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STOCK PURCHASE AGREEMENT
AMONG
SUMMIT HEALTH, LTD., AS BUYER,
ORNDA HEALTHCORP, AS GUARANTOR,
AND
FOUNTAIN VALLEY MEDICAL DEVELOPMENT CO., AS SELLER
Dated as of July 20, 1994
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TABLE OF CONTENTS
1. SALE AND TRANSFER OF THE SHARES; PURCHASE PRICE . . . . . . . . . . .3
1.1 Sale and Transfer of the Shares. . . . . . . . . . . . . . . . .3
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3 Payment of Purchase Price at Closing . . . . . . . . . . . . . .4
1.4 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . .4
1.5 Dispute of Adjustments . . . . . . . . . . . . . . . . . . . . .4
1.6 New Directors and Officers . . . . . . . . . . . . . . . . . . .5
1.7 Definitions; Interpretation. . . . . . . . . . . . . . . . . . .5
1.8 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.9 WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.10 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . 15
1.11 Physical Inventory . . . . . . . . . . . . . . . . . . . . . . 15
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Actions of Seller at Closing . . . . . . . . . . . . . . . . . 16
2.3 Action of Buyer at Closing . . . . . . . . . . . . . . . . . . 17
3. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . . . 18
3.1 Organization and Capacity. . . . . . . . . . . . . . . . . . . 18
3.2 Corporate Powers; Consents; Absence of Conflicts
With Other Agreements, Etc. . . . . . . . . . . . . . . . 19
3.3 Capital Stock of the Seller Companies. . . . . . . . . . . . . 19
3.4 Subsidiaries; Investments; Third Party Options . . . . . . . . 20
3.5 Financial Statements.. . . . . . . . . . . . . . . . . . . . . 20
3.6 Extraordinary Liabilities. . . . . . . . . . . . . . . . . . . 21
3.7 Post-Balance Sheet Results . . . . . . . . . . . . . . . . . . 21
3.8 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 23
3.9 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.10 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 23
3.11 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 25
3.12 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.13 Trademarks, Computer Software, etc . . . . . . . . . . . . . . 27
3.14 Agreements and Commitments . . . . . . . . . . . . . . . . . . 28
3.15 The Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 29
3.16 Certain Affiliate Transactions . . . . . . . . . . . . . . . . 30
3.17 Title to Personal Property . . . . . . . . . . . . . . . . . . 30
3.18 Healthcare License . . . . . . . . . . . . . . . . . . . . . . 30
3.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 30
3.20 Employees and Employee Relations . . . . . . . . . . . . . . . 33
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3.21 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.22 Medicare Participation/Accreditation . . . . . . . . . . . . . 35
3.23 Legal and Regulatory Compliance. . . . . . . . . . . . . . . . 36
3.24 Litigation or Proceedings. . . . . . . . . . . . . . . . . . . 37
3.25 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.26 Board and Medical Staff Matters. . . . . . . . . . . . . . . . 37
3.27 Special Funds. . . . . . . . . . . . . . . . . . . . . . . . . 38
3.28 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . 38
3.29 Experimental Procedures. . . . . . . . . . . . . . . . . . . . 38
3.30 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.31 Operation of the Facilities. . . . . . . . . . . . . . . . . . 39
3.32 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 39
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . 39
4.1 Corporate Capacity . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Corporate Powers; Consents; Absence of Conflicts
With Other Agreements, Etc. . . . . . . . . . . . . . . . 39
4.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . 40
4.5 Purchase for Investment. . . . . . . . . . . . . . . . . . . . 40
5. COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . 40
5.1 Intercompany Liabilities . . . . . . . . . . . . . . . . . . . 40
5.2 Access to and Provision of Additional Information. . . . . . . 40
5.3 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.4 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 42
5.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . 43
5.6 FTC Notification . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 No-Shop Clause . . . . . . . . . . . . . . . . . . . . . . . . 44
5.8 Insurance Ratings. . . . . . . . . . . . . . . . . . . . . . . 44
5.9 Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . 45
5.10 Real Estate Purchase Agreement . . . . . . . . . . . . . . . . 45
5.11 Real Estate Option Agreement . . . . . . . . . . . . . . . . . 45
5.12 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . 45
5.13 Tail Insurance . . . . . . . . . . . . . . . . . . . . . . . . 45
5.14 Key Employee Agreements. . . . . . . . . . . . . . . . . . . . 46
5.15 Change of Partnership Name, etc. . . . . . . . . . . . . . . . 46
5.16 Adverse Actions After Closing. . . . . . . . . . . . . . . . . 46
5.17 Further Acts and Assurances. . . . . . . . . . . . . . . . . . 46
6. COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 FTC Notification . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 47
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6.3 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . 47
6.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 47
6.5 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 48
6.6 Consolidated Tax Return. . . . . . . . . . . . . . . . . . . . 48
6.7 Adverse Actions After Closing. . . . . . . . . . . . . . . . . 49
6.8 Real Estate Purchase Agreement . . . . . . . . . . . . . . . . 49
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. . . . . . . . . . . . 49
7.1. Representations/Warranties . . . . . . . . . . . . . . . . . . 49
7.2. Opinion of Seller's Counsel. . . . . . . . . . . . . . . . . . 49
7.3 Pre-Closing Confirmations. . . . . . . . . . . . . . . . . . . 49
7.4 Action/Proceeding. . . . . . . . . . . . . . . . . . . . . . . 50
7.5 Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 50
7.6 Extraordinary Liabilities/Obligations. . . . . . . . . . . . . 50
7.7 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 50
7.8 Title Policy and Survey. . . . . . . . . . . . . . . . . . . . 50
7.9 Recent Agreements and Commitments. . . . . . . . . . . . . . . 51
7.10 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . 51
7.11 UCC Searches . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.13 Focus Survey . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.14 Assessments; Property Taxes. . . . . . . . . . . . . . . . . . 51
7.15 Full Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.16 Lender Approval. . . . . . . . . . . . . . . . . . . . . . . . 52
7.17 Real Estate Transaction. . . . . . . . . . . . . . . . . . . . 52
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER . . . . . . . . . . . 52
8.1 Representations/Warranties . . . . . . . . . . . . . . . . . . 52
8.2 Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . . 52
8.3 Action/Proceeding. . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Pre-Closing Confirmations. . . . . . . . . . . . . . . . . . . 53
8.5 Extraordinary Liabilities/Obligations. . . . . . . . . . . . . 53
8.6 Real Estate Transaction. . . . . . . . . . . . . . . . . . . . 53
9. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 54
10.1 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Allocation of Purchase Price . . . . . . . . . . . . . . . . . 54
10.3 Tax and Medicare Effect. . . . . . . . . . . . . . . . . . . . 54
10.4 Post-Closing Tax Returns . . . . . . . . . . . . . . . . . . . 54
10.5 Termination Prior to Closing . . . . . . . . . . . . . . . . . 56
10.6 Post-Closing Maintenance of and Access to Information. . . . . 56
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10.7 Reproduction of Documents. . . . . . . . . . . . . . . . . . 57
10.8 Misdirected Payments, etc. . . . . . . . . . . . . . . . . . 58
10.9 Government Reimbursement Program Prior Period Adjustments. . 58
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Indemnification by Seller. . . . . . . . . . . . . . . . . . 59
11.2 Limitations/Seller . . . . . . . . . . . . . . . . . . . . . 60
11.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . 61
11.4 Limitations/Buyer. . . . . . . . . . . . . . . . . . . . . . 61
11.5 Notice and Procedure . . . . . . . . . . . . . . . . . . . . 61
11.6 Treatment of Indemnification Payments. . . . . . . . . . . . 64
11.7 Survival of Representations and Warranties; Indemnity Period. 65
12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.1 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.2 Consented Assignment . . . . . . . . . . . . . . . . . . . . 66
12.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . 66
12.4 CON Disclaimer . . . . . . . . . . . . . . . . . . . . . . . 66
12.5 Consents, Approvals and Discretion . . . . . . . . . . . . . 66
12.6 Expenses; Legal Fees and Costs . . . . . . . . . . . . . . . 66
12.7 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . 67
12.8 Benefit/Assignment . . . . . . . . . . . . . . . . . . . . . 67
12.9 Accounting Date . . . . . . . . . . . . . . . . . . . . . . 67
12.10 No Third Party Beneficiary . . . . . . . . . . . . . . . . . 67
12.11 Waiver of Breach . . . . . . . . . . . . . . . . . . . . . . 67
12.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . 68
12.14 Gender and Number . . . . . . . . . . . . . . . . . . . . . 69
12.15 Divisions and Headings . . . . . . . . . . . . . . . . . . . 69
12.16 Entire Agreement/Amendment . . . . . . . . . . . . . . . . . 69
12.17 Press Releases . . . . . . . . . . . . . . . . . . . . . . . 69
12.18 Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.19 Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . 70
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LIST OF SCHEDULES
Schedule 1.3 . . . . . . .Company's Indebtedness to be Satisfied at Closing
Schedule 3.1 . . . . . . . . . . . . . . . . . . . . . .Knowledge of Seller
Schedule 3.1 . . . . . . . . . . . . . . . . . . .Organization and Capacity
Schedule 3.3 . . . . . . . . . . . . .Capital Stock of the Seller Companies
Schedule 3.4 . . . . . . . . Subsidiaries; Investments; Third Party Options
Schedule 3.5 . . . . . . . . . . . . . . . . . . . . .Financial Statements
Schedule 3.6 . . . . . . . . . . . . . . . . . . .Extraordinary Liabilities
Schedule 3.7 . . . . . . . . . . . . . . . . . . Post-Balance Sheet Results
Schedule 3.10 . . . . . . . . . . . . . . . . . . . . . . . .Real Property
Schedule 3.11 . . . . . . . . . . . . . . . . . . . .Environmental Matters
Schedule 3.12 . . . . . . . . . . . . . . . . . . . . . . . . . .Equipment
Schedule 3.13 . . . . . . . . . . . . .Trademarks, Computer Software, etc.
Schedule 3.14 . . . . . . . . . . . . . . . . . Agreements and Commitments
Schedule 3.16 . . . . . . . . . . . . . . . Certain Affiliate Transactions
Schedule 3.18 . . . . . . . . . . . . . . . . . . . . .Healthcare Licenses
Schedule 3.19 . . . . . . . . . . . . . . . . . . . Employee Benefit Plans
Schedule 3.20 . . . . . . . . . . . . . . Employees and Employee Relations
Schedule 3.21 . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taxes
Schedule 3.22 . . . . . . . . . . . Medicare Participation; Accreditations
Schedule 3.23 . . . . . . . . . . . . . . .Legal and Regulatory Compliance
Schedule 3.24 . . . . . . . . . . . . . . . . . .Litigation or Proceedings
Schedule 3.25 . . . . . . . . . . . . . . . . . . . . . . . . . .Insurance
Schedule 3.26 . . . . . . . . . . . . . . .Board and Medical Staff Matters
Schedule 3.28. . . . . . . . . . . . . . . . . . . . . .Brokers and Finders
Schedule 5.4 . . . . . . . . . . . . . . . . .Approved Capital Expenditures
Schedule 7.9 . . . . . . . . . . . . . . .Recent Agreements and Commitments
Schedule 10.2. . . . . . . . . . . . . . . . . Allocation of Purchase Price
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . Escrow Agreement
Exhibit B . . . . . . . . . . . . . . . . . . Real Estate Option Agreement
Exhibit C . . . . . . . . . . . . . . . . . . . . .Key Employee Agreements
Exhibit D . . . . . . . . . . . . . . . . .Litigation Assumption Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
effective as of July 20, 1994, by and among SUMMIT HEALTH, LTD., a California
corporation ("Buyer"), ORNDA HEALTHCORP, a Delaware corporation ("Guarantor"),
and FOUNTAIN VALLEY MEDICAL DEVELOPMENT CO., a California limited partnership
("Seller").
WITNESSETH:
A. Seller is owner of:
(1) 100% of the issued and outstanding shares (the "Company Shares")
of the common stock of Fountain Valley Regional Hospital and Medical
Center, a California corporation (the "Company"), which at the time of the
Closing (as defined below) will constitute one hundred percent (100%) of
the issued and outstanding capital stock of the Company;
(2) 100% of the issued and outstanding shares (the "MCS Shares") of
capital stock of MCS Administrative Services, Inc. ("MCS"), a California
corporation engaged in the business of providing management services to
independent practice associations, including Personal Care Medical Group,
Inc. ("PCMG"), an independent practice association comprised of physicians
most of whom practice at the Hospital;
(3) 100% of the issued and outstanding shares (the "FVHC Shares") of
capital stock of Fountain Valley Health Care, Inc ("FVHC"), a California
corporation which, as general partner, owns 1% of the partnership
interests in Fountain Valley Outpatient Surgical Center Limited
Partnership, a California limited partnership ("FVOSCLP");
(4) 100% of the issued and outstanding shares (the FVIC Shares") of
capital stock of Fountain Valley Imaging Corp. ("FVIC"), a California
corporation which, as general partner, owns 1% of the partnership
interests in Fountain Valley Imaging Center Limited Partnership, a
California limited partnership ("FVICLP");
(5) as limited partner, 99% of the partnership interests in FVOSCLP;
and
(6) as limited partner, 99% of the partnership interests in FVICLP
(MCS, FVHC, FVIC, each a "Seller Sub"and collectively, the "Seller Subs";
FVOSCLP and FVICLP each a "Seller Partnership" and collectively the
"Seller Partnerships"; and the Company, the Seller Subs and the Seller
Partnerships, collectively, the "Seller Companies");
B. Seller and the Seller Companies own the assets and operations
constituting the following healthcare facilities or businesses:
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(1) Fountain Valley Regional Hospital and Medical Center (the
"Hospital"), a tertiary care hospital located on a campus (the "Campus")
of approximately 37.5 contiguous acres at the intersection of Euclid and
Warner Avenues in the City of Fountain Valley, Orange County, California;
(2) a 9,000 square foot outpatient surgery center located on the
Campus adjacent to the Hospital (the "Surgery Center");
(3) a 7,000 square foot imaging center located on the Campus
adjacent to the Hospital (the "Imaging Center") (the Hospital, the Surgery
Center and the Imaging Center being hereinafter sometimes called the
"Facilities"); and
(4) four medical office buildings (the "MOBs") and a Living Care
Center located on the Campus and more particularly described in the Real
Estate Purchase Agreement (as defined below);
C. Prior to Closing, Seller intends to convey, transfer and deliver to
the Seller Companies all of the real and personal property, tangible and
intangible, owned or held by Seller for use in the businesses of the Facilities
(excluding the property subject to the Real Estate Purchase Agreement and the
Excluded Assets (as defined below)) and certain liabilities owed by Seller, so
that, as of Closing, all such properties are owned and such liabilities are
owed solely by the Seller Companies (the "Consolidation");
D. At Closing, Seller intends to convey to Buyer, and Buyer intends to
accept from Seller, on the terms and conditions more particularly set forth in
this Agreement, all right, title and interest of Seller in and to the Company
Shares, the MCS Shares, the FVHC Shares, the FVIC Shares (collectively, the
"Shares"), and the partnership interests in and to FVOSCLP and FVICLP (the
"Partnership Interests").
E. Pursuant to that certain Agreement of Sale and Purchase of even date
herewith among Seller, Healthcare Realty Trust Incorporated ("HRT"), and
Guarantor (the "Real Estate Purchase Agreement"), Seller intends to convey,
assign, transfer and deliver to HRT or its Affiliate all right, title and
interest in and to the real property, and improvements thereon and fixtures
therein, constituting the MOBs, the Living Care Center, all as more
particularly described in the Real Estate Purchase Agreement;
F. Buyer desires to purchase all of the Shares and Partnership Interest
from Seller on the terms and subject to the conditions hereinafter set forth
and Seller desires to sell the Shares and Partnership Interests to Buyer on
such terms and conditions.
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NOW, THEREFORE, for and in consideration of the premises, and the
agreements, covenants, representations and warranties hereinafter set forth,
and other good and valuable consideration, the receipt and adequacy of which
are forever acknowledged and confessed, the parties hereto agree as follows:
1. SALE AND TRANSFER OF THE SHARES; PURCHASE PRICE.
1.1 Sale and Transfer of the Shares. Subject to the terms and conditions
of this Agreement, Seller shall sell, convey and deliver to Buyer, and Buyer
shall purchase and accept from Seller, all of the right, title and interest of
Seller in and to the Shares and Partnership Interests.
1.2 Purchase Price. Subject to the terms and conditions hereof, in
reliance upon the representations, warranties and covenants of Seller herein
set forth, and as consideration for the sale of the Shares and Partnership
Interests as herein contemplated, Buyer shall tender to Seller at Closing, as
the purchase price hereunder (collectively, the "Purchase Price"), and in the
manner hereinafter provided, an amount equal to
(i) One Hundred Four Million and No/100 Dollars ($104,000,000.00) (the
"Base Purchase Price"),
plus (ii) the amount, if any, by which the Current Assets minus Current
Liabilities of Seller and the Seller Companies (other than current
liabilities relating to "current portion of long-term debt" and
"current portion of obligations under capital leases") ("Net Working
Capital"), as shown on the Final Balance Sheet, exceeds $19,033,000,
plus (iii) the net book value on the Final Balance Sheet of all Approved
Capital Expenditures (as defined in Section 5.4(j)) of the
Company since the Balance Sheet Date (as defined in Section
3.5),
minus (iv) the amount, if any, by which Net Working Capital, as shown on
the Final Balance Sheet, is less than $19,033,000,
minus (v) the net book value as of the Closing Date of long-term debt and
capitalized lease obligations of the Seller Companies (including
the current portions thereof) that are not the Company's
Indebtedness to be Satisfied at Closing (as defined in Section
1.3(b))
(such adjustments to the Base Purchase Price being called herein the "Purchase
Price Adjustment"). The Initial Purchase Price Adjustment (herein so called)
shall be an amount agreed to by Buyer and Seller at Closing based upon the
accounting entries in the most recently available balance sheet of Seller
prepared by Seller prior to the Closing Date (the "Closing Balance Sheet").
The Purchase Price shall be further adjusted, if necessary, by the Final
Purchase Price Adjustment (as defined in Section 1.4) based upon the relevant
accounting entries in the Final Balance Sheet. To the extent not already
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reflected on the Closing Balance Sheet, the Closing Balance Sheet shall include
as liabilities thereon amounts required by this Agreement to be paid by the
Company to the extent unpaid at Closing and shall exclude any assets or
liabilities that are to be satisfied at and as of Closing.
1.3 Payment of Purchase Price at Closing. The Purchase Price shall be
due and payable at Closing:
(a) by wire transfer to Escrow Agent of the Escrow Amount for the purpose
of securing the indemnification obligations of Seller contained in Article 11,
which amount shall be deposited by Escrow Agent in an interest bearing account
(with interest accruing to the benefit of Seller), pursuant to an escrow
agreement substantially in the form of Exhibit A (the "Escrow Agreement");
(b) by wire transfer to Escrow Agent (or such other Person as the parties
may agree) of immediately available funds in an amount equal to the outstanding
principal amount of, and accrued and unpaid interest on, the indebtedness
(including indebtedness relating to capital leases) described on Schedule 1.3
(the "Company's Indebtedness to be Satisfied at Closing"); and
(c) by wire transfer to Seller of immediately available funds in an
amount equal to the Purchase Price minus the sum of (a) and (b) above (the
"Purchase Price Payable to Seller at Closing").
1.4 Post-Closing Adjustments. On a date not later than 60 days after the
Closing Date Buyer shall deliver to Seller a balance sheet of the Seller
Companies as of the Closing Date (the "Final Balance Sheet"), prepared in
accordance with the terms of this Agreement and otherwise in accordance with
generally accepted accounting principles consistently applied, and the actual
final amount of additions to or subtractions from the Purchase Price shall be
determined from the Final Balance Sheet (subject to adjustment as provided in
Section 1.5, the "Final Purchase Price Adjustment"). If, as a result of the
Final Purchase Price Adjustment, Seller owes Buyer a portion of the Purchase
Price paid by Buyer at Closing, then Seller shall pay Buyer such amount. If,
as a result of the Final Purchase Price Adjustment, Buyer owes Seller an
additional portion of the Purchase Price, then Buyer shall pay Seller such
amount. Any such additional payment shall be by wire transfer of immediately
available funds to payee and shall be due and payable not later than ten
business days after the date Buyer delivers the Final Balance Sheet or, if
there exists any dispute of the Final Purchase Price Adjustment, not later than
ten business days after the independent accountants issue their decision
pursuant to Section 1.5.
