and Buyer. If Seller and Buyer are unable to
mutually select an appraiser, then one (1) MAI appraiser shall be selected and
paid by Buyer and one (1) MAI appraiser shall be selected and paid by Seller. If
a party does not select an appraiser as provided in the preceding sentence
within ten (10) days after the other party has given notice of the name of its
appraiser, such party shall lose its right to appoint an appraiser. If the two
appraisers are selected by the parties as provided above, they shall meet
promptly to determine the reduction in Purchase Price. If they are unable to
agree within fifteen (15) days after the second appraiser has been selected,
they shall jointly select a third MAI appraiser. The reduction in Purchase Price
shall be set by agreement of any two (2) of the three (3) appraisers. If the two
(2) appraisers are unable to agree on a third appraiser within thirty (30) days
after the second appraiser has been selected, either party, by giving written
notice to the other, may apply to the American Arbitration Association for the
purpose of determining the reduction in Purchase Price. The Seller and Buyer
shall each bear one-half (1/2) of the cost of selecting the third appraiser and
of paying the third appraiser's fee. If any two (2) appraisers are unable to
determine the reduction in Purchase Price within fifteen (15) days after the
third appraiser has been selected, then the three (3) appraisals shall be added
together and their total divided by three (3); the resulting quotient shall be
the reduction in Purchase Price.
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6.5 Risk of Loss. In the event there is any damage to or loss of any of
the Assets (whether by fire, theft, vandalism or other cause or casualty),
between the date hereof and the Closing, the Purchase Price shall be reduced by
the amount necessary to repair the damage, which reduction shall be offset by
any amounts paid by Seller's insurance company and assigned to Buyer; provided,
however, in the event of a casualty which in Buyer's sole judgment materially
adversely affects the business or operation or prospects of any of the Assets,
Buyer, at its sole option, may elect either (i) to terminate this Agreement in
its entirety, or (ii) to terminate this Agreement but only with respect to the
damaged property with a reduction in the Purchase Price determined as follows.
The reduction in Purchase Price shall be determined, based on the value on the
date of this Agreement of the Assets damaged or lost, the value of which shall
be determined by an MAI appraiser to be mutually selected and paid equally by
Seller and Buyer. If Seller and Buyer are unable to mutually select an
appraiser, then one (1) MAI appraiser shall be selected and paid by Buyer and
one (1) MAI appraiser shall be selected and paid by Seller. If a party does not
select an appraiser as provided in the preceding sentence within ten (10) days
after the other party has given notice of the name of its appraiser, such party
shall lose its right to appoint an appraiser. If the two (2) appraisers are
selected by the parties as provided above, they shall meet promptly to determine
the reduction in Purchase Price. If they are unable to agree within fifteen (15)
days after the second appraiser has been selected, they shall jointly select a
third MAI appraiser. The reduction in Purchase Price shall be set by agreement
of any two (2) of the three (3) appraisers. If the two (2) appraisers are unable
to agree on a third appraiser within thirty (30) days after the second appraiser
has been selected, either party, by giving written notice to the other, may
apply to the American Arbitration Association for the purpose of determining the
reduction in Purchase Price. The Seller and Buyer shall each bear one-half (1/2)
of the cost of selecting the third appraiser and of paying the third appraiser's
fee. The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party. If any two (2) appraisers are
unable to determine the reduction in Purchase Price within fifteen (15) days
after the third appraiser has been selected, then the three (3) appraisals shall
be added together and their total divided by three (3); the resulting quotient
shall be the reduction in Purchase Price. In determining the reduction in
Purchase Price, each appraiser shall take into consideration, understand, and
correctly employ those recognized techniques that are necessary to produce a
credible appraisal.
6.6 Condemnation. From the date hereof until the Closing, in the event
that any portion of the Assets becomes subject to or is threatened with any
condemnation or eminent domain proceedings which in Buyer's sole opinion
materially adversely affects the businesses or operations or prospects of any of
the Assets, then Buyer, at its sole option, may elect either (i) to terminate
this Agreement in its entirety or (ii) to terminate this Agreement with respect
only to that part which is condemned or threatened to be condemned with a
reduction in the Purchase Price determined as provided in Section 6.5.
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6.7 Good Faith. All parties shall act in good faith and use their
reasonable best efforts to satisfy all conditions to their respective
obligations to close.
6.8 Preserve Accuracy of Representations and Warranties. Seller and
Members shall refrain from taking any action which would render any
representations and warranties contained in Article IV hereof inaccurate as of
Closing. Seller and Members will promptly notify Buyer of any lawsuit, claim,
audit, investigation, administrative action or other proceeding asserted or
commenced against Seller or its directors, officers, Members or Affiliates, that
may involve or relate in any way to Seller, Members, the Assets or the business
and operations of Seller or the Assets. Seller and Members shall promptly notify
Buyer of any facts or circumstances which come to either's attention and which
cause, or through the passage of time may cause, any of Seller's and Members'
representations and warranties to be untrue or misleading at any time from the
date hereof to Closing.
6.9 Maintain Books and Accounting Practices. From the date hereof until
the 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 methods or
practices. Notwithstanding the foregoing, Buyer is aware of (and consents to)
the fact that long-term patient pay receivables and Seller's interest in the
Night Clinic are not reflected in Seller's books in accordance with generally
accepted accounting principles.
6.10 Indebtedness; Liens. Other than in the ordinary course of business
as reflected in the Financial Statements, from the date hereof until the
Closing, Seller shall not create, incur, assume, guarantee or otherwise become
liable or obligated with respect to any indebtedness for borrowed money, nor
make any loan or advance to, or any investment in, any person or entity, nor
create any lien, security interest, mortgage, right or other encumbrance in any
of the Assets, without Buyer's prior written approval which will not be
unreasonably withheld. Until Closing, Seller shall make all payments required
with respect to its long-term debt, including, without limitation, any bonds,
loans or other obligations as described in Section 1.4(1) and fully and timely
comply with and satisfy all its obligations with respect thereto. Seller shall
take all action necessary to fully defease any such bonds and retire any such
loans or other obligations and cause all collateral and obligations and security
against the Assets to be fully released to Buyer's satisfaction as contemplated
hereunder, and Buyer will cooperate with Seller in this regard.
