Exhibit 10.11
LEASE AND MANAGEMENT AGREEMENT
THIS LEASE AND MANAGEMENT AGREEMENT ("Lease"), made as of the June 9,
1998, by and between ST. LANDRY PARISH HOSPITAL SERVICE DISTRICT NO. 1, a
political subdivision of the State of Louisiana ("Lessor"), whose address is 400
Moosa Boulevard, Eunice, Louisiana 70535, doing business as "Moosa Memorial
Hospital" but currently operating as "Eunice Regional Medical Center"
("Lessor"), and PHC-EUNICE, INC., a Louisiana corporation ("Lessee"), whose
address is 105 Westwood Place, Suite 400, Brentwood, Tennessee 37027.
WITNESSETH:
WHEREAS, Lessor is a hospital service district, created under Louisiana
Revised Statute 46:1051 et. seq. whose object and purpose is, on behalf of the
citizens of its district, to own and operate a hospital for the care of persons
suffering from illnesses or disabilities which require that patient receive
hospital care; and
WHEREAS, Lessor is further allowed, by statute, to administer other
activities related to rendering care to the sick and injured or in the promotion
of health which may be justified by the facilities, personnel, funds and other
requirements available; and
WHEREAS, Lessor is further authorized, by statute, to participate so
far as circumstances may warrant in any activity designed and conducted to
promote the general health of the community; and
WHEREAS, Lessor is allowed to cooperate with other public and private
institutions and agencies in providing hospital and other health services to
residents of its district; and
WHEREAS, Lessor has previously owned and operated a hospital known as
"Moosa Memorial Hospital" and provided other ancillary health care services to
the residents of its district, all in compliance with its statutory purpose; and
WHEREAS, Lessor, in fulfilling its public purpose, now seeks a
strategic alliance with Lessee, to manage and provide health care services to
its residents, with such strategic alliance, including a lease and special
services, including improvements, to the existing facility.
WHEREAS, Lessor has entered into an Interim Management Services
Agreement with Lessee dated the 9th day of March, 1998, such Agreement being
attached hereto and incorporated herein; and
WHEREAS, both Lessor and Lessee now desire to enter into a long-term
Lease and Management Agreement, until such time as Lessee builds a replacement
hospital, all as discussed in more detail in that Agreement known as "Annex A to
Lease Agreement", such Agreement being incorporated herein by reference.
NOW, THEREFORE, for that mutual consideration more fully recited
herein, both parties agree to the following terms and conditions.
1. LEASE OF PREMISES AND EQUIPMENT. In consideration of the rents and
covenants herein stipulated to be paid and performed by Lessee and upon the
terms and conditions herein specified, Lessor hereby leases to Lessee, and
Lessee hereby leases from Lessor, the property commonly known as Eunice Regional
Medical Center, consisting of: (i) the parcel(s) of land located in Eunice, St.
Landry Parish, Louisiana, as described on Schedule A, Part I attached hereto and
made a part hereof for all purposes (the "Land"); (ii) all buildings,
structures, "Fixtures" (as hereinafter defined) and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Improvements"); (iii) all easements, rights and
appurtenances relating to the Land and the Improvements (collectively, the
"Appurtenant Rights"); (iv) all equipment, machinery, fixtures, and other items
of property, including all components thereof, now and hereafter permanently
affixed to or incorporated into the Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, (collectively the "Fixtures"); and (v) all
equipment, furnishings, furniture, trade fixtures and other personal property
used in connection with medical-surgical hospital, urgent care and medical
office building operations and businesses on the Premises, all as more
particularly described on Schedule B (collectively the "Equipment"). The Land,
the Improvements, the Appurtenant Rights and the Fixtures are hereinafter
referred to collectively as the "Premises."
2. TERM. The Premises and the Equipment are leased for an initial term
of ten (10) years (the "Initial Term") commencing on the date upon which all
conditions precedent to the Closing of the transactions set forth in Annex A
have occurred (the "Commencement Date") and ending on June 30, 2008, unless
terminated as hereinafter provided; provided however, in the event such
conditions precedent have not occurred and the transactions set forth in Annex A
have not closed on or before December 31, 1998, this Lease shall be null and
void. If Lessee is not in default hereunder, Lessee shall have the option to
extend the Initial Term for an additional five (5) years (the "Extended Term")
by giving written notice to
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Lessor of its election to exercise such option at least one hundred eighty (180)
days prior to the expiration of the Initial Term. Notwithstanding the foregoing,
unless Lessee otherwise elects in writing, this Lease shall automatically
terminate upon commencement of operations by Lessee of the Replacement Hospital
as set forth in Section 11 of Annex A hereto. "Lease Year" shall mean the period
beginning on the first day of the term and ending at 12:00 midnight of the day
prior to the first anniversary of the commencement date of the term and each
subsequent twelve (12) month period within the term of this Lease.
3. AMOUNT AND MANNER OF PAYMENT OF RENT. On the date hereof, Lessee
shall pay to Lessor, as partial prepayment of rent for the Initial Term, Thirty
Thousand Dollars ($30,000) (the "Initial Rent"). On the sixth anniversary of the
date of this Lease, Lessee shall pay to Lessor an additional prepayment of rent
in the amount of One Hundred Thousand Dollars ($100,000) (the "Additional
Rent"). In the event Lessee elects to extend the term of this Lease for the
Extended Term, Lessee shall pay to Lessor an additional prepayment of rent in
the amount of One Hundred Fifty Thousand Dollars ($150,000) (the "Extended Term
Rent"). In the event that, at anytime during the term of this Lease, Lessee
wrongfully terminates this Lease or defaults under this Lease and Lessor is
permitted and does terminate this Lease as a result of such default, Lessee
shall forfeit any claim it may have to the Initial Rent, Additional Rent or
Extended Term Rent. In the event that, at anytime during the first year of the
term of this Lease, Lessor wrongfully terminates this Lease or defaults under
this Lease and Lessee is permitted and does terminate this Lease as a result of
such default, Lessor shall forfeit and immediately repay the full amount of the
Initial Rent to Lessee. In the event that, at anytime after the first year of
the term of this Lease, Lessor wrongfully terminates this Lease or defaults
under this Lease and Lessee is permitted and does terminate this Lease as a
result of such default, Lessor shall forfeit and immediately repay a prorated
portion of the Initial Rent to Lessee, such prorated portion being equal to,
during the Initial Term, 120 minus the number of months (not to exceed 120)
which have elapsed from the Commencement Date to the date of such termination
multiplied by the Initial Rent, and during the Extended Term, 60 minus the
number of months (not to exceed 60) which have elapsed from the commencement of
the Extended Term.
The Initial Rent, Additional Rent and Extended Term Rent are
hereinafter referred to together as "Rent.") All Rent shall be paid in lawful
money of the United States to Lessor at Lessor's address set forth above or at
such other address or to such person as Lessor may designate in writing from
time to time. Any installment of Rent which is not paid within fifteen (15) days
of the Lease Payment Date shall bear interest at the rate of eight percent (8%)
per annum from the 31st day after such Payment Date until such installment is
paid. The parties agree that the Rent shall be allocable to and payable in
respect to the Premises (Land, Improvements, Appurtenant Rights and Fixtures)
and the Equipment as set forth in Schedule C.
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4. COVENANTS OF LESSEE AND LESSOR.
4.1 PAYMENT OF RENT. Lessee shall pay Rent in the manner provided in
Section 3 without notice or demand.
4.2 OPERATION AND MANAGEMENT. Lessee shall operate and manage the
premises, at the minimum, as an acute care hospital in a manner consistent with
those standards acceptable in the industry. Lessee shall perform its obligations
consistent with the public purpose of Lessor and shall not perform in any way
that threatens such purpose. Lessee further agrees that it will provide written
reports, when requested, but no less than on a quarterly basis, to the Board of
Commissioners of Lessor (the "Board of Commissioners") which discusses the
complete financial condition of the hospital and its ancillary services. Lessee
further agrees that it will file all Medicare and/or Medicaid cost reports
relating to the period from and after the Commencement Date in a timely fashion
and pay all adjustments due and owing, notwithstanding its ability to exercise
its appeal rights.
4.3 MAINTENANCE AND REPAIR.
(a) Lessee, at its own expense, will maintain all parts of the
Improvements in at least as good condition as they now are, except for ordinary
wear, tear, depreciation and obsolescence and damage by fire or other casualty.
(b) All of the Equipment shall be maintained by Lessee in such repair
and condition as similar equipment is maintained in other hospitals similar to
and similarly located to the Premises and parishes contiguous thereto, but
Lessee shall not be required to maintain any of the Equipment in any better
condition than it now is. In the event that Lessee decides for any reason that
any item or items of Equipment are no longer required for its use, Lessee may
dispose of the same in accordance with the provisions of Section 7.2. If Lessee
elects to replace any damaged or deteriorated Equipment instead of repairing the
same, such replacement items of equipment shall become the property of Lessee,
provided that the acquisition of any such replacement items of equipment shall
be subject to the provisions of Section 7. Upon the early termination of this
Lease, Lessee shall return to Lessor all items of Equipment not previously
returned to Lessor in such condition they are required to be maintained
hereunder, ordinary wear and tear, damage and deterioration, and any loss or
damage ordinarily covered by a policy of fire and extended coverages excepted.
As used throughout this Section 4.2(b), "ordinary wear and tear" shall mean the
wear, tear, damage and deterioration that would typically and ordinarily occur
if used for a period of time equivalent to the term of this Lease in a
medical-surgical hospital facility similar to the Premises. Upon the expiration
of this Lease, all of the Equipment and other items of personal property leased
to Lessee hereunder shall become the sole property of Lessee without further
payment to Lessor.
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4.4 TAXES AND UTILITIES. Lessee shall pay, prior to delinquency: all
taxes, assessments, levies, fees, water and sewer rents and charges, and all
other governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, which during the term hereof, (i) are imposed or levied
upon or assessed against the Premises and the Equipment, or (ii) arise out of
the operation, possession or use of the Premises. Lessee shall not be required
to pay any franchise, estate, inheritance, transfer, income or similar tax of
Lessor unless such tax is imposed, levied or assessed in substitution for any
other tax, assessment, charge or levy which Lessee is required to pay pursuant
to this Section 4.3. Lessee will furnish to Lessor, promptly after demand
therefor, proof of payment of all items referred to above which are payable by
Lessee. If any such assessment may legally be paid in installments, Lessee may
pay such assessment in installments; in such event, Lessee shall be liable only
for installments which accrue during the term hereof.
4.5 COMPLIANCE WITH LAWS. Lessee shall cause the Premises to be in
conformity with all laws, ordinances and regulations, and other governmental
rules, orders and determinations now or hereafter enacted, made or issued,
whether or not presently contemplated (collectively "Legal Requirements"),
applicable to the Premises or the use thereof. In the event that the Premises
are not now in conformity with all Legal Requirements, Lessor shall be
responsible for promptly causing the Premises to become in conformity with all
Legal Requirements, in accordance with the provisions of Section 7.2 of Annex
to this Lease.
4.6 INSURANCE.
(a) Lessee will maintain insurance on the Premises of the
following character:
(i) Insurance against loss by fire, flood, lightning,
vandalism, malicious mischief and other risks which at the time are included
under "extended coverage" endorsements with respect to the Premises, in an
amount not less than 100% of the actual replacement value of the Improvements,
exclusive of foundations, excavations, parking areas, drives, underground
utilities and all other land improvements.
(ii) Comprehensive public liability insurance against claims
for bodily injury, death or property damage occurring on, in or about the
Premises and adjoining streets and sidewalks, in the amounts of $3,000,000 for
bodily injury or death in any one occurrence and $1,000,000 for property damage.
(iii) Worker's compensation insurance (including employers'
liability insurance, if requested by Lessor) to the extent required by the law
of the state in which the Premises are located and to the extent necessary to
protect Lessor and the Premises against worker's compensation claims.
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(b) Lessee will maintain professional liability insurance in the amount
of at least $1,000,000 per occurrence and $3,000,000 in the aggregate, and
participate in the Louisiana Patient Compensation Fund as a "Participating
Provider".
The insurance referred to in subsections (a) and (b), above, such
insurance shall be written by companies legally qualified to issue such
insurance, and shall name Lessor and Lessee as insured parties as their
interests may appear. Coverage for the items referred to in subsections (a)(ii),
(a)(iii) and (b) above may be provided through such combination of self
insurance and to "umbrella" policies maintained by Lessee or an Affiliate of
Lessee as Lessee deems advisable. Lessee shall provide copies of certificates of
insurance for such coverage to Lessor on or before the Commencement Date, and
shall maintain current copies of any such certificates with Lessor at all times
during the term of this Lease. Lessee shall notify Lessor of any change or lapse
in coverage. For the purpose of this Agreement, the term "Affiliate of Lessee"
shall mean any person or entity that directly or indirectly controls, is
controlled by, or is under common control with, Lessee, (ii) any entity of which
Lessee owns ten percent (10%) or more of the outstanding voting securities, or
(iii) any entity of which Lessee is a managing or controlling general partner or
joint venturer. As used in this definition of "Affiliate," the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity whether through ownership
of voting securities, by contract or other written agreement.
4.7 SURRENDER OF PREMISES. Upon the expiration or termination of the of
this Lease, Lessee shall surrender the Premises to Lessor in the condition in
which the Premises were upon the commencement of this Lease, except as repaired,
rebuilt, restored, altered, added to, as permitted or required hereby; except
for ordinary wear and tear, normal deterioration and obsolescence, and damage
due to causes reasonably beyond Lessee's control and, if this Lease shall be
terminated by Lessee pursuant to Section 11.1, except any damage resulting from
any fire or other casualty.
4.8 USE OF PREMISES. Until such time as Lessee has built the
Replacement Hospital (as such term is defined in Annex A), Lessee may use and
occupy the Premises for operation of a medical surgical hospital or other health
care facility or facilities and the provision of such ancillary services and
related, incidental uses as are appropriate or desirable in conjunction with the
operation of such health care facilities and for any other purpose or purposes
permitted by applicable Legal Requirements. Thereafter, Lessee may use and
occupy the Premises for any purpose for which Lessor could use the Premises.
4.9 WAIVER OF SUBROGATION. Lessor and Lessee on behalf of themselves
and all others claiming under them, including any insurer, waive all claims
against each other, including all rights of subrogation, for loss or damage to
their respective property (including, but not limited to, the Premises) arising
from fire, smoke
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damage, windstorm, hail, vandalism, theft, malicious mischief and any of the
other perils normally insured against in an "all risk" or physical loss policy,
regardless of whether insurance against those perils is in effect with respect
to such party's property. If either party so requests, the other party shall
obtain from its insurer a written waiver of all rights of subrogation that it
may have against the other party.
4.10 COMPLIANCE WITH ACCREDITATION STANDARDS. Lessee shall at all times
at its own cost and expense use its best efforts to maintain the Premises and
operate the Hospital in material compliance with the Accreditation Standards of
the Joint Commission on the Accreditation of Healthcare Organizations ("JCAHO")
or any other comparable accrediting organization that offers "deemed status"
under the Medicare program, as the same may be amended from time to time. In the
event that the Premises are not now in conformity with all JCAHO Accreditation
Standards, Lessor shall be responsible for promptly causing the Premises to
become in conformity with all JCAHO Accreditation Standards.
5. TITLE AND CONDITION OF PREMISES.
5.1 TITLE TO PREMISES. Lessor covenants, represents and warrants that
Lessor has full right and lawful authority to enter into this Lease for the term
hereof, is lawfully seized of the Premises and has good and marketable title
thereto, free and clear of all liens and encumbrances except those listed on
Schedule A, Part II (the "Permitted Encumbrances").
5.2 CONDITION OF THE PREMISES. The Premises and the Equipment are in
good operating condition and repair and are structurally sound and, except as
set forth in Schedule D, there are no material deferred maintenance items and
none of the Equipment nor any of the buildings, structures, fixtures or
improvements which are part of the Premises are in need of any maintenance,
repair or replacement, except for ordinary routine periodic maintenance of the
kind usually required from time to time at similar facilities.
5.3 QUIET ENJOYMENT. So long as no Event of Default has occurred and is
continuing, Lessee shall peaceably and quietly have, hold, occupy and enjoy the
Premises and the Equipment and all the appurtenances thereto, without hindrance
or interruption from Lessor or any other persons and other entities whatsoever,
subject only to Permitted Encumbrances as set forth in Annex A.
6. INDEMNIFICATION. Lessee shall indemnify and hold Lessor harmless
against any and all claims, liabilities, damages or losses resulting from injury
or death of any person or damage to any property occurring on or about the
Premises or in any manner in conjunction with the use or occupancy of the
Premises in whole or in part, unless the death, injury or damage was sustained
as a result of any willful or negligent acts or omissions of Lessor, or Lessor's
agents or employees.
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7. ALTERATIONS, ADDITIONS AND REMOVAL.
7.1 ALTERATIONS, ADDITIONS AND REMOVAL. Lessee may, at its expense,
make additions to and alterations of the Improvements, and construct additional
Improvements, without permission of Lessor, provided that (i) such additions to
and alterations and construction are either described in Schedule F or do not
exceed $25,000.00; (ii) the market value of the Premises shall not be materially
lessened thereby; (iii) such work shall be completed in a good and workmanlike
manner and in compliance with all applicable Legal Requirements and the
requirements of all insurance policies required to be maintained by Lessee
hereunder; (iv) no material part of the Improvements shall be demolished unless
(A) the same are replaced by other improvements which are required by Lessee in
connection with its intended use of the Premises, and (B) Lessor's prior consent
shall have been obtained, which consent shall not be unreasonably withheld. All
such additions and alterations shall be and remain part of the realty and become
the property of Lessor at the expiration or earlier termination of this Lease.