1.5 Dispute of Adjustments. In the event that Seller, Buyer or both
shall dispute the Final Purchase Price Adjustment and such dispute is not
resolved to the mutual satisfaction of Seller and Buyer within one hundred
twenty (120) days after the Closing Date, Seller and Buyer shall each have the
right to require that such dispute be submitted to Arthur Anderson or, if
Arthur Anderson is unable or unwilling to participate, another mutually
acceptable independent "big six" certified public accounting firm, in any event
acting as experts and not as arbitrators, for computation or verification of
the Final Purchase Price Adjustment in accordance with the provisions of this
Agreement and
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otherwise where applicable in accordance with generally accepted
accounting principles applied on a consistent basis. The foregoing provisions
for certified public accounting firm review shall be specifically enforceable
by the parties; the decision of such accounting firm shall be final and binding
upon Seller and Buyer; there shall be no right of appeal from such decision;
and such accounting firm's fees and expenses shall be borne by the party whose
determination has been adversely modified by such accounting firm's decision or
by both parties in proportion to the relative amount each party's determination
has been adversely modified.
1.6 New Directors and Officers. On the Closing Date, Seller shall cause
a meeting of the Board of Directors of each of the Companies and the Seller
Subs to be held upon due notice or waiver thereof, at which time the
resignations of the officers and directors of each of the Company and the
Seller Subs shall be accepted, effective immediately, and the vacancies created
by such resignations shall be filled by the persons designated by Buyer.
1.7 Definitions; Interpretation. In this Agreement, unless the context
otherwise requires:
(1) the term "Accounts Receivable" shall have the meaning ascribed
to it in Section 3.8 of this Agreement;
(2) the term "Affiliate" means any Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with another Person and includes the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of securities, by contract or otherwise;
(3) the term "Affiliated Group" shall have the meaning ascribed to
it in Section 3.21(a) of this Agreement;
(4) the term "Agency Receivables" shall have the meaning ascribed to
it in Section 3.22 of this Agreement;
(5) "Agreement" means this Agreement and all Exhibits and Schedules
hereto;
(6) the term "Approved Capital Expenditures" shall have the meaning
ascribed to it in Section 5.4(j) of this Agreement;
(7) the term "Associate" shall have the meaning ascribed to it in
Section 3.16(a) of this Agreement;
1.8 the term "Assumed Litigation" shall mean the litigation set
forth on Schedule 3.24 hereto;
1.9 the term "Audited Balance Sheet" shall have the meaning ascribed
to it in Section 3.5(a)(i) of this Agreement;
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1.10 the term "Balance Sheet Date" shall mean October 31, 1993;
1.11 the term "Base Purchase Price" shall have the meaning ascribed
to it in Section 1.2(i) of this Agreement;
1.12 the term "Building Defects" shall mean conditions relating to
the structural soundness of any building located on the Real Property or
the soundness of the underlying Real Property, each which existed prior to
the Closing Date;
1.13 the term "Buyer's Indemnified Persons" shall have the meaning
ascribed to it in Section 11.1 of this Agreement;
1.14 the term "Campus" shall mean approximately 37.5 contiguous acres
at the intersection of Euclid and Warner Avenues in the City of Fountain
Valley, Orange County, California upon which the Hospital resides;
1.15 the term "Claim Notice" shall have the meaning ascribed to it in
Section 11.5(e) of this Agreement;
1.16 the term "Closing" shall have the meaning ascribed to it in
Section 2.1 of this Agreement;
1.17 the term "Closing Balance Sheet" shall have the meaning ascribed
to it in Section 1.2 of this Agreement;
1.18 the term "Closing Date" shall have the meaning ascribed to it in
Section 2.1 of this Agreement;
1.19 the term "Code" shall have the meaning ascribed to it in Section
3.19(a) of this Agreement;
(20) the term "Company" means Fountain Valley Regional Hospital and
Medical Center, a California corporation.
(21) the term "Company's Indebtedness to be Satisfied at Closing"
shall have the meaning ascribed to it in Section 1.3(b) of this Agreement;
(22) the term "Company Shares" means 100% of the issued and
outstanding shares of the common stock of the Company.
(23) the term "Confidential Information" shall have the meaning
ascribed to it in Section 6.4 of this Agreement.
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(24) the term "Consolidation" shall have the meaning ascribed to it in
Paragraph C of the Recitals;
(25) the term "Contracts" shall have the meaning ascribed to it in
Section 3.14 of this Agreement;
(26) the term "Controlled Group of Corporations" shall have the
meaning ascribed to it in Section 3.19(a) of this Agreement;
(27) the term "Cost Report Reconciliation Statement" shall have the
meaning ascribed to it in Section 10.9(a) of this Agreement;
(28) the term "Cost Reports" shall have the meaning ascribed to it in
Section 3.22 of this Agreement;
(29) the term "Disclosed Litigation" shall mean such litigation
listed on Schedule 3.24 hereto;
(30) the term "Due Date" shall have the meaning ascribed to it in
Section 10.4(b) of this Agreement;
(31) the term "Effective Time" shall have the meaning ascribed to it
in Section 2.1 of this Agreement;
(32) the term "Employee Benefit Plan" shall have the meaning ascribed
to it in Section 3.19(a) of this Agreement;
(33) the term "Employee Pension Benefit Plan" shall have the meaning
ascribed to it in Section 3.19(a) of this Agreement;
(34) the term "Employee Welfare Benefit Plan" shall have the meaning
ascribed to it in Section 3.19(a) of this Agreement;
(35) the term "Encumbrances" means liabilities, levies, claims,
charges, assessments, mortgages, security interests, liens, pledges,
conditional sales agreements, title retention contracts, leases,
subleases, rights of first refusal, options to purchase, restrictions and
other encumbrances and agreements to give any of the foregoing;
(36) the term "Environmental Claim" shall have the meaning ascribed
to it in Section 3.11(a) of this Agreement;
(37) the term "Environmental Laws" shall have the meaning ascribed to
it in Section 3.11(a) of this Agreement;
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(38) the term "Environmental Reports" shall have the meaning ascribed
to it in Section 3.11(a) of this Agreement;
(39) the term "ERISA" shall have the meaning ascribed to it in Section
3.19(a) of this Agreement;
(40) the term "Escrow Agent" shall mean a bank or other person
acceptable to the parties;
(41) the term "Escrow Agreement" shall have the meaning ascribed to
it in Section 1.3(a) of this Agreement;
(42) the term "Escrow Amount" shall mean an amount equal to $5 million
deposited with Escrow Agent pursuant to the Escrow Agreement;
(43) the term "Excluded Assets" shall have the meaning ascribed to it
in Section 1.10 of this Agreement;
(44) the term "Excluded Real Property" means the approximately 17
acres of undeveloped land described on Schedule 3.10 hereto;
(45) the term "Facilities" shall mean the Hospital, the Surgery
Center and the Imaging Center;
(46) the term "Fiduciary" shall have the meaning ascribed to it in
Section 3.19(a) of this Agreement;
(47) the term "Final Balance Sheet" shall have the meaning ascribed
to it in Section 1.4 of this Agreement;
(48) the term "Final Purchase Price Adjustment" shall have the meaning
ascribed to it in Section 1.4 of this Agreement;
(49) the term "Financial Statements" shall have the meaning ascribed
to it in Section 3.5(a) of this Agreement;
(50) the term "FTC" shall have the meaning ascribed to it in Section
5.6 of this Agreement;
(51) the term "FVHC" means Fountain Valley Health Care, Inc., a
California corporation.
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(52) the term "FVHC Shares" means 100% of issued and outstanding
shares of the common stock of FVHC.
(53) the term "FVIC" shall mean Fountain Valley Imaging Corp., a
California corporation;
(54) the term "FVIC Shares" shall mean 100% of the issued and
outstanding shares of capital stock of FVIC;
(55) the term "FVICLP" shall mean Fountain Valley Imaging Center
Limited Partnership, a California limited partnership;
(56) the term "FVOSCLP" shall mean Fountain Valley Outpatient Surgical
Center Limited Partnership, a California limited partnership;
(57) the term "Government Reimbursement Programs" shall have the
meaning ascribed to it in Section 3.22 of this Agreement;
(58) the term "Health Law Violation" shall mean a violation by any of
the Seller Companies of the Medicare fraud and abuse provisions of Title
XVIII of the Social Security Act or any comparable California
anti-kickback law relating to the ownership or operation of the Facilities
prior to the Closing Date, and knowledge that a particular arrangement
does not satisfy the Medicare fraud and abuse safe harbors shall not
constitute de facto knowledge of a Health Care Violation;
(59) the terms "hereof," "herein," "hereby," and derivative or
similar words refer to this entire Agreement;
(60) the term "Hill-Burton Act" shall have the meaning ascribed to it
in Section 3.27 of this Agreement;
(61) the term "Hospital" shall mean Fountain Valley Regional Hospital
and Medical Center, a tertiary care hospital;
(62) the term "HRT" shall mean Healthcare Realty Trust Incorporated, a
real estate investment trust;
(63) the term "HSR Act" shall have the meaning ascribed to it in
Section 5.6 of this Agreement;
(64) the term "Imaging Center" shall mean a 7,000-square-foot imaging
center located on the Campus;
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(65) the term "include" or "including" means including without
limitation;
(66) the term "Indemnified Party" shall have the meaning ascribed to
it in Section 11.5(a)(i) of this Agreement;
(67) the term "Indemnifying Party" shall have the meaning ascribed to
it in Section 11.5(a)(i) of this Agreement;
(68) the term "Indemnity Notice" shall have the meaning ascribed to
it in Section 11.5(f) of this Agreement;
(69) the term "Initial Purchase Price Adjustment" shall have the
meaning ascribed to it in Section 1.2 of this Agreement;
(70) the term "Intellectual Properties" shall have the meaning
ascribed to it in Section 3.14(c) of the Agreement.
(71) the term "Interest Commencement Date" shall have the meaning
ascribed to it in Section 1.8 of this Agreement;
(72) the term "Interim Balance Sheet" shall have the meaning ascribed
to it in Section 3.5(a)(ii) of this Agreement;
(73) the term "Interim Balance Sheet Date" shall mean May 31, 1994;
(74) the term "Investments" shall have the meaning ascribed to it in
Section 3.4(b) of this Agreement;
(75) the term "JCAHO" shall mean Joint Commission on Accreditation of
Healthcare Organizations;
(76) the term "judgment" includes any order, writ, injunction,
decree, determination or award of any court, governmental agency or
authority or tribunal (including arbitration panels);
(77) the term "Justice Department" shall have the meaning ascribed to
it in Section 5.6 of this Agreement;
(78) the term "Key Employee Agreements" shall have the meaning
ascribed to it in Section 5.14 of this Agreement;
(79) the term "Living Care Center" shall mean the facility known as
the Living Care Center which is located on the Campus;
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(80) the term "Losses" shall have the meaning ascribed to it in
Section 11.1 of this Agreement;
(81) the term "Malpractice Litigation" shall mean all litigation,
arbitration or other proceedings by third parties relating to the
professional services rendered at the Facilities by the Seller Companies
prior to the Closing Date;
(82) the term "Materials of Environmental Concern" shall have the
meaning ascribed to it in Section 3.11(a) of this Agreement;
(83) the term "MCS" means MCS Administrative Services, Inc., a
California corporation;
(84) the term "MCS Shares" means 100% of the issued and outstanding
shares of common stock of MCS;
(85) the term "MOBs" means the four medical office buildings located
on the Campus;
(86) the term "Multi-Employer Plan" shall have the meaning ascribed
to it in Section 3.19(a) of this Agreement;
(87) the term "Net Favorable Adjustments" shall have the meaning
ascribed to it in Section 10.9(a) of this Agreement;
(88) the term "Net Unfavorable Adjustments" shall have the meaning
ascribed to it in Section 10.9(a) of this Agreement;
(89) the term "Net Working Capital" shall have the meaning ascribed
to it in Section 1.2(ii) of this Agreement;
(90) the term "Notice Period" shall have the meaning ascribed to it in
Section 11.5(a)(i) of this Agreement;
(91) the term "Other Permitted Encumbrances" shall have the meaning
ascribed to it in Section 3.17 of this Agreement;
(92) the term "Other Plan" shall have the meaning ascribed to it in
Section 3.19(a) of this Agreement;
(93) the term "Owner's Title Insurance Policy for the Real Property"
shall have the meaning ascribed to it in Section 7.8 of this Agreement;
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(94) the term "partner" includes general and limited partners;
(95) the term "Partnership Interest" shall mean the partnership
interests in and to FVOSCLP and FVICLP;
(96) the term "party" means any party to this Agreement, its
respective successors and permitted assigns;
(97) the term "PBGC" shall have the meaning ascribed to it in Section
3.19(a) of this Agreement;
(98) the term "PCMG" means Personal Care Medical Group, Inc., a
California professional corporation;
(99) the term "Permitted Encumbrances" shall have the meaning ascribed
to it in Section 3.10(a) of this Agreement;
(100) the term "Person" means any individual, company, body
corporate, association, partnership, firm, joint venture, trust and
governmental agency;
(101) the term "Pre-Closing Period" shall have the meaning
ascribed to it in Section 10.4(a) of this Agreement;
(102) the term "Prior Period Adjustments" shall have the meaning
ascribed to it in Section 10.9(a) of this Agreement;
(103) the term "Prohibited Transaction" shall have the meaning
ascribed to it in Section 3.19(a) of this Agreement;
(104) the term "Purchase Price" shall have the meaning ascribed
to it in Section 1.2 of this Agreement;
(105) the term "Purchase Price Adjustment" shall have the meaning
ascribed to it in Section 1.2 of this Agreement;
(106) the term "Purchase Price Payable to Seller at Closing"
shall have the meaning ascribed to it in Section 1.3 of this Agreement;
(107) the term "Real Estate Option Agreement" shall have the
meaning ascribed to it in Section 5.11 to this Agreement;
(108) the term "Real Property" shall have the meaning ascribed to
it in Section 3.10 of this Agreement;
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(109) the term "Reportable Event" shall have the meaning ascribed
to it in Section 3.19(a) of this Agreement;
(110) the term "Required Lenders" shall have the meaning ascribed
to it in Section 7.16 of the Agreement;
(111) the term "Seller Companies" shall mean the Company, the
Seller Subs and the Seller Partnerships;
(112) the term "Seller Partnerships" shall mean FVOSCLP and FVICLP;
(113) the term "Seller Subs" shall mean MCS, FVHC and FVIC;
(114) the term "Seller's Credits" shall have the meaning ascribed
to it in Section 10.9(a) of this Agreement;
(115) the term "Seller's Indemnified Persons" shall have the
meaning ascribed to it in Section 11.3 of this Agreement;
(116) the term "Shares" shall mean the Company Shares, the MCS
Shares and the FVIC Shares;
(117) the term "Stocktake" shall have the meaning ascribed to it
in Section 1.11 of this Agreement;
(118) the term "Straddle Period" shall have the meaning ascribed
to it in Section 10.4(b) of this Agreement;
(119) the term "Subsidiary" shall have the meaning ascribed to it
in Section 3.4(a) of this Agreement;
(120) the term "Surgery Center" shall mean a 9,000-square-foot
outpatient surgery center located on the Campus;
(121) the term "Survey" shall have the meaning ascribed to it in
Section 3.10(f) of the Agreement;
(122) the term "Tax" shall have the meaning ascribed to it in
Section 3.21(a) of this Agreement;
(123) the term "Tax Return" shall have the meaning ascribed to it
in Section 3.21(a) of this Agreement;
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(124) the term "Third Party Claim" shall have the meaning
ascribed to it in Section 11.5(a)(i) of this Agreement; and
(125) the term "UNAC" shall have the meaning ascribed to it in
Section 3.20 of the Agreement;
(126) the term "WARN Act" shall have the meaning ascribed to it
in Section 1.9 of this Agreement.
(127) references to any document (including this Agreement) are
references to that document as amended, consolidated, supplemented,
novated or replaced by the parties from time to time in accordance with
this Agreement;
(128) references to any law are references to that law as
amended, consolidated, supplemented or replaced from time to time prior to
the Closing Date and all rules and regulations promulgated thereunder
prior to the Closing Date;
(129) the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose the contents of such
document as an exception to a representation or warranty made herein
unless the representation or warranty has to do with the existence of the
document or other item itself or unless the listing of a document or other
item is prefaced with the words "the contents of" which shall put Buyer on
notice that the contents of such document or other item are being
disclosed;
(130) each representation, warranty and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that such party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant;
(131) references to time are references to Los Angeles, California
time;
(132) references to "knowledge of Seller" or "Seller's knowledge"
mean the current actual knowledge of those Persons described on Schedule
1.7; and
(133) "Articles" and "Sections" are references to articles and
sections of this Agreement.
1.8 Interest. Unless otherwise provided herein to the contrary, any
payment required to be made by any party pursuant to this Agreement, if not
paid before twenty (20) business days after the date such payment is required
to be made (the "Interest Commencement Date"), shall include interest from the
Interest Commencement Date to the date such payment is made, computed at an
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annual rate equal to the average prime rate of Citibank, N.A., during such
period plus one percent (1%) per annum. All requests for payment pursuant to
this Section shall be accompanied by a certificate of an officer of the party
entitled to receive such payment setting forth the amount of the payment due
pursuant to this Agreement (without regard to any amounts payable through
operation of this Section), the applicable Interest Commencement Date and
applicable interest rate.
1.9 WARN Act. Buyer shall continue the employment of a legally
sufficient number of employees of the Seller Companies after Closing for at
least sixty-one days. The parties do not expect that the Worker Adjustment and
Retraining Act, 29 U.S.C. Section Section 2101-2109 (the "WARN Act") shall be
applicable to the sale of the Shares and Partnership Interests hereunder.
1.10 Excluded Assets. Seller's interest in and to the Excluded Real
Property, except to the extent provided in the Real Estate Option Agreement (as
defined in Section 5.11), and PCMG (collectively, the "Excluded Assets") are
excluded from the assets of the Seller Companies being acquired by or
transferred to Buyer at the Closing through the acquisition of the Shares and
Partnership Interests.
1.11 Physical Inventory. Seller conducted on June 17, 18 and 19, 1994
a physical count (the "Stocktake") of all items of inventory and supplies of a
quality usable or saleable in the ordinary course of business of the
Facilities. In conducting the Stocktake, all items of inventory and supplies
which were obsolete, below standard quality or in the process of repair on such
date were excluded or reserved for as of such date. The book value of all
items inventory and supplies shall be restated as of the date of the Stocktake
at the lower of cost (on a first-in, first-out basis) or market. From and
after the date of the Stocktake until the Closing Date, Seller shall account
for all dispositions of items of inventory and supplies in accordance with
normal business and accounting policies and practices such that, as of the
Closing Date, the book value of the inventory and supplies will be reasonably
accurate. The book value of the inventory and supplies as of the Closing Date
determined in accordance with this Section shall be stated as such in the Final
Balance Sheet.
2. CLOSING.
2.1 Closing. Subject to the satisfaction or waiver by the appropriate
party of all the conditions precedent to Closing specified in Articles 7 and 8,
the consummation of the sale and purchase of the Shares and Partnership
Interests and the other transactions contemplated by and described in this
Agreement (the "Closing") shall take place at the offices of Manatt, Phelps &
Phillips, 11355 West Olympic Boulevard, Los Angeles, California 90064-1614, Los
Angeles, California, at 10:00 A.M. on August 1, 1994, or on such later date or
at such other location as the parties may mutually agree in writing (the
"Closing Date"). The Closing shall be effective as of 12:01 A.M. on the
Closing Date (the "Effective Time").