6.11 Compliance with Laws and Regulatory Consents. From the date hereof
until the Closing, (a) Seller shall comply with all applicable statutes, laws,
ordinances and regulations; (b) Seller shall keep, hold and maintain all
certificates, certificates of need, certificates of exemption, accreditations,
participations, licenses, and other permits necessary for the business and
operation of the Assets; (c) Seller and Members shall use
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their best 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; (d) Seller and
Members shall 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 (e) Seller and
Members shall use reasonable efforts to consummate the transactions contemplated
by this Agreement and the agreements and documents to be executed in connection
with this Agreement as soon as is practicable.
6.12 No Sale, Merger or Consolidation. From the date hereof until the
Closing, Members shall not sell, pledge or transfer any of their interest in
Seller, and Seller shall not sell all or substantially all of its assets, merge
or consolidate with any other entity; neither of Seller nor Members shall
solicit any inquiries, proposals or offers relating to such transactions; and
both shall promptly notify Buyer orally, and confirm in writing, of all relevant
details relating to inquiries, proposals or offers which it may receive relating
to any of the matters referred to in this Section.
6.13 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 the Buyer (which approval shall not be unreasonably withheld), the
existing insurance on the Assets and the operations of the Hospital 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.
Prior to Closing, Seller will obtain "tail" insurance coverage for a
malpractice and general liability insurance policy with limits no less than
$1,000,000.00 per occurrence and $3,000,000.00 in the aggregate from a carrier
with coverages naming Buyer and its affiliates as additional insureds with an
insurer and having coverages acceptable to Buyer with a $10,000,000.00 umbrella
coverage extending back a period of five (5) years and forward a period of three
(3) years. Seller will provide Buyer evidence thereof acceptable to Buyer.
6.14 Medicare and Medicaid Reporting. From the date hereof until the
Closing, 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, but not limited to, Medicare, Medicaid, and Blue
Cross prior to Closing. Seller has paid or will pay all liabilities for
contracted adjustments, discounts, refunds and other offsets in connection with
the filing of such reports and claims up to Closing; provided, however, that if
any adverse adjustments or offsets regarding operations on or after Closing are
the result of the willful
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acts or omissions, or gross negligence, of Seller and/or its employees,
representatives or agents, Seller shall be responsible for such adjustments and
offsets. Seller shall be entitled to receive any refund or other benefit which
may result from the filing of said reports and claims for operations up to
Closing, and Buyer shall likewise be so entitled on and after Closing. Buyer
will prepare and file the terminating cost reports for the Hospital. Seller
shall assist the Buyer in any way needed to complete the cost report in a timely
manner. Seller shall have the right to review and approve said report.
6.15 Current Return Filing. Seller shall be responsible for the
preparation and filing of the federal, state and local income tax returns for
all the tax periods of Seller ending on or before the Closing. Seller shall be
responsible for returns for organizations exempt from income tax for Seller and
related parties for all periods ending on or before the Closing. Seller shall
prepare and timely file the Federal, state and/or local income tax returns and
shall pay such tax when due.
6.16 Performance. Seller, Members and Buyer shall take appropriate
steps to satisfy their respective obligations, and the conditions to Closing,
including without limitation, the obtaining of necessary contracts and
application for necessary licenses and permits.
6.17 WARN Act. Prior to Closing, Seller will not temporarily or
permanently close or shut down any "single site of employment" or any "facility"
or any "operating unit" or any "workplace," department or service within a
single site of employment, as such terms are used in WARN and any similar state
law. Seller and Members represent that there have been no such closures or
shutdowns within the period of at least ninety (90) days before Closing. Seller
will not, for any reason, permanently or temporarily reduce the number of its
full-time employees by five hundred (500) or one-third (1/3), whichever is less,
and in any case not more than forty-nine (49), during the ninety (90) days prior
to Closing.
6.18 Termination of Employee Plans.
(1) At or as soon as possible after Closing, Seller will take
the following steps with respect to the Employee Plans:
(a) With respect to any Employee Plan that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA),
Seller shall freeze the Employee Plan at Closing and as soon as
possible after Closing Seller shall take all steps necessary to
terminate the Employee Plan effective on or before the Closing, to the
extent allowable by applicable law, including, but not limited to,
notice of the termination to all participants and the adoption by
Seller's Board of Directors of a written resolution providing that the
Employee Plan will be terminated as soon as possible after the Closing,
that all participants in the Employee Plan will
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be fully vested in their benefits accrued to the date of termination
and that Seller shall make such additional contributions to the
Employee Plan as may be necessary to fully fund all benefits accrued
under the Employee Plan on a terminated basis.
(b) With respect to each other Employee Plan, Seller
shall terminate the Employee Plan as soon as possible after the Closing
including, but not limited to, notice of the termination to all
participants and affected third parties (including insurance companies)
and the adoption of written resolutions of the Seller's Board of
Directors providing for the termination of the Employee Plan.
(c) With respect to the termination of each Employee
Plan, Seller agrees to terminate the plan in accordance with all
applicable laws and in such a manner so as to ensure the payment of any
benefit to which a participant may have become entitled and that the
best interests of plan participants are otherwise served. Seller
further agrees that to the extent necessary, it will contract with one
or more third parties to effect or facilitate the termination of the
Employee Plan in a timely and efficient manner.
(d) Seller shall reasonably consult with Buyer in the
process of terminating all Employee Plans and all such actions shall be
taken by Seller as soon as possible following Closing. Decisions of
Seller with respect to Employee Plans that are "employee pension
benefit plans" that impact employees who have been hired by Buyer in a
potentially adverse manner must be satisfactory to Buyer in Buyer's
reasonable discretion. Actions taken by Seller after the Closing in
terminating the plans are actions taken on behalf of Seller and Seller
agrees that the indemnification of Buyer provided in Section 13.2 of
the Agreement shall include all direct or indirect consequences
thereof.