Lessee may place upon the Premises any trade fixtures, machinery, equipment,
materials, inventory, furniture and/or other personal property belonging to
Lessee or third parties (collectively, "Lessee's Personal Property"), whether or
not the same shall be affixed to the Premises, which are used in connection with
any of Lessee's business operations on the Premises. Lessee may remove any of
Lessee's Personal Property at any time during the term of this Lease. Lessee
shall repair any damage to the Premises caused by such removal.
7.2 DISPOSAL OF EQUIPMENT. If Lessee shall determine at any time and
from time to time that any item or items of Equipment are obsolete or no longer
suitable for Lessee's use in connection with Lessee's business or operations at
the Premises, Lessee may sell, transfer, exchange, or otherwise dispose of such
item(s) in such manner as Lessee may deem appropriate so long as such is in
compliance with both state and local law. If requested by Lessee, Lessor shall
deliver to Lessee or to Lessee's designee a bill of sale, in form and substance
reasonably satisfactory to Lessee, duly executed and acknowledged by Lessor,
which shall be sufficient to convey and transfer to Lessee or its designee all
of Lessor's right, title and interest in and to the item(s), free and clear of
all liens and encumbrances whatsoever other than Permitted Encumbrances as set
forth in Annex A. Lessee may retain as its sole and absolute property the
proceeds, whether in cash or in exchange property or otherwise, of any sale,
transfer, exchange or other disposition of any such items.
8. LESSEE'S RIGHT TO MORTGAGE ITS LEASEHOLD INTEREST.
8.1 LESSEE'S RIGHT TO ENCUMBER AND MORTGAGE THIS LEASEHOLD. At any time
during the term of this Lease, Lessee may mortgage, hypothecate or otherwise
encumber Lessee's leasehold estate under this Lease in respect to both the
Premises and Equipment to secure indebtedness of Lessee under one or more
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leasehold mortgages and may assign this Lease as security for such mortgage or
mortgages.
8.2 EXECUTION OF DOCUMENTS REQUIRED BY LEASEHOLD MORTGAGES. Lessor
shall execute and deliver such documents as may reasonably be requested from
time to time by any leasehold mortgagee for the purpose of allowing such
leasehold mortgagee reasonable means to protect or preserve its lien upon
Lessee's leasehold interest under this Lease on the occurrence of a default
under the terms of this Lease, including without limitation a landlord
agreement; provided, however, that any such documents shall not in any way
affect Sections 2, 3 or 4.7 of this Lease, or without the prior written approval
of Lessor, which will not be unreasonably withheld, modify any other provision
of this Lease in a manner which materially adversely affects Lessor.
9. ASSIGNMENTS AND SUBLEASES. Lessee and its assigns shall have the
right to assign this Lease, in whole or in part, and to sublet the Premises, or
any part thereof, from time to time to an Affiliate (as that term is defined in
Section 4.6(b)) without the prior written consent of Lessor.
10. PERMITTED CONTESTS. Notwithstanding any provision of this Lease to
the contrary, Lessee shall not be required, nor shall Lessor have the right, to
pay, discharge or remove any tax, assessment, levy, fee, rent (except Rent,
additional rent and any other sums due hereunder payable to or for the benefit
of Lessor), charge, lien or encumbrance, or to comply with any Legal Requirement
applicable to the Premises or the use thereof, as long as Lessee shall contest
the existence, amount or validity thereof by appropriate proceedings which shall
prevent the collection of or other realization upon the tax, assessment, levy,
fee, rent, charge, lien or encumbrance so contested, and which also shall
prevent the sale, forfeiture or loss of the Premises or any Rent, or to satisfy
the same or Legal Requirements, and which shall not affect the payment of any
Rent, provided that such contest shall not subject Lessor to the risk of any
criminal liability or any material civil liability. Lessee shall give such
reasonable security as may be demanded by Lessor, or any mortgagee to insure
ultimate payment of such tax, assessment, levy, fee, rent, charge, lien, or
encumbrance and compliance with Legal Requirements and to prevent any sale or
forfeiture of the Premises, any Rent, any additional rent or any other sum
required to be paid by Lessee hereunder.
11. CASUALTY AND CONDEMNATION.
11.1 CASUALTY.
(a) Except as hereinafter provided, if any of the Improvements shall be
damaged or destroyed by fire or any other casualty covered by a standard policy
of fire and extended coverage insurance, as required pursuant to Section 4.5
hereof, Lessee shall thereafter commence and diligently prosecute to completion,
at Lessee's sole expense, the repair or rebuilding of the Improvements or
portion
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thereof which was damaged, in a good and workmanlike manner, in accordance with
plans and specifications satisfactory to Lessee and Lessor, which Lessor shall
not unreasonably disapprove, provided that the Improvements upon completion of
such repair or rebuilding shall have a value which is not substantially less
than the value of the Improvements immediately prior to the damage or
destruction. All proceeds remaining after payment of the costs of collection and
recovery, if any ("Net Proceeds") shall be paid over to Lessee to fund the costs
of repair and rebuilding.
(b) In the event that either (i) the damage or destruction with respect
to any building ("Building") which is a part of the Improvements is so extensive
that it cannot be rebuilt, restored or repaired as required in Section 12.1(a)
within one hundred twenty (120) days after such occurrence, as determined by
Lessee in its reasonable judgment or (ii) any such damage or destruction occurs
during the last two years of the term of this Lease, then Lessee shall have the
right to terminate this Lease with respect to the damaged or destroyed Building,
but no other part of the Premises, by giving written notice thereof to Lessor
within sixty (60) days after the occurrence of such damage or destruction and
such termination will be effective retroactively as of the date of such damage
or destruction; provided that, if the Building which suffered such damage or
destruction is the main hospital building located on Tract 1 of the Premises,
then Lessee shall have the right to terminate this Lease by giving written
notice thereof to Lessor within sixty (60) days after the occurrence of such
damage or destruction and such termination will be effective retroactively as of
the date of such damage or destruction. In addition, if any Building is
materially damaged or destroyed by any casualty not covered by the standard
policy of fire and extended coverage insurance, then Lessee may terminate this
Lease effective as of the date of such damage or destruction by giving the other
party written notice thereof within sixty (60) days after the occurrence of such
damage or destruction. If Lessee exercises its option to terminate this Lease in
part on account of damage or destruction to a Building, the parties shall
promptly thereafter execute an amendment to this Lease which shall provide that
such Building will be excised from the Premises, and that Rent will be
proportionately and equitably reduced. In the event of a termination of this
Lease, either in whole or in part, pursuant to Section 11.1(b), the Net Proceeds
of insurance shall be paid over to Lessor, except that Lessee shall be entitled
to receive such portion of such proceeds which represents the amount allocable
to the value of the leasehold improvements made by Lessee and Lessee's Personal
Property.
11.2 CONDEMNATION.
(a) If (i) the Premises are taken by an entity with the power of
eminent domain ("Condemning Authority") or if the Premises are conveyed to a
Condemning Authority by a negotiated sale, or if part of the Premises is so
taken or conveyed such that any of the Improvements cannot be rebuilt so that
upon completion Lessee may again use the Premises without substantial
interference, or (ii) due to
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any such taking or conveyances, access to the Premises or any part thereof by
motor vehicles and trucks as operated by Lessee, its contractors, employees,
patients and invitees in the course of Lessee's business as theretofore
conducted, is substantially impaired or terminated; then in any such event,
Lessee may terminate this Lease by giving Lessor written notice any time after
the occurrence of any of the foregoing and such termination shall be effective
sixty (60) days from the date possession is taken by the Condemning Authority.
(b) If part of the Premises or any Building or a substantial part
thereof is so taken or conveyed without substantially interfering with the use
of the Premises as a whole, but only one or more of the Buildings thereon, this
Lease shall not terminate, except to the extent hereinafter provided. In such
event, however, (i) Lessee shall have the option to terminate this Lease in
respect to any Building which is subject to such taking or conveyance by
notifying within sixty (60) days after the title is transferred to the
Condemning Authority, and Lessor shall be entitled to all awards and payments
made or to be made by the Condemning Authority, and (ii) if Lessee exercises
such termination option, Lessor shall apply such portions of any award or
payment made to Lessor for such taking or conveyance as is necessary to pay the
cost of restoring the Building and/or the Premises to a complete architectural
unit suitable for Lessee's use and business on the Premises. If Lessee exercises
its option to terminate this Lease in part on account of a taking or conveyance
of a Building or any substantial part thereof as provided in clause (i) above,
the parties shall promptly thereafter execute an amendment to this Lease which
shall provide that the Building will be excised from the Premises, and that Rent
will be proportionately and equitably reduced.
(c) Except as provided below and in Section 11.2(b), all payments made
for any such taking or conveyance shall be the property of Lessor; provided,
however, Lessor shall have no interest in any award or payment or any portion of
any such award or payment which is attributable to the taking or conveyance of
any trade fixtures, equipment and other personal property that have been placed
on or within the Premises by Lessee since the Commencement Date or any leasehold
improvements made by Lessee since the Commencement Date, all of which shall be
paid to Lessee.
(d) If this Lease is terminated pursuant to this Section 11, Lessor and
Lessee shall be released and discharged from all liabilities arising or accruing
under this Lease subsequent to the effective date of termination.
12. RIGHT OF ENTRY.
Upon not less than twenty-four (24) hours prior written notice to
Lessee, Lessor and its agents and designees may enter upon and examine the
Premises at reasonable times for the purpose of determining the condition of the
Premises, and may show the Premises to prospective purchasers, mortgagees or
lessees as long as
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such examination or showing shall not unreasonably interfere with the business
operations of Lessee on the Premises.
13. DEFAULT.
13.1 DEFAULT; NOTICE AND CURE; REMEDIES. In the event Lessee shall
default in the payment of Rent or any other sums payable by Lessee hereunder,
and such default shall continue for a period of fifteen (15) days after Lessee
receives written notice thereof from Lessor; or, if Lessee shall default in the
performance of any other covenants or agreements hereunder and such default
shall continue for thirty (30) days after written notice thereof, or, if the
default is of such a nature that it could not reasonably be cured within such
thirty (30) day period and Lessee does not, within said thirty (30) day period
commence to cure it and thereafter proceed, with due diligence, to cure it; or,
if Lessee shall fail to cause the Premises to be in conformity with the Legal
Requirements and all other contracts, agreements, covenants, conditions and
restrictions applicable to the ownership, occupancy or use of the Premises, as
set forth in Section 4.4 hereof, and such failure shall continue for thirty (30)
days after written notice thereof, or if the failure is of such a nature that it
could not reasonably be cured within such thirty (30) day period and Lessee does
not, within such thirty (30) day period commence to cure it and thereafter
proceed, with due diligence, to cure it; then, and in addition to any and all
other legal remedies and rights, Lessor may perform such covenant or agreement
and to the extent sums are expended in connection therewith, and add such sums
to the Rent due from Lessee to Lessor or, at the election of Lessor, may
terminate this Lease and retake possession of the Premises by eviction, reentry
or otherwise. Such re-entry shall not bar the right or recovery of Rent or
damages for breach of covenants, nor shall the receipt of Rent after conditions
broken be deemed a waiver of Lessor's remedies.
13.2 OBLIGATION TO RELET. After a dispossession or removal in
accordance with Section 13.1, the Rent shall be paid to the date of such
dispossession or removal, (i) Lessor shall use its reasonable best efforts to
re-let the Premises or portions thereof, either in the name of Lessor, Lessee or
otherwise, for a term or terms which may, at the option of Lessor, be less than
or exceed the period which would otherwise have constituted the balance of the
term of this Lease, (ii) Lessee shall pay Lessor monthly any deficiency between
the Rent due hereunder and the amount, if any, of the rent collected on account
of the new lease or leases of the Premises for each month of the period which
would otherwise have constituted the balance of the term of this Lease (not
including any renewal or extension the commencement of which shall not have
occurred prior to such dispossession or removal), and (iii) Lessor shall have
any and all other rights and remedies available to it.
13.3 COSTS AND EXPENSES. If Lessee should fail to make any payment or
cure any default hereunder within the time herein permitted, Lessor, without
being
12
under any obligation to do so and without thereby waiving such default, may make
such payment and/or remedy such other default for the account of Lessee, and
thereupon Lessee shall be obligated to, and hereby agrees, to pay Lessor, upon
demand, all costs, expenses and disbursements (including reasonable attorneys'
fees) incurred by Lessor in taking such remedial action.
14. ENVIRONMENTAL MATTERS.
14.1 WARRANTY OF LESSOR. Except as set forth in Schedule D, Lessor
represents and warrants to Lessee that as of the date hereof no "Hazardous
Substances" (as hereafter defined) or any other toxic material or medical waste
are known to be present on or in the Improvements or Land, except for Hazardous
Substances or other toxic materials or medical waste brought, kept or used in
the Premises in commercial quantities similar to those quantities usually kept
on similar premises by others in the same business or profession or who operate
medical facilities similar to those located in and on the Premises, and which
are used and kept in compliance with applicable public health, safety and
environmental laws; and Lessor shall indemnify Lessee against any and all
claims, demands, liabilities, losses and expenses, including consultant fees,
court costs and reasonable attorneys' fees, arising out of any breach of the
foregoing warranty.
14.2 COVENANT OF LESSEE. Except for Hazardous Substances or other toxic
materials or medical waste brought, kept or used in the Premises in commercial
quantities similar to those quantities usually kept on similar premises by
others in the same business or profession or who operate medical facilities
similar to those located in and on the Premises, medical specialty, and which
are used and kept in compliance with applicable public health, safety and
environmental laws, Lessee shall not allow any Hazardous Substance, or other
toxic material or medical waste to be located in, on or under the Premises or
allow the Premises to be used for the disposal of any Hazardous Substance or
other toxic material and Lessee shall indemnify Lessor against any and all
claims, demands, liabilities, losses and expenses, including consultant fees,
court costs and reasonable attorneys fees, arising out of any breach of the
foregoing warranty.
14.3 COMPLIANCE WITH LAWS. Lessee shall at all times and in all
respects comply with all Legal Requirements applicable to the Premises or the
use thereof relating to industrial hygiene, the handling, storage and disposal
of medical waste, environmental protection, or the use, analysis, generation,
manufacture, storage, disposal or transportation of any Hazardous Substance,
toxic material or medical waste.
14.4 REMEDIATION. If Lessee becomes aware of the presence of any
Hazardous Substance in or on the Premises (except for those Hazardous Substances
or other toxic material or medical waste brought, kept or used in the Premises
by Lessee in commercial quantities similar to those quantities usually kept on
similar
13
premises by others in the same business, profession or medical specialty and
which are used and kept in compliance with applicable public health, safety and
environmental laws) or if Lessee, or the Premises become subject to any order of
any federal, state or local agency to repair, close, detoxify, decontaminate or
otherwise cleanup the Premises, Lessee shall, at its own cost and expense, carry
out and complete any repair, closure, detoxification, decontamination or other
cleanup of the Premises; provided that Lessee shall not be responsible for any
of the foregoing relating to any Hazardous Substance, or other toxic materials
or medical waste located on, in or under the Premises on the date of this Lease,
all of which shall be the responsibility of Lessor pursuant to Section 14.1 and
Lessor shall promptly execute and complete any required repair, closure,
detoxification, decontamination or other clean-up of the Premises. If either
party Lessee fails to implement and diligently pursue any such repair, closure,
detoxification, decontamination other cleanup of the Premises which it is
required to do hereunder, the other party Lessor shall have the right, but not
the obligation, to carry out such action and to recover all of the costs,
expenses, penalties and fines from the other.
14.5 DEFINITION. "Hazardous Substances" as such term is used in this
Lease means any hazardous or toxic substance, material or waste, regulated or
listed pursuant to any federal, state or local environmental law, including
without limitation, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conversation and Recovery Act, the Federal Insecticide,
Fungicide, Rodenticide Act, the Safe Drinking Water Act and the Occupational
Safety and Health Act.
15. NOTICES, DEMANDS AND OTHER INSTRUMENTS. All notices, offers,
consents and other instruments given pursuant to this Lease shall be in writing
and shall be validly given when personally delivered or when placed in the
United States mail, registered or certified with return receipt requested, when
sent by prepaid telegram or facsimile followed by a confirmatory letter actually
delivered or when sent by a courier or express service guaranteeing overnight
delivery, (i) if to Lessor, addressed to it at its address set forth above, (ii)
if to Lessee, addressed to Lessee at its address set forth above. Lessor and
Lessee each may from time to time specify, by giving fifteen (15) days notice to
each other party, (i) any other address in the United States as its address for
purposes of this Lease and (ii) any other person or entity that is to receive
copies of notices, offers, consents and other instruments hereunder.
16. SEVERABILITY; BINDING EFFECT. Each provision hereof shall be
separate and independent and, the breach of any such provision by Lessor shall
not discharge or relieve Lessee from its obligations to perform each and every
covenant to be performed by Lessee hereunder. If any provision hereof or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remaining provisions hereof, or the application of such
provision
14
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
valid and shall be enforceable to the extent permitted by law. All provisions
contained in this Lease shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of Lessor and Lessee to
the same extent as if each such successor and assign were named as a party
hereto. This Lease may not be changed, modified or discharged except by a
writing signed by Lessor and Lessee. Any such change, modification or discharge
made otherwise than as expressly permitted by this paragraph shall be void. This
Lease shall be governed by and interpreted in accordance with the laws of the
State of Louisiana.