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2.2 Actions of Seller at Closing. At the Closing and unless otherwise
waived in writing by Buyer, Seller shall deliver to Buyer:
(a) a certificate or certificates representing all of the Shares, in
genuine and unaltered form, accompanied by duly executed stock powers endorsed
in blank for transfer with requisite stock transfer stamps, if any, attached,
in sufficient form to transfer to Buyer good and valid title in and to the
Shares, free of all Encumbrances;
(b) an assignment of partnership interests, in form and substance
acceptable to Buyer, fully executed by Seller, in form sufficient to transfer
to Buyer good and valid title in and to the Partnership Interests, free of all
Encumbrances;
(c) the Owner's Policy of Title Insurance for the Real Property, as
provided in Section 7.8;
(d) copies of resolutions duly adopted by the partners and executive
committee of Seller authorizing and approving the consummation of the
transactions contemplated hereby and the execution and delivery of this
Agreement and the documents described herein, certified as true and in full
force and effect as of the Closing Date by the appropriate partners of Seller;
(e) certificates of a duly authorized partner of Seller certifying that
each representation and warranty of Seller set forth herein is true and correct
in all material respects as of the Closing Date, and that each covenant and
agreement of Seller to be complied with or performed on or prior to the Closing
Date pursuant to this Agreement has been complied with or performed in all
material respects;
(f) certificates of incumbency for the respective partners of Seller
executing this Agreement or making certifications for Closing, dated as of the
Closing Date;
(g) certificates of existence of Seller and each of the Seller
Partnerships, and certificates of existence and good standing of each of the
Seller Companies from the State of California, each dated the most recent
practical date prior to Closing;
(h) an opinion of Seller's counsel in a form acceptable to Seller and
Buyer;
(i) the Escrow Agreement, fully executed by Seller;
(j) the Real Estate Option Agreement, fully executed by Seller;
(k) the Key Employee Agreements (as defined in Section 5.14), fully
executed by Messrs. Ways and Butler;
(l) such other instruments and documents as Buyer reasonably deems
necessary to effect the transactions contemplated hereby; and
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(m) the Litigation Assumption Agreement, in the form attached hereto as
Exhibit D, fully executed by Seller.
2.3 Action of Buyer at Closing. At the Closing and unless otherwise
waived in writing by Seller, Buyer shall deliver to Seller:
(a) the Purchase Price Payable to Seller at Closing;
(b) copies of resolutions duly adopted by the board of directors of Buyer
authorizing and approving Buyer's performance of the transactions contemplated
hereby and the execution and delivery of this Agreement and the documents
described herein, certified as true and in full force and effect as of the
Closing Date by an appropriate officer of Buyer;
(c) certificates of the duly authorized President or a Vice President of
Buyer certifying that each representation and warranty of Buyer set forth
herein is true and correct in all material respects as of the Closing Date, and
that each covenant and agreement of Buyer to be complied with or performed on
or prior to the Closing Date pursuant to this Agreement has been complied with
or performed in all material respects;
(d) certificates of incumbency for the respective officers of Buyer
executing this Agreement or making certifications for Closing, dated as of the
Closing Date;
(e) certificates of existence and good standing of Buyer from the state
of its incorporation, dated the most recent practical date prior to Closing;
(f) an opinion of Buyer's counsel, in a form acceptable to Seller and
Buyer;
(g) the Real Estate Option Agreement, fully executed by Buyer;
(h) the Escrow Agreement, fully executed by Buyer;
(i) the Key Employee Agreements, fully executed by Guarantor;
(j) the Litigation Assumption Agreement, in the form attached hereto as
Exhibit D, fully executed by Seller; and
(k) such other instruments and documents as Seller reasonably deems
necessary to effect the transactions contemplated hereby.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER.
As of the date hereof and as of the Closing Date, Seller represents and
warrants to Buyer that the following facts and circumstances are and, except as
contemplated hereby, at all times up to the Closing Date will be, true and
correct, and hereby acknowledges that such facts and circumstances constitute
the basis upon which Buyer has been induced to enter into and perform this
Agreement:
3.1 Organization and Capacity.
(a) Seller is a limited partnership duly organized and validly existing
as a limited partnership under the laws of the State of California. Seller has
the requisite power and authority to enter into this Agreement, sell the Shares
and Partnership Interests to Buyer at Closing, perform its other obligations
hereunder, and conduct its businesses as now being conducted. A true and
complete copy of the partnership agreement of Seller, and a complete and
accurate list of the names, residence or office addresses and percentage
interests of all partners in Seller, have been provided to Buyer.
(b) Each of the Company and the Seller Subs is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Each of the Seller Partnerships is a limited partnership duly
organized and validly existing as a limited partnership under the laws of the
State of California. None of the Seller Companies is licensed, qualified or
admitted to do business in any jurisdiction other than the State of California,
and there is no other jurisdiction in which the ownership, use or leasing of
any of the Seller Companies's assets or properties, or the conduct or nature of
their businesses, makes such licensing, qualification or admission necessary.
The information concerning each of the Seller Companies set forth on Schedule
3.3 is accurate in all respects. True and complete copies of the articles or
certificate of incorporation, bylaws and all other agreements, instruments or
other documents relating to the creation and governance of the Company are
attached to Schedule 3.1.
(c) The minute books and other similar records of each of the Seller
Companies have been made available to Buyer prior to the effective date hereof,
and contain a true, correct and complete record of all action taken at all
meetings, and by all written consents in lieu of meetings, of the stockholders,
the boards of directors and committees of the boards of directors of each of
the Seller Companies, excluding the Board of Governors of the Company. The
stock and partnership transfer ledgers and other similar records of each of the
Seller Companies have been made, or prior to Closing will be made, available to
Buyer, are true, correct and complete, and accurately reflect all transactions
in the capital stock or partnership interests of the Seller Companies.
3.2 Corporate Powers; Consents; Absence of Conflicts With Other
Agreements, Etc.
(a) The execution, delivery and performance of this Agreement by Seller
and all other agreements referenced in or ancillary hereto to which it is a
party and the consummation of the transactions contemplated herein by Seller:
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(i) are within Seller's partnership powers, are not in contravention
of law or of the terms of its agreement of partnership and amendments
thereto, or the articles or certificate of incorporation and bylaws or
partnership agreements of any of the Seller Companies, and have been duly
authorized by all appropriate corporate or partnership action;
(ii) except as otherwise expressly herein provided or listed on
Schedule 3.2, do not require any approval or consent of, or filing with,
any governmental agency or authority bearing on the validity of this
Agreement;
(iii) except for liabilities included in the Company's
Indebtedness to be Satisfied at Closing as expressly provided in Section
3.10, do not conflict, result in any breach or contravention of, or permit
the acceleration of the maturity of any liabilities of Seller or of the
Seller Companies, and do not create or permit the creation of any
Encumbrance on or affecting any of the assets of Seller or the Seller
Companies;
(iv) do not violate any statute, law, rule or regulation of any
governmental authority to which the any of the Seller Companies or its
assets may be subject (including any bulk transfer law);
(v) do not violate any judgment to which Seller or any of the Seller
Companies may be subject; and
(vi) except as expressly provided in Section 3.10 to the
contrary with respect to the Company's Indebtedness to be Satisfied at
Closing, do not conflict with or result in a breach or violation of any
material agreement to which Seller or any of the Seller Companies is a
party or to which any of them is bound.
(b) This Agreement and all agreements to which Seller becomes a party
hereunder are valid and legally binding obligations of Seller, enforceable
against Seller in accordance with the respective terms hereof or thereof,
except as enforceability may be restricted, limited or delayed by applicable
bankruptcy or other laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
3.3 Capital Stock of the Seller Companies. The authorized capital stock
or partnership equity of each of the Seller Companies is set forth on Schedule
3.3 and is accurate in all respects. The Shares and Partnership Interests are
duly authorized, validly issued, outstanding, fully paid and non-assessable,
and the Shares constitute 100% of the issued and outstanding equity securities
of each of the Seller Subs and the Partnership Interests, together with FVHC's
partnership interest in FVOSCLP and FVIC's partnership interest in FVICLP,
constitute 100% of the partnership interests of each of the Seller
Partnerships. Seller owns the Shares and Partnership Interests beneficially
and of record, free and clear of all Encumbrances. There are no outstanding
securities, rights, subscriptions, warrants, calls, options, "phantom" stock
rights or (except for this Agreement) other contracts, commitments obligations
or claims of any kind that give any Person the right to (a)
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purchase or otherwise receive or be issued any shares of capital stock
of the Company or any of the Seller Subs, partnership interests in the Seller
Partnerships, or any security or liability of any kind convertible into or
exchangeable for any such shares or partnership interests, (b) receive any
benefits or rights similar to any rights enjoyed by or accruing to the holder
of shares of capital stock or partnership interests of the Seller Companies, or
(c) participate in the equity, income or election of directors, officers or
partners of any of the Seller Companies (except by virtue of Seller's equity
interest in the Seller Companies). Except as set forth on Schedule 3.3, Seller
has full voting power over the Shares and Partnership Interests, subject to no
proxy, shareholders' or partners' agreement, voting trust or other agreement
relating to the voting of any of the Shares or Partnership Interests. Other
than this Agreement, there is no agreement between Seller and any Person with
respect to the disposition of the Shares or Partnership Interests. At the
Closing, Seller will transfer to Buyer good and valid title to all Shares and
Partnership Interests, free and clear of all Encumbrances.
3.4 Subsidiaries; Investments; Third Party Options. Except as set forth
on Schedule 3.4,
(a) none of the Seller Companies (i) owns a majority of the common stock
of any corporation or (ii) has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors of any corporation
(each such corporation described in clause (i) or (ii) above, a "Subsidiary").
(b) None of the Seller Companies owns any shares of capital stock of any
corporation, interests in general or limited partnerships, and interests in
joint ventures, or other equity or debt instruments in any such Persons
(collectively, "Investments").
(c) There are no existing agreements, options, commitments or rights
with, of or to any Person to acquire, directly or indirectly, any of the Seller
Companies' assets or any interest therein.
3.5 Financial Statements.
(a) Seller attaches hereto (Schedule 3.5) copies of the following
financial statements prepared on an accrual-basis (together with the Closing
Balance Sheet and the financial information delivered pursuant to Section
5.2(b), collectively, the "Financial Statements"):
(i) an audited consolidated balance sheet of Seller as of October
31, 1993 (including the notes thereto, the "Audited Balance Sheet"),
audited consolidated balance sheets and notes thereto of Seller as of
October 31, 1992, and October 31, 1991, and the related consolidated
statements of income and notes thereto, partners' equity and cash flows
and notes thereto for the years then ended, together with the report
thereon of BDO Seidman, independent auditors; and
(ii) an unaudited consolidated balance sheet of Seller as of May
31, 1994 (including any notes thereto, the "Interim Balance Sheet"), and
the related unaudited consolidated statements of income and cash flows for
the seven months then ended.
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(b) The Financial Statements are true, complete and accurate and fairly
present in all material respects the financial condition and results of
operations of Seller and the Seller Companies as of the respective dates
thereof and for the periods therein referred to, all in accordance with
generally accepted United States accounting principles, subject in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (which, if presented, would not differ
materially from those included in the Audited Balance Sheet); and the Financial
Statements reflect the consistent application of such accounting principles
throughout the periods involved, except as otherwise expressly set forth
therein.
3.6 Extraordinary Liabilities. Seller attaches hereto an accurate list
(Schedule 3.6) of all liabilities of the Seller Companies not included within
Schedule 3.5 which are of the kind and character required in financial
statements prepared in accordance with generally accepted accounting
principles, whether accrued, absolute, contingent or otherwise, together with,
in the case of those liabilities which are not fixed in amount, a reasonable
estimate of the maximum amount which may be payable in respect thereof. Except
as disclosed in Schedules 3.5, 3.6 and 3.24 and to Seller's knowledge, none of
the Seller Companies has liabilities of any nature, whether accrued, absolute,
contingent or otherwise. To Seller's knowledge, there are no facts that are
not fully disclosed in Schedule 3.5, 3.6 or 3.24 which might serve as the basis
for any liability or obligation of the Seller Companies.
3.7 Post-Balance Sheet Results. Since the Balance Sheet Date and except
as set forth on Schedule 3.7, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), working capital reserves, income or
business of Seller, the Seller Companies or the Facilities;
(b) any damage, destruction or loss (whether or not covered by insurance)
affecting any assets of the Seller Companies;
(c) any increase in the compensation payable or to become payable by any
of the Seller Companies to any of its employees or agents, or any bonus payment
or arrangement made to or with any employees or agents, except in the ordinary
course of business in accordance with existing personnel policies, and none of
the Seller Companies has employed any additional management personnel;
(d) any labor dispute, enactment of law or adoption of regulation or any
event or condition of any character materially adversely affecting the business
of Seller;
(e) any sale, assignment, transfer, distribution or other disposition of
any asset of the Seller Companies, except in the ordinary course of their
business;
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(f) the incurrence of any material liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise) except in the ordinary and
regular course of the business of the Seller Companies or except as otherwise
described in or contemplated by this Agreement;
(g) the payment, discharge or satisfaction of any liability or obligation
(whether absolute, accrued, contingent or otherwise) other than by payment,
discharge or satisfaction in the ordinary and regular course of the business of
the Seller Companies, except as otherwise described in or contemplated by this
Agreement;
(h) the imposition on any of Seller Companies' assets of any mortgage,
pledge, lien, security interest, encumbrance or restriction;
(i) the cancellation or waiver of any rights in respect of any of the
Seller Companies' assets, except in the ordinary and regular course of their
business;
(j) the incurrence of any individual capital expenditure or commitment
for additions to property, plant or equipment of the Facilities in excess of
Fifty Thousand Dollars ($50,000), except Approved Capital Expenditures;
(k) any change in any method of accounting or accounting practice;
(l) other than compensation paid in the ordinary course of employment or
pursuant to the Contracts, the payment of any amount to, the payment of any
amount on behalf of, the sale of any assets to, or the entering into of any
agreement or arrangement with, any officer, director, shareholder or partner of
Seller or the Seller Companies, or any Affiliate or Associate (as defined in
Section 3.16) of any officer, director, shareholder or partner of Seller or the
Company;
(m) the payment of any amount to any Person in respect of any claim,
obligation, liability, loss, damage or expense, of whatever kind or nature,
based upon any provision of federal, state or local law or regulations or
common law pertaining to environmental protection; or
(n) the initiation or prosecution of any transaction by the Company
outside the ordinary course of business which creates a liability or obligation
in excess of Fifty Thousand Dollars ($50,000) other than the Approved Capital
Expenditures.
3.8 Accounts Receivable. The accounts receivable of Seller and the
Seller Companies (including the Agency Receivables; the "Accounts Receivable")
to the extent uncollected, arose from bona fide commercial transactions and are
not subject to any Encumbrances; there are not any refunds, discounts or
setoffs payable or assessable with respect to the Accounts Receivable (taken as
a whole) not reflected in reserves or allowances in the Financial Statements;
Seller adequately records on the Financial Statements all estimates for future
Cost Report settlements under the Government Reimbursement Programs for all
years open to settlement; Seller has heretofore delivered to Buyer the
following information about the Accounts Receivable as of May 19, 1994: (a)
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the aging of the Accounts Receivable by financial classification; (b) each
Account Receivable in excess of $10,000; and (c) each Account Receivable
(other than Agency Receivables) in excess of $2,000 that is more than 90 days
past due.
3.9 Inventory. The inventory and supplies of the Seller Companies are
valued on the Financial Statements at the lower of cost (on a first-in,
first-out basis) or market and are properly stated in the Balance Sheet as of
the Balance Sheet Date.
3.10 Real Property. The Company owns, or at Closing will own, fee or
leasehold title to the real property described in Schedule 3.10 as the "Real
Property", together with all buildings, improvements and fixtures thereon and
all appurtenances and rights thereto (the "Real Property"), and neither Seller,
nor the Company, nor any Affiliate of Seller has created or may assert any
rights in respect of any Encumbrances which will interfere with the Company's
use of the Real Property after Closing; and
(a) the Real Property is subject only to Encumbrances of record, each as
more particularly described in Schedule 3.10, and at Closing will be subject
only to those Encumbrances of record relating to capital leases and
indebtedness which is not the Company's Indebtedness to be Satisfied at
Closing, and other Encumbrances approved by Buyer in writing after the
effective date hereof (the "Permitted Encumbrances").
(b) except as set forth on Schedule 3.10, the buildings standing on the
Real Property are in a state of good condition and repair, to the knowledge of
Seller are structurally sound, and are in need of no maintenance or repairs
except for ordinary, routine maintenance;
(c) the Real Property comprises all of the real property owned or leased
by Seller and the Seller Companies associated with or employed in the operation
of the Facilities or other businesses of the Seller Companies (other than the
Excluded Real Property, which is not employed in the operation of the
Facilities, and the real property subject to the Real Estate Purchase
Agreement);
(d) to Seller's knowledge, none of Seller and the Seller Companies has
received a written notice (or reduced to writing an oral notice) of a violation
of any applicable ordinance or other law, order, regulation or requirement, and
none has received a written notice (or reduced to writing an oral notice) of
condemnation or similar proceeding relating to any part of the Real Property or
the operation thereof;
(e) to Seller's knowledge, the Real Property and its operation are in
compliance in all material respects with all planning, zoning and building
codes and ordinances; to Seller's knowledge, none of Seller and the Seller
Companies has received any outstanding or uncured notice alleging that the
Facilities violate local planning, zoning and building codes and ordinances;
and to Seller's knowledge the consummation of the transactions contemplated
herein will not result in a violation of any applicable planning, zoning or
building code or ordinance, or the termination of any applicable zoning
variances or "grandfathering" now existing;
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(f) Seller has delivered to Buyer a true and genuine copy of (i) an
A.L.T.A Survey, last revised on July 26, 1991, prepared by Robert Bein, William
Frost & Associates ("BW&F"), (ii) an A.L.T.A. Survey, dated June 21, 1994,
prepared by B,W & F, and (iii) an A.L.T.A. Survey, dated July 1, 1994,
prepared by B,W & F (collectively, the "Survey"), which Survey is the latest
prepared survey of the Real Property in the possession or control of Seller or
any of the Seller Companies;
(g) to Seller's knowledge and except as set forth on the Survey or
disclosed on Schedule 3.10, no part of the Real Property contains, is located
within or abuts any flood plain, navigable water or other body of water,
tideland, wetland, marshland or any other area which is subject to special
State, federal or municipal regulation, control or protection;
(h) except for those tenants in possession of the Real Property under
Contracts described in Schedule 3.14, there are no parties in possession of, or
claiming any possession, adverse or not, to or other interest in, any portion
of the Real Property as lessees, tenants at sufferance, trespassers or
otherwise;
(i) no tenant is entitled to any rebate, concession, or free rent, other
than as reflected in the Contract with such tenant; no commitments have been
made to any Tenant for repairs or improvements other than for normal repairs
and maintenance in the future or improvements required by the tenant Contract;
and no rents due under any of the tenant Contracts have been assigned or
hypothecated to, or encumbered by, any Person, other than pursuant to the
Encumbrances of the Company's Indebtedness to be Satisfied at Closing, or
Permitted Encumbrances, as additional security for the payment thereof;
(j) except as set forth on Schedule 3.10, all painting, repairs,
alterations and other work required to be performed by the Seller Companies as
landlord under each of the tenant Contracts, and all of the other obligations
of the Seller Companies as landlord required to be performed thereunder, have
been, or will be as of the Closing Date, fully performed and either paid for or
accrued on the Final Balance Sheet; and
(k) to the knowledge of Seller, all essential utilities (including water,
sewer, gas, electricity and telephone service) are available to the Real
Property, as currently developed by Seller, and, to the knowledge of Seller,
there are no conditions existing which could result in the termination or
reduction of the current access from the Real Property to existing roadways.