(2) Buyer agrees that it will make its on-site personnel
reasonably available during normal business hours to assist Seller in gathering
information necessary to terminate the Employee Plans, so long as such
cooperation with Seller does not interfere with the normal job responsibilities
of such employees.
6.19 Power to Endorse Checks. As specified in Section 4.13(5), Buyer
has been granted the power to execute and endorse for payment all payments on
Receivables sold to Buyer.
6.20 Phase I Environmental Assessment; Additional Environmental
Inspections. Seller and the Members shall permit Buyer prior to Closing to
conduct a Phase I Environmental Assessment on any of the Real Estate, the
results of which shall be satisfactory to Buyer. Buyer shall bear the cost of
such Phase I Environmental Assessment. If Buyer becomes aware of the presence of
any Hazardous Substances on
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the Real Estate, including hydrocarbons, Buyer shall have the right to make
whatever additional borings or inspections it deems necessary to determine the
condition of the Real Estate. Such additional borings or inspections shall be at
Buyer's expense. The results of such additional borings or inspections shall be
satisfactory to Buyer.
ARTICLE VII. TITLE AND SURVEY
7.1 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 Chicago Title Insurance Company setting forth the
condition of title to each tract of Real Estate (the "COMMITMENT") (or such
reasonably equivalent commitment as is available in Texas) which Commitment
shall commit for the issuance of a title insurance policy, ALTA Owner's Policy
(or leasehold, as appropriate) Form 1992 (or such equivalent policy as is
available in Texas) (the "TITLE POLICY") as to each tract of Real Estate. The
Commitment and Title Policy shall show that the Real Estate is owned in fee
simple (or leased, as the case may be) by Seller, free from all liens,
restrictions, encumbrances, easements and clouds on title whatsoever, except the
Permitted Exceptions. The Commitment and Title Policy will also contain, to the
extent available, (a) a so-called "tax parcel endorsement" listing all of the
tax parcel identification numbers affecting the Real Estate covered by the Title
Policy and that no other property is included in the Real Estate and that no
other tax parcel identification numbers affect such Real Estate, (b) a
contiguity endorsement, (c) a 3.1 zoning endorsement or its equivalent as then
in use by the title company in form and substance acceptable to Buyer, (d)
extended coverage deleting all standard and general exceptions, (e) affirmative
coverage against any Xxxx-Xxxxxx or other similar lien under any other law or
act described in Section 4.27 of this Agreement, (f) an owner's comprehensive
endorsement, and (g) any additional endorsements or insurance as Buyer may
reasonably require. The Title Policy shall be in form acceptable to Buyer's
lender and shall permit a simultaneous issue rate for the lender's mortgage
title policy. When delivering the Commitment, the title company shall provide
Buyer one (1) copy of all recorded documents affecting title of the Real Estate.
At Closing, there shall be issued to Buyer, at Seller's expense, the Title
Policy in the amount of the Purchase Price which is allocated to the Real Estate
as improved. In the event Buyer requests, and at Buyer's expense, the title
company shall issue a mortgage title policy in an amount up to the Purchase
Price which is allocated to the Real Estate as improved, at simultaneous issue
rates. Seller and Buyer shall execute such certificates and affidavits as may be
reasonably required in connection with the issuance of the Title Policy and
endorsements.
7.2 Survey. At least ten (10) days prior to Closing, Seller shall
obtain and deliver to Buyer, at Seller's expense, an as-built survey of the Real
Estate (the "SURVEY") accompanied by a certificate of a registered surveyor
licensed in the State of Texas, certified as directed by Buyer, sufficient to
cause the title company to delete the standard
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printed survey exception (or modified to read "shortages in area") and to issue
the Title Policy free from any survey objections or exceptions whatsoever other
than as shown on the Survey. The Survey shall show the boundaries of the Real
Estate, separate legal descriptions and boundaries for the tracts, the location
and dimension of all improvements, the physical location of all utilities, and
the location of all streets, highways, alleys and public ways crossing or
abutting said Real Estate, all dominant and servient easements identified by
recording information, all building lines and all buildings and structures as
are situated thereon as of said date. Said certificate shall be in form and
substance acceptable to Buyer. Said certificate shall also state whether or not
the Real Estate or any part thereof lies within the boundaries of a local, state
or federal flood plain designation. If available, the Survey shall also provide,
zoning information and other data sufficient for the title company to provide
the title insurance coverage as described in Section 7.1 above.
7.3 U.C.C. Searches. U.C.C. 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", trade names and fictitious names of Seller (including, but not limited
to, all names set forth in Exhibit 4.13(4)), from each of the jurisdictions in
which such entity does business or has done business within the preceding five
(5) years (the "U.C.C. SEARCHES"), shall be obtained, at Seller's cost, and
delivered to Buyer at least ten (10) days prior to Closing. The results shall be
updated to Closing to reflect Closing and the release of all financing statement
liens other than the Permitted Exceptions.
7.4 Defects and Cure. The Commitment and Title Policy and the Survey
and U.C.C. Searches described in this Article are collectively referred to as
"TITLE EVIDENCE." Buyer shall notify Seller as soon as reasonably possible of
any liens, claims, encroachments exceptions or defects disclosed in the Title
Evidence which either: (a) do not constitute Permitted Exceptions, or (b) even
if they constitute Permitted Exceptions, adversely impact any of the Assets or
the financeability thereof in the reasonable opinion of Buyer (collectively,
"DEFECTS"). Seller, at its sole cost and expense, may elect to not cure the
objection and shall give written notice to Buyer within ten (10) days of its
receipt of Buyer's objections of its decision whereupon Buyer may waive such
objection and close or may terminate this Agreement, which election shall be
made within ten (10) days of receipt of notice from Seller. If Seller fails to
timely give such notice, Seller shall be deemed to have elected not to cure the
objection, whereupon Buyer may waive such objection and close or may terminate
this Agreement, which election by Buyer shall be made within thirty (30) days
following notice of objection to Seller. Upon termination of this Agreement
under the terms of this Section 7.4, no party to this Agreement shall have any
further claims under this Agreement against any other party.