17. HEADINGS AND TABLE OF CONTENTS. The table of contents and the
headings of the various Sections and Schedules of this Lease have been inserted
for reference only and shall not to any extent have the effect of modifying,
amending or changing the expressed terms and provisions of this Lease.
18. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
19. MEMORANDUM OF LEASE. Upon request of either party hereto, the
parties shall execute and deliver to each other duplicate originals of a
Memorandum of this Lease, in recordable form, containing the information
required by law for recording the same.
20. ASSIGNMENT OF EXISTING LEASES. Lessor hereby assigns to Lessee all
of its right, title and interest as lessor under those certain leases affecting
the Premises which are existing and in effect as of the date of execution of
this Lease listed on Schedule 4.6 of Annex A (hereinafter the "Existing
Leases"), and Lessee hereby agrees to assume all Lessor's obligations, covenants
and agreements as lessor under the Existing Leases. Lessee shall be entitled to
collect and receive all such rents and other sums from the lessees under the
Existing Leases accruing on and after the Commencement Date, and Lessee and
Lessor agree that the Existing Leases shall upon this assignment become
subleases subject and subordinate to this Lease. Lessee shall notify each of the
lessees under the Existing Leases of this assignment.
21. TERMINATING INTERIM MANAGEMENT SERVICES AGREEMENT. Upon the
Commencement Date of this Lease, the Interim Management Services Agreement,
dated March 9, 1998, shall cease. Lessee agrees that Lessor shall not owe any
further obligations to Lessee, including financial obligations, and all
indebtedness, whether evidenced by a promissory note or not, shall be paid by
Lessor in the manner set forth in Annex A. Notwithstanding, Lessee agrees to
continue to provide assistance to Lessor in the winding down of its joint
venture
15
agreement with Lafayette Health Systems, including assistance in the preparation
of financial information and/or cost reports, if reasonably requested to do so.
22. NO PARTNERSHIP. The parties hereto intend the relationship created
by this Lease to be that of lessor and lessee and do not intend for the
arrangement between them to be a partnership.
23. DEPARTMENT OF HEALTH AND HUMAN SERVICES REGULATION. Until the
expiration of four years after the expiration or earlier termination of the Term
of this Lease, Lessor will make available to the Secretary, U.S. Department of
Health and Human Services, and the U.S. Comptroller General, and their
representatives, this Lease and all books, documents, and records necessary to
certify the nature and extent of Lessor's costs with respect to this Lease and
the Premises. If Lessor carries out any of its duties under this Lease through a
subcontract worth $10,000 or more over a 12-month period with a related
organization, the subcontract will also contain an access clause to permit
access by the Secretary, Comptroller General, and their representatives to the
related organization's books and records.
24. ANNEX, EXHIBITS AND SCHEDULES. Annex A, Exhibits A and B, and
Schedules A, B, C, D and E, referred to in this Lease are hereby incorporated by
reference herein.
25. DUE DILIGENCE. The parties acknowledge and agree that they have
executed this Lease (i) prior to Lessee having completed its due diligence with
respect to the transactions described in Annex A, and (ii) without there being
attached hereto all of the Schedules required by this Lease, or, in the case
where a Schedule has been attached, it may not contain all of the information
required to make it complete. Lessor shall provide full and complete Schedules
on or before June 19, 1998, and may amend or supplement any theretofore
submitted Schedules on or before such date. Such finally submitted complete
Schedules submitted on or before June 19, 1998, shall be deemed part of this
Lease and incorporated herein as of the date hereof as if originally submitted
to Lessee and attached hereto as of the date hereof. Lessee shall have until
July 10, 1998 (the "Due Diligence Period") to review the Schedules and complete
its due diligence. The Due Diligence Period may be modified by mutual written
agreement of Lessor and Lessee, and shall be extended a reasonable period of
time to allow Lessee to consider and conduct due diligence with respect to the
Schedules. Notwithstanding the foregoing, in the event Lessee discovers any
material issue in the course of its due diligence with respect to the matters
set forth in the Schedules and matters related or incident thereto, Lessee shall
give Lessor written notice thereof, and Lessor shall have thirty (30) days to
resolve such issue to Lessee's satisfaction. In the event Lessor is unable to do
so, Lessee may terminate this Lease and Annex A, and thereafter this Lease and
Annex A, and the rights and obligations of the parties under this Lease and
Annex A shall be null and void.
16
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date and year first written above.
WITNESSES: LESSOR:
/s/ Newton Thibodeaux ST. LANDRY PARISH HOSPITAL SERVICE
- ------------------------------------ DISTRICT NO. 1
/s/ Brian N. Heinen, M.D.
- ------------------------------------
By: /s/ Thomas R. Myers
-----------------------------------
Name: Thomas R. Myers
---------------------------------
Title: Chairman
--------------------------------
LESSEE:
/s/ Darla T. Cowan PHC-EUNICE, INC.
- ------------------------------------
/s/ Nancy D. Lancaster
- ------------------------------------
By: /s/ James Thomas Anderson
---------------------------------
Name: James Thomas Anderson
---------------------------------
Title: Senior Vice President
--------------------------------
17
SCHEDULE A
(PART 1)
LEGAL DESCRIPTION
18
SCHEDULE A
(PART II)
PERMITTED ENCUMBRANCES
19
SCHEDULE B
EQUIPMENT
20
SCHEDULE C
RENT ALLOCATION
21
SCHEDULE D
DEFERRED MAINTENANCE ITEMS
22
SCHEDULE E
ENVIRONMENTAL MATTERS
23
SCHEDULE F
REPAIRS, RENOVATIONS AND IMPROVEMENTS
24
ANNEX A TO LEASE AND MANAGEMENT AGREEMENT
THIS ANNEX A TO LEASE AND MANAGEMENT AGREEMENT ("Annex A"), dated as of
June 9, 1998, between ST. LANDRY PARISH HOSPITAL SERVICE DISTRICT NO. 1, a
political subdivision, doing business as "Moosa Memorial Hospital", but
currently operating as "Eunice Regional Medical Center" ("Lessor"), and
PHC-EUNICE, INC. ("Lessee"), a Louisiana corporation.
WITNESSETH:
WHEREAS, Lessor is a hospital service district, created under Louisiana
Revised Statute 46:1051 et. seq. whose object and purpose is, on behalf of the
citizens of its district, to own and operate a hospital for the care of persons
suffering from illnesses or disabilities which require that patient receive
hospital care; and
WHEREAS, Lessor is further allowed, by statute, to administer other
activities related to rendering care to the sick and injured or in the promotion
of health which may be justified by the facilities, personnel, funds and other
requirements available; and
WHEREAS, Lessor is further authorized, by statute, to participate so
far as circumstances may warrant in any activity designed and conducted to
promote the general health of the community; and
WHEREAS, Lessor is allowed to cooperate with other public and private
institutions and agencies in providing hospital and other health services to
residents of its district; and
WHEREAS, Lessor has previously owned and operated a hospital known as
"Moosa Memorial Hospital" and provided other ancillary health care services to
the residents of its district, all in compliance with its statutory purpose; and
WHEREAS, Lessor, in fulfilling its public purpose, now seeks a
strategic alliance with Lessee, to manage and provide health care services to
its residents, with such strategic alliance, including a lease and special
services, including improvements, to the existing facility.
WHEREAS, Lessor has entered into an Interim Management Services
Agreement with Lessee dated the 9th day of March, 1998, such Agreement being
attached hereto and incorporated herein; and
WHEREAS, both Lessor and Lessee now desire to enter into a long-term
Lease and Management Agreement, until such time as Lessee builds a replacement
hospital, all as discussed in more detail in that Agreement known as "Lease and
Management Agreement", such Agreement being incorporated herein by reference
(the "Lease").
25
NOW, THEREFORE, for and in consideration of the foregoing premises and
the agreements, covenants, representations and warranties hereinafter set forth
and other good and valuable consideration, the receipt and adequacy of all of
which are acknowledged and agreed, the parties hereto agree as follows:
1. SALE OF ASSETS AND CERTAIN RELATED MATTERS.
1.1 SALE OF ASSETS. At the Closing, as defined in Section 2.1,
Lessor shall sell, transfer, convey assign and deliver to Lessee (or its
designee), and Lessee shall purchase from Lessor, the following
(together, the "Assets"):
(a) to the extent assignable or transferable under
applicable law, all licenses, certificates of need, certificates
of exemption, franchises, accreditations and registrations and
other licenses or permits issued in connection with the Hospital
(the "Licenses"), including, without limitation, the Licenses
described in Schedule 1.1(a);
(b) all documents, records, operating manuals and files
owned by Lessor or its affiliates, pertaining to or used in
connection with the Hospital, including, without limitation, all
patient records, medical records, financial records, equipment
records, construction plans and specifications, but excluding
Lessor's minute books and other records;
(c) the name "Eunice Regional Medical Center" and
legally permissible variations thereof;
(d) all of Lessor's interest, to the extent assignable
or transferable by it under applicable law, in and to those
contracts and agreements relating to the Hospital set forth in
Schedule 1.1(d) (the "Contracts");
(e) the deposits, escrows, prepaid taxes or other
advance payments relating to any expenses of the Hospital
identified in Schedule 1.1(e) (the "Prepaid Expenses");
(f) to the extent useable and not obsolete, all
inventories of supplies, drugs, food, janitorial and office
supplies and other disposables and consumables existing on the
Closing Date (as defined in Section 2.1) and located at the
Hospital (the "Operating Inventory");
(g) all notes and accounts receivable, whether recorded
or unrecorded or assigned for collection arising from and after
March 9, 1998 in connection with the operation of the Hospital
(the "Patient Receivables");
26
(h) all cash and cash equivalents and short-term
investments, if any (the "Cash and Cash Equivalents"); and
(i) all goodwill associated with the foregoing.
1.2 EXCLUDED ASSETS. The following items which are related to
the Assets are not intended by the parties to be covered by the sale and
transfer under Section 1.1 and are excluded from the Assets
(collectively, the "Excluded Assets"): (i) prepaid expenses not listed
on Schedule 1.1(e), and (ii) any other assets of Lessor related to the
Hospital or otherwise not specifically referred to in Section 1 hereof.
1.3 NET EARNINGS; EXPENSES AND LOSSES. Lessor acknowledges that
from and after the Closing, Lessee will be entitled to retain all
profits and benefits derived from the operation of the Hospital and
Replacement Hospital. Lessee shall pay all expenses and costs, of every
kind and description, associated with its operation of the Hospital and
the Replacement Hospital. In the event the Hospital or the Replacement
Hospital is operating at a loss at any time during the term of the
Lease, Lessee shall not be entitled to any payment, in kind or
otherwise, from Lessor, and Lessee shall be solely responsible for
covering any such loss.
1.4 ASSIGNMENT AND ASSUMPTION; ASSETS FREE AND CLEAR.
(a) Notwithstanding any other provision hereof to the
contrary, all Assets to be assigned and transferred to Lessee
shall, on the Closing Date, be free and clear of all
liabilities, liens and encumbrances, except for the liens,
liabilities and encumbrances expressly agreed to be assumed by
Lessee pursuant to the Assignment and Assumption Agreement (the
"Assumption Agreement") substantially in the form attached
hereto as Appendix 1.4(a). Except as provided in the Assumption
Agreement, Lessee is not assuming and shall not be deemed to
have assumed any other liability or obligation of Lessor or any
of its affiliates, fixed or contingent, disclosed or
undisclosed, or otherwise.
(b) To effect assignments and assumptions of Contracts
contemplated hereby and the Scheduled Leases (as that term is
defined in Section 4.6) which Lessee agrees to assume (the
"Leases"), Lessee and Lessor shall execute the Assumption
Agreement. Except for those Contracts and Scheduled Leases of
Lessor expressly assumed by Lessee in the Assumption Agreement,
Lessee is not undertaking and shall not be deemed to be
responsible for any other of Lessor's leases, agreements or
contracts or for any indebtedness incurred or arising with
respect to any period on or prior to the Closing Date in
connection
27
with the Assets or their operation, whether fixed or contingent,
disclosed or undisclosed, or otherwise.
(c) If, in the Assumption Agreement, Lessee assumes any
liabilities of Lessor and if there are, or are alleged to be,
any liabilities of Lessor related to those so assumed by Lessee
as of the date immediately preceding the Closing Date in excess
of the amount of such liabilities so assumed, Lessee shall not
be required hereunder to assume or pay such items, but instead
shall promptly deliver such items to Lessor for payment,
contest, compromise or settlement as Lessor may determine. The
amount of any liability assumed by Lessee shall be determined in
accordance with Section 1.5.
(d) With respect to any indebtedness secured by a lien
on the Assets which is not expressly assumed by Lessee in the
Assumption Agreement, Lessor shall discharge any such lien prior
to or at the Closing.
1.5 PURCHASE OF PREPAID EXPENSES AND OPERATING INVENTORY.
(a) The purchase price for the Assets shall be an amount
equal to the value as of the Closing Date of i) the Cash and
Cash Equivalents, ii) the Patient Receivables, iii) the Prepaid
Expenses, iv) the Operating Inventory and v) an amount equal the
amount necessary, if any, when added to the value of i) through
iv) to equal to the amount owed by Lessor to Lessee under that
certain Interim Management Services Agreement dated as of March
9, 1998, as amended (the "Interim Management Agreement"),
whether evidenced by promissory notes or otherwise (the
"Additional Purchase Price") (together, the "Purchase Price").
The Purchase Price shall be payable by Lessee to Lessor at
Closing by offsetting such amount against the amount owed by
Lessor to Lessee under the Interim Management Agreement, whether
evidenced by promissory notes or otherwise.
(b) The value of the Prepaid Expenses shall be initially
determined based on the Interim Balance Sheet (as hereinafter
defined), and shall be subject to adjustment as provided in
Section 1.6. Should any dispute arise concerning such inventory,
such dispute shall be referred to the Accountants (as
hereinafter defined) whose determination in respect of such
dispute shall be final.
(c) The value of the Operating Inventory shall be
determined by a physical inventory of such items to be conducted
jointly by Lessor and Lessee preceding the Closing Date or on
such other day as mutually agreed upon by Lessee and Lessor.
Such inventory shall be conducted in accordance with Lessor's
prior practices, policies and
28
procedures, and shall be subject to adjustment as provided in
Section 1.6. Should any dispute arise concerning such inventory,
such dispute shall be referred to the Accountants whose
determination in respect of such dispute shall be final.
(d) As of the Closing, Lessee and Lessor shall prorate,
if possible, property lease payments, property taxes and other
assessments, as well as all other income and expenses with
respect to the Hospital which are normally prorated upon the
sale of assets of a going concern. Lessor shall, to the extent
practicable, order final readings of all power and other utility
charges to be made as of the Closing Date and shall pay when due
all charges in respect thereof.
1.6 ADJUSTMENTS TO PURCHASE PRICE.
(a) For purposes of determining adjustments to the
Purchase Price on the Closing Date, such adjustments shall be
made initially on or prior to the Closing Date using Lessor's
latest regularly prepared unaudited balance sheet in respect of
the Hospital (the "Interim Balance Sheet"). The Interim Balance
Sheet shall be as of a date not more than forty-five (45) days
prior to the Closing. Such initial calculations shall be set
forth on a schedule delivered by Lessor to Lessee with a copy of
the Interim Balance Sheet not less than three (3) days prior to
the Closing.
(b) Within one hundred twenty (120) days after the
Closing Date (or as soon thereafter as possible), the parties
shall make final adjustments to the Purchase Price as
contemplated by Section 1.5 (the "Post Closing Adjustments").
Lessor shall use its reasonable best efforts, and Lessee shall
fully cooperate with Lessor in such efforts, to prepare and
deliver to Lessee not later than ninety (90) days after Closing
an audited balance sheet of Lessor with respect to the Hospital
as of the close of business on the Closing Date (the "Closing
Balance Sheet"). The Closing Balance Sheet will be used to
determine any Post Closing Adjustments and shall be prepared in
accordance with generally accepted accounting principles applied
on a basis consistent with the presentation of the May 31, 1997
balance sheet.
(c) Lessor shall deliver a schedule to Lessee detailing
any Post Closing Adjustments and detailing the differences
between the Purchase Price, as adjusted, and the amount paid as
the Purchase Price on the Closing Date. Such schedule shall be
delivered to Lessee with a copy of the Closing Balance Sheet.
29
(d) Should Lessee dispute the Post Closing Adjustments
proposed by Lessor, Lessee shall promptly (and in no event later
than fifteen (15) days after receipt of the Closing Balance
Sheet and the required schedule of Post Closing Adjustments)
deliver a schedule to Lessor detailing each disputed Post
Closing Adjustment and its proposed Post Closing Adjustments. If
after thirty (30) days after delivery of the Closing Balance
Sheet, Lessee and Lessor are unable to agree upon the amount of
the Post Closing Adjustments, Lessor and Lessee shall submit the
matter to arbitration to be determined by an accounting firm
mutually acceptable to them. If Lessor and Lessee are unable to
agree on the choice of the accounting firm, they will select a
nationally recognized accounting firm (the "Accountants") by
lot, excluding their respective regular independent accounting
firms. The Accountants shall review the proposed Post Closing
Adjustments and determine the amount thereof, such determination
to be made as soon as practicable. In making such review and
determination, the Accountants shall utilize the terms and
provisions of this Annex A, together with generally accepted
accounting policies and procedures applied on a basis
consistent. The decision of the Accountants shall be binding on
both Lessor and Lessee. Each of Lessee and Lessor shall pay
one-half the expenses of engagement of the Accountants in
respect of such review and the resolution of any dispute
concerning the Operating Inventory and Post-Closing Adjustments.