3.11 Environmental Matters.
(a) The following definitions apply to this Section: (i) "Environmental
Claim" means any written notice (or oral notice reduced to writing by Seller)
by a Person alleging potential liability of Seller or any of the Seller
Companies (including potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from (1) the presence, or release into the environment, of any Materials of
Environmental Concern (as defined below) at any location, whether
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or not owned by the Company, or (2) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Laws; (ii)
"Environmental Laws" means any and all federal, state, local and foreign laws
and regulations (including common law) relating to pollution or protection of
human health or the environment (including ground water, land surface or
subsurface strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, recycling, reporting or handling
of Materials of Environmental Concern; (iii) "Materials of Environmental
Concern" means pollutants, contaminants, hazardous waste, medical waste, toxic
substances, petroleum and petroleum products; and (iv) "Environmental Reports"
means (1) that certain Phase I Environmental Assessment, dated June 1994,
including all appendices attached thereto, prepared for Guarantor by Gresham,
Smith and Partners, and (2) that certain Preliminary Site Assessment dated May
17, 1989 (Job #18552-001-128) prepared by Dames & Moore, as amended; that
certain Report Asbestos Consulting Services Bulk Sampling and Analysis for
Drywall and Mud dated August 23, 1989 (Job No. 18552-003-136) prepared by Dames
& Moore; that certain Underground Storage Tank Compliance Plan dated September
14, 1989 (Job No. 18552-004-015) prepared by Dames & Moore; that certain
Report of Liquefaction Studies Proposed Hospital Addition dated July 11, 1978
(Job No. D-78214) prepared by LeRoy Crandall & Associates; that certain Letter
dated June 15, 1993 re Results of Supplemental Geotechnical Investigation (ESE
Project No. 6-92-4839) prepared by Environmental Science & Engineering, Inc.;
that certain Preliminary Geotechnical Investigation Proposed Emergency Room
Expansion dated February 5, 1993 (Project No. 6-92-4042) prepared by
Environmental Science & Engineering, Inc.; that certain Geotechnical
Investigation Report dated March 29, 1993 (Project No. 6-92-4839) prepared by
Environmental Science & Engineering, Inc.; that certain undated Phase I
Preliminary Site Assessment (HLA Project No. 22831-1) prepared by Harding
Lawson Associates; that certain Report Engineering Review for Refinancing
Medical Office Buildings dated February 9, 1993 (Job No. 08-19-92-48) prepared
by Seismic Design Consultants, Inc.; and all attachments and appendices and
amendments to each of the above-listed documents. Seller has delivered to
Buyer complete and genuine copies of the Environmental Reports, and Buyer
acknowledges receipt of copies of the Environmental Reports. Buyer further
acknowledges that it contracted for the Phase I Environmental Assessment, dated
June, 1994 prepared by Gresham, Smith and Partners and, notwithstanding the
fact that such report expressly prohibits the reliance by third Persons on the
matters set forth therein, as between Buyer and Seller, Seller and the Seller
Companies are relying on such report in connection with the representations and
warranties contained in this Section 3.11.
(b) To Seller's knowledge, each of Seller and the Seller Companies, and
the conduct of their businesses, is in compliance in all material respects with
all applicable Environmental Laws. Except as described in the Environmental
Reports or on Schedule 3.11, neither Seller nor any of the Seller Companies has
received any written communication (or reduced to writing any oral
communication), whether from a governmental authority, employee or other
Person, that alleges that Seller or any of the Seller Companies is not in full
compliance with all applicable Environmental Laws. Each of Seller and the
Seller Companies has all material permits, licenses and approvals required
under applicable Environmental Laws to own its properties and to conduct its
business
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thereon. All such permits and other governmental authorizations
currently held by Seller and the Seller Companies pursuant to the Environmental
Laws are identified in Schedules 3.11 and 3.18.
(c) There is no Environmental Claim pending or, to Seller's knowledge,
threatened against Seller, the Seller Companies or, to Seller's knowledge
without investigation, against any Person whose liability for any Environmental
Claim Seller or any of the Seller Companies has or may have retained or assumed
either contractually or by operation of law.
(d) To Seller's knowledge or except as set forth in the Environmental
Reports and on Schedule 3.11, during the period Seller and the Seller Companies
have operated any of the Facilities, no actions, activities, circumstances,
conditions, events or incidents, including the release, emission, discharge or
disposal of any Materials of Environmental Concern, have occurred that could
reasonably be expected to form the basis of any Environmental Claim against
Seller or any of the Seller Companies.
(e) Without in any way limiting the generality of the foregoing, (i) all
on-site and off-site locations where Seller and the Seller Companies currently
stores, disposes or arranges for the disposal of Materials of Environmental
Concern are identified in Schedule 3.11, (ii) to Seller's knowledge, all
Contracts dealing with the removal, storage, disposal and handling of Materials
of Environmental Concern are with properly licensed vendors, (iii) to Seller's
knowledge, all underground storage tanks, and the capacity and contents of such
tanks, located on the Real Property are identified in the Environmental Reports
or on Schedule 3.11, (iv) to Seller's knowledge and except as set forth in the
Environmental Reports or on Schedule 3.11, there is no asbestos contained in or
forming part of Real Property, (v) except as set forth on Schedule 3.11, no
polychlorinated biphenyls (PCBs) are used or stored at any Real Property, and
(vi) to Seller's knowledge, all cleanup and disposal efforts undertaken by
Seller and the Seller Companies as a result of the leaking underground storage
tank have been performed and completed in accordance with all applicable laws,
rules, regulations and judgments in effect at the time of such clean-up.
3.12 Equipment. Seller attaches hereto a depreciation schedule as of the
Balance Sheet Date (Schedule 3.12) which, to Seller's knowledge, takes into
consideration all the equipment associated with, or constituting any part of,
the assets and businesses of Seller and the Seller Companies. Since the
Balance Sheet Date, neither Seller nor any of the Seller Companies has sold or
otherwise disposed of any item of equipment having a value in excess of $500,
except with a comparable replacement thereof. The Seller Companies own (or
have valid leasehold titles to) all equipment located on the Real Property or
within the Facilities and which is ordinarily and typically required by any
hospital, imaging center or surgery center, as the case may be, providing a
similar scope and level of care as the Seller Companies. Except as set forth
on Schedule 3.12, all equipment, whether reflected in the Financial Statements
or otherwise, is well maintained and in good operating condition, except for
reasonable wear and tear and except for items which have been written down in
the Financial Statements to a realizable market value or for which adequate
reserves have been provided therein. Except as set forth on Schedule 3.12, all
medical and leased equipment is maintained in accordance with manufacturer and
lessor requirements, and complete and accurate
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maintenance logs or journals have been maintained at all times. Except
as set forth on Schedule 3.12, all equipment (except for leased equipment as to
which the lessors have valid security interests) is held by the Company free
and clear of any Encumbrance. No Person other than Company owns any equipment
situated on the Real Property, except for (i) items leased by the Company
pursuant to Contracts described on Schedule 3.14, (i) ordinary items
customarily owned or leased by tenants of the Facilities and wholly within
their respective leased premises, and (iii) other items with an aggregate value
of less than $5,000. The Hospital's acute psychiatric unit presently occupies
40 beds on the second floor of the Living Care Center, but is equipped and
licensed for a 40-bed acute psychiatric unit. The third floor of the Living
Care Center is properly equipped to operate 40 licensed skilled nursing care
beds. The fourth floor of the Living Care Center is licensed to operate 40
licensed skilled nursing care beds.
3.13 Trademarks, Computer Software, etc. Except as set forth on Schedule
3.13, each of the Seller Companies has the right to use, free and clear of any
royalty or other payment obligations, claims of infringement or other
Encumbrances, (a) all Intellectual Properties used or needed by it in the
conduct of its business or at the Facilities, including those Intellectual
Properties described in Schedule 3.13; and (b) all computer software, programs
and similar systems owned by or licensed under Contracts to the such company or
used in the conduct of the business of the Facilities, including those computer
software, programs and similar systems described in Schedule 3.13; and, except
as set forth on Schedule 3.13, none of the Seller Companies is in conflict with
or violation or infringement of, nor has Seller or any of the Seller Companies
received any notice alleging any conflict with, or violation or infringement
of, any Contract or other alleged rights of any Person with respect to any such
Intellectual Properties or any computer software, programs or similar systems.
To the knowledge of Seller, no other Person is in conflict with or in violation
or infringement of any Contract or other rights of the Seller Companies in and
to the Intellectual Properties, or any computer software, programs or similar
systems. Except as set forth in Schedule 3.13, the Seller Companies will,
subsequent to the Closing, without further action or the payment of additional
fees, royalties or other compensation to any Person, be entitled to
unrestricted (except as provided in the Contracts) use of all Intellectual
Properties, computer software, programs and similar systems currently used in
the Facilities. The computer software, programs and similar systems currently
used in the Facilities support the accounting and operational requirements of
the Facilities.
3.14 Agreements and Commitments. Seller attaches hereto an accurate list
(Schedule 3.14) of all commitments, contracts, leases, licenses, agreements and
understandings, and all outstanding offers or solicitations to enter into any
of the foregoing (hereinafter called "Contracts"), written or oral, relating
to the Facilities or operation thereof, to which Seller or any of the Seller
Companies is a party, or by which any of them or any of their assets are bound
(including provider based physician agreements, managed care agreements,
agreements with health maintenance organizations, independent practice
organizations, preferred provider organizations or other alternative delivery
systems, joint venture or partnership agreements, employment agreements, tenant
leases, property management agreements, equipment leases and schedules,
equipment maintenance agreements and schedules, agreements with municipalities
and labor organizations, loan agreements, bonds, mortgages, liens and other
security agreements). Seller has delivered true and correct copies of the
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Contracts to Buyer. Except as set forth on Schedule 3.14, there are no
Contracts which render, or after Closing would render, Seller unable to perform
its obligations under this Agreement. Except for Contracts listed on Schedule
3.14, there are not:
(a) any Contracts to which any of the Seller Companies is a party, or
affecting its assets or business, which cannot, or in reasonable probability
will not, be performed or terminated before ninety (90) days after the Closing
Date without the payment of a penalty or other monies;
(b) any Contracts affecting ownership of, title to, use of, or any
interest in any Real Property, excluding this Agreement and the Real Estate
Purchase Agreement;
(c) any Contracts with respect to marks, names (including the names
"Fountain Valley Regional Hospital and Medical Center", "Fountain Valley
Hospital", Fountain Valley Medical Center", "Fountain Valley Outpatient Surgery
Center", "The Women's and Children's Hospital at Fountain Valley", "Regional
Care Center", "Living Care Center" and "Fountain Valley Imaging Center"),
trademarks, service marks, patents, patent rights, assumed names, logos and
copyrights (including variants thereof and applications therefor)
(collectively, "Intellectual Properties") used in connection with the ownership
and operation of the Facilities;
(d) any Contracts relating to computer or data processing programs,
software or source codes utilized by any of the Seller Companies in the conduct
of its business;
(e) any collective bargaining agreements or other Contracts with labor
unions or other employee representatives or groups of employees affecting or
which could affect any of the Seller Companies;
(f) any employment or other Contracts with individual employees or agents
of any of the Seller Companies, and any Contracts between or among Affiliates
of Seller;
(g) any Contracts providing for payments based in any manner on the
revenues, purchases or profits of any of the Seller Companies, or its business;
(h) any Contracts relating to the Consolidation;
(i) any Contracts with referral sources to any of the Facilities,
indicating specifically on Schedule 3.14 all such Contracts; or
(j) any Contracts, whether in the ordinary course of business or not,
which involve the future payment, performance of services or delivery of goods
or materials to or by any of the Seller Companies of any amount or value in
excess of Ten Thousand Dollars ($10,000) in the aggregate affecting or which
could affect the assets or business of any of the Seller Companies.
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3.15 The Contracts.
(a) Except as set forth on Schedule 3.15, the Contracts constitute
lawful, valid and legally binding obligations of Seller or one or more of the
Seller Companies, as the case may be, and are enforceable against Seller or the
respective Seller Company, as the case may be, in accordance with their terms;
(b) each Contract constitutes the entire agreement by and between the
parties thereto;
(c) in all material respects, all obligations required to be performed
under the terms of the Contracts by Seller or the respective Seller Company, as
the case may be, and, to Seller's knowledge, by the other parties to the
Contracts, have been performed, no act or omission has occurred or failed to
occur which, with the giving of notice, the lapse of time or both would
constitute a default under the Contracts, and each of such Contracts is in full
force and effect;
(d) except as expressly set forth on Schedule 3.14, none of the Contracts
requires the consent of any Person to the purchase by Buyer of the Shares and
the Partnership Interests; and
(e) exept as set forth on Schedule 3.14, the purchase of the Shares and
Partnership Interests by Buyer at Closing will not result in any penalty,
premium or material variation of the rights, remedies, benefits or obligations
of any party to the Contracts.
3.16 Certain Affiliate Transactions. Except as set forth in Schedule 3.16:
(a) the Company is not indebted, either directly or indirectly, to any
partner, officer or director of Seller or the Seller Companies, or to any other
Person in which any of the foregoing has a financial interest ("Associate"), in
any amount whatsoever relating to the business of the Seller Companies or the
Facilities, other than current obligations for payments of salaries, bonuses
and other fringe benefits for past services rendered or payments under any
Contract disclosed on Schedule 3.14; and
(b) no partner, officer or director of Seller or the Seller Companies,
and no Associate, is indebted to any of the Seller Companies.
3.17 Title to Personal Property. The Seller Companies own, or at Closing
will own, and hold good and valid title to all assets (other than the Real
Property), tangible or intangible, constituting, associated with or employed in
the operation of the Facilities or located on the Real Property, free and clear
of any and all Encumbrances other than Permitted Encumbrances and those other
Encumbrances described on Schedule 3.17 (the "Other Permitted Encumbrances").
3.18 Healthcare License. The Hospital is duly licensed by the California
Department of Health Services as a 413-bed general acute care hospital,
allocated as follows: general acute care-209; skilled nursing-80; acute
psychiatric-40; intensive care-29; pediatric-23; perinatal-18; and
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neonatal ICU-14. The ancillary departments located at the Facilities
which are required to be specifically licensed (including the Surgery Center)
are duly licensed by the appropriate state health agencies. The Facilities are
in compliance in all material respects with such licensing requirements.
Seller attaches hereto an accurate list and summary description and copy
(Schedule 3.18) of all material licenses, permits, franchises and certificates
of need owned or held by the Seller Companies relating to the ownership,
development or operations of the Facilities, all of which are, to Seller's
knowledge, in good standing and not subject to meritorious challenge. There
are no provisions in or agreements relating to any such licenses, permits,
franchises and certificates of need which would preclude or limit the Seller
Companies from operating the Facilities and using all the beds therein as they
are currently classified. Attached to Schedule 3.18 is a copy of all licensure
survey reports of the California Department of Health Services, and all fire
marshall reports, relating to the Facilities issued after January 1, 1992. All
violations set forth in such reports, if any, or of which Seller or any of the
Seller Companies has notice or knowledge, have been or prior to Closing will be
corrected in all material respects. Schedule 3.18 also lists the Hospital's
peer review organizations.
3.19 Employee Benefit Plans.
(a) As used herein, the term: (i) "Code" means the Internal Revenue Code
of 1986, as amended; (ii) "ERISA" means the Employment Retirement Income
Security Act of 1974, as amended; (iii) "Employee Pension Benefit Plan" has the
meaning set forth in ERISA Sec. 3(2); (iv) "Employee Welfare Benefit Plan" has
the meaning set forth in ERISA Sec. 3(1); (v) "Employee Benefit Plan" means any
(1) nonqualified deferred compensation or retirement plan or arrangement which
is an Employee Pension Benefit Plan, (2) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan, (3)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (4) Employee
Welfare Benefit Plan or material fringe benefit plan or program; (vi) "Other
Plan" means any Contract or program (other than those described on Schedule
3.20) which provides cash or non-cash benefits or perquisites to employees of
any of the Seller Companies, but which is not an Employee Benefit Plan; (vii)
"Fiduciary" has the meaning set forth in ERISA Section 3(21); (viii)
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37); (ix)
"Controlled Group of Corporations" has the meaning set forth in Code Sec. 1563;
(x) "PBGC" means the Pension Benefit Guaranty Corporation; (xi) "Prohibited
Transaction" has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975;
and (xii) "Reportable Event" has the meaning set forth in ERISA Sec. 4043;
(b) Schedule 3.19 lists each Employee Benefit Plan and Other Plan that
the Seller Companies maintain or to which any of them contributes.
(i) Except as set forth in Schedule 3.19, each Employee Benefit Plan
(and related trust, insurance contract or fund) complies in form and in
operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws, and has been administered and
operated in accordance with the terms of the Plan;
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(ii) all required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each Employee Benefit Plan, and the requirements of Part 6 of Subtitle B
to Title I of ERISA and of Code Sec. 4980B have been met with respect to
each Employee Benefit Plan which is an Employee Welfare Benefit Plan;
(iii) all contributions (including employer contributions and
employee salary reduction contributions) to each Employee Benefit Plan
which is an Employee Pension Benefit Plan that are required to be paid
prior to the Closing Date have been paid, and all contributions in respect
of periods ending the day prior to the Closing Date that are not required
to be paid prior to the Closing Date have been accrued on the Final
Balance Sheet in accordance with applicable laws and consistent with the
past custom and practice of Seller; all premiums or other payments for all
periods ending on or before the Closing Date have been paid with respect
to each Employee Benefit Plan which is an Employee Welfare Benefit Plan;
(iv) each Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code Sec. 401(a)
and has received a favorable determination letter from the Internal
Revenue Service, copies of which have been provided to Buyer;
(v) the market value of assets under each Employee Benefit Plan
which is an Employee Pension Benefit Plan equals or exceeds the present
value of all vested and nonvested liabilities thereunder determined in
accordance with PBGC methods, factors and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for determination;
and
(vi) Seller has delivered to Buyer correct and complete copies of the
plan documents and summary plan descriptions, the most recent
determination letters received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts and other funding agreements which implement each
Employee Benefit Plan.
(c) With respect to each Employee Benefit Plan that Seller, any of the
Seller Companies, or the Controlled Group of Corporations which includes Seller
or any of the Seller Companies, maintains or ever has maintained or to which
any of them contributes, ever has contributed, or ever has been required to
contribute:
(i) no such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or the subject of
a Reportable Event as to which notices would be required to be filed with
the PBGC. No proceeding by the PBGC to terminate any Employee Pension
Benefit Plan has been instituted or threatened;
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(ii) there have been no Prohibited Transactions with respect to any
Employee Benefit Plan; no Fiduciary has any material liability for breach
of fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee
Benefit Plan; no action, suit, proceeding, hearing or investigation with
respect to the administration or the investment of the assets of any
Employee Benefit Plan (other than routine claims for benefits) is pending
or threatened; and, to Seller's knowledge, there exists no basis for any
such action, suit, proceeding, hearing or investigation; and
(iii) none of the Seller Companies has incurred, and, to Seller's
knowledge, there is no reason to expect that any of the Seller Companies
will incur or be responsible for, any material liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to any
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(d) None of the Seller Companies, and none of the other members of the
Controlled Group of Corporations that includes any of the Seller Companies,
contributes to, ever has contributed to, or ever has been required to
contribute to any Multiemployer plan or has any liability (including withdrawal
liability) under any Multiemployer Plan.
(e) None of the Seller Companies, and none of the other members of the
Controlled Group of Corporations that includes the Seller Companies, maintains
or contributes, or ever has maintained or contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan providing medical,
health or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other than
in accordance with Code Sec. 4980B).
(f) Seller has delivered to Buyer true and genuine copies of all plan
documents relating to the Company's "Money Purchase Pension Plan".
3.20 Employees and Employee Relations. Schedule 3.20 attached hereto sets
forth a complete list (as of the date set forth therein) of names, positions,
current annual salaries or wage rates, and bonus and other compensation
arrangements of all full-time and part-time employees of Seller and the Seller
Companies employed in the operation of the Facilities and businesses of Seller
and the Seller Companies (indicating whether each employee is part-time or
full-time). Pursuant to a judgment of the United States Court of Appeals for
the Ninth Circuit, the Company is negotiating with the United Nurses
Association of California ("UNAC"), as the duly elected bargaining agent for
the nonprofessional medical staff of the Hospital. To Seller's knowledge, the
Company's relations with its employees and UNAC are good. There is no pending
or, to Seller's knowledge, threatened employee strike, work stoppage or labor
dispute. Other than as set forth in the UNAC Contract or above, to Seller's
knowledge, no union representation question exists respecting any employees of
Seller or any of the Seller Companies, no collective bargaining agreement
exists or is currently being negotiated by Seller or any of the Seller
Companies, no demand has been made for recognition by a labor organization by
or with respect to any employees of Seller or any of the Seller Companies, no
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union organizing activities by or with respect to any employees of Seller or
any of the Seller Companies are taking place, and none of the employees of
Seller or any of the Seller Companies is represented by any labor union or
organization. Except as set forth on Schedule 3.20, there is no unfair
practice claim against Seller or any of the Seller Companies before the
National Labor Relations Board, or any strike, dispute, slowdown, or stoppage
pending or, to Seller's knowledge, threatened against or involving the
Facilities, and none has occurred. The Seller Companies are in compliance in
all material respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours.