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ARTICLE VIII. CLOSING
8.1 Closing. If all of the conditions to Closing set forth in Articles
IX and X hereof are satisfied, the closing shall occur on July 31, 1997, at the
offices of Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C., Nashville, Tennessee, or
at such other time (whether earlier or later) or place as the parties may
mutually agree. If all of the conditions to Closing set forth in Articles IX and
X hereof are not satisfied by July 31, 1997, the closing shall occur on the last
business day of any month following the date upon which all of the conditions to
Closing set forth in Articles IX and X hereof are satisfied or at such other
time as the parties may mutually agree. Upon transfer of the assets and payment
of the Purchase Price, the Closing shall be deemed to be effective (the
"CLOSING") and the transfer of the Assets shall be deemed to have occurred as of
12:01 a.m. local time on August 1, 1997 (or such later first of the month if
execution of all necessary and contemplated documents occurs after July 31,
1997). On the day of the effectiveness of Closing, Seller shall receive good
funds in the amount of the Purchase Price. In the event that the Purchase Price
is received by Seller before or after the date of effectiveness of the Closing,
the Purchase Price shall be reduced or increased on a per diem basis, based on
the Rate as defined in Section 13.2 of this Agreement.
8.2 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:
(1) 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, Seller or Members; 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 a reasonable period of time and such breach is not waived by Seller in
writing.
(2) 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, Seller or Members; (ii)
pursuant to Section 6.5 or 6.6; or (iii) in the event Seller or Members breach
or violate any material provision of this Agreement or fail to perform any
material covenant or agreement to be performed by Seller and/or the Members
under the terms of this Agreement and Buyer has provided written notice thereof
to Seller and/or the Members giving reasonable specificity and Seller and/or
Members have not cured same within a reasonable period of time and such breach
is not waived by Buyer in writing.
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(3) By Buyer or Seller if the Closing hereunder shall not have
taken place by September 30, 1997, 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 that a party shall not have the right to
terminate under this Section 8.2(3) 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 IX. SELLER'S AND MEMBERS' CONDITIONS TO CLOSE
The obligations of Seller and Members under 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):
9.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits hereto) or in any certificate or document
delivered to Seller and/or Members pursuant hereto, shall be deemed to have been
made again at the Closing and shall then be true in all respects; and Buyer
shall have performed and complied 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 Regulatory Approvals. Buyer shall have obtained (at its own cost)
all consents, licenses, permits, approvals, provider contracts, determinations
or certificates from the appropriate governmental agencies, required for Buyer
to acquire and operate the Assets as contemplated hereunder.
9.3 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 xxxxx xxxxx that to
proceed with the transactions hereunder may constitute a violation of law.
9.4 Compliance with Article XII. The Buyer shall have made to the
Seller the deliveries required by Article XII hereof.
9.5 Approval by Counsel. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before the Closing
by counsel for Seller and Members, which approval will not be unreasonably
withheld.
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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,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, or, in either case, to exercise rights of ownership
pursuant thereto. There shall have been no federal or state statute, rule or
regulations 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.
9.7 Completion of Exhibits. All exhibits to this Agreement will be
completed to the mutual satisfaction of the parties.
ARTICLE X. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under 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):
10.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Seller, Members and Affiliates
contained in this Agreement (including the Exhibits hereto) 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; and
Seller and the Members shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at Closing.
10.2 No Loss, Damage or Destruction. In the event there is any damage
to or loss of any of the Assets (whether by fire, theft, vandalism or other
cause or casualty), the terms of Sections 6.5 and 6.6 hereof shall have been
complied with to the satisfaction of Buyer.
10.3 No Material Adverse Change. There shall have been no material
adverse change or change known to have a future material adverse affect in the
condition or prospects, financial or otherwise, of Seller, the Assets or the
operations. There shall not be any material claims, litigation or governmental
proceedings pending or threatened against Seller and/or Members which would
adversely affect the Assets or the consummation of the transactions contemplated
hereby at Closing.
10.4 Regulatory Approvals. Buyer shall have obtained or have reasonable
assurance that it will obtain (at its own cost) (a) certification for
participation in the Medicaid Programs of the State of Texas, (b) certification
from the appropriate agency of the federal
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government for participation in the federal Medicare Program, and (c) all other
consents, licenses, permits, approvals, material provider contracts,
determinations or certificates of need necessary in the judgment of Buyer.
10.5 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 xxxxx xxxxx that to
proceed with the transactions hereunder may constitute a violation of law.
10.6 Compliance with Articles VII and XI. Seller and/or Members shall
have made to Buyer the deliveries required by Articles VII and XI hereof within
the time periods required thereunder.
10.7 Inspection of Assets; U.C.C. Searches, etc. Buyer shall have
obtained environmental engineering reports and mechanical and electrical
engineering reports and surveys, if Buyer elects to obtain them, at Buyer's
cost, indicating a condition of the Assets acceptable to Buyer. Buyer and its
representatives shall have had and continue to have reasonable rights of
inspection of the Assets in connection with Buyer's due diligence review, and
the results of Buyer's inspection and due diligence review shall be acceptable
to it in Buyer's sole discretion. Seller shall have delivered to Buyer, at
Seller's expense, all U.C.C. financing statements, local and central, including
fixtures, and federal and state pending litigation, tax lien and judgment
searches, with respect to Seller, its affiliates and predecessors, Seller's
business operations and the Assets, including all "DBA's," trade names and
fictitious names of Seller (including, but not limited to, all names set forth
in Exhibit 4.13(4)), from each of the jurisdictions in which such entity does
business within the preceding five (5) years, and shall be delivered to Buyer at
least ten (10) days prior to Closing with results satisfactory to Buyer.
10.8 Approval by Counsel. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before the Closing
by counsel for Buyer, which approval will not be unreasonably withheld.
10.9 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,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, or, in either case, to exercise rights of ownership
pursuant thereto. There shall have been no federal or state statute, rule or
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regulations 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.
10.10 Repayment of Loans. The completion by Seller of repayment of any
bonds, loans or other long-term obligations as described in Section 1.4(1) on
such terms as are reasonably acceptable to Buyer and full release of any
security relating thereto and of any claims by any such lenders or obligors.