(e) Within twenty (20) days of Lessee's receipt of the
Closing Balance Sheet and the required schedule of Post Closing
Adjustments (or if Lessee disputes the Post Closing Adjustments,
within ten (10) days of the resolution or determination of the
adjustments in accordance with Section 1.6(d), above) either i)
if applicable, the amount of the Additional Purchase Price shall
be adjusted, or (ii) if an adjustment to the Additional Purchase
Price is not applicable, (A) Lessee shall be entitled to receive
from the Lessor the amount by which the Purchase Price paid on
the Closing Date exceeds the Purchase Price, as adjusted, and
Lessor shall pay Lessee in cash or in other immediately
available funds such additional amounts as may be needed to
cover the amount due Lessee; or (B) Lessee shall pay Lessor in
cash or other immediately available funds the amount by which
the Purchase Price paid on the Closing Date is less than the
Purchase Price, as adjusted.
1.7 OTHER CALCULATIONS. All accounts payable for Operating
Inventory ordered by Lessor in a manner prohibited by Section 6.3 hereof
shall be retained by Lessor and not purchased by Lessee, unless Lessee
shall otherwise agree. Additionally, before the Closing Date, Lessor
shall calculate, as of the Closing, the salary and other pay owed to its
employees who are
30
employed in connection with the Hospital and whose employment by Lessor
will terminate as of the Closing, and Lessor shall distribute such
amounts to such employees promptly following the Closing.
1.8 CESSATION OF LESSOR'S OPERATION. Effective as of the
Closing, Lessor shall cease its operation of the Hospital. Such
cessation shall include, without limitation, closing the books and
accounts, termination of all employees and payment of all amounts due to
such terminated employees as contemplated herein, and taking all other
actions specified herein and in the Lease and otherwise necessary to
facilitate the transactions contemplated herein and in the Lease.
1.9 PROCEDURE WITH RESPECT TO PATIENTS IN THE HOSPITAL AT
CLOSING. To compensate Lessor for services rendered and medicine, drugs
and supplies provided by Lessor before the date hereof (the "Lessor
Transition Services") to patients admitted to the Hospital on or before
the Closing Date but discharged on or after the Closing Date (such
patients being referred to herein as the "Transition Patients"), the
parties shall take the following actions:
(a) As soon as practicable after the Closing Date,
Lessor shall deliver to Lessee a statement itemizing the Lessor
Transition Services provided by Lessor prior to the Closing Date
to those Transition Patients for which reimbursement is made on
a DRG (or similar "fixed price") basis ("DRG Transition
Patients"). Lessee shall allocate to Lessor an amount equal to:
(x) the total DRG and outlier payments including
capital (before deposit and deductible/copayments per
the remittance advice) actually received by Lessee on
behalf of a particular DRG Transition Patient,
multiplied by a fraction, the numerator of which shall
be the total patient days related to the Lessor
Transition Services provided to the DRG Transition
Patient, and the denominator of which shall be the sum
of (1) the total patient days related to the Lessor
Transition Services provided to the DRG Transition
Patient and (2) the total patient days related to
services rendered and medicine, drugs and supplies
provided by Lessee on or after the date hereof (the
"Lessee Transition Services") to such DRG Transition
Patient,
minus
(y) the amount of deposits and
deductibles/copayments per the remittance advice.
31
Such allocation shall be made to Lessor for the purpose of
determining the amount of Patient Receivables as of the Closing
Date. Lessee shall provide copies of remittances and other
supporting documentation as reasonably required by Lessor.
(b) With respect to those Transition Patients for which
Government Program Reimbursement is made on a cost basis (the
"Medicare Straddle Patients"), Lessee shall allocate to Lessor
an amount equal to:
(x) the amount of cost-based reimbursement
actually received by Lessee for a particular
Medicare/Medicaid Straddle Patient on or after the date
hereof multiplied by a fraction, the numerator of which
shall be the total number of days prior to the date
hereof on which Lessor provided Lessor Transition
Services to the Medicare/Medicaid Straddle Patient, and
the denominator of which shall be the total number of
days of the Medicare/Medicaid Straddle Patient's stay at
the Hospital;
minus
(y) the amount of deposits and
deductibles/copayments per the remittance advice.
(c) As of the Closing Date, Lessor shall prepare
internal cut-off billings for all patients not covered by
Section 1.9(a) or Section 1.9(b) (the "Straddle Patients").
Lessor shall be responsible for billing and collecting all
amounts due Lessor from Straddle Patients.
(d) If Lessee receives any amounts from the Medicare
program for periodic interim payments or costs paid for on a
pass through basis (such as capital costs) associated with the
operation of the Hospital and relating to periods prior to the
Closing Date, the amount applicable to the period prior to the
Closing Date shall be allocated to Lessor for the purpose of
determining the Purchase Price as a Post Closing Adjustment. If
Lessor receives any amounts from the Medicare program for
periodic interim payments or pass through costs (such as capital
costs) associated with the operation of the Hospital relating to
periods subsequent to the Closing Date, Lessor shall promptly
tender same to Lessee.
(e) If Lessee receives after Closing any deductibles/
copayments due Lessor from DRG Transition Patients, or any
amount from any Government Reimbursement Program for cost-based
patients which relate to services rendered, Lessee shall
allocate the full amount thereof to Lessor for the purpose of
determining the Purchase Price as
32
a Post Closing Adjustment. If Lessor receives any amount from
any Government Reimbursement Program for cost-based patients
which relate to services rendered by Lessee, Lessor shall remit
within ten (10) days the full amount thereof to the other party.
(f) In the event that Lessee and Lessor are unable to
agree on the amount to be allocated to Lessor under Section
1.9(a), (b), (c) or (d) above, then such amount shall be
determined by an accounting firm mutually acceptable to Lessee
and Lessor at their joint expense.
1.10 EXCLUDED LIABILITIES. Except as expressly provided to the
contrary herein, under no circumstance shall Lessee be obligated to pay
or assume, and none of the Assets shall be or become liable for or
subject to, any liability of Lessor, including, without limitation, the
following, whether fixed or contingent, recorded or unrecorded
(collectively, the "Excluded Liabilities"):
(a) indebtedness and other obligations or guarantees of
Lessor of any kind or nature, other than those specifically
assumed by Lessee pursuant to this Annex A;
(b) liabilities or obligations of Lessor in respect of
periods prior to and including Closing arising under the terms
of the Medicare, Medicaid, Blue Cross or other third party payor
programs, and any liability arising pursuant to the Medicare,
Medicaid, Blue Cross or any other third party payor program as a
result of the consummation of the transactions contemplated
herein, including, without limitation, recapture;
(c) federal, state or local tax liabilities or
obligations of Lessor in respect of periods prior to Closing or
resulting from the consummation of the transactions contemplated
herein, including, without limitation, any income tax, any
franchise tax, any tax recapture, any sales and/or use tax, any
indigent care tax, any state and local recording fees and taxes
which may arise upon the consummation of the transactions
contemplated herein and any FICA, FUTA, workers' compensation
taxes and any and all other taxes or amounts due and payable as
a result of the exercise by any employees of Lessor (who are not
hired by Lessee or who elect prior to or as of Closing not to
become employees of Lessee subsequent to Closing) of such
employees' rights to vacation, sick leave and holiday benefits
accrued while in the employ of Lessor;
(d) liability for any and all claims by or on behalf of
Lessor's employees relating to periods prior to Closing,
including, without limitation, liability for all employee
benefits whether or not covered by
33
the Employee Retirement Income Security Act of 1974, as amended,
including without limitation, any pension, profit sharing,
deferred compensation, or any other employee health and welfare
benefit plans, liability for any EEOC claim, wage and hour
claim, unemployment compensation claim or workers' compensation
claim, and liability for all employee wages and benefits,
including, without limitation, accrued vacation, sick leave,
holiday pay, severance pay, and related taxes or other liability
related thereto in respect Lessor's employees;
(e) liability arising out of or in connection with any
employee benefit plan or arrangement contributed to by Lessor or
any affiliate of Lessor;
(f) liabilities or obligations arising as a result of
any breach by any Lessor at any time of any contract or
commitment that is not assumed by Lessee;
(g) liabilities or obligations arising out of any breach
by Lessor prior to Closing of any Contract;
(h) any obligation or liability attributable to periods
prior to or as of Closing and asserted under the federal
Hill-Burton program or other restricted grant and loan programs
with respect to the ownership or operation of the Assets;
(i) any liability arising out of or in connection with
claims for alleged acts or omissions relating to the ownership
or operation of the Hospital or the Assets that occurred prior
to Closing;
(j) contracts and agreements between any Lessor and one
or more of Lessor's affiliates;
(k) any debt, obligation, expense or liability of the
Lessor arising out of or incurred solely as a result of any
transaction of Lessor occurring after Closing or for any
violation by Lessor of any law, regulation or ordinance at any
time;
(l) liability arising out of the assignment at Closing
of any Contract, except for those Contracts for which the Lessor
has obtained appropriate consents to the assignment or notified
Lessee that required consents have not been obtained and Lessee
has accepted the assignment;
(m) any accounts payable attributable to legal and
accounting fees and similar costs incurred by Lessor that are
directly related to the sale of any of the assets of Lessor;
34
(n) any other current payable that has not been
historically accounted for by the Lessor as an "Account
Payable", including any payable related to compensation or
fringe benefits for Lessor's employees;
(o) any Medicare "recapture" which may be payable by
Lessor in connection with the transactions contemplated by the
Lease and this Annex A; and
(p) any consents or other documents required by any
leasehold mortgagee providing financing to Lessee in connection
with this transaction to be executed and delivered by Lessor.
2. CLOSING.
2.1 CLOSING. The consummation of all matters contemplated herein
(the "Closing") shall take place in Eunice, Louisiana at the offices of
Lessor or other agreed upon location at 9:00 A.M. local time on the date
upon which all conditions to Closing set forth in this Agreement have
been satisfied, including without limitation all required regulatory and
other approvals to the Closing having been obtained, but in no event
later than December 31, 1998 unless the parties hereto agree otherwise
in writing (the "Closing Date").
2.2 ACTION OF LESSOR AT CLOSING. At the Closing, Lessor shall
deliver to Lessee the following:
(i) the Assumption Agreement;
(ii) a general bill of sale and assignment substantially
in the form attached hereto as Appendix 2.2(ii) (the "Bill of
Sale") conveying and assigning to Lessee all of the Assets
described in Section 1.1;
(iii) copies of resolutions duly adopted by Lessor
authorizing and approving Lessor's performance of the
transactions contemplated hereby and the execution and delivery
of the documents described herein, certified as true and of full
force as of Closing by appropriate officers of Lessor;
(iv) certificates, dated as of the Closing Date, of
officers of Lessor certifying that as of the Closing all of the
representations and warranties by or on behalf of Lessor
contained in this Annex A are true and correct and all covenants
and agreements of Lessor to be performed prior to or as of the
Closing pursuant to this Annex A have been performed;
35
(v) certificates of incumbency, dated as of the Closing
Date, for the officers of Lessor making certifications for
Closing or executing the Assumption Agreement or this Annex A;
(vi) all of Lessor's Contracts, Leases, commitments,
books, records and other data relating to the Hospital and the
Assets, and simultaneously with such delivery will take all such
steps as may reasonably be required to put Lessee in actual
operating control of the Hospital and the Assets; and
(vii) such other documents as may be reasonably
requested by Lessee.
2.3 ACTION OF LESSEE AT CLOSING. At the Closing, Lessee shall
deliver to Lessor the following:
(i) payment of the Purchase Price in cash or immediately
available funds;
(ii) the Assumption Agreement;
(iii) copies of corporate resolutions duly adopted by
Lessee authorizing and approving Lessee's performance of the
transactions contemplated hereby and the execution and delivery
of the documents described herein, certified as true and of full
force as of Closing by appropriate officers of the Lessee;
(iv) a certificate, dated as of the Closing Date, of an
officer of Lessee certifying that as of the Closing all of the
representations and warranties by or on behalf of Lessee
contained in this Annex A are true and correct and the covenants
and agreements of Lessee to be performed prior to or as of
Closing pursuant to this Annex A have been performed;
(v) a certificate of incumbency, dated as of the Closing
Date, for the officers of Lessee making certifications for
Closing or executing the Assumption Agreement or this Annex A;
(vi) a certificate of qualification to do business of
Lessee from the State of Louisiana, dated the most recent
practical date prior to Closing;
(vii) evidence of the purchase by Lessor of the tail
insurance provided for under Section 7.9 hereof; and
36
(viii) such other documents as may be reasonably
requested by Lessor.
3. OPERATION OF HOSPITAL BY LESSEE.
3.1 GENERAL DESCRIPTION. Except as otherwise provided herein and
in the Lease, Lessee shall, at its sole cost and expense be entitled to
the profits and benefits, provide the services it deems necessary and
appropriate for the operation of the Hospital and the Replacement
Hospital. Without limiting the generality of the foregoing, Lessee shall
have full and complete authority and discretion consistent with the
policies and directives of the Hospital Board (as hereinafter defined),
(i) in the management, supervision, direction and overall operation of
the Hospital and the Replacement Hospital for the purposes stated
herein, (ii) as to all policy matters and other decisions affecting such
operation, management and maintenance of the Hospital and the
Replacement Hospital, (iii) in the day-to-day business, operations and
affairs of the Hospital and the Replacement Hospital, and (iv) in
planning and coordinating the strategic operational direction of the
Hospital. In all events, Lessee's operation of the Hospital shall not
cause the Hospital (i) to lose its license, or (ii) to lose its public
purpose as defined under Louisiana law, and all duties and
responsibilities herein and in the Lease to be performed by Lessee shall
be performed in compliance with all Legal Requirements. Lessee shall use
its reasonable best efforts to cause the Hospital not to lose its
accreditation as a general hospital by JACHO.
3.2 WARRANTIES BY LESSEE. Notwithstanding that authority granted
to Lessee in Paragraph 3.1, Lessee shall operate and manage the Hospital
and Replacement Hospital at a minimum as an acute care hospital
consistent with those standards acceptable in the industry. Lessee shall
perform its obligations consistent wit the public purpose of Lessee and
shall not perform in any way that alters such purpose. Lessee further
agrees that it shall provide written reports, when requested, but no
less than on a quarterly basis, to the Board of Commissioners of Lessor
which discusses the complete financial condition of the Hospital or the
Replacement Hospital and its ancillary services.
3.3 EMPLOYEES. Lessee shall, at is sole cost and expense, and
for its own account and benefit, recruit, employ, train, supervise,
promote and/or terminate all personnel it deems necessary for its
operation of the Hospital and the Replacement Hospital. Lessee shall use
its best efforts to employ substantially all of the personnel employed
at the Hospital immediately prior to the Closing who wish to continue
their employment at the Hospital after the Closing. Notwithstanding the
foregoing, Lessee does not commit to or guarantee the continued
employment of any individual, or to the maintenance of certain staffing
levels. From and after closing Lessee shall be
37
solely responsible for all matters associated with such personnel,
including, without limitation, payment, in kind or otherwise, of
compensation and benefits, payroll and other taxes imposed by federal,
state and local Legal Requirements (as that term is defined in the
Lease), setting of guidelines for raises, promotions, discipline and/or
termination during the term of the Lease.
3.4 BILLINGS AND COLLECTION. Lessee shall be solely responsible
for all billing and collection activities necessary and required for its
operation of the Hospital and the Replacement Hospital. Lessee, in its
sole discretion, shall establish records, accounts and practicing
guidelines, including, without limitation, setoffs for its own purposes
from the accounts, the placement of accounts for collection, settlement
and compromise of claims and institution of legal action for recovery of
accounts, for such billing and collection activities.
3.5 MAINTENANCE OF EXISTING SERVICES. During the term of this
Lease, Lessee shall provide at the Hospital or the Replacement Hospital
those healthcare services set forth in Schedule 3.5 which Lessor
currently provides at the Hospital and shall not delete such services
without consent of Lessor.
3.6 HOSPITAL BOARD. During the term of the Lease, Lessee shall
maintain either a seven (7) or a nine (9) member hospital operating
board ("Hospital Board") consisting of the Chief Executive Officer of
the Hospital or the Replacement Hospital and an equal number of (i)
physician members who are members of the active medical staff of the
Hospital or the Replacement Hospital, and (ii) community members, one
(1) of whom shall be a member of the Board of Commissioners. The
Hospital Board shall be governed by Bylaws substantially in the form
attached hereto as Appendix 3.6, and shall (a) assist in the development
of and monitor reasonably necessary quality review and utilization
management programs relating to medical and non-medical professional and
technical staffs and patient care units; (b) monitor and evaluate
activities required by DHH, JCAHO, JCAHO Accreditation Standards and by
other applicable law; (c) evaluate practitioner performance through
valid and reliable measurement systems based when appropriate on
objective, clinically-sound criteria; (d) monitor clinical aspects of
providing quality health care; (f) assist in the development and
adoption of criteria, policies, and procedures regarding appointment,
reappointment and alteration of medical staff status, granting clinical
privileges, disciplinary action and other matters referred by the
medical staff boards; and (h) assist in the development of reporting
mechanisms so that pertinent findings and recommendations from the
foregoing activities are shared with the medical staff. Any policies,
procedures, guidelines and directives adopted by the Hospital Board
shall be consistent with the foregoing responsibility. Lessee
38
shall keep the Hospital Board informed of matters relating to the
operation of the Hospital, including without limitation providing the
Hospital Board with copies of its capital budgets, strategic plans,
licensing and accreditation surveys, reviews and reports, and summaries
of its purchases of furniture, fixtures and equipment and the costs of
any leasehold improvements.