To Seller's knowledge, none of Seller and the Seller Companies is engaged in
any unfair labor practices. Except as set forth on Schedule 3.20 or 3.24,
there are no pending or, to Seller's knowledge, threatened EEOC, wage and hour,
unemployment compensation, workers' compensation or similar claims against
Seller or any of the Seller Companies or the Facilities. Schedule 3.20 also
sets forth a complete list of employees whose employment with Seller or any of
the Seller Companies has terminated for any reason (i) as of the effective date
hereof, at any time during the 90 day period ending no earlier than two
business days prior to the effective date hereof, and (ii) as of the Closing
Date, since date of the immediately preceding list. Except with respect to the
Key Employee Agreements, none of the Seller Companies will be subject to any
claim or liability for severance pay as a result of the transactions
contemplated by this Agreement. All claims of present and former employees of
Seller and the Seller Companies on the account of or for (a) overtime pay for
any period on or before the Closing Date, (b) wages, salary, bonuses or amounts
accruing under any Employee Benefit Plan or Other Plan, or (c) sick pay,
severance pay, claim for unlawful discharge, holiday or vacation pay or paid
time off, have been or will be fully accrued on the Financial Statements
3.21 Taxes.
(a) As used herein, the term (i) "Tax" means any federal, state, local or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Sec. 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, stamp, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, tax,
assessment, charge, levy or fee of any kind whatsoever, including any interest
or penalties thereon and additions thereto, which are due or alleged to be due
to any taxing authority, whether disputed or not; (ii) "Tax Return" means any
federal, state or local return, declaration, report, claim for refund,
information return or statement, including any schedule or attachment thereto
and amendments relating to Taxes; and (iii) "Affiliated Group" means any
affiliated group within the meaning of Code Sec. 1504 or any similar group
defined under a similar provision of state, local or foreign law.
(b) The Seller Companies have filed all Tax Returns required to be filed
by or on behalf of any of them, all such Tax Returns are correct and complete
in all material respects, and the Seller Companies have duly paid or made
provision in the Financial Statements for the payment of all Taxes; except as
set forth on Schedule 3.21, none of the Seller Companies currently is the
beneficiary of any extension of time within which to file any Tax Return; no
claim has ever been made by a taxing
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authority in a jurisdiction where any of the Seller Companies does not
file Tax Returns that it is or may be subject to Tax by that jurisdiction; and
there are no Encumbrances on any assets of any of the Seller Companies that
arose in connection with any failure (or alleged failure) to pay any Tax.
(c) Each of the Seller Companies have withheld proper and accurate
amounts from its employees' compensation in full and complete compliance with
all withholding and similar provisions of the Code and any and all other
applicable laws, and has withheld and paid, or caused to be withheld and paid,
all Taxes on monies paid by the Seller Companies to independent contractors,
creditors, stockholders, partners and other Persons for which withholding or
payment is required by law.
(d) None of the Seller Companies expects any taxing authority to assess
any additional Taxes for any period for which Tax Returns have been filed;
except as set forth on Schedule 3.21 or 3.24, there is no dispute or claim
concerning any Tax liability of the Seller Companies either (i) claimed or
raised by any authority in writing, or (ii) as to which either Seller or any of
the Seller Companies has notice or knowledge based upon personal contact with
any agent of such authority; Schedule 3.21 lists all federal, state, local and
foreign income Tax Returns filed with respect to the Seller Companies for
taxable periods ended on or after October 31, 1986, indicates those Tax Returns
that have been audited and those that currently are the subject of audit or
that have not been audited; Seller has provided to Buyer access to all Tax
Returns, examination reports, and statements of deficiencies assessed against
or agreed to by any of the Seller Companies prior to October 31, 1986.
(e) There is not currently in effect any waiver of a statute of
limitations in respect of Taxes Seller or any of the Seller Companies or any
agreement to extend the time with respect to a Tax assessment or deficiency.
(f) None of the Seller Companies has filed a consent under Code Sec.
341(f) concerning collapsible corporations; none of the Seller Companies has
made any payments, is obligated to make any payments, and is a party to any
Contract that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Sec. 280G; none of the Seller
Companies has been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified in Code
Sec. 897(c)(1)(A)(ii); the Seller Companies have disclosed on their federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Sec. 6662; none of the Seller Companies is a party to any Tax allocation or
sharing agreement; none of the Seller Companies is or has been a member of an
Affiliated Group filing a consolidated federal income Tax Return.
(g) Schedule 3.21 sets forth the basis of the Seller Companies in their
assets as of April 30, 1994.
(h) The Taxes of the Seller Companies for the current fiscal year (i) do
not exceed, as of the Interim Balance Sheet Date, the amount of estimated tax
payments for such fiscal year set forth on the Interim Balance Sheet, and (ii)
do not exceed such estimated tax payments, adjusted for the passage of time
through the Closing Date, in accordance with the past custom and practice of
the
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Seller Companies in preparing monthly balance sheets, paying estimated
taxes, and filing their Tax returns.
(i) None of the Seller Companies has any liability for the Taxes of
any Person other than the Seller Companies (i) under Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise.
(j) For federal income Tax purposes, the Consolidation shall constitute a
taxable exchange of those assets described in the Consolidation documentation
for additional shares of common stock in the Company and the assumption by the
Company of those liabilities of Seller described in the Consolidation
documents.
3.22 Medicare Participation/Accreditation. The Facilities are qualified
for participation in the Medicare, MediCal and CHAMPUS programs (together with
their respective intermediaries or carriers, the "Government Reimbursement
Programs") are entitled to reimbursement under the Medicare Program for
services rendered to qualified Medicare beneficiaries, and comply in all
material respects with the conditions of participation in, and have received
all approvals or qualifications necessary for capital reimbursement on the
assets of the Seller Companies from, all Government Reimbursement Programs.
The Hospital voluntarily terminated its contract with MediCal in 1990, and,
therefore, does not currently hold a contract with MediCal. The acute
psychiatric unit has been reimbursed on a cost basis since November 1, 1993.
There is no pending or, to Seller's knowledge, threatened proceeding or
investigation by any of the Government Reimbursement Programs, or for
reimbursement of amounts due or to become due to the Seller Companies from the
Government Reimbursement Programs (the "Agency Receivables"). The cost
reports of the Facilities for which cost reports may be filed under the
Government Reimbursement Programs, and for reimbursement of any other Agency
Receivables ("Cost Reports") for all Cost Report periods through October 31,
1993, have been filed and have been audited through the Cost Report period
ending October 31, 1992. The Cost Reports since October 31, 1980 were filed
when due and do not claim, and the Facilities have not received, reimbursement
in excess of the amount provided by law or any applicable agreement, except to
the extent set forth in the Financial Statements. Except as set forth on
Schedule 3.22, there exists no dispute or issue under appeal between Seller or
any of the Seller Companies and any governmental authority, fiscal intermediary
or carrier or other Person regarding the Government Reimbursement Programs for
Cost Report periods subsequent to October 31, 1980, other than with respect to
adjustments made in the ordinary course of business for open Cost Report years
which do not involve more than $100,000 in the aggregate. All liabilities and
contractual adjustments of the Facilities under the Government Reimbursement
Programs have been properly reflected and adequately reserved in the Financial
Statements. The inpatient acute psychiatric program of the Hospital has
applied for designation as an involuntary unit with the Orange County Mental
Health Department under the Lanterman-Petris-Short Act. Schedule 3.22 lists
all accreditations and trade memberships held by the Seller Companies. The
Hospital is duly accredited with no contingencies (except as set forth in
Schedule 3.22), by the JCAHO for the three (3) year period ending July 31, 1994
and, to Seller's knowledge, no circumstances exist which could result in the
Hospital's failure to receive accreditation without
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contingencies by the JCAHO for the three year period ending July 31,
1997. Seller has attached to Schedule 3.22 true and complete copies of the
most recent JCAHO and other accreditation survey reports and deficiency lists,
Statement of Deficiencies and Plan of Correction, and state licensing report
and list of deficiencies, if any. The Company has taken all reasonable steps
to correct all material deficiencies noted therein.
3.23 Legal and Regulatory Compliance. Except as set forth on Schedule
3.23, each of the Seller Companies is in compliance in all material respects
with all applicable laws of federal, state and local authorities and all
applicable rules, regulations and requirements of all federal, state and local
commissions, boards, bureaus and agencies having jurisdiction over the
Facilities and the operations thereof, including the Internal Revenue Service,
the California Franchise Tax Board, the Office of Statewide Health Planning and
Development, the South Coast Air Quality Management Association, and the
California Department of Health Services; and the Seller Companies have timely
filed all reports, data and other information required to be filed with such
commissions, boards, bureaus and agencies where a failure to file timely would
have an adverse effect on the Company's business or assets. Except as set
forth on Schedule 3.23, neither Seller nor any of the Seller Companies has
received written notice of, nor to Seller's knowledge is there threatened, any
investigation by governmental authorities regarding a violation of the Medicare
fraud and abuse provisions of the federal Social Security Act or any comparable
state legislation.
3.24 Litigation or Proceedings. Seller attaches hereto an accurate list
and summary description (Schedule 3.24) of all litigation, arbitration or other
proceedings with respect to the Facilities and businesses of the Seller
Companies to which any of the Seller Companies, or any insurer of any of the
Seller Companies is a party. None of the matters disclosed in Schedule 3.24
will result in any cost, expense, damage or liability (including court costs or
attorneys fees) to the Seller Companies after Closing, other than Assumed
Litigation specifically identified as such on Schedule 3.24, that is not
covered by the insurance policies described in Section 3.25, and the ultimate
result of all such proceedings will not have a material adverse effect on the
financial condition of any of the Seller Companies. Except as set forth on
Schedule 3.24, none of the Seller Companies is in default under any judgment
of any court, arbitration tribunal or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located. Except to the extent set forth on Schedule 3.24, there are
no claims, actions, suits, proceedings or investigations pending, or to
Seller's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any court, arbitration tribunal, federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality wherever located and, to Seller's knowledge, there exist no
facts that might reasonably form the basis of any such claim, action, suit,
proceeding or investigation on or after the Closing Date.
3.25 Insurance. Seller attaches hereto an accurate schedule (Schedule
3.25) disclosing the insurance policies covering the ownership and operations
of the assets and operations of the Company, which Schedule reflects the
policies' numbers, terms, identity of insurers, amounts and coverage. All of
such policies are outstanding and in full force and effect with insurers
unaffiliated with Seller, with no premium arrearages. Except as described on
Schedule 3.25, to Seller's
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knowledge, since January 1, 1989, no liability insurance carrier has
cancelled or reduced, or given notice of its intention to cancel or reduce, the
policy limit (including an increase in the self-insured retention) of any
liability insurance coverage with respect to the Facilities and, to Seller's
knowledge, there exist no grounds to cancel or avoid any such policies or the
coverages provided thereby. True and correct copies of all such policies and
any endorsements thereto have been or will be delivered to Buyer prior to
Closing.
3.26 Board and Medical Staff Matters.
(a) Attached to Schedule 3.26 are copies of the annual management letters
from Seller's independent certified accountants for the last three fiscal
years. Seller has provided to Buyer (i) true and correct copies of those
portions of the minutes of meetings since April 1, 1991, of the partners and
executive committees of Seller relating to the ownership and operation of the
Facilities and the Assets, (ii) access to the minutes of all meetings of the
directors, partners and executive and other committees of the Seller Companies,
excluding the Board of Governors of the Company.
(b) Attached to Schedule 3.26 are true, correct and complete copies of
the bylaws and rules and regulations of the medical staff and medical executive
committee of the Facilities. As of February 28, 1993, there were 757 members
on the Hospital's active, associate and courtesy medical staffs and, as of July
13, 1994, there were 828 members on the Hospital's active, associate and
courtesy medical staffs. Except as set forth on Schedule 3.26, there are no
pending or, to Seller's knowledge, threatened disputes with medical staff
members or applicants or allied health professionals, and, except as set forth
on Schedule 3.26, all appeal periods in respect of any medical staff member or
applicant against whom an adverse action has been taken have expired. Schedule
3.26 sets forth a complete and accurate list and description of (a) the name of
each member of the medical staff (active, associate, courtesy or other) of the
Facilities since January 1, 1992, (b) the age of each current medical staff
member, (c) the title, specialty and board certification, if any, of each
medical staff member, (d) the names of medical staff members (current and
former) in respect of whom any of the Seller Companies has made a report to the
National Practitioners Data Bank during the last three years, and (e) the
number of current medical staff members in respect of whom any committee of the
medical staff has recommended adverse action which is not yet final.
3.27 Special Funds. None of the Seller Companies or their assets
(including restricted cash) are subject to any liability in respect of funds
received by any Person for the purchase or improvement of any of the Seller
Companies's assets under restricted or conditioned grants or donations,
including monies received under the Public Health Service Act, 42 U.S.C.
Section 291 et seq. (the "Hill-Burton Act").
3.28 Brokers and Finders. Except as set forth on Schedule, 3.28, none of
Seller, the Seller Companies, any Affiliate of Seller, and any officer,
director, employee or agent thereof, has engaged any finder or broker in
connection with the transactions contemplated hereunder.
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3.29 Experimental Procedures. Except as set forth on Schedule 3.29, since
January 1, 1990, the Company has not performed or authorized the performance of
any experimental or research procedures or studies involving patients in the
Facilities.
3.30 Solvency. Seller is not, and after Closing as a result of the
transactions contemplated hereby will not be, rendered insolvent or otherwise
unable to pay its debts as they become due; Seller has no intention of filing
in any court pursuant to any statute either of the United States or of any
state a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or any portion of Seller's
property; and, to Seller's knowledge, no other Person has filed or threatened
to file such a petition against Seller.
3.31 Operation of the Facilities. The assets, properties, goodwill and
businesses owned or leased by Seller and the Seller Companies on the effective
date hereof and by the Seller Companies after the Consolidation constitute all
assets, properties, goodwill and business necessary to operate the Facilities
in all material respects in the manner in which they have been operated prior
to the effective date hereof.
3.32 Full Disclosure. This Agreement and Schedules hereto and all other
documents and information furnished to Buyer and Buyer's representatives by
Seller pursuant hereto do not and will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
As of the date hereof, Buyer represents and warrants to Seller the
following:
4.1 Corporate Capacity. Buyer is a for-profit corporation duly organized
and validly existing in good standing under the laws of the State of
California. Buyer has the requisite power and authority to enter into this
Agreement, perform its obligations hereunder and to conduct its businesses as
now being conducted.
4.2 Corporate Powers; Consents; Absence of Conflicts With Other
Agreements, Etc. The execution, delivery and performance of this Agreement by
Buyer and all other agreements referenced in or ancillary hereto to which Buyer
is a party and the consummation of the transactions contemplated herein by
Buyer:
(a) are within Buyer's corporate powers and are not in contravention of
the terms of its Articles or Certificate of Incorporation and Bylaws, or any
amendments thereto, and have been approved by all requisite corporate action;
(b) except as otherwise expressly herein provided, do not require any
approval or consent of, or filing with, any governmental agency or authority
bearing on the validity of this Agreement;
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(c) do not conflict with or result in any breach or contravention of, or
the creation of any Encumbrance under, any indenture, agreement, lease,
instrument or understanding to which Buyer is a party or by which Buyer is
bound;
(d) do not violate any statute, law, rule or regulation of any
governmental authority to which Buyer may be subject and which may have an
effect on the Shares subsequent to Closing;
(e) do not violate any judgment to which Buyer may be subject and which
may have an effect on the Shares subsequent to Closing; and
(f) do not conflict with or result in a breach or violation of any
material agreement or commitment to which Buyer is a party.
4.3 Binding Effect. This Agreement and all other agreements to which
Buyer becomes a party hereunder are valid and legally binding obligations of
Buyer, enforceable against Buyer in accordance with the respective terms hereof
and thereof, except as enforceability against Buyer may be restricted, limited
or delayed by applicable bankruptcy or other laws affecting creditors' rights
generally and except as enforceability may be subject to general principles of
equity.
4.4 Brokers and Finders. Neither Buyer nor any Affiliate of Buyer, nor
any officer, director, employees or agent thereof, has engaged any finder or
broker in connection with the transactions contemplated hereunder.
4.5 Purchase for Investment. The Shares and the Partnership Interests
are being acquired by Buyer (or, if applicable, its assignee pursuant to
Section 12.8), for its own account for the purpose of investment, it being
understood that the ability to dispose of such Shares or the Partnership
Interests shall be entirely within the discretion of Buyer, provided that Buyer
will refrain from transferring or otherwise disposing of any of the Shares, or
any interest therein, in such manner as to violate any registration provision
of the Securities Act of 1933, as amended, or the qualification provisions of
the California Corporate Securities Act of 1968, as amended.
5. COVENANTS OF SELLER.
5.1 Intercompany Liabilities. On or before thirty (30) calendar days
after the effective date hereof, Seller will furnish Buyer with a true and
complete list and description of all intercompany liabilities between any of
the Seller Companies, on the one hand, and Seller, any Affiliate of Seller, or
any officer, director or partner of Seller or the Seller Companies, on the
other hand, which are expected to be outstanding immediately prior to Closing.
Seller will cause the Seller Companies to not enter into, modify or amend any
Contract, and to not engage in any transaction with Seller, any Affiliate of
Seller or any officer, director or partner of Seller or the Seller Companies,
provided that the foregoing limitation shall not apply to (i) the Company's
entering into of the Key Employee Agreements, (ii) transactions required to
consummate the Consolidation, and (iii) actions necessary to comply with the
following sentence. On or prior to the Closing Date, Seller will terminate,
and
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will cause its officers, directors, partners and Affiliates to terminate,
each such Contract with the Seller Companies without penalty or further
liability of any kind or nature.
5.2 Access to and Provision of Additional Information.
(a) From the effective date hereof until the Closing Date and except
where prohibited by law or when necessary to preserve attorney-client
privilege, Seller shall provide, and cause its agents (including counsel and
accountants) to provide, to the officers and agents of Buyer full and complete
access to and the right to inspect the plants, properties, books and records of
the Seller Companies, and will furnish and cause to be furnished to Buyer all
material information concerning the Seller Companies or their businesses not
otherwise disclosed pursuant to this Agreement, and such additional financial,
operating and other data and information regarding the Seller Companies and
their businesses as Buyer may from time to time reasonably request, without
regard to where such information may be located.
(b) Within 20 days following the end of each calendar month prior to the
Closing Date, and within 30 days following the end of each calendar quarter
prior to the Closing Date, Seller will deliver to Buyer true and complete
copies of the unaudited balance sheets and the related unaudited statements of
income and cash flow of, or relating to, the Seller Companies for each such
month or quarter then ended, together with any notes thereto.
(c) From the effective date hereof until the Closing Date, Seller shall
cause the Seller Companies's officers and employees to confer on a regular and
frequent basis with one or more representatives of Buyer to report material
operational matters in respect of the Seller Companies and the Facilities and
to report the general status of on-going operations. Seller shall notify Buyer
in writing of any material changes in the operations, financial condition or
businesses of the Facilities or the Seller Companies and of any complaints,
investigations, hearings or adjudicatory proceedings (or communications
indicating that the same may be contemplated) of any Person which would
materially and adversely affect the businesses of the Seller Companies, and
shall keep Buyer fully informed of such events and permit its representatives
to participate in all discussions relating thereto.
5.3 Operations. From the effective date hereof until the Closing Date
and except as otherwise provided in this Agreement, Seller will cause the
Seller Companies to use their best efforts to:
(a) carry on the Seller Companies' businesses in substantially the same
manner as the Seller Companies have heretofore and not make any material change
in personnel, operations, finances, accounting policies, or real or personal
property of the Facilities;
(b) maintain the Seller's Companies's assets and all parts thereof in as
good working order and condition as at present, ordinary wear and tear
excepted;
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(c) operate the Seller Companies and the Facilities in accordance with
all applicable laws, rules, regulations and judgments;
(d) perform all of the Seller Companies' obligations under the Contracts
as they become due;
(e) take all actions necessary and appropriate to render title to the
Shares, the Partnership Interests and the Seller Companies's assets free and
clear of all Encumbrances (except for the Permitted Encumbrances) and to obtain
appropriate releases, consents, estoppels and other instruments as Buyer may
reasonably request;
(f) keep in full force and effect present insurance policies or other
comparable insurance and maintain sufficient liquid assets to meet all
deductible, self-insurance or copayment requirements under present insurance
policies;
(g) maintain and preserve the Seller Companies' business organizations
and operations intact; retain the present employees at the Facilities; maintain
the Seller Companies' relationships with physicians, suppliers, customers and
others having business relations with the Seller Companies; and take such
actions as are necessary and to cause the smooth, efficient and successful
transition to Buyer of such business organizations and operations and employee
and other relations at Closing; and
(h) permit and allow reasonable access by Buyer to discuss post-Closing
employment with any of Seller or Seller Companies' personnel, and to establish
relationships with physicians and others having business relations with the
Seller Companies, provided that such actions do not materially and adversely
interfere with the business of the Seller Companies.