10.11 Consents. Seller shall have obtained all of the consents
described in Section 6.4.
10.12 Tail Insurance. Buyer shall deliver evidence of its tail
insurance coverage required by Section 6.13 hereof.
10.13 Approvals. This Agreement and consummation of the transactions
contemplated hereunder shall have been approved by the Board of Directors of
Buyer and Buyer's primary lenders.
10.14 Completion of Exhibits. All exhibits to this Agreement will be
completed to the mutual satisfaction of the parties.
ARTICLE XI. OBLIGATIONS OF SELLER AND MEMBERS AT CLOSING
At Closing, Seller and Members shall deliver or cause to be delivered
to Buyer or Buyer's designee, at Seller's expense, the following in a form and
substance reasonably satisfactory to Buyer or Buyer's designee:
11.1 Documents Relating to Title. Seller shall execute, acknowledge,
deliver and cause to be executed, acknowledged and delivered to Buyer or Buyer's
designee:
(1) General warranty deeds, in form satisfactory to Buyer or
Buyer's designee and the title insurer, and conveying to Buyer good, valid and
indefeasible title in fee simple to the Real Estate 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.
(2) General warranty bills of sale and assignments, in form
satisfactory to Buyer, warranting and conveying to Buyer good 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
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assessments, defects in title, encroachments and other burdens, except for
Permitted Exceptions.
(3) Certificates of title to all vehicles which constitute
Assets endorsed by Seller (or its affiliates, as is appropriate) together with
completed originals of any forms required by the State of Texas to transfer the
same, free and clear of liens.
(4) An assignment to Buyer of all Leases and Contracts
constituting the Assumed Contracts.
(5) Title Policy and Survey as specified in Sections 7.1 and
7.2 hereof; provided, however, that in lieu of the Title Policy, Seller may
deliver to Buyer at Closing the Title Commitment marked by the title agent to
show the final form in which the Title Policy will be issued (including the
deletion of all exceptions other than the Permitted Exceptions), and in each
case Seller shall provide the Title Policy to Buyer within five (5) business
days after Closing.
(6) U.C.C. Financing Statement searches as specified in
Section 7.3 hereof, together with evidence satisfactory to Buyer of the right to
full release at Closing of all liens noted thereon except for the Permitted
Exceptions.
11.2 Possession. Seller shall deliver to Buyer full possession and
control of the Assets, free and clear of all liens, mortgages, pledges, security
interests, restrictions, encumbrances, mortgages, easements, liabilities, and
burdens of any kind whatsoever, including, without limitation, limitations on
use and rights of reclamation by donees, except for Permitted Exceptions.
11.3 Opinion of Seller's Counsel. Seller shall deliver to Buyer and its
lender the favorable opinion of counsel for Seller, dated as of Closing, in form
and substance reasonably acceptable to Buyer and its lender. The form of opinion
will generally follow the format of the Legal Opinion accord of the ABA Section
of Business Law (1991), as modified by the Report of the ABA Section of Real
Property, Probate and Trust Law and the American College of Real Estate Lawyers
(1993).
11.4 Good Standing and Resolutions. Seller shall deliver to Buyer
Certificates of Good Standing from the Secretary of State of its state of
organization, and from each jurisdiction in which Seller is qualified to do
business, certified copies of its Certificate of Organization, Operating
Agreement and any other governance resolutions, and a certified copy of the
resolutions of its Members and its governing body 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,
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sufficient in form and content to meet the requirements of the law of the State
of Texas relevant to such transactions and certified by officers of Seller to be
validly adopted and in full force and effect and unamended as of Closing.
11.5 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 such parties in all material
respects, and (b) each representation and warranty of Seller is true and correct
on the Closing as if made on and as of the Closing.
11.6 Third Party Consents. Seller shall deliver to Buyer:
(1) Any consents, estoppels, approvals, releases, filings and
authorizations of third parties which are necessary in the reasonable opinion of
Buyer (in form reasonably acceptable to Buyer) for the execution, delivery and
consummation of this Agreement, and the transactions contemplated hereunder,
including without limitation, those necessary for the assignment of the leases
and contracts included in the Assumed Liabilities;
(2) All consents required by Section 6.4;
(3) Estoppel and attornment letters from tenants of Seller, in
form of Exhibit 11.6(3).
11.7 Taxes and Other Payments. Seller shall deliver to Buyer:
(1) Proof of cash payment directly to the tax authorities or
cash payment (or credit on the Purchase Price) to Buyer in the amount of all
real estate taxes and assessments which are a lien on the date of Closing,
general and special.
(2) 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. In the event that Seller
cannot furnish such a certificate or is not entitled to rely upon such a
certificate under the provisions of Section 1445 and the regulations thereunder,
Seller shall take and/or permit Buyer or Buyer's nominee to take any and all
steps necessary to allow Buyer or Buyer's nominee to satisfy the requirements or
Section 1445.
(3) Receipt or other evidence from the Texas Comptroller of
Public Accounts showing that all liability for sale and use taxes and employment
taxes due from Seller have been paid through the most recent reporting date, in
form reasonably acceptable to Buyer.
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11.8 Releases and Other Matters. Seller shall deliver to Buyer:
(1) Full releases of all obligations described in Section
1.4(1).
(2) Releases of mortgages, security interests, etc. as
required after completion of due diligence.
(3) Environmental representations and indemnifications set
forth in a separate agreement acceptable to the parties and Buyer's lender.
11.9 Notice to Third-Party Payors. Seller shall deliver executed
notices, of the sale of the Hospital, to be furnished to all third-party payors
including the Programs, in the form of Exhibit 11.9 hereto.
11.10 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 and Members shall cooperate with Buyer to put Buyer in actual
possession and operating control of the 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
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/or Members and to execute and deliver such further instruments and to
cooperate with Buyer as Buyer may reasonably request or to enable Buyer to
obtain all necessary health care or regulatory certifications, approvals,
consents and licenses, accreditations or permits. In addition, in the event that
after Closing Buyer elects to sell any ownership interest to local physicians,
Members shall provide such assistance to Buyer as Buyer may reasonably request.