3.7 LICENSES; PERMITS; INSURANCE. Lessee shall obtain and
maintain all licenses, permits, other certificates and insurance
necessary and required to operate, manage and maintain the Hospital in
compliance with all applicable Legal Requirements, as contemplated
herein during the term of the Lease. Lessor shall cooperate with Lessee
in causing all such licenses now issued in Lessor's name to be issued or
reissued in Lessee's name.
4. REPRESENTATIONS AND WARRANTIES OF LESSOR.
As of the date hereof, Lessor represents and warrants to Lessee that:
4.1 CAPACITY. Lessor is a political subdivision of the State of
Louisiana duly formed, validly existing and in good standing under the
laws of the State of Louisiana, and has all requisite power and
authority to operate and lease its properties and to carry on its
businesses as now being conducted.
4.2 POWERS; ABSENCE OF CONFLICTS WITH OTHER AGREEMENTS, ETC.
(a) The execution, delivery and performance by Lessor of
the Lease and this Annex A and the other agreements and
transactions contemplated hereby:
(i) are within the power of Lessor, are not in
contravention of the terms of the any resolution or act
or governing instrument or any amendments thereto of
Lessor and have been duly authorized by Lessor as and to
the extent required; and
(ii) on the Closing Date, (A) will not result in
any breach of any indenture, agreement, lease or
instrument to which Lessor is a party or by which Lessor
is bound, (B) will not constitute a violation of any
judgment, decree, or order of any court of competent
jurisdiction applicable to Lessor, (C) will not violate
any law, rule or regulation of any governmental
authority applicable to Lessor or any of the Assets and
(D) will not require any consent, approval or
authorization of, or notice to, or declaration, filing
or registration with, any governmental or regulatory
authority.
39
(b) As of the Closing, this Annex A and the other
agreements and instruments contemplated hereby have been duly
and validly executed and delivered by Lessor. This Annex A and
the other agreements and instruments contemplated hereby
constitute the valid, legal and binding obligations of Lessor
enforceable against it in accordance with their terms except as
such may be limited by bankruptcy and other laws of general
applicability affecting sellers' and creditors' rights and
general equitable principles.
4.3 FINANCIAL STATEMENTS. Schedule 4.3 hereto consists of true,
correct and complete copies of Lessor's audited financial statements for
the years ended May 31, 1995 and 1996, and unaudited financial
statements for the period beginning June 1, 1997 and ending March 8,
1998 (collectively, the "Financial Statements"). The Financial
Statements have been prepared from and are in accordance with the books
and records of Lessor, and, as such, are true, complete and accurate,
and fairly present the financial position of Lessor as of the dates and
for the periods indicated, in each case in accordance with generally
accepted accounting principles consistently applied ("GAAP"), during
such periods. Any financial statements of Lessor prepared as of a date
after March 8, 1998 and delivered to Lessee previously or pursuant to
this Annex A have been or shall be subject to and prepared in accordance
with the preceding representation and the standards set forth therein.
4.4 LICENSES. Lessor has all licenses and permits relating to
the ownership of the Assets and operation of the Hospital as are
necessary and required for such ownership and operation. Schedule 4.4
hereto contains a complete description of all material licenses,
permits, franchises, certificates of need, certificate of need
applications, and PRO memos, if any, and their respective dates of
termination or renewal, owned or held by Lessor relating to the
ownership, development or operation of the Hospital or the Assets,
together with any formal and specific notices or directives received
from the agency responsible for such Schedule 4.4 item, for which
noncompliance with such notice or directive would likely cause the
revocation, suspension or material diminution in term for such item. All
items listed on Schedule 4.4 are, to the best of Lessor's knowledge and
belief, in good standing and, except as expressly set forth on Schedule
4.4, are not subject to renewal within less than one (1) year.
4.5 CERTAIN CONTRACTS. Schedule 4.5 lists all contracts to which
Lessor is a party involving obligations of Lessor in respect of the
Hospital (the "Scheduled Contracts"). Lessor has delivered to Lessee
true and correct copies of all Scheduled Contracts. All of such
Contracts which Lessee has agreed to assume pursuant to the Assumption
Agreement are valid and binding obligations of Lessor, are in full force
and effect, and are enforceable
40
against Lessor in accordance with their terms. Except as expressly noted
in Schedule 4.5, all Contracts which Lessee has agreed to assume
pursuant to the Assumption Agreement are terminable at the option of
Lessor on no more than ninety (90) days notice without liability to
Lessor. Lessor has not received any notice that the other parties to the
Contracts which Lessee has agreed to assume pursuant to the Assumption
Agreement are (i) in default under such Contracts or (ii) consider
Lessor to be in default thereunder. Except as expressly noted in
Schedule 4.5, to the best knowledge of Lessor, no party to any of the
Contracts which Lessee has agreed to assume pursuant to the Assumption
Agreement intends to terminate or materially adversely modify its
agreement(s) with respect thereto, or materially adversely change the
volume of business done thereunder.
4.6 CERTAIN LEASES. Schedule 4.6 lists all leases to which
Lessor is a party in respect of the Hospital ("Scheduled Leases").
Lessor has delivered to Lessee true and correct copies of all Scheduled
Leases and all related amendments, supplements, modifications and
related documents (the "Scheduled Lease Documents"). Except as set forth
in Schedule 4.6, the Scheduled Lease Documents are unmodified and in
full force and effect, and there are no other agreements, written or
oral, between Lessor and any third parties claiming an interest in
Lessor's interest in the Scheduled Leases or otherwise relating to
Lessor's use and occupancy of any leased property. All such Scheduled
Leases which Lessee has agreed to assume pursuant to the Assumption
Agreement are valid and binding obligations of Lessor, are in full force
and effect, and are enforceable against Lessor in accordance with their
terms; and no event has occurred including, but not limited to, the
execution, delivery and performance of this Annex A and the consummation
of the transactions contemplated hereby which (whether with or without
notice, lapse of time or both) would constitute a default thereunder.
Lessor has not received any notice that the other parties to the
Scheduled Leases which Lessee has agreed to assume pursuant to the
Assumption Agreement are (i) in default under such Leases or (ii)
consider Lessor to be in default thereunder. No property leased under
any Scheduled Lease which Lessee has agreed to assume pursuant to the
Assumption Agreement is, excepted for the Permitted Encumbrances,
subject to any lien, encumbrance, easement, right of way, building or
use restriction, exception, variance, reservation or limitation as might
in any respect interfere with or impair the present and continued use
thereof in the usual and normal conduct of the Hospital.
4.7 TITLE TO ASSETS AND RELATED MATTERS. On the Closing Date,
Lessor will hold of record good, marketable and insurable title to all
of the Assets free and clear of all title defects, liens, pledges,
claims, charges, rights of first refusal, security interests or other
encumbrances and not subject to any rights of way, building or use
restrictions, exceptions, variances, reservations or limitations of any
nature whatsoever, except with respect to
41
all such properties, (i) matters set forth in Schedule 4.7(a), and (ii)
liens for current taxes and assessments not in default (collectively,
"Permitted Encumbrances"). Copies of the most current title insurance
policies, commitments or binders issued to or in the possession of
Lessor with respect to the real property described in Schedule A to the
Lease are set forth as part of Schedule 4.7(b). Such real property and
structures and all machinery and equipment owned or leased by Lessor,
are in good operating condition and repair (ordinary wear and tear
excepted), taking into account their respective ages and consistent with
their past uses, and are adequate for the uses to which they are being
put. Except as set forth on Schedule 4.7(c), such buildings and
improvements are structurally sound and are in good operating condition
and repair (ordinary wear and tear excepted). Lessor has not received
any notice of any violation of any building, zoning or other law,
ordinance or regulation in respect of such property or structures or
their use by Lessor. To Lessor's best knowledge, there is no existing,
proposed or contemplated plan to modify or realign any street or highway
or any existing, proposed or contemplated eminent domain proceeding that
would result in the taking of all or any part of the Hospital facilities
or that would materially adversely affect the current or planned use of
the Hospital facilities or any part thereof. Schedule 4.7(d) contains
rent rolls for each building in which Lessor leases or subleases space
to tenants, which rent rolls identify each building and its total square
footage, and, with respect to each lease or sublease, identify (a) the
tenant or subtenant, (b) the number of square feet leased, (c) the term
commencement date and expiration date, (d) the annual or monthly rent
and (e) tenant's suite number.
4.8 EMPLOYEE BENEFIT PLANS. Schedule 4.8 lists (i) any "employee
benefit plans" as defined in ERISA (other than a defined contribution
pension plan not requiring any contribution by Lessor, Lessor's paid
time off policy, and employee group life and health insurance plans that
are fully funded through commercial insurance) and (ii) any defined
benefit "employee pension benefit plans" (as defined in ERISA).
4.9 LITIGATION OR PROCEEDINGS. Schedule 4.9 contains a list of
each lawsuit or legal proceeding to which Lessor is a party or which
arose out of or in connection with the Hospital or which, to the best of
Lessor's knowledge, has been threatened against Lessor in connection
with the Hospital. Since May 31, 1997, Lessor has not been subject to
any formal or informal (of which Lessor has received notice)
investigations or proceedings of the Louisiana Department of Health, the
United States General Accounting Office, the Health Care Financing
Administration or other similar governmental agencies (except for any
investigations being conducted in the ordinary course of business and
applicable to all hospitals) with respect to the Hospital. There are no
such claims, actions, proceedings or investigations of which Lessor has
received notice pending or, to the best of Lessor's
42
knowledge, threatened challenging the validity or propriety of the
transactions contemplated by this Annex A. Lessor is not now, and has
not been, a party to any injunction, order, or decree restricting the
method of the conduct of its business or the marketing of any of its
services, nor has any governmental agency investigated or requested
(other than on a routine basis) information with respect to such methods
of business or marketing of services; Lessor has not received any claim
that Lessor currently violates any federal, state, or local law,
ordinance, rule or regulation, which could have a material adverse
effect on the Hospital and no such claim is or has been threatened; and
there have been no developments materially adverse to Lessor with
respect to any pending or threatened claim, action or proceeding of an
administrative or judicial nature, including but not limited to those
referred to in Schedule 4.9, and including without limitation any such
pending or threatened claim, action or proceeding arising from or
relating to (i) the assertion by any governmental authority of any
retroactive adjustment of the sums which Lessor was entitled to receive
pursuant to government or third party reimbursement programs such as
(but not limited to) Medicare and Medicaid, or (ii) any allegation by
any governmental authority of fraud or abuse by any current or former
officers or employees of Lessor in connection with the making of any
application for reimbursement pursuant to the government or third party
reimbursement programs referred to in the preceding clause (i).
4.10 INSURANCE. Schedule 4.10(a) is a list and brief description
of all policies or binders of fire, liability, product liability,
workers' compensation, health and other forms of insurance policies or
binders currently in force insuring Lessor against risks which will
remain in full force and effect (or will be replaced by substantially
similar coverage) at least through the Closing Date. Schedule 4.10(b)
contains a description of all malpractice liability insurance policies
of Lessor. Except as set forth on Schedule 4.10(c), (i) Lessor has never
filed a written application for any insurance coverage which has been
denied by an insurance agency or carrier and (ii) Lessor has been
continuously insured for professional malpractice claims for at least
the past seven (7) years, including periods during which Lessor was
self-insured. Schedule 4.10(c) also sets forth a list of all claims for
any insured loss in excess of $5,000 per occurrence, filed by Lessor
during the three (3) year period immediately preceding the Closing Date,
including but not limited to, workers' compensation, general liability,
environmental liability and professional malpractice liability claims.
Lessor is not in material default with respect to any provision
contained in any such policy and has not failed to give any notice or
present any claim under any such policy in due and timely fashion.
43
4.11 POST-BALANCE SHEET RESULTS. Except as set forth on Schedule
4.11, since May 31, 1997, there has not been:
(a) any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting the
Hospital, taken as a whole;
(b) any sale, lease, transfer or disposition by Lessor
of the Hospital; or
(c) any change or the occurrence of any fact or
condition which may be reasonably expected to have a material
adverse effect on the Hospital or the value of the Assets, other
than such changes, facts and conditions, if any, affecting the
Eunice, Louisiana hospital service area generally, the general
economy or the healthcare industry generally.
4.12 LESSOR'S EMPLOYEES. Schedule 4.12 contains a list of all of
Lessor's employees, their current salary or wage rates, department and a
job title or other summary of the responsibilities of such employees.
Since May 31, 1997 there has not been any increase in the compensation
payable or to become payable by Lessor to any of Lessor's officers,
employees or agents, or any bonus payment or arrangement made to or with
any such person, except as described in Schedule 4.12. Lessor has not
incurred any liability, or taken or failed to take any action which will
result in any liability, in respect of any failure to comply with the
Fair Labor Standards Act or any other applicable laws dealing with
minimum wages or maximum hours for employees. Except as set forth on
Schedule 4.12, all employees of Lessor are terminable at will by Lessor.
Schedule 4.12 includes a list of all employees of Lessor (other than
"part-time employees") who have been "terminated" or "laid-off" since
January 1, 1998 (as such quoted terms are defined in the Worker
Adjustment and Retraining Notification Act).
4.13 LABOR MATTERS. Lessor has no collective bargaining
agreements with any labor union, and there are no current negotiations
with a labor union. Lessor is in compliance in all material respects
with all applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is no unfair labor practice
complaint against Lessor pending before the National Labor Relations
Board. There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the best knowledge of Lessor, threatened against or
affecting Lessor. No grievance which might have an adverse effect on
Lessor or any such arbitration proceeding arising out of or under
collective bargaining agreements is pending, and no claim therefor
44
exists. Lessor has not experienced any employee strikes since the date
the Hospital began operation.
4.14 CERTAIN REPRESENTATIONS WITH RESPECT TO THE HOSPITAL.
(a) The Hospital has current contractual arrangements
with Blue Cross. Complete and accurate copies of the existing
Blue Cross contracts of the Hospital have been furnished to
Lessee. The Hospital is presently in compliance with all of the
terms, conditions and provisions of such contracts.
(b) The Hospital is duly accredited as a general
hospital by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO"), and a copy of its most recent report,
list of deficiencies, if any, and Certificate of Accreditation
relating to the Hospital is included in Schedule 4.14.
(c) The Hospital is qualified for participation in the
Medicare program. Complete and accurate copies of Lessor's
existing Medicare contracts for the Hospital have been furnished
to Lessee. The Hospital is presently in compliance with all of
the terms, conditions and provisions of such contracts.
(d) The Hospital is qualified for participation in the
Medicaid program. Complete and accurate copies of Lessor's
existing Medicaid contracts for the Hospital have been furnished
to Lessee. The Hospital is presently in compliance with all of
the terms, conditions and provisions of such contracts.
(e) The Hospital participates in the CHAMPUS program.
The Hospital is presently in compliance in all material respects
with all of the terms and conditions of such participation.
(f) Included in Schedule 4.14 are copies of the fire
marshal reports with respect to the Hospital since January 1,
1994. The Hospital is not in violation in any material respect
of any fire code.
(g) Except as set forth in Schedule 4.14, Lessor has
received no written notification that the Hospital is in
violation of local building codes, ordinances or zoning laws.
The building or buildings in which the Hospital is located
comply in all material respects with all local building codes,
ordinances and zoning laws and are in a state of good condition
and repair, normal wear and tear excepted.
45
(h) Included in Schedule 4.14 is a copy of all licensure
survey reports of the Hospital by the Louisiana Department of
Health and Hospitals since January 1, 1994.
(i) Included in Schedule 4.14 are copies of the Bylaws
of the Medical Staff of the Hospital and copies of minutes of
meetings thereof since January 1, 1996. No proceedings are
pending or threatened seeking to remove or limit the privileges
of any member of the medical staff of the Hospital.
(j) Complete and accurate copies of all appraisals, if
any, obtained by Lessor since January 1, 1994, relating to the
Hospital or any of the Assets have been furnished to Lessee.
(k) The Hospital is licensed by the Louisiana Department
of Health and Hospitals as a general acute care hospital
authorized to operate a _____ bed general acute care hospital in
its existing facilities located in the Eunice, Louisiana. Except
as set forth in Schedule 4.14, the Hospital is presently in
compliance in all material respects with all the terms,
conditions and provisions of such licenses. Schedule 4.14 also
contains a copy of such licenses. The facilities, equipment, and
operations of the Hospital satisfy, without material exception,
the applicable hospital licensing requirements of the State of
Louisiana.
4.15 REIMBURSEMENT MATTERS. Complete and accurate copies of all
Medicare cost reports and related forms filed during the past three
years by Lessor have been furnished to Lessee. To the best of knowledge
and belief of Lessor, the amounts set up as provisions for the Medicaid
or Medicare adjustments and adjustments by any other third party payors
on the Financial Statements are sufficient to pay any amounts for which
Lessor may be liable. Lessor has received no written notices that
Medicare or Medicaid have any claims against it which may reasonably be
expected to result in consolidated net offsets against future
reimbursement in excess of that provided for in such financial
statements. Neither Lessor nor any of its employees have committed a
violation of the Medicare and Medicaid fraud and abuse provisions of the
federal Social Security Act. Lessor agrees that Lessee may, in its
discretion, reopen cost reports for any period prior to Closing, and
that Lessee shall be entitled to retain any amounts which would be
payable to Lessor as a result of any adjustments thereto.