5.4 Negative Covenants. From the effective date hereof until the Closing
Date and except as otherwise expressly provided in this Agreement, Seller will
not, in the case of clauses (b) and (g) below, and will cause the Seller
Companies not to, in the case of all clauses below other than (b), without the
prior written consent of Buyer:
(a) amend or terminate any of the Contracts, enter into any Contract or
incur or agree to incur any liability, except in the ordinary course of
business, and in no event that requires the payment by the Seller Companies of
an amount greater than Fifty Thousand Dollars ($50,000) per Contract or
$1,000,000 in the aggregate, or that is not terminable without cause or penalty
within ninety (90) days following the Closing Date;
(b) make offers of employment to any employees of the Seller Companies for
employment with Seller or any Affiliate of Seller after Closing;
(c) increase compensation payable or to become payable to, make a bonus
payment to, or otherwise enter into one or more bonus agreements with, any
employee or agent of the Seller Companies, except in the ordinary course of
business in accordance with existing personnel policies;
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(d) create, assume or permit to exist any new Encumbrance upon any of the
Seller Companies' assets;
(e) sell, assign, transfer, distribute or otherwise dispose of any
property, plant or equipment of the Seller Companies, except in the normal
course of business with comparable replacement thereof;
(f) take any action outside the ordinary course of business;
(g) amend the articles or certificate of incorporation, bylaws or
partnership agreements of the Seller Companies, or take any action relating to
any such amendment or any liquidation or dissolution of the Seller Companies or
Seller;
(h) authorize or issue any shares of the stock of the Seller Companies or
other equity securities; enter into any Contract or grant any option, warrant,
or right calling for the authorization or issuance of any such shares or other
equity securities; create or issue any securities directly or indirectly
convertible into or exchangeable for any such shares or other equity
securities; or issue any options, warrants, or rights to purchase any such
convertible or exchangeable securities;
(i) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of the Seller Companies or partnership equity of
Seller, or directly or indirectly redeem, purchase, or otherwise acquire any
capital stock of the Seller Companies or any interest in or right to acquire
such stock, provided that Seller may distribute on or prior to the Closing Date
all distributions to partners accrued by Seller in the ordinary course of
Seller's business.
(j) either (i) acquire or agree to acquire a block of business or all or
substantially all the assets or properties or capital stock or other equity
securities of any Person, (ii) otherwise acquire or agree to acquire control or
ownership of any Person by merger, consolidation or other combination, or (iii)
make any capital expenditures except in the ordinary course of business and
consistent with past practice and in an amount not exceeding $50,000; provided
that Buyer hereby consents to, and Seller shall cause the Company to incur and
pay or accrue prior to Closing, the capital expenditures described on Schedule
5.4 (the "Approved Capital Expenditures"); or
(k) create, incur, assume, guarantee or otherwise become liable for,
cancel, pay, agree to cancel or pay, otherwise provide for a complete or
partial discharge in advance of a scheduled payment date with respect to, or
waive any right of any of the Seller Companies to receive any direct or
indirect payment or other benefit under, any liability of any of the Seller
Companies, except in the ordinary course of business consistent with past
practices and in an amount not exceeding $50,000 individually or $500,000 in
the aggregate.
5.5 Governmental Approvals. From the effective date hereof until the
Closing Date, Seller shall, and shall cause each of the Seller Companies to,
(a) promptly apply for and use its best efforts to obtain prior to Closing all
consents, approvals, authorizations and clearances of governmental and
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regulatory authorities required of Seller or the Seller Companies to consummate
the transactions contemplated hereby, (b) provide such information and
communications to governmental and regulatory authorities as Buyer or such
authorities may reasonably request, and (c) assist and cooperate with Buyer to
obtain all consents, licenses, permits, approvals, authorizations and
clearances of governmental and regulatory authorities that Buyer reasonably
deems necessary or appropriate, and to prepare any document or other
information required of Seller or the Seller Companies by any such authorities,
to consummate the transactions contemplated herein.
5.6 FTC Notification. The parties acknowledge that on June 14, 1994, a
Notification and Report Form was filed by each of Buyer and Seller with the
Federal Trade Commission ("FTC") and the United States Department of Justice
("Justice Department") under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). From the effective date hereof until the
Closing Date, Seller shall file, if and to the extent required by law, file,
all reports or other documents required or requested by the FTC or the Justice
Department concerning the transactions contemplated hereby, and comply promptly
with any requests by the FTC or Justice Department for additional information
concerning such transactions, so that the waiting period specified in the HSR
Act will expire as soon as reasonably possible after the effective date of this
Agreement. Seller shall furnish to Buyer such information concerning the
Seller Companies as Buyer needs to perform its obligations under Section 6.1.
5.7 No-Shop Clause. From the effective date hereof until the earlier of
the termination of this Agreement or August 31, 1994 (unless the Closing Date
is extended beyond such date by the parties), Seller shall not, and will not
authorize any of the Seller Companies, any Affiliate of Seller or any other
Person acting for or on behalf of Seller, the Seller Companies or any Affiliate
of Seller to, without the prior written consent of Buyer: (i) offer for sale
the Shares or Partnership Interests, or any portion thereof, or any of the
assets of any of the Seller Companies, (ii) solicit offers to buy the Shares or
Partnership Interests, or any portion thereof, or any of the assets of any of
the Seller Companies, (iii) hold discussions with any Person looking toward
such an offer or solicitation, or looking toward a merger, consolidation or
other combination with the Seller Companies, Seller or any Affiliate of Seller
(provided this clause shall not prohibit Seller from answering unsolicited
calls or requests from any Person), (iv) enter into any agreement with any
Person with respect to the sale of the Shares or the Partnership Interests, or
any portion thereof, or any of the assets of any of the Seller Companies, or
with respect to any merger, consolidation, or other combination with the Seller
Companies, Seller or any Affiliate of Seller, or (v) furnish or permit or cause
to be furnished any information with respect to Seller or the Seller Companies
to any Person that Seller knows or has reason to believe is in the process of
considering any one of the transactions described above. If Seller, any
Affiliate of Seller, any of the Seller Companies, or any other Person acting
for or on behalf of any of the foregoing persons receives from any Person
(other than Buyer or a representative thereof) any offer, inquiry or
informational request referred to above, Seller will promptly advise such
Person, by written notice, of the substantive terms of this Section.
5.8 Insurance Ratings. From the effective date hereof until the Closing
Date, Seller will take all action reasonably requested by Buyer to enable the
Seller Companies to maintain and preserve
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the Workmen's Compensation and Unemployment Insurance ratings,
insurance policies, deposits and other interests of the Seller Companies and
the Facilities for insurance or other purposes. Buyer shall not be obligated
to succeed to any such rating, insurance policy, deposit or other interest,
except as it may elect to do so.
5.9 Consolidation. From the effective date hereof until the Closing
Date, Seller shall enter into, and shall cause the Seller Companies and any
other Affiliates to enter into, all agreements, instruments and takes all
actions required to cause the assets and businesses owned by Seller and
Seller's Affiliates and constituting a part of the assets or businesses of the
Facilities to be fully and effectively conveyed, assigned, transferred,
delivered and vested in and to the Seller Companies prior to the Closing so
that, upon delivery of the Shares and Partnership Interests hereunder, Buyer
shall be in complete and lawful possession and ownership of the Facilities and
all other assets, properties and rights described in or contemplated by this
Agreement (except the property conveyed pursuant to the Real Estate Purchase
Agreement). Seller shall provide to Buyer for its review and approval genuine
copies of all agreements, instruments or other documents relating to the
Consolidation that Seller proposes any of the Seller Companies to execute or
pursuant to which any of the Seller Companies may incur any liability or
obligation (including indemnity obligations) after the Closing.
5.10 Real Estate Purchase Agreement. From the effective date hereof until
the Closing Date, Seller shall take, and shall cause its Affiliates to enter
take, all actions required in order to cause the MOBs, Living Care Center and
other assets described in the Real Estate Purchase Agreement to be fully and
effectively conveyed, assigned, transferred, delivered and vested in and to HRT
or its designee as of the Closing Date so that, concurrently upon delivery of
the Shares and Partnership Interests hereunder, HRT or its designee shall be in
complete and lawful possession and ownership of the MOBs, Living Care Center
and other assets, properties and rights described in or contemplated by the
Real Estate Purchase Agreement, and Seller shall otherwise perform all
obligations of Seller under the Real Estate Purchase Agreement.
5.11 Real Estate Option Agreement. Seller shall grant and convey to Buyer
or the Company at Closing an option to purchase the Excluded Real Property,
pursuant to a Real Estate Option Agreement in the form attached hereto as
Exhibit B (the "Real Estate Option Agreement").
5.12 Closing Conditions. From the effective date hereof until the Closing
Date, Seller will use its reasonable best efforts, and will cause each of the
Seller Companies to use its reasonable best efforts, to cause the conditions
specified in Articles 7 and 8 over which it or any of the Seller Companies has
control to be satisfied as soon as reasonably practicable, but in all events
before the Closing Date.
5.13 Tail Insurance. On or prior to the Closing Date, Seller will cause
the Seller Companies to obtain "tail" insurance for the professional and
general liability insurance policies in effect since December 1, 1993, in form
and substance acceptable to Buyer, to insure against professional and general
liability claims made on or after the Closing Date resulting from or arising
out of events occurring at the Facilities or on the Real Property prior to the
Closing Date. The
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minimum coverage under such "tail" insurance shall be $20,000,000 in
the aggregate with not more than a $10,000 self-insured retention per incident,
and the policy shall otherwise meet the requirements described in Section 3.25.
5.14 Key Employee Agreements. Seller shall deliver to Buyer at Closing
originals of employment agreements with Messrs. Thomas M. Ways, Chief Executive
Officer, and Richard E. Butler, Administrator, substantially in the form of
Exhibit C (the "Key Employee Agreements"), fully executed by Messrs. Ways and
Butler.
5.15 Change of Partnership Name, etc. None of Seller, and any Affiliate,
director or officer of Seller shall use after the Closing Date the words
"Fountain Valley" or any similar name in the conduct of a healthcare trade or
business. Seller acknowledges that the name "Fountain Valley", as used in the
conduct of the businesses of the Seller Companies, is an Asset being acquired
by Buyer as a result of the consummation of the transactions described in this
Agreement. Seller desires, however, to continue to conduct its non-healthcare
business without changing its name after Closing, if the same can be done
without confusing the public. Subject to the following sentence, Buyer
consents, therefore, to the conduct of non-healthcare business by Seller after
Closing without changing its name. Notwithstanding the foregoing, Buyer shall
have the right, at any time and for any reason, to notify Seller that Buyer
desires Seller to change its name. Upon receipt of such notice, Seller shall
change its name with reasonable promptness to a name not containing the words
"Fountain Valley". Each party shall take such reasonable steps requested by
the other party to notify the public or others that Seller, on the one hand,
and Buyer and the Seller Companies, on the other hand, are not related or
liable for any actions of the other after the Closing Date.
5.16 Adverse Actions After Closing. Seller shall not take, or fail to
take, any action after Closing that would render Seller unable to perform its
post-Closing obligations under this Agreement. After Closing, Seller shall
satisfy all liabilities of Seller, the failure of which would have a material
adverse effect on Buyer or the Seller Companies.
5.17 Further Acts and Assurances. At any time and from time to time at
and after the Closing, upon request of Buyer, Seller shall do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, confirmations and assurances as Buyer may reasonably
request to more effectively convey, assign and transfer to and vest in Buyer,
its successors and assigns, full legal right, title and interest in and actual
possession of the Shares, the Partnership Interests, and the assets, Facilities
and other businesses of Seller and the Seller Companies, to confirm Seller's
capacity and ability to perform its post-Closing covenants and agreements under
this Agreement, and to generally carry out the purposes and intent of this
Agreement. Seller shall also furnish, and shall cause each of the Seller
Companies to furnish, Buyer with such information and documents in its
possession or under its control, or which Seller or the Seller Companies can
execute or cause to be executed, as will enable Buyer to prosecute any and all
petitions, applications, claims and demands relating to or constituting a part
of the assets and businesses of the Seller Companies.
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6. COVENANTS OF BUYER.
6.1 FTC Notification. From the effective date hereof until the Closing
Date, Buyer shall file, if and to the extent required by law, all reports or
other documents required or requested by the FTC or the Justice Department
under the HSR Act concerning the transactions contemplated hereby, and comply
promptly with any requests by the FTC or Justice Department for additional
information concerning such transactions, so that the waiting period specified
in the HSR Act will expire as soon as reasonably possible after the effective
date of this Agreement. Buyer shall furnish to Seller such information
concerning Buyer as Seller needs to perform its obligations under Section 5.6.
6.2 Regulatory Approvals. From the effective date hereof until the
Closing Date, Buyer shall (a) promptly apply for and use its best efforts to
obtain prior to Closing all consents, licenses, permits, approvals (including
planning approvals), authorizations and clearances of governmental and
regulatory authorities required of it to consummate the transactions
contemplated hereby, (b) provide such information and communications to
governmental and regulatory authorities as Seller, the Seller Companies or such
authorities may reasonably request, and (c) assist and cooperate with Seller
and the Seller Companies to obtain all consents, approvals, authorizations and
clearances of governmental and regulatory authorities that Seller or the Seller
Companies reasonably deem necessary or appropriate, and to prepare any document
or other information required of Buyer by any such authorities, to consummate
the transactions contemplated hereby.
6.3 Closing Conditions. From the effective date hereof until the Closing
Date, Buyer will use its reasonable best efforts to cause the conditions
specified in Articles 7 and 8 over which Buyer has control to be satisfied as
soon as reasonably practicable, but in all events before the Closing Date.
6.4 Confidentiality. From the effective date hereof until the Closing
Date, Buyer will, and will use its best efforts to cause its employees,
representatives and agents to, hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of counsel,
by other requirements of law, all Confidential Information (as defined below);
and Buyer will not disclose Confidential Information to any Person, except as
otherwise may be reasonably necessary to carry out the transactions
contemplated by this Agreement, including any business or the diligence review
by or on behalf of Buyer. If this Agreement is terminated prior to Closing,
then, upon Seller's written request, Buyer will promptly return or cause to be
returned to Seller all documents and copies thereof furnished by Seller or the
Seller Companies and held by Buyer, its representatives or agents containing
such Confidential Information, shall not use such information to the detriment
of Seller or the Seller Companies. For the purposes hereof, "Confidential
Information" means all information of any kind concerning Seller or the Seller
Companies obtained directly or indirectly from Seller or the Seller Companies
in connection with the transactions contemplated by this Agreement except
information: (a) ascertainable or obtained from public or published
information; (b) received from a third party not known by Buyer to be under an
obligation to Seller or the Seller Companies to keep such information
confidential; (c) that is or becomes known to the public (other than through a
breach by Buyer of this Section); or (d) that was in Buyer's possession prior
to the disclosure by Seller or
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the Seller Companies of such information in connection with the transactions
contemplated by this Agreement.
6.5 Employee Matters.
(a) Subject to the exclusions set forth in this Section, and in reliance
upon the representations and warranties of Seller made in Section 3.20, Buyer
will cause the Seller Companies after Closing to retain the employment of a
sufficient number of its employees working at the Facilities immediately prior
to Closing so that Seller and the Seller Companies may avoid the imposition of
any liability under WARN.
(b) Buyer shall give, or cause the Seller Companies to give, all
employees of the Seller Companies as of the Closing Date credit for their years
of service with the Seller Companies prior to Closing for purposes of
determining how much vacation, holiday and sick time such employees are
entitled to under the applicable Employee Welfare Benefit Plan of Buyer or the
Seller Companies after Closing. For purposes of determining eligibility to
participate in and vesting percentages in Buyer's Employee Pension Benefit
Plans, Buyer will give, or cause the Seller Companies to give, all employees of
the Seller Companies as of the Closing Date the same credit after Closing for
years of service with Seller Companies as the Seller Companies or Seller gives
such employees under their or its Employee Pension Benefit Plans immediately
prior to Closing.
(c) Buyer shall make contributions after Closing for all eligible
employees of the Seller Companies to the Company's Money Purchase Pension Plan
for the 1994 plan year, subject to and in accordance with the terms of such
plan, and shall continue the Company's Money Purchase Pension Plan until at
least the end of the 1994 plan year. Nothing in this Section shall require
Buyer to make contributions on behalf of non-employees, regardless of the
practice of Seller prior to Closing.
6.6 Consolidated Tax Return. Buyer shall include the Seller Companies as
part of its Affiliated Group for federal income Tax purposes on and after the
Closing Date. For purposes of Treasury Regulations Section 1.1502-76(b), the
Closing shall be deemed to occur at 11:59 p.m. on the day prior to the Closing
Date, and all transactions on the Closing Date shall not be reported on the
separate tax returns of the Seller Companies for the pre-Closing period, but
rather shall be reported on Buyer's consolidated income tax return for the year
that includes the Closing Date. Without the written consent of Seller, Buyer
shall not permit any of the Seller Companies to undertake any transaction on
the Closing Date that is outside the ordinary and regular course of business of
the Seller Companies, except as provided in or contemplated by this Agreement.
After Closing, Buyer shall not amend any Tax Return of the Seller Companies in
any manner that would have a material adverse effect on Seller (Buyer having
regard for Seller's indemnification obligations in respect of Taxes described
in this Agreement), unless (i) such amendment is required by applicable law,
rule, regulation or judgment, or (ii) Buyer receives an opinion of counsel to
the effect that such amendment is required.
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6.7 Adverse Actions After Closing. Buyer shall not take, or fail to
take, any action after Closing that would render Buyer unable to perform its
post-Closing obligations under this Agreement. After Closing, Buyer shall
satisfy or cause the Seller Companies to satisfy all of their liabilities, the
failure of which would have a material adverse effect on Seller.
6.8 Real Estate Purchase Agreement. In the event that HRT fails to
perform any obligation under the Real Estate Purchase Agreement, Buyer shall
perform such obligation in accordance wih the Real Estate Purchase Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer hereunder are, at the option of Buyer, subject to
the satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Buyer:
7.1. Representations/Warranties. The representations and warranties of
Seller contained in this Agreement shall be true when made and true and correct
in all material respects on and as of the Closing Date as though such
representations and warranties had been made on and as of the Closing Date; and
each and all of the terms, covenants and conditions of this Agreement to be
complied with or performed by Seller or the Company on or before the Closing
Date pursuant to the terms hereof shall have been duly complied with and
performed in all material respects.
7.2. Opinion of Seller's Counsel. Buyer shall have received an opinion
from counsel to Seller dated as of the Closing Date and addressed to Buyer, in
a form agreed by the parties.
7.3 Pre-Closing Confirmations. Buyer shall have obtained documentation
or other evidence reasonably satisfactory to Buyer that Buyer has
(a) received all consents, permits, approvals, authorizations and
clearances of governmental and regulatory authorities required to complete the
transactions herein contemplated;
(b) obtained Government Reimbursement Programs certification of the
Facilities for their operation by the Company as of the Closing Date so that
the Company may participate in and receive reimbursement from such programs as
of the Closing Date;
(c) obtained such other consents and approvals as may be legally or
contractually required for Buyer's consummation of the transactions described
herein; and
(d) complied with all waiting periods under the HSR Act.
7.4 Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions herein contemplated, wherein an
unfavorable judgment would prevent or make materially unfavorable the carrying
out of this Agreement or render any of the transactions described herein
subject to rescission,
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and there shall not be in effect any order restraining, enjoining or otherwise
preventing consummation of the sale of the Shares or Partnership Interests and
other transactions contemplated herein.
7.5 Adverse Change. No material adverse change in the results of
operations, financial condition or businesses of the Company or the Facilities
shall have occurred, and Buyer shall not have elected to terminate this
Agreement pursuant to Section 10.1 with respect to destroyed, damaged or lost
assets.