ARTICLE XII. 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 and Members;
12.1 Purchase Price. Buyer shall deliver to Seller in immediately
available funds, the aggregate amount of the Purchase Price as specified in this
Agreement.
12.2 Corporate Good Standing and Certified Board Resolutions. Buyer
shall deliver to Seller a certificate of good standing from the Secretary of
State of its state of organization dated the most recent practical date prior to
Closing and a certified copy of
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the resolutions of the Board of Directors of the Buyer approving this Agreement
and consummation of the transactions hereunder contemplated.
12.3 Opinion of Buyer's Counsel. Buyer shall deliver to Seller a
favorable opinion of counsel for Buyer, dated as of Closing, in form and
substance reasonably acceptable to Seller.
12.4 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.
12.5 Closing Certificate. Buyer shall deliver to Seller a certificate
of an officer of the 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 on the Closing as if made on and as of the Closing.
12.6 Seller's Employees. For employees who accept Buyer's offer of
employment, Buyer shall recognize the employee's length of service with Seller
for eligibility and vesting under Buyer's employee benefit programs, including
vacation and pension.
12.7 Health Insurance. Employees who accept Buyer's offer of employment
shall be entitled to such medical (without pre-existing condition limitations
beyond those currently imposed by Seller) and other employee benefits as are
provided to employees of Buyer in similar positions.
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
13.1 Survival. The covenants, obligations, representations and
warranties of Buyer and Seller contained in this Agreement, or in any
certificate or document delivered pursuant to this Agreement, shall be deemed to
be material and to have been relied upon by the parties hereto notwithstanding
any investigation prior to the Closing and shall survive the date of Closing for
a period of three (3) years after Closing, and shall not be merged into any
deeds or other documents delivered in connection with the Closing; provided that
claims relating to the following matters (collectively, the "ABSOLUTE
COVENANTS") shall survive until sixty (60) days after the applicable statute of
limitations relating to the underlying claim: Assumed Liabilities, Excluded
Liabilities, title to Assets, lack of corporate authority, ERISA and employee
benefit matters, taxes, claims by third parties whether founded on negligence,
malpractice or statutory or regulatory violations, any failure of Seller to
transfer all of the Assets to Buyer, and claims for breach of the
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covenants of Sections 6.3, 6.18 and Article XIV and representations set forth in
Sections 4.1, 4.5, 4.6 and 4.15.
13.2 Indemnification by Seller. Subject to the provisions of Section
13.4, Seller promptly shall indemnify, defend and hold harmless (and upon demand
shall reimburse) 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)
(the "BUYER INDEMNIFIED PARTIES") against any and all claims, actions, demands,
suits, proceedings, assessments, judgments, losses, costs, and expenses
(including reasonable cost of investigation, court costs, legal fees and
expenses incident to any of the foregoing or incurred in attempting to avoid the
same or oppose the imposition thereof or in enforcing this indemnity) and other
damages (individually and collectively a "LOSS") resulting from (i) any breach
by either Seller or Members of any of their covenants, obligations,
representations or warranties or breach or untruth of any covenant, obligation,
representation, warranty, fact or conclusion contained in this Agreement or any
certificate or document of Seller and/or Members delivered pursuant to this
Agreement (or which would not have been suffered or incurred if such
representation, warranty, fact or conclusion were true or had not been breached
or such covenant or obligation had been fully performed), (ii) arising out of
the ownership, licensing, operation, action, inaction or conduct of Seller,
Members, Hospital, or any of the Assets or any of Seller's employees, agents or
independent contractors, relating to all periods of time prior to Closing,
except the Assumed Liabilities, (iii) the Excluded Liabilities, and (iv) in
respect of any other liabilities of Seller not expressly assumed by Buyer
hereunder. Any indemnification payment pursuant to the foregoing shall include
interest at a rate equal to ten percent (10%) (the "RATE") from the date the
loss, costs, expenses or damages were incurred until the date of payment;
provided, however, the Rate shall not be payable with respect to attorneys' fees
incurred until such date as the underlying claim is determined to be payable.
13.3 Indemnification by Buyer. Buyer shall promptly indemnify, defend,
and hold harmless (and upon demand shall reimburse) Seller, its Members and the
officers, employees and agents of Seller against any Loss resulting from (i) any
breach by Buyer of any of its covenants, obligations, representations or
warranties or breach or untruth of any covenant, obligation, representation,
warranty, fact or conclusion contained in this Agreement or any certificate or
document of Buyer delivered pursuant to this Agreement (or which would not have
been suffered or incurred if such representation, warranty, fact or conclusion
were true or had not been breached or such covenant or obligation had been fully
performed), (ii) any claim which is brought or asserted by any third party(ies)
against Seller for failure to pay or perform any of the Assumed Liabilities, and
(iii) any claim arising out of the ownership of the Assets or the conduct of the
business of the Hospital after Closing, except for failure to obtain consents
for the assignment of the contracts and
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except those directly or indirectly resulting from a breach by the Seller of any
representations or covenants of this Agreement. Any indemnification payment
pursuant to the foregoing shall include interest at the Rate from the date of
the loss, costs, expenses or damages were incurred until the date of payment;
provided, however, the Rate shall not be payable with respect to attorneys' fees
incurred until such date as the underlying claim is determined to be payable.
13.4 Indemnification by Foundation. Buyer and Seller acknowledge that a
portion of the Purchase Price will be paid by Seller to the Foundation (as
defined below). As a condition precedent to Foundation's receipt of said
payment, Seller shall obtain Foundation's agreement that with respect to any
Losses incurred by Buyer with respect to matters for which Xxxxx Xxxxxxx
Memorial Foundation ("FOUNDATION"), as successor in interest to Xxxxx Xxxxxxx
Memorial Hospital, agreed to indemnify the Dolly, Inc., predecessor in interest
to Seller, pursuant to the terms of the Closing Affidavit dated September 27,
1991, between Xxxxx Xxxxxxx Memorial Hospital and Xxxxxx Healthcare Group, Inc.