4.16 HILL-BURTON FUNDS. To the extent funds have been received
on behalf of Lessor or any predecessor of Lessor to construct, improve
or acquire any of the Assets under the "Hill-Burton" Act, the financial
obligation in respect of such funds has been fully satisfied, and Lessee
shall not be required to pay, or otherwise satisfy, any amounts as a
"recovery" or
46
otherwise as a result of the consummation of the transactions
contemplated by this Annex A.
4.17 TAXES. Lessor has filed all tax returns required by law to
be filed and has paid all taxes, assessments and other governmental
charges shown thereon as due and payable, other than those presently
payable without penalty or interest or those being contested in good
faith by appropriate procedures. There are no liens with respect to
taxes (except for liens with respect to property taxes not yet due) upon
any of the Assets. Lessor has not conducted the business of the Hospital
or engaged in any transaction which would cause the transaction
contemplated hereby to be taxable under Louisiana sales and use tax
laws.
4.18 EQUIPMENT. All assets of Lessor consisting of equipment listed on
Schedule B to the Lease are in good operating condition and repair, ordinary
wear and tear excepted. Except as disclosed on Schedule 4.18, the only
transactions related thereto since May 31, 1997, have been additions thereto in
the ordinary course of business. All of such equipment (except for leased items
for which the lessors have valid security interests) at the Closing will be free
and clear of any lien or security interest or other encumbrance other than
Permitted Encumbrances.
4.19 PAYMENTS. Neither Lessor nor any affiliate or representative
thereof has, directly or indirectly, paid, delivered or agreed to pay or deliver
any fee, commission or other sum of money or item of property, however
characterized, to any person, government official or other party with respect to
the Hospital that has or is illegal under any federal, state or local law.
4.20 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or specifically reserved against (which reserves are believed adequate
in amount) in the Financial Statements or any financial statements prepared in
respect of Lessor's business thereafter, Lessor did not have, at the date of
such financial statements, any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise and whether due or to become
due) required to be reflected thereon or included therein, except for any
liabilities which were incurred in the ordinary course of business consistent
with past practice or have been discharged or paid in full prior to the date
hereof.
4.21 NO MISLEADING STATEMENTS. No representation or warranty by Lessor
contained in the Lease or this Annex A, and no statement contained in any
Schedule (including any supplement or amendment thereto) and the documents to be
delivered at the Closing by or on behalf of Lessor to Lessee or any of its
representatives in connection with the transactions contemplated hereby (the
Schedules, including any supplement or amendment thereto, and such other
documents are herein referred to, collectively, as the "Additional Documents"),
and no written statement made or delivered by Lessor in connection with this
Annex A
47
or the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or, to the best of their knowledge after due
inquiry, omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. Copies of all documents described
on any Schedule hereto shall be true, correct and complete, and all descriptions
of such documents shall be true and complete.
5. REPRESENTATIONS AND WARRANTIES OF LESSEE. As of the date hereof
Lessee represents and warrants to Lessor the following:
5.1 LESSEE CAPACITY. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee with all requisite power and authority to own, operate and
lease its properties, and carry on its business in Louisiana.
5.2 CORPORATE AUTHORIZATION/CONTRACT BINDING. The execution,
delivery and performance by Lessee of the Lease and this Annex A and the
other agreements and transactions contemplated hereby are within
Lessee's power, are not in contravention of the terms of Lessee's
Articles of Incorporation or Bylaws, or any amendments thereto. No
provisions exist in any document or instrument to which Lessee is a
party or by which Lessee is bound which would be violated by the
execution of, or the performance by Lessee, and the consummation by
Lessee of the transactions contemplated by, this Annex A. This Annex A
will, upon execution, constitute the valid, legal and binding obligation
of Lessee, enforceable against Lessee in accordance with its terms
except as such may be limited by bankruptcy and other laws of general
applicability affecting sellers' and creditors' rights and general
equitable principles.
5.3 NO MISLEADING STATEMENTS. No representation or warranty by
Lessee contained in the Lease or this Annex A, and no statement
contained in any of the documents to be delivered at the Closing by or
on behalf of Lessee to Lessor or any of its representatives in
connection with the transactions contemplated hereby, and no written
statement made or delivered by Lessee in connection with this Annex A or
the transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or, to the best of its knowledge
after due inquiry, omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
5.4 FULL DISCLOSURE. During the term of its management and
operation of the Hospital, which term began on March 9, 1998, and
continuing through the date of this Agreement, neither Lessee nor any of
its Affiliates (as
48
that term is defined in the Lease) or any of their respective officers,
directors, employees or agents, has any actual notice or has any actual
knowledge of any fact or other information which would cause Lessor to
be in default of any representation, warranty, covenant or other
agreement made by Lessor in this Agreement or in the Lease. Lessee
expressly agrees to forfeit any and all rights of indemnification under
Section 8.2 hereof or elsewhere herein or in the Lease with respect to
the breach of any such representation, warranty, covenant or other
agreement made by Lessor to the extent of any breach by Lessee of the
representation and warranty contained in this Section 5.4.
6. COVENANTS OF LESSOR. LESSOR COVENANTS AND AGREES AS FOLLOWS:
6.1 INFORMATION. Between the date of this Annex A and the
Closing Date, Lessor shall afford to the officers and authorized
representatives of Lessee reasonable access during normal business hours
to the Hospital and to Lessor's books and records and will furnish to
Lessee such additional financial data and other information relating to
the Hospital as Lessee may from time to time reasonably request. Lessor
covenants and agrees to cooperate reasonably with Lessee in Lessee's
efforts (i) to make any required filings and to obtain any governmental
approvals necessary in order to consummate the transactions contemplated
hereby, (ii) to respond to any governmental investigation of such
transactions, and (iii) to defend any legal or administrative
proceedings challenging such transactions. Lessor will, upon reasonable
request, cooperate with Lessee, Lessee's representatives and counsel in
the preparation of any document or other material which may be required
by any governmental agency as a predicate to or result of the
transactions herein contemplated. With respect to Confidential
Information provided by Lessor in connection with and relative to the
transactions contemplated by this Annex A, Lessee covenants and agrees
to use reasonable efforts to cause its officers, employees,
representatives and agents to hold all such Confidential Information in
strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of Lessee's counsel, by other
requirements of law, and, if requested, to return all originals and
copies of any such written Confidential Information to Lessor in the
event for any reason the transactions herein are not consummated. Any
release to the public of information with respect to the transactions
herein will be made only in the form and manner approved by the parties
and their respective representatives. Lessee covenants and agrees that
it will not use, and will not knowingly permit others to use, any
Confidential Information in a manner detrimental to the business of the
Hospital or Lessor or to their competitive disadvantage. For the
purposes hereof, "Confidential Information" shall mean all information
of any kind concerning Lessor, obtained, directly or indirectly, from
Lessor in connection with the transactions contemplated by this Annex A
except information (i) ascertainable or obtained from public or
published information, (ii) received
49
from a third party not known by Lessee to be under an obligation to
Lessor to keep such information confidential, or (iii) which is or
becomes known to the public (other than through a breach of this Annex
A).
6.2 OPERATIONS. Between the date of this Annex A and the Closing
Date, with respect to the ownership of the Assets and operation of the
Hospital, Lessor will:
(a) carry on Lessor's business in substantially the same
manner as Lessor has heretofore and not make any material change
in personnel or operations, and not make any change in finance
or accounting policies;
(b) maintain the Assets in substantially as good working
order and condition as at present, ordinary wear and tear
excepted;
(c) perform in all respects Lessor's obligations under
agreements relating to or affecting the Hospital;
(d) keep in full force and effect present insurance
policies or other comparable insurance coverage;
(e) use its reasonable best efforts to maintain and
preserve Lessor's business organization intact, retain Lessor's
present employees and maintain Lessor's relationship with
suppliers, customers and others having business relations with
Lessor;
(f) within a reasonable time prior to Closing, permit
Lessee to make offers to any of Lessor's personnel who work at
the Hospital for employment by Lessee subsequent to the Closing,
which personnel shall be allowed to accept or reject such offers
without penalty;
(g) terminate the participation of the employees that
are hired by Lessee in Lessor's employee health or welfare
benefit plans, if any, and comply with the terms and conditions
of all such plans;
(h) not effect, grant or pay any increase in
compensation to any employee, officer or director of Lessor
other than annual raises and bonuses to employees and officers
consistent with those effected, granted or paid in prior years
or otherwise pursuant to existing policies; and
6.3 CERTAIN CHANGES. Except as described in Schedule 6.3,
between the date of this Annex A and the Closing Date, Lessor will not,
without the prior written consent of Lessee:
50
(a) license or sell or agree to license or sell any of
the Assets except for the depletion of inventories sold in the
ordinary course of Lessor's business; or
(b) engage in any transaction out of the ordinary course
of business, including any sale, transfer, lease, encumbrance or
granting of a security interest in any portion of the Assets
(except as provided in Section 6.3(a) above); or
(c) acquire, or make any capital expenditure in respect
of, any additional items of property, plant or equipment having
a value in excess of $1,000 with respect to any one item or
$10,000 in the aggregate.
Lessor agrees to consult with Lessee with respect to entering
into, renewing or terminating any contract or lease relating to the
Hospital and will not enter into, renew or terminate any such contract
or lease without the prior written consent of Lessee.
6.4 CASUALTY. If any material part of the Hospital is damaged so
as to be rendered unusable or destroyed prior to Closing, Lessee may
elect to terminate the Lease and this Annex A and all obligations of the
parties hereunder.
6.5 BEST EFFORTS TO CLOSE. Lessor shall use its best efforts to
proceed toward the Closing and to cause the conditions to Closing to be
met as soon as practicable and consistent with other terms contained
herein. Lessor shall notify Lessee as soon as practicable of any event
or matter which comes to Lessor's attention which may reasonably be
expected to prevent the conditions to Lessor's obligations being met.
6.6 FINAL COST REPORT. Within one hundred fifty (150) days after
Closing, Lessor shall furnish to Lessee a copy of Lessor's final cost
report filed in respect of the Medicare and Medicaid programs, or any
successor governmental program, reflecting consummation of the
transactions contemplated hereby.
6.7 CONSENTS. Lessor will use its reasonable best efforts to
obtain all permits, approvals, authorizations and consents of all third
parties necessary in the reasonable opinion of Lessee, prudent for the
purpose of (i) consummating the transactions contemplated hereby, or
(ii) enabling the Lessee to continue to operate the Hospital in the
ordinary course after the Closing.
51
6.8 INSURANCE. Lessor shall take all action reasonably requested
by Lessee to enable it to succeed to the Workmen's Compensation and
Unemployment Insurance ratings, insurance policies, deposits and other
interests of Lessor and other ratings for insurance or other purposes
established by Lessor. Lessee shall not be obligated to succeed to any
such rating, insurance policy, deposit or other interest, except as it
may elect to do so.
6.9 NOTICE; EFFORTS TO REMEDY. Lessor shall promptly give
written notice to Lessee upon becoming aware of the impending occurrence
of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of Lessor contained or referred
to in this Annex A and shall use its reasonable best efforts to prevent
or promptly remedy the same.
6.10 SUPPLEMENTS TO SCHEDULES. From time to time prior to the
Closing, Lessor will promptly supplement or amend the Schedules prepared
pursuant to Section 4 hereof with respect to any matter hereafter
arising which, if existing or occurring at the date of this Annex A,
would have been required to be set forth or described in the Schedules
or which is necessary to correct any information in the Schedules which
has been rendered inaccurate thereby; provided, however, that upon
delivery of any such supplement or amendment to the Schedules, Lessee
shall have the right to terminate this Annex A by notifying Lessor of
its election to so terminate.
6.11 NON-COMPETITION. During the term of the Lease, neither
Lessor nor any of its subsidiaries or affiliates shall, without the
prior written consent of Lessee, directly or indirectly, (i) engage in
the construction or operation of any hospital (other than the
Replacement Hospital) or of any other health care facility which
provides services similar to the services provided by the Hospital or
the Replacement Hospital, or (ii) acquire, lease or own, serve as a
member or be a shareholder (other than a stockholder of a corporation
listed on a national securities exchange or whose stock is regularly
traded in the over-the-counter market, provided that such holding at no
time exceeds five percent (5%) of the outstanding stock of any class of
any such corporation) of, or otherwise exercise management control over,
a hospital, any other health care facility or any business providing
health insurance or funding the delivery of health care which is in
completion with the Hospital or the Replacement Hospital, which, in
respect of (i) and (ii) above, is located within one hundred (100) miles
of Eunice, Louisiana.
52
7. COVENANTS OF LESSEE. Lessee covenants and agrees as follows:
7.1 BEST EFFORTS TO CLOSE. Lessee shall use its best efforts to
proceed toward the Closing and to cause the conditions to Closing to be
met as soon as practicable and consistent with other terms contained
herein. Lessor shall notify Lessee as soon as practicable of any event
or matter which comes to Lessor's attention which may reasonably be
expected to prevent the conditions to Lessor's obligations being met.
7.2 CONSENTS. Lessee will use its reasonable best efforts to
obtain all permits, approvals, authorizations and consents of all third
parties necessary in the reasonable opinion of Lessee, prudent for the
purpose of (i) consummating the transactions contemplated hereby, or
(ii) enabling the Lessee to continue to operate the Hospital in the
ordinary course after the Closing.
7.3 NOTICE; EFFORTS TO REMEDY. Lessee shall promptly give
written notice to Lessor upon becoming aware of the impending occurrence
of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of Lessee contained or referred
to in this Annex A and shall use its reasonable best efforts to prevent
or promptly remedy the same.
7.4 MIS SYSTEM. Lessee shall complete the installation of a new
management information system for use in the operation of the Hospital
as soon as reasonably possible following the Closing.
7.5 NEW EQUIPMENT. Lessee shall purchase at least One Million
Six Hundred Thousand Dollars ($1,600,000) of new equipment for use in
the Hospital within the first twelve (12) months of the Lease. Such
equipment shall include a C-arm, CT scanner and a new "R and F" unit to
be ordered within thirty (30) days following the Closing. Thereafter,
Lessee shall spend at least Five Hundred Thousand Dollars ($500,000) per
year on new equipment in each of the next two (2) years following
Closing. Thereafter, Lessee shall purchase new equipment each year as
needed consistent with comparable acute care facilities.
7.6 WORKING CAPITAL. Lessee shall provide up to Three Million
Five Hundred Thousand Dollars ($3,500,000) in new working capital for
use in the operation of the Hospital. Such working capital is inclusive
of any working capital previously provided in connection with Lessee's
interim management of the Hospital, but is in addition to Lessee's
responsibility for all financial operations of the Hospital and the
Replacement Hospital.
53
7.7 FULL DISCLOSURE. On and from the date hereof continuing to
and including the Closing, Lessee covenants and agrees to disclose to
Lessor in writing any and all notices it or any of its Affiliates, or
any of their respective officers, directors, employees or agents,
receive, and any actual knowledge of any fact or other information which
they now have or hereafter acquire, which would cause Lessor to be in
default of any representation, warranty, covenant or other agreement
made by Lessor in this Agreement or in the Lease. Lessee expressly
agrees to forfeit any and all rights of indemnification under Section
8.2 hereof or elsewhere herein or in the Lease with respect to the
breach of any such representation, warranty, covenant or other agreement
made by Lessor to the extent of any breach by Lessee of the covenant and
agreement contained in this Section 7.7.
7.8 TAIL INSURANCE. Lessee will obtain, at its expense, "tail"
malpractice insurance coverage which (a) provides coverage for an
unlimited period of time for claims asserted after Closing relating to
incidents occurring prior to Closing; (b) provides coverage of not less
than $1,000,000.00 per claim; (c) is provided by a carrier reasonably
acceptable to Lessor; and (d) names Lessor as an additional insured.
7.9 PHYSICIAN RECRUITING. Lessee will use its best efforts to
recruit six (6) new physicians, in specialty areas selected after
consultation with the Hospital Board in the twenty-four (24) month
period following Closing at a cost not to exceed $200,000 per physician.
Lessee shall not, at anytime during the term of the Lease, directly or
indirectly, recruit or assist in the recruiting, of any physician then a
member of the medical staff of the Hospital or the Replacement Hospital,
away from the Hospital or the Replacement Hospital.
7.10 MEDICAL OFFICE BUILDING. At such time as Lessee has entered
into binding agreements with five (5) additional physicians to locate or
relocate their medical practices in the Eunice, Louisiana community, net
of any physicians currently on the active medical staff of the Hospital
who may have relocated away from the Eunice, Louisiana community or
ceased practicing medicine, Lessee will meet and work with Lessor and
interested physicians to identify a site (the "MOB Site") for the
construction of a new medical office building ("MOB") and to determine
an appropriate arrangement for causing the MOB to be constructed.