7.6 Extraordinary Liabilities/Obligations. Except as required to
consummate the Consolidation, the Company shall not have incurred any liability
or obligation outside the ordinary course of business since the effective date
hereof which materially affects its assets; neither Seller nor the Company
shall (a) be in receivership or dissolution, (b) have made any assignment for
the benefit of creditors, (c) have admitted in writing its inability to pay its
debts as they mature, (d) have been adjudicated a bankrupt, (e) have filed a
petition in voluntary bankruptcy, a petition or answer seeking reorganization,
or an arrangement with creditors under the federal bankruptcy law or any other
similar law or statute of the United States or any state, nor shall any such
petition have been filed against any of them, or (f) have entered into any
Contract to do or permit the doing of any of the foregoing on or after the
Closing Date.
7.7 Transfer of Shares. Seller shall have furnished to Buyer, in form
reasonably acceptable to Buyer and approved by Buyer's counsel, stock powers,
assignments or other instruments of transfer, and consents and waivers by
others, necessary or appropriate to transfer to and effectively vest in Buyer
all of Seller's right, title and interest in and to the Shares.
7.8 Title Policy and Survey. Buyer shall have received commitments or
endorsements, satisfactory to Buyer, from the local issuing agent of Chicago
Title Insurance Company to issue to the Company as of the Closing Date an
owner's title insurance policy for the Real Property (the "Owner's Title
Insurance Policy for the Real Property "), together with improvements,
buildings and fixtures thereon, in an amount acceptable to Buyer and Seller,
and in the customary form prescribed for use in the state in which the Real
Property is located. The commitment shall provide for the issuance of said
policy to the Company as of the Closing Date and shall insure good and
marketable fee or, as to Real Property leased by Seller, leasehold title to the
Real Property in the Company subject only to (i) the lien of real property
Taxes for the year in which the Closing Date occurs, not yet due and payable,
(ii) Encumbrances, if any, that secure indebtedness of the Company that is not
the Company's Indebtedness to be Satisfied at Closing, (iii) Encumbrances that
are created by Buyer, and (iv) the Permitted Encumbrances. The title policy
provided to Buyer shall include the following endorsements, if applicable and
available: (i) insurance that the Real Property insured is the same as the
property shown on the survey; (ii) insurance that any multiple parcels are
contiguous if so shown by the survey; (iii) insurance on any specified access
issues reasonably identified by Buyer prior to Closing; (iv) insurance on
specific locations of easements and improvements identified by survey; and (v)
insurance that there are no encroachments of improvements by or onto the Real
Property, or easements or setback lines thereon. Additionally, Buyer shall
have received an as-built survey of the Real Property for the purpose of
deleting the standard survey exceptions as provided above and
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reflecting all improvements visible on the grounds and all easements, rights of
way, means of ingress or egress, encroachments and drainage ditches, whether
abutting or interior, of record or on the grounds. The survey shall reflect
whether and the extent to which any portion of the Real Property lies within
flood prone areas or flood plains. The survey shall be certified to the title
company and Buyer and shall be in a form satisfactory to both. The costs of
such survey and title policy (including the survey exception deletion) shall
be shared equally by Buyer and the Company.
7.9 Recent Agreements and Commitments. Seller shall have delivered to
Buyer an accurate list and substantially complete description (Schedule 7.9),
as of the Closing Date, showing all Contracts entered into by the Company since
the effective date hereof.
7.10 Closing Documents. Seller shall have executed and delivered to Buyer
all agreements, instruments, certificates or other documents required to be
executed by Seller or any of the Seller Companies pursuant to any term or
provision of this Agreement (including the Escrow Agreement, the Real Estate
Option Agreement and the Key Employee Agreements).
7.11 UCC Searches. Seller or the Company shall have obtained and
delivered to Buyer UCC lien, judgment and tax searches showing no Encumbrances
on any assets of the Seller Companies except for Encumbrances that secure the
Company's Indebtedness to be Satisfied at Closing and the Permitted
Encumbrances and the Other Permitted Encumbrances which Buyer accepts in
writing.
7.12 Insurance. Seller or the Seller Companies shall have purchased the
"tail" insurance required by Section 5.13, and shall have delivered
certificates evidencing the same and naming the Seller Companies and Buyer as
insureds thereunder.
7.13 Focus Survey. The most recent focus survey report of the Hospital
shall have been delivered to, and be in a form satisfactory to, Buyer.
7.14 Assessments; Property Taxes. If, as of the Closing Date, any of the
Real Property shall be or shall have been affected by an assessment or
assessments which are or may become payable in annual installments, of which
the first installment is then a charge or lien, or has been paid, then all
unpaid installments of any such assessments, including those which are to
become due and payable after Closing, shall have been paid and discharged by
Seller or the Seller Companies prior to the Closing Date or accrued on the
Final Balance Sheet. The Seller Companies shall have paid all property taxes
and assessments on the Assets for all calendar years prior to Closing, and
shall have accrued on the Final Balance Sheet any real property Taxes for the
calendar year in which Closing occurs, prorated to the Closing Date.
7.15 Full Sale. Seller shall have fully and effectively sold to Buyer all
of the Shares and Partnership Interests, it being understood and agreed that
the obligation of Buyer to purchase the Shares and Partnership Interests is
conditioned upon the full and effective sale by Seller of all of the
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Shares and Partnership Interests so that upon Closing each of the Seller
Companies becomes a wholly-owned subsidiary of Buyer.
7.16 Lender Approval. Buyer shall have obtained the approval of the
"Required Lenders", as such term is defined in the U.S. $700,000,000 Credit,
Security, Guaranty and Pledge Agreement dated April 19, 1994, among Guarantor
and certain other entities, including, without limitation, The Bank of Nova
Scotia, as Administrative Agent.
7.17 Real Estate Transaction. The closing under the Real Estate Purchase
Agreement shall have occurred or occur simultaneously with the Closing of this
transaction.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller hereunder are, at the option of Seller, subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions unless waived in writing by Seller:
8.1 Representations/Warranties. The representations and warranties of
Buyer contained in this Agreement shall be true when made and true and correct
in all material respects as of the Closing Date as though such representations
and warranties had been made on and as of the Closing Date; and each and all of
the terms, covenants and conditions of this Agreement to be complied with or
performed by Buyer on or before the Closing Date shall have been duly complied
with and performed.
8.2 Opinion of Buyer's Counsel. Seller shall have received from counsel
to Buyer (which may be house counsel) an opinion dated as of the Closing Date
and addressed to Seller, in a form agreeed by the parties.
8.3 Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions herein contemplated, wherein an
unfavorable judgment would prevent or make materially unfavorable the carrying
out of this Agreement or render any of the transactions described herein
subject to rescission, and there shall not be in effect any order restraining,
enjoining or otherwise preventing consummation of the sale of the Shares or
Partnership Interests.
8.4 Pre-Closing Confirmations. Seller shall have obtained documentation
or other evidence reasonably satisfactory to Seller that Buyer has:
(a) received all consents, approvals, authorizations and clearances of
governmental and regulatory authorities required of it to consummate the
transactions contemplated hereby;
(b) obtained such other consents and approvals as may be legally or
contractually required for Seller's consummation of the transactions described
herein; and
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(c) complied with all waiting periods under the HSR Act.
8.5 Extraordinary Liabilities/Obligations. Neither Buyer nor Guarantor
shall (a) be in receivership or dissolution; (b) have made any assignment for
the benefit of creditors; (c) have admitted in writing its inability to pay
its debts as they mature; (d) have been adjudicated a bankrupt; (e) have filed
a petition in voluntary bankruptcy, a petition or answer seeking
reorganization, or an arrangement with creditors under the federal bankruptcy
law or any other similar law or statute of the United States or any state, nor
shall any such petition have been filed against Buyer; or (f) have entered
into any Contract to do or permit the doing of any of the foregoing on or after
the Closing Date.
8.6 Real Estate Transaction. The closing under the Real Estate Purchase
Agreement shall have occurred or occur simultaneously with the Closing of this
transaction.
9. NONCOMPETITION.
Seller and Buyer recognize that (i) Buyer's entering into this Agreement
is induced primarily because of the covenants and assurances made by Seller and
Buyer hereunder and under the Non-Competition Agreement, (ii) Seller's
covenant not to compete is necessary to insure the continuation of the
businesses of the Seller Companies subsequent to Closing, and (iii) irreparable
harm and damage will be done to Buyer and the Seller Companies in the event
that Seller competes with the Seller Companies within the area or areas
specified in this Section. Therefore, in consideration of the premises and as
an inducement for Buyer to enter into this Agreement and consummate the
transactions contemplated herein, Seller covenants that, for a period of three
(3) years from and after the Closing Date, Seller shall not, directly or
indirectly, in any capacity:
(i) employ, engage or seek to employ or engage any Person
employed by the Seller Companies on or after the Closing Date and who,
within the prior twelve months, had been an officer, director, employee
or medical staff member of the Seller Companies, unless such officer,
director, employee or medical staff member (i) resigns voluntarily
(without any solicitation from Seller or any of its Affiliates) and Buyer
consents in writing to such employment or engagement, or (ii) is
terminated by the Seller Companies after the Closing Date;
(ii) or cause or attempt to cause any Person to replace or
terminate any Contract for the provision or arrangement of healthcare
services from the Facilities with products or services of any other Person
at any time after the Closing Date; or
(iii) own, manage, operate, control, participate in the
management, operation or control of, be employed by or under contract
with, or maintain or continue any interest whatsoever in any Person within
Orange County, California, engaged in any business similar to the business
of the Seller Companies at the Facilities immediately after Closing.
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The parties hereto acknowledge and agree that any remedy at law for any breach
of the provisions of this Article 9 would be inadequate, and Seller hereby
consents to the granting by any court of an injunction or other equitable
relief, without the necessity of actual monetary loss being proved, in order
that a breach or threatened breach of such provisions may be effectively
restrained. For purposes of this Article 9, Seller shall mean the Person
comprised of all partners of Seller and shall not be defined as a smaller group
of partners acting on their own behalf.
10. ADDITIONAL AGREEMENTS.
10.1 Casualty. If any part of the assets of the Company are destroyed,
damaged or lost (whether by fire, theft, vandalism or other cause or casualty)
prior to the Closing Date, and the fair market value of such destruction,
damage or loss is $1,000,000 or more, Buyer may, at its option, either (i)
close this transaction in accordance with its terms, and retain the proceeds
(or the right to receive the proceeds) of the applicable insurance policy, or
(ii) terminate this Agreement in its entirety without penalty. In the event
Buyer elects to close this transaction, Seller and, after the Closing, Buyer
shall cause the Company to accrue, be liable for, set aside and reserve as of
the Closing Date, any and all applicable deductibles or coinsurance amounts due
or to become due on or after the Closing Date.
10.2 Allocation of Purchase Price. The Purchase Price shall be allocated
in accordance with Schedule 10.2. Any Tax Returns or other tax information the
parties may file or cause to be filed with any governmental agency shall be
prepared and filed consistent with such agreed upon allocation.
10.3 Tax and Medicare Effect. None of the parties (nor such parties'
counsel or accountants) has made or is making any representations to any other
party (nor such party's counsel or accountants) concerning any of the Tax or
Medicare effects on such other party of the transactions provided for in this
Agreement. Each party represents and warrants to the other that it has
obtained, or may obtain, independent Tax and Medicare advice with respect
thereto and upon which it, if so obtained, has solely relied.
10.4 Post-Closing Tax Returns.
(a) Seller shall prepare or cause to be prepared, deliver to the Seller
Companies for review, approval and execution not less than 30 days before the
Due Date (as defined below), and timely file, all Tax Returns of the Seller
Companies with respect to any taxable period ending prior to the Closing Date
(a "Pre-Closing Period") and, to the extent not accrued on the Final Balance
Sheet, shall pay all Taxes with respect to the Pre-Closing Period.
(b) If the taxable period of the Seller Companies that includes the day
immediately prior to the Closing Date does not terminate on such date (a
"Straddle Period"), the parties will, to the extent permitted by applicable
law, elect with the relevant governmental or regulatory authority to treat a
portion of any such Straddle Period as a short taxable period ending as of the
close of business
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on the day immediately prior to the Closing Date and such short taxable period
shall be treated as a Pre-Closing Period for purposes of this Agreement. In
any case where applicable law does not permit such an election to be made,
Taxes with respect to the Seller Companies for the Straddle Period shall be
allocated to the Pre-Closing Period using an interim closing-of-the-books
method that is consistent with the priniciples of Treas. Reg. Section 1.1502-
76(b)(4)(i) (assuming that such taxable period ended at the close of business
on the day immediately preceding the Closing Date), and treating such period
as a Pre-Closing Period, except that (i) exemptions, allowances or deductions
that are calculated on an annual basis (such as the deduction for depreciation)
shall be apportioned on a per-diem basis, and (ii) real property Taxes shall be
allocated in accordance with Section 164(d) of the Code. In the case of any
Straddle Period described in the preceding sentence, Buyer shall provide
Seller and its authorized representatives with copies of the completed Tax
Return for such period and a statement certifying the amount of Taxes shown on
such Tax Return that are chargeable to the Seller Companies at least thirty
(30) days prior to the due date for the filing of such Tax Return (including
any extensions thereof; the "Due Date"), and Seller and its authorized
representatives shall have the right to review such Tax Return and statement
prior to the filing of such Tax Return. Seller and Buyer agree to consult and
resolve in good faith any issues arising as a result of the review of such Tax
Return and Tax statement by Seller or its authorized representatives and to
mutually consent to the filing of such Tax Return. If Seller disputes any
amount, item, allocation or election set forth in the Tax Return or the
statement, Seller shall notify Buyer of such dispute, setting forth with
reasonable particularity the matter or matters in dispute. If the parties are
unable to resolve the dispute within ten (10) business days prior to the Due
Date, the parties shall jointly request Arthur Anderson, or another mutually
acceptable independent certified "big six" accounting firm to resolve any
issue as promptly as possible. If such accounting firm is unable to make a
determination with respect to any disputed issue prior to the Due Date, Buyer,
the Seller Companies or Buyer's Affiliate, as the case may be, may file such
Tax Return without the consent of Seller, subject, however, to the obligation
thereafter to file an amended Tax Return reflecting the final decision of the
accounting firm (which decision shall be rendered prior to the expiration of
the period during which an amended Tax Return may validly be filed with respect
to the applicable taxable period). Not later than five (5) business days
before the Due Date, Seller shall pay to Buyer or the Seller Companies an
amount equal to the Taxes shown on the statement as being chargeable to Seller
pursuant to this Section. If Seller has disputed any such amount, item,
allocation or election, the appropriate amounts in dispute may be withheld by
Seller, subject to Seller's obligation to pay to Buyer or the Seller Companies
appropriate amounts to reflect the decision of the accounting firm in
immediately available funds not later than five (5) days after such decision
has been rendered.
(c) Buyer, in its discretion, may cause any of the Seller Companies to
make an election under Section 338(g) of the Code and/or corresponding
provisions of state tax law; provided that the economic and tax consequences of
any such election shall be imposed solely on Buyer and its Affiliates, shall
not reduce the amounts payable to Seller under this Agreement, and shall not be
allocated as a cost or responsibility of Seller under subsection (b) above.
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(d) Buyer and Seller acknowledge that Tax authorities may make
adjustments to Tax Returns for one or more of the Seller Companies that
increase Taxes for the Seller Companies for one or more Pre-Closing Periods and
also create a related decrease in Taxes for the Seller Companies for one or
more periods after the Closing. In determining the extent to which Buyer is
entitled to indemnification under Section 11.1, Seller shall be given credit
for post-Closing favorable Tax adjustments which Buyer will realize during the
three year period after the Closing Date as a result of the pre-Closing
unfavorable Tax (except for interest and penalties) adjustment.
10.5 Termination Prior to Closing. Notwithstanding anything herein to the
contrary, this Agreement may be terminated at any time: (i) on or prior to the
Closing Date by mutual consent of Buyer and Seller; (ii) on or prior to the
Closing Date by Buyer, if there has been a material adverse change in the
operations, financial condition, businesses or prospects for future results of
operations of the Facilities, taken as a whole, since the effective date
hereof; (iii) on the Closing Date by Buyer if any of the conditions specified
in Article 7 of this Agreement have not been satisfied by Seller or the Seller
Companies or waived in writing by Buyer; (iv) on the Closing Date by Seller if
any of the conditions specified in Article 8 of this Agreement have not been
satisfied by Buyer or waived in writing by Seller; and (v) by Buyer or Seller
if the Closing shall not have taken place on or before 11:59 p.m. on August 31,
1994 (which date may be extended by mutual written agreement of Buyer and
Seller), in any event unless the party desiring to terminate this Agreement is
in default hereunder.
10.6 Post-Closing Maintenance of and Access to Information.
(a) Seller and Buyer acknowledge that after Closing each party may need
access to information or documents in the control or possession of the other
party for the purposes of concluding the transactions herein contemplated, Tax
Returns or audits, compliance with the Government Reimbursement Programs and
other laws and regulations, and the prosecution or defense of third party
claims. Accordingly, each party shall keep, preserve and maintain in the
ordinary course of business, and as required by law and relevant insurance
carriers, all books, records (including patient medical records), documents and
other information in the possession or control of such party and relevant to
the foregoing purposes at least until the expiration of any applicable statute
of limitations or extensions thereof.
(b) Each party shall cooperate fully with, and make available for
inspection and copying by, the other party, its employees, agents, counsel and
accountants or governmental agencies, upon written request and at the expense
of the requesting party, such books, records documents and other information to
the extent reasonably necessary to facilitate the foregoing purposes. In
addition, each party shall cooperate with, and shall permit and use its best
efforts to cause its respective former and present directors, officers and
employees to cooperate with, the other party on and after Closing in furnishing
information, evidence, testimony and other assistance in connection with any
action, proceeding, arrangement or dispute of any nature with respect to the
subject matters of this Agreement and pertaining to periods prior to the
Closing Date.
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(c) Upon the Company's receipt of appropriate consents and
authorizations, Seller shall be entitled to remove from the Facilities, at
Seller's sole risk and expense, any patient records solely for purposes of
pending litigation involving a patient to whom and services to which such
records refer, as certified in writing prior to removal by counsel retained by
Seller in connection with such litigation. Any records so removed from the
Facilities shall be promptly returned to Company following their use by Seller.
(d) The exercise by Seller of any right of access granted herein
shall not materially interfere with the business operations of Company.
(e) Buyer shall permit, and shall permit the Seller Companies to
permit, Mr. Thomas M. Ways, so long as he is employed by Guarantor or any
Affiliate of Guarantor, to assist Seller in post-Closing matters relating to
the transactions contemplated by this Agreement. Such assistance shall be
limited to eight hours each month for one year after the Closing Date at no
cost to Seller (except for reimbursable expenses as described below). Seller
shall reimburse Buyer for assistance provided by Mr. Ways in excess of eight
hours each month or after one year at the rate of $150.00 per hour. In no
event shall Mr. Ways be required to provide any assistance pursuant to this
Section for more than 24 hours in any one month or after one year. Seller
shall reimburse Mr. Ways, Buyer or its Affiliate for all direct, out-of-pocket
expenses incurred by Mr. Ways or by Buyer or its Affiliate on behalf of Mr.
Ways in connection with such assistance.
10.7 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) the agreements, instruments
and other documents delivered at the Closing, and (c) financial statements,
certificates and other information previously or hereafter furnished to Seller
or to Buyer, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process and Seller and
Buyer may destroy any original documents so reproduced. Seller and Buyer
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial, arbitral or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was
made by Seller or Buyer in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
10.8 Misdirected Payments, etc. Each of Seller and Buyer shall
remit to the other with reasonable promptness any payments received, which
payments are on or in respect of accounts or notes receivable owned by and due
to (or are otherwise payable to) the other. In addition, if any Government
Reimbursement Program or other Person determines that funds previously paid or
credited to Seller, any of the Seller Companies, any other Affiliate of Seller,
or the Facilities in respect of services rendered prior to the Closing Date
have resulted in an overpayment or must be repaid, Seller shall be responsible
for, and reimburse the Seller Companies and Buyer for, the repayment of said
monies (and the defense of such actions). Subject to the provisions of
Section 10.9, if Buyer or any of the Seller Companies suffers any deduction to
or offset against amounts due Buyer or the Seller Companies of funds previously
paid or credited to Seller, the Seller Companies, any other
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Affiliate of Seller, or the Facilities in respect of services rendered prior to
the Closing Date, Seller shall immediately pay to Buyer or the Seller Companies
the amounts so billed or offset upon demand.