(herein, a "PRIOR PERIOD LOSS"), Foundation shall indemnify and hold the Buyer
Indemnified Parties harmless for any Prior Period Loss. Buyer agrees that
notwithstanding the provisions of Section 13.2, Seller shall have no liability
to the Buyer Indemnified Parties with respect to any Prior Period Loss so long
as Foundation (i) delivers an opinion of counsel in form and substance
satisfactory to Buyer to the effect of the due organization of Foundation, and
the valid, binding nature of execution of this Agreement by Foundation and its
full enforceability in accordance with its terms, and such other matters as
Buyer shall reasonably determine are needed, (ii) delivers certified resolutions
authorizing execution of the foregoing, and (iii) enters into an agreement
acceptable to Buyer evidencing Foundation's indemnification obligation to Buyer.
13.5 Procedure for Indemnification.
(1) Notice. Within thirty (30) days 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 that the
failure of the Indemnitee to give the Indemnitor notice within the specified
number of days 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. Indemnitor shall be liable to Indemnitee with
respect to Losses only so long as Indemnitee gives Indemnitor written notice
thereof prior to the expiration of the survival periods set forth in Section
13.1.
(2) Third Party Claims.
(a) If any claim for indemnification by Indemnitee
arises out of a Claim by a person other than Indemnitee, the Indemnitor shall be
entitled to assume the
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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 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.
(b) 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.
(c) 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.
(3) Other Claims. In the event of any Claim other than those
provided for in subsection (2) hereof, Indemnitee shall be entitled to
indemnification hereunder as provided herein.
(4) Payment of Claims. Amounts payable by the Indemnitor to
the Indemnitee under this Section 13.5 shall be payable by the Indemnitor (or
the escrow agent under the Escrow Agreement) as incurred by the Indemnitee. In
the event Indemnitor (or the escrow agent under the Escrow Agreement) 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 but subject to the Cap,
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(i) interest on the amount claimed at the Rate, and (ii) reasonable attorneys'
fees in connection with the enforcement of payment under this Section 13.5.
(5) No Set-Off. The Indemnitee's right to indemnification
under this Section 13.5 shall not be subject to set-off for any claim by the
Indemnitor against the Indemnitee.
(6) Claims by a Straddle Patient. Any claim by a patient
relating to professional negligence or similar matters involving a patient of
the Hospital 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 clearly the incident giving rise to
liability arose prior to Closing, Seller shall respond to the loss and defense
expenses; (ii) if it is a claim in which clearly the incident giving rise to
liability arose subsequent to Closing, Buyer shall respond to the loss and
defense expenses; and (iii) in the event that the incident giving rise to
liability as to time is not clear, Seller and Buyer will jointly 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 both indemnity and
expenses, then the matter shall be submitted to binding arbitration in
accordance with the rules and procedures of the American Arbitration
Association.
(7) Cap. Notwithstanding any other provision herein, the
aggregate indemnification obligation of any party hereunder shall in no event
exceed the Purchase Price.
13.6 Assignment by Buyer. No consent by Seller and/or Members shall be
required for any assignment or reassignment of the rights of Buyer under this
Article XIII.
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
14.1 Covenant Not to Compete. Seller and Members hereby covenant and
agree with Buyer that during the "NONCOMPETE PERIOD" within the "NONCOMPETE
AREA" they shall not, directly or indirectly, (a) acquire, lease, manage,
consult for, finance or own any part of (as member, shareholder or partner) any
health care facility which provides any services similar to the services
provided by the Hospital or what are normally provided by a hospital, including
but not limited to skilled nursing, obstetrics, psychiatric, alcohol/chemical
dependency, rural health, primary care, urgent care, ambulatory surgery,
diagnostics, psychiatric counseling or any other health related services or (b)
solicit for employment or employ any person who at Closing became an employee of
Buyer, or (c) disrupt or attempt to disrupt any past, present or reasonably
foreseeable future relationship, contractual or otherwise between Buyer, on the
one hand, and any physician, physician group, or other
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health care provider with whom Buyer contracts with in connection with the
Hospital, on the other hand. Notwithstanding the above, the restriction
described in this Section as item (a) above shall apply only to Seller, Xxxx
Xxxxx ("XXXXX") and R. Xxxxxxx Xxxxxx ("XXXXXX"). The Members other than Xxxxx
and Xxxxxx hereby covenant and agree with Buyer that in lieu of said
restriction, during the Noncompete Period and within the Noncompete Area, they
shall not, directly or indirectly, acquire, lease, manage, finance or own any
part of (as member, shareholder or partner) any hospital (other than the
Hospital) or outpatient diagnostic center. The "NONCOMPETE PERIOD" shall
commence at the Closing and terminate on the second anniversary thereof. The
"NONCOMPETE AREA" shall mean the area within a fifty (50) mile radius of the
Hospital. Ownership of less than five percent (5%) of the stock of a publicly
held company shall not be deemed a breach of this covenant.
14.2 Enforceability. In the event of a breach of Section 14.1 hereof,
Seller and Members recognize that monetary damages shall be inadequate to
compensate Buyer and Buyer shall be entitled, without the posting of a bond or
similar security, to an injunction restraining such breach, with the costs
(including attorneys' fees) of securing such injunction to be borne, jointly and
severally, by Seller and Members. Nothing contained herein shall be construed as
prohibiting Buyer from pursuing any other remedy available to it for such breach
or threatened breach.
All parties hereto hereby acknowledge the necessity of protection
against the competition of Seller and Members and that the nature and scope of
such protection has been carefully considered by the parties. The period
provided and the area covered are expressly represented and agreed to be fair,
reasonable and necessary. The consideration provided for herein is deemed to be
sufficient and adequate to compensate for agreeing to the restrictions contained
in Section 14.1 hereof. If, however, any court determines that the forgoing
restrictions are not reasonable, such restrictions shall be modified, rewritten
or interpreted to include as much of their nature and scope as will render them
enforceable.