7.11 NON-COMPETITION. During the term of the Lease, neither
Lessee nor any of its subsidiaries or affiliates shall, without the
prior written consent of Lessor, directly or indirectly, (i) engage in
the construction or operation of any hospital (other than the
Replacement Hospital) or of any other health care facility which
provides services similar to the services provided by the Hospital or
the Replacement Hospital, or (ii) acquire, lease or
54
own, serve as a member or be a shareholder (other than a stockholder of
a corporation listed on a national securities exchange or whose stock is
regularly traded in the over-the-counter market, provided that such
holding at no time exceeds five percent (5%) of the outstanding stock of
any class of any such corporation) of, or otherwise exercise management
control over, a hospital, any other health care facility or any business
providing health insurance or funding the delivery of health care which
is in completion with the Hospital or the Replacement Hospital, which,
in respect of (i) and (ii) above, is located within one hundred (100)
miles of Eunice, Louisiana.
7.12 BUSINESS OFFICE AND ACCOUNTING FUNCTIONS. Lessee will
complete its reestablishment of the business office and all accounting
functions at a cost of approximately $100,000.
7.13 MARKETING. Lessee will initiate an area wide marketing
campaign promptly following the Closing at a cost not to exceed $50,000.
7.14 HOSPITAL IMPROVEMENTS. During the first twelve months
following the Closing Date, Lessee shall make repairs, renovations and
improvements to the Hospital in an amount not less than $1,000,000,
including without limitation those repairs, renovations and improvements
described in Schedule 7.14.
8. INDEMNIFICATION.
8.1 Indemnity by Lessee. Lessee shall indemnify, defend and hold
harmless Lessor, its officers, directors, employees and agents (jointly
and severally, "Lessee Indemnified Parties") from and against any and
all liabilities, losses, damages, demands, claims, suits, actions,
judgments, causes of action, assessments, costs and expenses, including,
without limitation, interest, penalties, attorneys' fees, any and all
expenses incurred in investigating, preparing and defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation
(collectively, "Damages"), asserted against, resulting to, imposed upon,
or incurred or suffered by any of them, directly or indirectly, as a
result or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of any
of the representations, warranties, covenants or agreements made
by Lessee in this Annex A or the other agreements contemplated
hereby;
(ii) any liability imposed on Lessor to the extent such
liability has been expressly assumed by Lessee pursuant to this
Annex A or the Assumption Agreement;
55
(iii) any misrepresentation in or any omission from any
certificate or other document (collectively, the "Additional
Documents") furnished or to be furnished by or on behalf of
Lessee under this Annex A; and
(iv) any liability threatened or imposed on Lessor
arising out of Lessee's operation of the Hospital from and after
Closing, whether or not such liability has been expressly
assumed by Lessee pursuant to any provision of this Annex A.
The indemnification obligations of Lessee shall survive
indefinitely.
To be entitled to such indemnification, Lessee Indemnified Party
shall give Lessee prompt written notice of any breach or of the
assertion by a third party of any claim with respect to which Lessee
Indemnified Party may bring a claim for indemnification hereunder, and
in all events must have supplied such notice to Lessee within the period
for the defense of such claims by Lessee. Lessee shall have the right,
at its own expense, to defend and litigate any such third party claim,
and such Lessee Indemnified Party shall cooperate in good faith with
Lessee to permit Lessee to do so. Should such Lessee Indemnified Party
settle or compromise any claim or matter for which an indemnity would be
payable by a Lessee hereunder without the prior written consent of such
Lessee, Lessee shall be relieved of any liability hereunder to such
Lessee with respect to such claim or matter.
8.2 INDEMNITY BY LESSOR. Lessor shall indemnify, defend and hold
harmless Lessee and its respective officers, directors, employees,
shareholders and agents (jointly and severally, the "Lessor Indemnified
Parties") from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by any of them,
directly or indirectly, as a result or arising out from the following:
(i) any inaccuracy in or breach or nonfulfillment of any
of the representations, warranties, covenants or agreements made
by Lessor in this Annex A or the other agreements contemplated
hereby;
(ii) any liability of Lessor or liability, including
without limitation professional malpractice or general liability
claims and claims of liability under either the Medicare or
Medicaid programs, arising out of the operation of the Hospital
prior to the Closing which is imposed on Lessee, except to the
extent such liability has been expressly assumed by Lessee
pursuant to this Annex A or the Assumption Agreement; and
56
(iii) any misrepresentation in any certificate or other
document (collectively, the "Additional Documents") furnished or
to be furnished by or on behalf of Lessor under this Annex A.
To be entitled to such indemnification, a Lessor Indemnified
Party shall give Lessor prompt written notice of any breach or the
assertion by a third party of any claim with respect to which a Lessor
Indemnified Party may bring a claim for indemnification hereunder, and
in all events must have supplied such notice to Lessor within the
applicable period for defense of such claims by Lessor. At the request
of Lessor, Lessor shall contest in good faith by appropriate proceedings
any claim or matter for which an indemnity may be payable by Lessor
hereunder. In the alternative, Lessor shall also have the right, at its
own expense, and at its option, to contest any such third party claim,
and Lessor Indemnified Party shall cooperate in good faith with Lessor
to permit Lessor to do so. Should such Lessor Indemnified Party settle
or compromise any claim or matter for which an indemnity may be payable
by Lessor hereunder without the prior written consent of Lessor, Lessor
shall be relieved of any liability hereunder with respect to such claim
or matter.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE. The obligations of
Lessee hereunder are subject to the satisfaction, on or prior to the Closing
Date, of the following conditions unless waived in writing by Lessee:
9.1 REPRESENTATIONS/WARRANTIES. The representations and
warranties of Lessor contained in this Annex A shall be true and correct
as of the Closing Date; and the covenants and conditions of this Annex A
to be complied with or performed by Lessor on or before the Closing Date
pursuant to the terms hereof shall have been duly complied with and
performed.
9.2 OPINION OF LESSOR'S COUNSEL. Lessee shall have received an
opinion from Massengale DeBruhl, counsel to Lessor, dated as of the
Closing Date and addressed to Lessee, to the effect that: (i) Lessor has
been duly formed, is validly existing and in good standing under the
laws of the State of Louisiana; (ii) Lessor has full power and authority
to make, execute, deliver and perform the Lease and this Annex A, and
all proceedings required to be taken by Lessor to authorize the
execution and performance of the Lease and this Annex A, and to sell,
convey, assign, transfer and deliver the Assets described in Section
1.3, as herein contemplated have all been duly taken and in accordance
with any applicable Sunshine Law; (iii) the Lease and this Annex A and
all, assignments and other instruments of conveyance and transfer
delivered hereunder constitute the valid and binding obligations of
Lessor, enforceable in accordance with their terms, subject to
bankruptcy and other similar laws affecting creditors' rights and
debtors' relief generally and subject to general principles of equity;
(iv) except as specifically set forth in Annex A or any Schedule to
Annex A, neither the execution and delivery of
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the Lease and this Annex A nor the consummation of the asset sale
transaction herein contemplated conflicts with, or results in a breach
of, any resolution or act or governing instrument of Lessor or any
material agreement or instrument known to Lessor's counsel to which
Lessor is a party or by which Lessor or the Assets are bound; and (v)
such other matters as may be reasonably requested by Lessee.
9.3 PRE-CLOSING CONFIRMATIONS. Lessee shall have obtained
documentation or other evidence confirming the following:
(a) confirmation and effective transfer or reissuance of
the appropriate licensure of the Hospital if and to the extent
required by the State of Louisiana for its continued operation
after Closing; and
(b) confirmation of Medicare and Medicaid certification
of the Hospital if and to the extent required for its continued
operation after Closing.
9.4 ACTION OR PROCEEDING. No action, proceeding, investigation
or administrative hearing before a court or any other governmental
agency or body shall have been instituted or threatened against Lessor
or Lessee which seeks injunctive relief in anticipation of the sale of
the Assets and may reasonably be expected to prohibit the sale of the
Assets to Lessee or seeks damages in a material amount by reason of the
consummation of such sale.
9.5 SCHEDULES. Lessee shall have been furnished with those
Schedules enumerated on the Table of Schedules updated to the most
recent practicable date prior to Closing to the extent of any changes
therein to which Lessor has knowledge and Lessee shall not have
expressed reasonable objection to Lessor in writing with respect
thereto.
9.6 CONSENTS; LICENSES. All notices to, and consents,
authorizations, approvals and waivers from, third parties required for
Lessor to consummate the transactions contemplated hereby or required in
connection with Lessor's assignment and Lessee's assumption of any
Contract or Lease shall have been made and obtained. Lessee shall have
reason to believe that the Louisiana Department of Health shall issue to
Lessee promptly after the Closing a license to operate the Hospital and
all presently authorized supplemental and special services shall be so
authorized for Lessee on and after Closing.
9.7 PROCEEDINGS AND DOCUMENTS SATISFACTORY. Lessee shall have
received such certificates, opinions and other documents as it or its
counsel may reasonably require in order to consummate the transactions
contemplated hereby, all of which shall be in form and substance
reasonably satisfactory to it and its counsel. All proceedings in
connection with the
58
transactions contemplated herein and all certificates and documents
delivered to Lessee pursuant to this Annex A shall be reasonably
satisfactory in form and substance to Lessee and its counsel acting
reasonably and in good faith.
9.8 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, Lessor shall
have delivered to Lessee all documents, agreements and instruments
contemplated by Section 2.2.
9.9 ENVIRONMENTAL SURVEY. Lessee shall have received
environmental assessments, satisfactory in form and substance, with
respect to the real property.
9.10 ADVERSE CHANGES. There shall not have occurred after the
date hereof any change in or effect on Lessor that is, or with
reasonable certainty might be, materially adverse to its business,
prospects, operations, properties, assets, liabilities or condition
(financial or otherwise).
9.11 BOND FINANCING. Lessor's bond indebtedness secured by the
Hospital (the "Bond Financing") shall have been paid off or defeased to
the satisfaction of Lessee.
9.12 APPROVAL OF SCHEDULES. Lessee and Lessor shall have
mutually agreed upon the content of each Schedule hereto.
9.13 TITLE COMMITMENT, POLICY AND SURVEY.
(a) At least thirty (30) days prior to Closing, Lessee
shall have received a title commitment (the "Title Commitment")
from a nationally recognized title company selected by Lessee
(the "Title Company") with reinsurance through such title
reinsurers and in such amounts as is acceptable to Lessee,
together with legible copies of all exceptions to title
referenced therein. The Title Commitment shall set forth the
state of title to the Premises, together with all exceptions or
conditions to such title, including, without limitation, all
easements, restrictions, rights-of-way, covenants, reservations,
and all other encumbrances affecting the Premises which would
appear in an owner's title policy, if issued. The Title
Commitment shall contain the express commitment of the Title
Company to issue one or more owners' title policies
(collectively, the "Title Policy") to Lessee in an amount
satisfactory to Lessee The Title Policy (a) shall insure
leasehold title to the Premises in Lessee, subject only to such
matters as may be acceptable to Lessee in its sole discretion
(the "Permitted Encumbrances"), and (b) shall include such
reinsurance pursuant to reinsurance agreement with direct access
to the reinsurers as Lessee may reasonably require. The standard
printed exceptions to such
59
policies shall be modified or endorsed as follows: (a) the
standard printed exception for taxes shall be limited to taxes
for 1998, not yet due and payable, (b) the standard printed
exception for rights of parties in possession shall be limited
to "rights of parties in possession under recorded or unrecorded
leases, if any, and (c) the standard printed exception for
discrepancies, conflicts, or shortages in area or boundary
lines, or any encroachments, or protrusions or any overlapping
of improvements shall be modified to delete all of the foregoing
except "shortages in area." The Title Commitment and the Title
Policy will be furnished to the Lessee at Lessee's sole cost and
expense.
(b) SURVEY. No later than twenty (20) days prior to the
Closing Date, Lessee shall have received, at its sole cost and
expense, cause three (3) copies of one or more surveys of the
Premises (whether one or more, the "Survey"). The Survey shall,
at a minimum: (a) be currently dated (which may include a
current re-certification of a previously prepared survey plat);
(b) show the location on the Premises of all improvements,
fences, evidences of abandoned fences, lakes, ponds, creeks,
streams, rivers, easements, roads, and right-of-way; (c)
identify all easements and rights-of-way by reference to the
recording information applicable to the documents creating such
easements or rights-of-way; (d) show any encroachments onto the
Premises from any adjacent property, any encroachments from the
Premises onto adjacent property, and any encroachments into any
easement or restricted area within the Premises; (e) locate all
existing improvements (such as buildings, power lines, fences,
and the like); (f) locate all dedicated public streets or other
roadways providing access to the Premises, including all curb
cuts and all alleys; (g) locate all set-back lines and similar
restrictions covering the Premises or any part thereof and any
violations of such restrictions; and (h) show thereon a legal
description of the boundaries of the Premises by metes and
bounds or other appropriate legal description. The Survey shall
otherwise be in accordance with minimum technical standards for
surveys of comparable property as set forth in all applicable
laws, regulations, or statements of professional surveying
standards. The Survey shall contain the surveyor's certification
to Lessee, the Title Company and Lessee's lender that: (i) the
Survey was made on the ground; (ii) there are no visible or
recorded easements, discrepancies, conflicts, encroachments or
overlapping of improvements except as shown on the Survey; (iii)
the Survey correctly shows all visible or recorded easements or
rights of way across the Premises or any other easements or
rights of way of which the Surveyor has been advised, including,
without limitation, those matters affecting title reflected in
the Title Commitment; (iv) the Survey correctly shows the
location of all
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buildings, structures and other improvements situated on the
Premises; (v) the Survey conforms to all applicable minimum
guidelines for surveys of comparable property as set forth in
applicable laws, regulations or professional standards; (vi) all
streets abutting the Premises and all means of ingress to and
egress from the Premises have been completed, dedicated and
accepted for public maintenance by the city, town or other
appropriate political subdivision in which the Premises is
located; (vii) except as shown thereon, the Premises are not
located within the 100-year flood plain or other flood hazard
area; (viii) the Survey is a true, correct and accurate
representation of the Premises; and (ix) such other matters as
may be required by the Title Company to allow it to issue the
Title Policy or Lessee's lender to allow it to make the loan.
(c) UNPERMITTED EXCEPTIONS AND SURVEY DEFECTS. If (i)
the Title Commitment discloses a title exception other than a
Permitted Encumbrance (an "Unpermitted Exception") or (ii) the
Survey discloses an encroachment or overlap or any other matter
which renders title to the Premises unmarketable or reflects
that any utility service to the improvements or access thereto
does not lie wholly within the Premises or an unencumbered
easement for the benefit of the Premises or reflects any other
matter adversely affecting the use or improvements of the
Premises ( a "Survey Defect"), then Lessor shall have thirty
(30) days from the date of delivery thereof to have the
Unpermitted Exception removed from the Title Commitment or the
Survey Defect corrected or insured over by an appropriate title
insurance endorsement, all in a manner reasonably satisfactory
to Lessee, and in any such event the Closing shall be extended,
if necessary, to the date which is five (5) business days after
the expiration of such 30 day period. If Lessor fails to have
any Unpermitted Exception removed or any Survey Defect corrected
or otherwise insured over to the reasonable satisfaction of
Lessee within the time specified therefor, Lessee, at its sole
option, upon not less than three (3) days' prior written notice
to Lessor, may elect to:
(1) Take leasehold title to the subject parcel
of Premises as it then is with the right to require a
cash payment to Lessee in an amount equal to all liens,
claims, encumbrances and costs of correction;
(2) Waive such Unpermitted Encumbrance or Survey
Defect; or
(3) Terminate the Lease and this Annex A and all
of Lessee's obligations hereunder and thereunder.
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSOR. The obligations of
Lessor hereunder are subject to the satisfaction, on or prior to the Closing
Date, of the following conditions unless waived in writing by Lessor:
10.1 REPRESENTATIONS/WARRANTIES. The representations and
warranties of Lessee contained in this Annex A shall be true and correct
as of the Closing Date; and the covenants and conditions of this Annex A
to be complied with or performed by Lessee on or before the Closing Date
pursuant to the terms hereof shall have been duly complied with and
performed.
10.2 OPINION OF LESSEE'S COUNSEL. Lessor shall have received
from Waller Lansden Dortch & Davis, A Professional Limited Liability
Company, counsel to Lessee, an opinion dated as of the Closing Date
addressed to Lessor, in form and substance satisfactory to Lessor to the
effect that: (i) Lessee is a corporation validly existing and in good
standing under the laws of the State of Tennessee and is duly qualified
to do business in the State of Louisiana; (ii) the execution, delivery
and performance of the Lease and this Annex A has been duly authorized
by all requisite action; (iii) Lessee has full power and authority to
make, execute, deliver and perform the Lease and this Annex A, and all
proceedings required to be taken by Lessee to authorize the execution
and performance of the Lease and this Annex A as herein contemplated
have all been duly and properly taken; (iv) the Lease and this Annex A
constitute valid and binding obligations of Lessee, enforceable in
accordance with their terms, subject to bankruptcy and other similar
laws affecting creditors' rights or debtors' relief generally and
subject to general principles of equity; (v) neither the execution and
delivery of the Lease and this Annex A, nor the consummation of the
transactions therein or herein contemplated, nor the compliance and
fulfillment of the terms and conditions thereof or hereof will conflict
with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under the Articles of Incorporation or Bylaws of
Lessee or any agreement or instrument known to Lessee's counsel to which
Lessee is a party or by which Lessee is bound or affected; and (vi) such
other matters as may be reasonably requested by Lessor. Lessee's
counsel's opinion may state that such counsel is not admitted to
practice in any state other than the State of Tennessee and may be
limited to the laws of the State of Tennessee, the General Corporation
Law of the State of Delaware, and the federal laws of the United States;
provided however, that Lessee's counsel shall assume, in giving such
opinion, that the laws of the State of Louisiana are identical with the
laws of the State of Tennessee.