ARTICLE XV. MISCELLANEOUS
15.1 Assignment. Following Closing, Buyer freely may assign any or all
rights or delegate any or all of its obligations under this Agreement without
the express written consent of Seller or Members. No assignment shall relieve
the assignor of any liability or obligation hereunder. Neither Seller nor
Members may assign any rights or delegate any obligations under this Agreement
without the prior written consent of Buyer, and any prohibited assignment or
delegation will be null and void.
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15.2 Other Expenses. Except as otherwise provided in this Agreement,
Seller and Members shall pay all of their 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. State and local sales and use taxes incurred in connection
with the transactions contemplated under this Agreement shall be borne and
timely paid by Seller. Buyer will pay the cost of all appraisals and shall pay
all transfer taxes. Buyer will pay the cost of the Phase I Environmental
Assessment set out in Section 6.20 and the costs of any additional environmental
reports, borings or inspections as set out in Section 6.20.
15.3 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 or Members:
c/x Xxxxxx Health Group, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 0
Xxxx, Xxxxx 00000
Attention: R. Xxxxxxx Xxxxxx, President
with a copy to:
Xxxxxxxx & Xxxxxxxx, L.L.P.
000 Xxxx Xxx Xxxxx Xxxxxx, #000
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx III, Esq.
To Buyer:
NAHC II of Texas, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
P.O. Box 3689
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, President & CEO
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with a copy to:
Xxxxxx X. Xxxx XX, Esq.
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
1800 First American Center
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
15.4 Controlling Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Texas.
15.5 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.
15.6 Benefit. Subject to Section 15.1 hereof, this Agreement shall be
binding upon and shall inure to the exclusive benefit of the respective heirs,
legal representatives, successors and assigns of the parties hereto and Buyer
shall require any of its successors to assume Buyer's obligations under this
Agreement. This Agreement is not intended to, nor shall it, create any rights in
any other party.
15.7 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.
15.8 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.
15.9 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.
15.10 Interpretation; Knowledge. 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. Further,
it is acknowledged by the parties that this Agreement including exhibits 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.
Whenever in this Agreement the term "to the knowledge of Seller" or the like is
used, Seller shall be deemed to have the knowledge of each Member and Seller's
officers, directors and key employees; and Seller shall be under a duty of due
inquiry.
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15.11 Entire Agreement. This Agreement, including the Exhibits hereto,
constitutes the entire agreement between the parties hereto with regard to the
matters 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, Seller and Members. 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.
15.12 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,
without limitation, attorneys' fees, costs and necessary disbursements, in
addition to any other relief to which such party shall be entitled.
15.13 Exclusivity. Buyer contemplates the expenditure of substantial
sums of time and money in connection with legal, accounting, financial, and due
diligence work to be performed in conjunction with the transactions contemplated
under this Agreement. For purposes of inducing Buyer to proceed with the
transactions, Seller and Members shall not, directly or indirectly, without
Buyer's prior written consent, initiate or hold discussions with any person or
entity (other than Buyer) concerning a purchase, affiliation, or lease of all or
a material part of the Assets, directly or indirectly, whether by sale of
equity, merger, consolidation, sale or lease of material assets, affiliation,
joint venture, or other material transaction for the period of time from the
date hereof until the date specified in the first sentence of Section 8.2(3) (or
such later period of time as the parties mutually agree pursuant to Section
8.2(3)). Seller will promptly notify Buyer by telephone and thereafter confirm
in writing via fax, if any such discussions or negotiations are sought to be
initiated with, or any such proposal or possible proposal is received directly
or indirectly, by Seller. In the event Seller receives an unsolicited offer
related to a type of transaction described in this paragraph, Seller shall
promptly inform the person making such unsolicited offer of the existence of its
obligations under this Section 15.13 but shall not disclose the contents of this
Section or this Agreement, and Seller shall reject such offer and promptly
notify Buyer thereof.
15.14 Completion of Exhibits. Certain of the Exhibits have not been
prepared in their final form at the time of execution of this Agreement. Input
by Seller and Buyer is necessary to finalize the Exhibits and each party agrees
to use its reasonable best efforts to finalize them. Submission of Exhibits
shall be in writing delivered via overnight courier to the other party's
counsel. Either party may supplement the Exhibits by like written delivery. The
submitted Exhibits shall be deemed accepted and thereby become an Exhibit to
this Agreement unless: (i) such proposed Exhibit would, individually or in
aggregate with the effect of items disclosed in other Exhibits which were first
submitted after signing of this Agreement, constitute a material adverse effect
on the receiving party
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in the receiving party's sole discretion, and (ii) within five (5) business days
after receipt of such proposed Exhibit, such receiving party provides written
notice to opposing counsel reasonably detailing the objection thereof and
changes in such proposed Exhibit which would make the same acceptable. Should
the parties not be able to resolve written objections within ten (10) business
days thereafter, then either party may withdraw from this Agreement and
terminate it without any obligation or liability of any sort and this Agreement
shall be treated as never having been executed or delivered. Acceptance of
Exhibits shall not mean that the underlying information (e.g. understanding
claim, likelihood of successful defense and adequacy of insurance coverage) is
acceptable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SELLER":
THE DOLLY V L.C.
By:
-------------------------------------------
Title:
----------------------------------------
"BUYER":
NAHC II OF TEXAS, INC.
By:
-------------------------------------------
Title:
----------------------------------------
MEMBERS":
-----------------------------------------------
XXXXXXX XXXXXXXX, M.D.
-----------------------------------------------
XXX X. XXXXX
-----------------------------------------------
XXX XXXXXXXX, M.D.
-----------------------------------------------
XXXX XXXXX
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HEJAR, LTD.
By:
-------------------------------------------
XXXXXX XXXXXXX, M.D., General Partner
-----------------------------------------------
XXXXX XXXXXXX, M.D.
-----------------------------------------------
XXXXXX XXXXXXX, M.D.
-----------------------------------------------
XXXXX XXXXX
-----------------------------------------------
R. XXXXXXX XXXXXX
-----------------------------------------------
XXXXXX X. XXXX
-----------------------------------------------
XXXX XXXXX
-----------------------------------------------
L. XXXXXX XXXXXXX
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