10.3 ACTION OR PROCEEDING. No action, proceeding, investigation
or administrative hearing before a court or any other governmental
agency or body shall have been instituted or threatened against Lessee
or Lessor which seeks injunctive relief in anticipation of the
transactions contemplated herein
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and may reasonably be expected to prohibit the transactions contemplated
herein or seeks damages in a material amount by reason of the
consummation of such transactions.
10.4 PROCEEDINGS AND DOCUMENTS SATISFACTORY. Lessor shall have
received such certificates, opinions and other documents as it or its
counsel may reasonably require in order to consummate the transactions
contemplated hereby, all of which shall be in form and substance
reasonably satisfactory to it and its counsel. All proceedings in
connection with the purchase of the Assets set forth herein and all
certificates and documents delivered to Lessor pursuant to this Annex A
shall be reasonably satisfactory in form and substance to Lessor and its
counsel acting reasonably and in good faith.
10.5 DELIVERY OF CERTAIN DOCUMENTS. At the Closing, the Lessee
shall have delivered to Lessor all documents, agreements and instruments
contemplated by Section 2.3.
10.6 APPROVAL OF SCHEDULES. Lessee and Lessor shall have
mutually agreed upon the content of each schedule hereto.
10.7 PRE-CLOSING CONFIRMATIONS. Lessor shall have obtained
documentation or other evidence confirming the following:
(a) confirmation and effective transfer or reissuance of
the appropriate licensure of the Hospital if and to the extent
required by the State of Louisiana for its continued operation
after Closing; and
(b) confirmation of Medicare and Medicaid certification
of the Hospital if and to the extent required for its continued
operation after Closing.
10.8 CONSENTS; LICENSES. All notices to, and consents,
authorizations, approvals and waivers from, third parties required for
Lessor to consummate the transactions contemplated hereby or required in
connection with Lessor's assignment and Lessee's assumption of any
Contract or Lease shall have been made and obtained. Lessor shall have
reason to believe that Louisiana Department of Health shall issue to
Lessee promptly after the Closing a license to operate the Hospital and
all presently authorized supplemental and special services shall be so
authorized for Lessee on and after Closing.
10.9 BOND FINANCING. Lessor's Bond Financing shall have been
paid off or defeased to the satisfaction of Lessee.
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10.10 ADVERSE CHANGES. There shall not have occurred after the
date hereof, any change in or effect on Lessee that is, or with
reasonable certainty might be, materially adverse to its business,
prospects, operations, properties, assets, liabilities or condition
(financial or otherwise).
11. REPLACEMENT HOSPITAL. With twelve (12) months of the Closing Date,
Lessee shall deliver to Lessor architectural rendering for a Replacement
Hospital. At the time the MOB site is identified pursuant to Section 7.11,
Lessor and Lessee shall also identify the site for the Replacement Hospital.
Immediately upon the Hospital achieving revenues Net Patient Revenues of
$18,000,000 on an annualized basis (such amount to be adjusted annually on
January 1st based on changes in the Consumer Price Index during the preceding
year) (the "Target Net Revenues"), Lessee shall use its reasonable best efforts,
seek necessary approvals for, construct and equip the Replacement Hospital. The
term "Net Patient Revenues" means gross revenues derived from the provision of
patient services less contractual adjustments and policy discounts. The term
"Replacement Hospital" means an acute care hospital, including the property on
which it is situated, and those subordinate and related facilities, furnishings,
fixtures and equipment having a cost currently estimated to be approximately
Twenty Million Dollars ($20,000,000) that Lessee deems adequate to meet the
health care needs of the Eunice, Louisiana community. Lessee shall assist Lessor
in acquiring land needed for the project, arranging design of the facility by
competent professional architects, seeking necessary approvals, and engaging a
contractor to accomplish the construction and the purchasing of necessary
equipment. Lessor shall hold title to any land acquired and, upon acquisition of
such land, Lessee and Lessor shall enter into a ground lease for such land
providing for a) a term of at least fifty (50) years, b) prepayment of rent in
an amount equal to the costs to Lessor of acquiring the land, c) a right of
first refusal in favor of Lessee in the event Lessor elected to transfer its
interest in the land, d) a right of first refusal in favor of Lessor in the
event Lessee elected to transfer its leasehold interest in the land and/or its
interest in the Replacement to any person not an affiliate of Lessee, e) payment
by Lessor to Lessee at the end of the term of the ground lease of an amount
equal to the unamortized value of any improvements to the land or the
Replacement Hospital in the ten (10) years immediately preceding the end of the
term of the ground lease, f) an option in favor of the Lessor to purchase from
Lessee at fair market value any personal property assets used in the operation
of the Replacement Hospital, and (g) such other terms and conditions mutually
satisfactory to Lessor and Lessee. Immediately thereafter, Lessor and Lessee
shall execute whatever documents are reasonably necessary to enable the project
to proceed including, without limitation, contracts and agreements associated
with the design, construction and equipping of the Replacement Hospital. Lessor
shall cooperate as requested and shall actively support Lessee's efforts to
secure the necessary approvals for the Replacement Hospital, including, without
limitation, approval of an application for a certificate of need from the
appropriate state licensing authority and reasonably requested changes in
zoning, variances in zoning, and any other land use restrictions.
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12. GENERAL.
12.1 APPENDICES, SCHEDULES AND OTHER INSTRUMENTS. Each Appendix,
Schedule and Certificate, if any, to this Annex A shall be considered a
part hereof as if set forth herein in full.
12.2 PRE-CLOSING ACCESS. In addition to Lessor's covenants in
Section 5.1, Lessor shall give Lessee, its accountants, its counsel, and
other representatives reasonable access to the premises, books and
records, and offices of the Hospital, and make such information in
respect thereof as Lessee may reasonably request available to Lessee, as
may be necessary for Lessee to examine the Assets being acquired. No
such inspection by Lessee shall interfere with Lessor's conduct of
business in the ordinary course.
12.3 ADDITIONAL ASSURANCES. The provisions of this Annex A shall
be self-operative and shall not require further agreement by the parties
except as may be herein specifically provided to the contrary; provided,
however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are
reasonably necessary to effectuate this Annex A.
12.4 CONSENTS, APPROVALS AND DISCRETION. Whenever this Annex A
requires any consent or approval to be given by either party or either
party must or may exercise discretion, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed and
such discretion shall be reasonably exercised.
12.5 CHOICE OF LAW. THE PARTIES AGREE THAT THIS ANNEX A SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF LOUISIANA.
12.6 BENEFIT; ASSIGNMENT. Subject to the provisions herein to
the contrary, this Annex A shall inure to the benefit of and be binding
upon the parties hereto and their respective legal representatives,
successors and assigns; provided, however, that no party may assign this
Annex A without the prior written consent of the other party.
12.7 BROKERAGE. Lessor on one hand and Lessee on the other hand
agree to indemnify the other parties from and against all loss, cost,
damage or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying
party.
12.8 COST OF TRANSACTION. Whether or not the transactions
contemplated hereby shall be consummated, the parties agree as follows:
(i) Lessor will pay the fees, expenses, and disbursements of Lessor and
its
65
agents, representatives, accountants, and counsel incurred in connection
with the subject matter hereof and any amendments hereto; and (ii)
Lessee shall pay the fees, expenses and disbursements of Lessee and its
agents, representatives, accountants and counsel incurred in connection
with the subject matter hereof and any amendments hereto. Lessor shall
pay any transfer taxes and recording fees resulting from the
consummation of the transactions contemplated hereby.
12.9 CONFIDENTIALITY. It is understood by the parties that the
information acquired by, and the documents and instruments delivered to,
Lessee or the shareholder, affiliates, officers, employees or agents of
Lessee (collectively, "Agents"), by Lessor or Lessor's officers,
employees or agents (collectively, "Lessor" and "Lessor's Agents") are
of a confidential and proprietary nature. Lessee agrees that it will and
will use its best efforts to cause Agents to maintain the
confidentiality of all such information, documents or instruments
acquired by or delivered to Lessee and Agents in connection with the
negotiation of this Annex A or in compliance with the terms, conditions
and covenants hereof and only to disclose such information, documents
and instruments to such duly authorized persons as are necessary to
effect the transaction contemplated hereby. Lessee further agrees that
if the transactions contemplated hereby are not consummated, Lessee and
Agents will return all documents and instruments acquired from Lessor or
its affiliates and all copies thereof in their possession to Lessor, and
will not use any such non-public information in any way to compete with
Lessor or Lessor's respective affiliates, successors or assigns or in a
manner which would be detrimental to the businesses, financial affairs
or reputations of Lessor or Lessor's respective officers and affiliates,
successors and assigns. Lessee for itself and Agents recognizes that any
breach of this Section 10.9 would result in irreparable harm to Lessor
and Lessor's respective officers and affiliates and that therefore
either Lessor or any of Lessor's respective officers and affiliates
shall be entitled to an injunction to prohibit any such breach by Lessee
and Agents in addition to all of their other legal and equitable
remedies. Nothing in this Section 10.9 shall prohibit the use of such
confidential information, documents or information for such governmental
filings as are required by law or governmental regulations or the
disclosure of such confidential information if such disclosure is
compelled by judicial or administrative process or, in the opinion of
Lessee's counsel, other requirements of law.
12.10 WAIVER. The waiver by either party of a breach or
violation of any term or provision of this Annex A shall not operate as,
or be construed to be, a waiver of any subsequent breach of the same
provision by any party or of the breach of any other term or provision
of this Annex A. The delay or a failure of a party to transmit any
written notice hereunder shall not constitute a waiver by such party of
any default hereunder or of any other or
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further default under this Annex A except as may expressly be provided
for by the terms of this Annex A.
12.11 TAX ALLOCATION. The allocation of the Purchase Price for
tax purposes shall be made in a manner reasonable acceptable to both
Lessor and to Lessee prior to the Closing. Such allocation shall be set
forth in a statement prepared in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended, which statement shall be
prepared in a manner generally consistent with the form of Internal
Revenue Service Form 8594. Lessee and Lessor shall cooperate in the
preparation of such statement of allocation and each party hereto shall
file a copy of such statement as required by applicable law.
12.12 INTERPRETATION. Each of the parties has agreed to the use
of the particular language of the provisions of this Annex A including
all attached Appendices and Schedules, and any questions of doubtful
interpretation shall not be resolved by any rule or interpretation
against the draftsman but rather in accordance with the fair meaning
thereof, having due regard to the benefits and rights intended to be
conferred upon the parties hereto and the limitations and restrictions
upon such rights and benefits intended to be provided.
12.13 NOTICE. Any notice, demand or communication required,
permitted, or desired to be given hereunder shall be in writing and
shall be deemed effectively given when personally delivered or mailed by
prepaid certified mail, return receipt requested, addressed as follows:
Lessor: St. Landry Parish Hospital District No. 1
450 Moosa Blvd.
Eunice, Louisiana 70535
Attention: Chairman
with a copy to:
Massengale DeBruhl
2750 Poydras Center
650 Poydras Street
New Orleans, Louisiana 70130-6101
Attention: Kathleen DeBruhl
Lessee: PHC-Eunice, Inc.
105 Westwood Place, Suite 400
Brentwood, Tennessee 37027
Attention: Chief Executive Officer
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with a copy to:
Waller Lansden Dortch & Davis,
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: Franklin A. Berryman, Esq.
or to such other address, and to the attention of such other person or
officer as any party may designate, with copies thereof to the
respective counsel thereof as notified by such party.
12.14 SEVERABILITY. In the event any provision of this Annex A
is held to be invalid, illegal or unenforceable for any reason and in
any respect, such invalidity, illegality, or unenforceability shall in
no event affect, prejudice or disturb the validity of the remainder of
this Annex A, which shall be in full force and effect, enforceable in
accordance with its terms, including, without limitation, those terms
which contemplate or require the further agreements of the parties.
Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Annex A
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and still be legal, valid or enforceable.
12.15 GENDER AND NUMBER. Whenever the context of this Annex A
requires, the gender of all words herein shall include the masculine,
feminine and neuter, and the number of all words herein shall include
the singular and plural.
12.16 DIVISIONS AND HEADINGS. The divisions of this Annex A
into sections and subsections and the use of captions and headings in
connection therewith are solely for convenience and shall have no legal
effect in construing the provisions of this Annex A.
12.17 CONSENTED ASSIGNMENT. Anything contained herein to the
contrary notwithstanding, this Annex A shall not constitute an
agreement to assign any claim, right, contract, license, lease,
commitment, sales order or purchase order if an attempted assignment
thereof without the consent of another party thereto would constitute a
breach thereof or in any material way affect the rights of Lessor
thereunder, unless such consent is obtained. If such consent is not
obtained, or if an attempted assignment would be ineffective or would
materially affect Lessor's rights thereunder so that Lessee would not
in fact receive all such rights, Lessor shall cooperate in any
reasonable arrangement designed to provide for Lessee the benefit under
any such claims, rights, contracts, licenses, leases, commitments,
sales orders or purchase orders, including, without limitation,
enforcement, at no out-of-
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pocket cost to Lessor, of any and all rights of Lessor against the other
party or parties thereto arising out of the breach or cancellation by
such other party or otherwise.
12.18 SURVIVAL. All statements made by the parties hereto herein
or in the Schedules or in any other financial statement, document,
instrument, certificate, exhibit or list delivered to each other
hereunder by or on behalf of parties hereto shall be deemed
representations and warranties of the parties hereto regardless of any
investigation made by or on behalf of Lessee. Furthermore, the
representations, warranties, covenants and agreements made by the
parties in this Annex A shall survive the Closing for a period of five
(5) years, except for the representations and warranties of Lessor set
forth in Section 3.7 which shall survive indefinitely.
12.19 ENTIRE AGREEMENT; AMENDMENT. This Annex A supersedes all
prior contracts, understandings and agreements, whether written or oral,
and constitutes the entire agreement of the parties respecting the
within subject matter and no party shall be entitled to benefits other
than those specified herein. As between or among the parties, no oral
statements or prior written material not specifically included herein
shall be of any force and effect; the parties specifically acknowledge
that in entering into and executing this Annex A, the parties rely
solely upon the representations and agreements contained in this Annex A
and no others. No terms, conditions, warranties, or representations,
other than those contained herein and no amendments or modifications
hereto, shall be binding unless made in writing and signed by the party
to be charged.
12.20 COUNTERPARTS. This Annex A may be executed in multiple
originals or counterparts, each and all of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
12.21 RISK OF LOSS. Notwithstanding any other provision hereof
to the contrary, the risk of loss in respect of casualty to the Assets
shall be borne by Lessor through the time of Closing and by the Lessee
thereafter.
12.22 PAYMENT OF ADDITIONAL AMOUNT. Lessee shall pay Lessor an
additional amount at Closing equal to the amount required to pay off the
Bond Financing. Lessor and Lessee anticipate that such amount will be
approximately $600,000 at Closing. Such amount shall be used by Lessor
to pay off or defease the Bond Financing at Closing.
12.23 PAYMENT OF CERTAIN EXPENSES OF LESSOR. So long as the
Lease or the ground lease with respect to the Replacement Hospital is in
effect, to the extent that Lessor does not otherwise have a source of
funds available to it, Lessee shall pay the ongoing reasonable legal and
accounting fees and expenses actually incurred by Lessor in an amount
not to exceed an
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amount to be mutually agreed on by Lessor and Lessee prior to Lessor
incurring the same, and the statutory per diem amounts payable to the
members of the Board of Commissions in connection with the regularly
scheduled meetings of the Board of Commissioners.
12.24 DUE DILIGENCE. The parties acknowledge and agree that they
have executed this Annex A (i) prior to Lessee having completed its due
diligence with respect to the transactions described in this Annex A,
and (ii) without there being attached hereto all of the Schedules
required by this Annex A, or, in the case where a Schedule has been
attached, it may not contain all of the information required to make it
complete. Lessor shall provide full and complete Schedules on or before
June 19, 1998, and may amend or supplement any theretofore submitted
Schedules on or before such date. Such finally submitted complete
Schedules submitted on or before June 19, 1998, shall be deemed part of
this Annex A and incorporated herein as of the date hereof as if
originally submitted to Lessee and attached hereto as of the date
hereof. Lessee shall have until July 10, 1998 (the "Due Diligence
Period") to review the Schedules and complete its due diligence. The Due
Diligence Period may be modified by mutual written agreement of Lessor
and Lessee, and shall be extended a reasonable period of time to allow
Lessee to consider and conduct due diligence with respect to the
Schedules. Notwithstanding the foregoing, in the event Lessee discovers
any material issue in the course of its due diligence with respect to
the matters set forth in the Schedules and matters related or incident
thereto, Lessee shall give Lessor written notice thereof, and Lessor
shall have thirty (30) days to resolve such issue to Lessee's
satisfaction. In the event Lessor is unable to do so, Lessee may
terminate this Annex A and the Lease, and thereafter this Annex A and
the Lease, and the rights and obligations of the parties under this
Annex A and the Lease shall be null and void.
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IN WITNESS WHEREOF, the parties hereto have caused this Annex A
to be executed in multiple originals by their duly authorized officers
and their corporate or official seals duly affixed hereto, all as of the
day and year first above written.
PHC-EUNICE, INC.
By: /s/ James Thomas Anderson
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Title: Senior Vice President
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ST. LANDRY PARISH HOSPITAL SERVICE
DISTRICT NO. 1
By: /s/ Thomas R. Myers
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Title: Chairman
--------------------------------
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