10.9 Government Reimbursement Program Prior Period Adjustments.
(a) As used herein, the term (i) "Prior Period Adjustments" means any and
all Cost Report adjustments suffered by Buyer or any of the Seller Companies
after Closing and relating to Cost Report periods ending prior to the Closing
Date, (ii) "Net Favorable Adjustments" means the difference between favorable
Prior Period Adjustments, and unfavorable Prior Period Adjustments, (iii) "Net
Unfavorable Adjustments" means the difference between unfavorable Prior Period
Adjustments and favorable Prior Period Adjustments, (iv) "Seller's Credits"
means all indemnification payments made by Seller to Buyer pursuant to Article
11 in respect of adverse Prior Period Adjustments only, and (iv) "Cost Report
Reconciliation Statement" means the statement prepared by Buyer setting forth
either the Net Favorable Adjustments or Net Unfavorable Adjustments, as the
case may be.
(b) On the second anniversary of the Closing Date (or as soon thereafter
as is reasonably practicable), Buyer shall provide to Seller the Cost Report
Reconcilation Statement. If the Cost Report Reconcilation Statement shows a
Net Favorable Adjustment and there exist any Seller Credits, Buyer shall pay to
Seller the amount of Seller Credits. If the Cost Report Reconciliation
Statement shows a Net Unfavorable Adjustment and the Net Unfavorable
Adjustments exceed the Seller Credits, then Seller shall pay to Buyer the
difference. If the Cost Report Reconciliation Statement shows a Net
Unfavorable Adjustment and the Seller Credits exceed the Net Unfavorable
Adjustments, then Buyer shall pay to Seller the difference. Any amounts due
hereunder shall be paid within twenty business days after delivery of the Cost
Report Reconciliation Statement If Seller disputes the figures in the Cost
Report Adjustment Statement and the dispute is not resolved to the mutual
satisfaction of Seller and Buyer within 30 days after the delivery of the Cost
Report Reconciliation Statement, such dispute shall be submitted to Arthur
Anderson or, if Arthur Anderson is unable or unwilling to participate, another
mutually acceptable independent "big six" certified public accounting firm, in
any event acting as experts and not as arbitrators, for verification of the
Cost Report Adjustment Statement in accordance with the provisions of this
Agreement. The decision of the accounting firm shall be final and binding upon
Seller and Buyer; there shall be no right of appeal from such decision; and
such accounting firm's fees and expenses shall be borne equally by the parties.
(c) Amounts due Buyer or Seller pursuant to this Section shall not be
taken into account when determining whether the "buckets" described in Sections
11.2(a)(i) and 11.4(a)(i) have been exceeded, it being the intention of the
parties that the provisions of this Section be observed without regard to such
buckets.
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11. INDEMNIFICATION.
11.1 Indemnification by Seller. Subject to and to the extent provided in
this Article 11, from and after the Closing, Seller shall indemnify, defend
and hold harmless Buyer, the Company, and each of Buyer's and the Company's
subsidiaries, stockholders, Affiliates, officers, directors, employees,
successors and assigns after Closing (Buyer, the Company and such persons,
collectively, "Buyer's Indemnified Persons"), from and against any damages,
claims, costs, losses, liabilities, expenses or obligations (including
interest, penalties, court costs, costs of preparation and investigation,
reasonable attorneys', accountants' and other professional advisors' fees and
associated expenses) (collectively, "Losses") incurred or suffered by Buyer's
Indemnified Persons, directly or indirectly, as a result of or arising from:
(a) any breach of any representation or warranty of Seller contained
herein, whether or not Buyer's Indemnified Persons relied thereon or had
knowledge thereof, or the nonfulfillment of any covenant, agreement or
other obligation of Seller, set forth in this Agreement, or any agreement,
instrument, certificate or other document delivered or to be delivered
pursuant hereto;
(b) the Company's Indebtedness to be Satisfied at Closing;
(c) all Taxes and Government Reimbursement Program obligations or
liabilities of the Seller Companies or Seller arising out of or resulting
from the Consolidation;
(d) all Taxes and Government Reimbursement Program obligations in
respect of all periods ending prior to the Closing Date, to the extent not
set forth on the Final Balance Sheet (other than Medicare recapture
arising as a result of the sale of the Living Care Center to HRT);
(e) all intercompany accounts between the Seller and any of the
Seller Companies as of the Closing Date;
(f) all Building Defects if Seller had knowledge of such Building
Defects and failed to disclose to Buyer such Building Defects in the
Schedules hereto;
(g) all liabilities arising out of Disclosed Litigation, excluding
Assumed Litigation;
(h) all Environmental Claims relating to the ownership of the Real
Property or the operation of the Facilities prior to the Closing Date if
Seller had knowledge of such Environmental Claims (or facts which would
form the basis of such a claim) and failed to disclose to Buyer such
Environmental Claims (or facts which would form the basis of such a claim)
in the Schedules hereto or in the Environmental Reports;
(i) all Malpractice Litigation;
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(j) all Health Law Violations if Seller had knowledge of such Health
Law Violations and failed to disclose to Buyer such Health Law Violations
in the Schedules;
(k) all Health Law Violations which are not reasonably ascertainable
from the terms of any Contract upon which liability is based;
(l) all liabilities arising out of or in connection with litigation
or other proceedings by third parties for acts or omissions relating to
the ownership or operation of the Facilities prior to the Closing Date,
excluding Environmental Claims, claims relating to Building Defects and
Health Law Violations, if Seller had knowledge of such acts or omissions
and failed to disclose such acts or omissions in the Schedules; or
(m) all liabilities arising out of or in connection with litigation
or other proceedings for acts or omissions relating to the ownership or
operation of the Facilities prior to the Closing Date, excluding
Environmental Claims, claims based on Building Defects and Health Law
Violations.
11.2 Limitations/Seller.
(a) Seller shall have no liability under Section 11.1 and no claim under
Section 11.1 of this Agreement shall:
(i) accrue to any of Buyer's Indemnified Persons against Seller
under Section 11.1(a) unless and until the total liability of Seller in
respect of claims under Section 11.1(a) exceeds $150,000 in the aggregate;
provided that there shall be no $150,000 minimum Loss requirement, and
liability of Seller shall arise from and after $1.00 of Losses, in respect
of Losses resulting from Seller's intentional, willful or reckless
nonfulfillment or breach of any covenant in this Agreement or Seller's
intentional misrepresentation or fraud;
(ii) be made unless notice thereof shall have been given by or
on behalf of any of Buyer's Indemnified Persons to Seller in the manner
provided in Section 11.5, and
(iii) be made for a breach of Section 3.14 if (i) the liability
or obligation of Buyer arising as a result of such breach was incurred by
Seller in the ordinary course of Seller's business (ii) the liability or
obligation of Seller arising under the Contract prior to Closing was
accrued or expensed on the Financial Statements of Seller, and (iii) if
the Contract is terminable by Buyer without penalty and within twelve
months of the Closing Date.
11.3 Indemnification by Buyer. Subject to and to the extent provided in
this Article 11, from and after the Closing Date, Buyer shall indemnify,
defend and hold harmless Seller and each of Seller's subsidiaries,
stockholders, Affiliates, officers, directors, employees, successors and
assigns after Closing (Seller and such persons, collectively, "Seller's
Indemnified Persons") from and against any Losses incurred or suffered by
Seller's Indemnified Persons, directly or indirectly, as a result of
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or arising from (i) any breach of any representation or warranty of Buyer
contained herein, whether or not Seller's Indemnified Persons relied thereon
or had knowledge thereof, or the nonfulfillment of any covenant, agreement or
other obligation of Buyer, set forth in this Agreement, or any agreement,
instrument, certificate or other document delivered or to be delivered
pursuant hereto, and (ii) any Medicare recapture arising out of the sale by
Seller of the Living care Center to HRT.
11.4 Limitations/Buyer.
(a) Buyer shall have no liability under Section 11.3 and no claim under
Section 11.3 of this Agreement shall:
(i) accrue to any of Seller's Indemnified Persons against Buyer
under Section 11.3(a) unless the total liability of Buyer in respect of
claims under Section 11.3(a) exceeds $150,000 in the aggregate; provided
that there shall be no $150,000 minimum Loss requirement, and liability of
Buyer shall arise from and after $1.00 of Losses, in respect of Losses
resulting from Buyer's intentional, willful or reckless nonfulfillment or
breach of any covenant in this Agreement or Buyer's intentional
misrepresentation or fraud; and
(ii) be made unless notice thereof shall have been given by or
on behalf of any of Seller's Indemnified Persons to Buyer in the manner
provided in Section 11.5.
11.5 Notice and Procedure. All claims for indemnification by any Person
against whom claims of indemnification are being asserted (an "Indemnifying
Party") under any provision of Article 11 hereof shall be asserted and resolved
as follows:
(a)(i) If any claim or demand for which an Indemnifying Party would be
liable for Losses to a Person claiming indemnification (an "Indemnified Party")
is asserted against or sought to be collected from the Indemnified Party by a
Person other than Buyer or Seller or any Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a Claim Notice (as defined below)
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to deliver the Claim Notice to the Indemnifying Party within 30 days
after the Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party will not be obligated to indemnify the Indemnified Party
with respect to such Third Party Claim if and only to the extent that the
Indemnifying Party's ability to defend the Third Party Claim has been
irreparably prejudiced by such failure. The Indemnifying Party will notify the
Indemnified Party within 11 days after receipt of the Claim Notice (the "Notice
Period") whether the Indemnifying Party intends, at the sole cost and expense
of the Indemnifying Party, to defend the Indemnified Party against the Third
Party Claim. The assumption by the Indemnifying Party of the defense of the
Third Party Claim constitutes an admission by the Indemnifying Party that the
claim is one for which the Indemnifying Party is ultimately liable under this
Article 11.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party intends to defend the
Indemnified Party against the Third
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Party Claim, then the Indemnifying Party will have the right to defend,
at its sole cost and expense, the Third Party Claim by all appropriate
proceedings, which proceedings will be diligently prosecuted by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party (with the consent of the Indemnified Party, which
consent will not be unreasonably withheld). The Indemnifying Party will
have full control of such defense and proceedings; provided that the
Indemnified Party may file during the Notice Period, at the sole cost and
expense of the Indemnifying Party, any motion, answer or other pleading
that the Indemnified Party may deem necessary or appropriate to protect
its interests and not irrevocably prejudicial to the Indemnifying Party
(it being understood and agreed that, except as provided in Section
11.5(a)(iii), if an Indemnified Party takes any such action that is
irrevocably prejudicial and conclusively causes a final adjudication that
is materially adverse to the Indemnifying Party, the Indemnifying Party
will be relieved of its obligations hereunder with respect to that portion
of the Third Party Claim prejudiced by the Indemnified Party's action);
and provided further that, if requested by the Indemnifying Party, the
Indemnified Party shall cooperate, at the sole cost and expense of the
Indemnifying Party, with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party elects to
contest or, if appropriate in the judgment of the Indemnified Party and
related to the Third Party Claim, in making any counterclaim or
cross-claim against any Person (other than the Indemnified Party). The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim assumed by the Indemnifying Party
pursuant to this Section 11.5(a)(ii) and, except as provided in the
preceding sentence, the Indemnified Party will bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnifying Party may not assume the defense of the Third
Party Claim if (1) the Persons against whom the claim is made, or any
impleaded Persons, include both the Indemnifying Party and any Indemnified
Party, and (2) representation of both such Persons by the same counsel
would be inappropriate due to actual or potential differing interests
between them, in which case any Indemnified Party shall have the right to
defend the Third Party Claim and to employ counsel at the expense of the
Indemnifying Party.
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party intends to
defend the Indemnified Party against the Third Party Claim, or if the
Indemnifying Party gives such notice but fails to diligently prosecute or
settle the Third Party Claim, or if the Indemnifying Party fails to give
any notice whatsoever within the Notice Period, then the Indemnified Party
will have the right (but not the obligation) to defend, at the sole cost
and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be diligently prosecuted
by the Indemnified Party to a final conclusion or settled at the
discretion of the Indemnified Party. The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided that, if requested by the Indemnified Party,
the Indemnifying Party shall cooperate, at the sole cost and expense of
the Indemnifying Party, with the Indemnified Party and its counsel in
contesting the Third Party Claim which the Indemnified Party is
contesting, or, if appropriate in the judgment of the Indemnified Party
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and related to the Third Party Claim, in making any counterclaim or cross
claim against any Person (other then the Indemnifying Party).
(iv) Notwithstanding the foregoing provisions of Section
11.5(a)(iii), if the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party disputes its
obligation to indemnify the Indemnified Party against the Third Party
Claim, and if such dispute is resolved pursuant to Section 11.5(c) in
favor of the Indemnifying Party, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Section 11.5(a)(iii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party will reimburse the Indemnifying Party in full for all
such costs and expenses. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to Section 11.5(a)(iii), but the Indemnifying Party will bear its
own costs and expenses with respect thereto if such participation is not
at the request of the Indemnifying Party.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that is not a Third Party Claim, the Indemnified
Party shall deliver an Indemnity Notice (as defined below) with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the notice referred to in the preceding sentence shall not impair such
party's rights hereunder except to the extent that an Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party fails to notify the Indemnified Party within ten (10) days
following its receipt of the Indemnity Notice that the Indemnifying Party
disputes its obligation to indemnify the Indemnified Party hereunder, the claim
will be conclusively deemed a liability of the Indemnifying Party hereunder.
(c) If the Indemnifying Party timely disputes its liability with respect
to claim described in a Claim Notice or an Indemnity Notice, the Indemnifying
Party and the Indemnified Party shall proceed promptly and in good faith to
negotiate a resolution of such dispute within sixty (60) days following receipt
of a Claim Notice or an Indemnity Notice and, if such dispute is not resolved
through negotiations during such 60-day period, it shall be resolved pursuant
to the provisions of Article 12.
(d) The Indemnifying Party shall pay the amount of any liability to the
Indemnified Party within thirty (30) days following its receipt of a Claim
Notice or an Indemnity Notice, or on such later date (i) in the case of a Third
Party Claim, as the Indemnified Party suffers Losses in respect of the Third
Party Claim, or (ii) in the case of an Indemnity Notice in which the amount of
the claim is estimated, promptly after the amount of such claim becomes finally
determined. In the event the Indemnified Party is not paid in full for its
claim in a timely manner after the Indemnifying Party's obligation to indemnify
and the amount thereof has been determined in accordance with this Article 11,
the amount due shall bear interest from the date that the Indemnifying Party
received the Claim Notice or the Indemnity Notice until paid at the interest
rate provided in Section 1.8, and in addition to any other rights it may have
against the Indemnifying Party, the Indemnified Party shall have the
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right to set-off the unpaid amount of such claim against any amounts owed by
it to the Indemnifying Party.
(e) The term "Claim Notice" means written notification of a Third Party
Claim by an Indemnified Party to an Indemnifying Party under Article 11,
enclosing a copy of all papers served, if any, and specifying the nature of and
alleged basis for the Third Party Claim and, to the extent then feasible, the
alleged amount or the estimated amount of the Third Party Claim.
(f) The term "Indemnity Notice" means written notification of a claim for
indemnity under Article 11 hereof other than a Third Party Claim by an
Indemnified Party to an Indemnifying Party pursuant to Section 11.5(b) hereof,
specifying the nature of and specific basis for the claim and, to the extent
then feasible, the amount or the estimated amount of the claim.
(g) Any estimated amount of a claim submitted in a Claim Notice or an
Indemnity Notice shall not be conclusive of the final amount of such claim, and
the giving of a Claim Notice when an Indemnity Notice is properly due, or the
giving of an Indemnity Notice when a Claim Notice is properly due, shall not
impair such Indemnified Party's rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. Notice of any claim comprised in part of Third Party Claims and
claims that are not Third Party Claims may be given pursuant to either Section
11.5(a) or 11.5(b).
(h) For purposes of this Article 11 and with respect to Taxes, a Third
Party Claim includes a Revenue Agent's Report, Statutory Notice of Deciency,
Notice of Proposed Assessment, or any other official written notice from a
Taxing authority that Taxes are due or that a Tax audit will be conducted.
11.6 Treatment of Indemnification Payments. Any indemnification payment
made by either party pursuant to this Article 11 shall be treated by the
parties as an adjustment to that portion of the Purchase Price allocated to the
Company Shares and the Partnership Interests.
11.7 Survival of Representations and Warranties; Indemnity Period
Notwithstanding any right of Buyer (whether or not exercised) to investigate
the affairs of Seller or Company or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement, Seller has, on the one hand, and
Buyer has, on the other hand, the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements respectively made by
Seller, on the one hand, and Buyer, on the other hand, in this Agreement or in
any certificate respectively delivered by Seller or Buyer pursuant to Section
7.1 or 8.1 will survive the Closing (a) indefinitely with respect to matters
covered by Sections 3.1, 4.1 and 11.1(b), 11.1(e) and11.1(g), (b) until sixty
(60) calendar days after the expiration of all applicable statutes of
limitations (including all periods of extension, whether automatic or
permissive) with respect to matters covered by Sections 3.19, 3.24, 11.1(c),
11.1(d), 11.1(i), 11.1(j) and 11.1(l), and
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(c) until the second anniversary of the Closing Date in the case of Sections
11.1(f), 11.1(h), 11.1(k), 11.1(m), and all other representations, warranties,
covenants and agreements, provided that:
(i) any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with clause (b) or (c) above shall
survive if (and only with respect to the matters set forth in) a Claim
Notice or an Indemnity Notice shall have been given on or prior to such
termination date, until the related claim for indemnification has been
satisfied or otherwise resolved in accordance with Article 12;
(ii) in the event of fraud in the making of any representation
or warranty, or intentional, willful or reckless nonfulfillment or breach
of any covenant in this Agreement, all representations, warranties,
covenants and agreements that are the subject of the fraud, willful or
reckless nonfulfillment or breach, shall survive until sixty (60) calendar
days after the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive) with
respect to matters covered thereby;
(iii) covenants and agreements to be performed after the Closing
Date will survive the Closing for the term specified therein, or, if no
term is specified, indefinitely;
(iv) rights to indemnification under Article 11 will survive
until any claims brought thereunder shall have been satisfied or otherwise
resolved as provided therein; and
(v) rights to indemnification by Buyer pursuant to Section 11(k)
and (m) shall be limited to recovery against the Escrow Amount.
12. GENERAL.
12.1 Schedules. The Schedules and all exhibits and documents referred to
in or attached to this Agreement are integral parts of this Agreement as if
fully set forth herein and all statements appearing therein shall be deemed to
be representations. Seller shall have the right to update the Schedules after
the effective date of this Agreement for matters arising between the effective
date of this Agreement and the Closing Date and, subject to Buyer's right to
terminate this Agreement pursuant to Section 10.5(ii), such updated Schedules
shall constitute the Schedules on and as of the Closing Date. Except as set
forth in the Schedules, Seller represents and warrants to Buyer that Seller has
provided to Buyer complete and genuine copies of all Contracts, instruments and
other documents described in, attached to or referenced in the Schedules.
12.2 Consented Assignment. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract if an attempted assignment thereof without the consent of another
Person would (i) constitute a breach thereof or in any material way affect the
rights of the Company thereunder, (ii) be ineffective, or (iii) materially
affect the Company's rights thereunder so that after Closing the Company would
not in fact maintain or receive all such rights. In any such event, Seller
shall cooperate in any reasonable arrangement designed to
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provide for the Company after Closing the benefits of the Contracts, including
enforcement of any and all rights of Seller against the other Person arising
out of the breach or cancellation by such other Person or otherwise.
12.3 Time of Essence. Time is of the essence in the performance of this
Agreement. This Section may not be waived except in a writing expressly
referring hereto.
12.4 CON Disclaimer. This Agreement shall not be deemed to be an
acquisition or obligation of a capital expenditure or of funds within the
meaning of the certificate of need statute of any state, until the appropriate
governmental agencies shall have granted a certificate of need or other
appropriate approval or ruling.
12.5 Consents, Approvals and Discretion. Except as herein expressly
provided to the contrary, whenever this Agreement requires any consent or
approval to be given by any party or any party must or may exercise discretion,
such consent or approval shall not be unreasonably withheld or delayed and such
discretion shall be reasonably exercised.
12.6 Expenses; Legal Fees and Costs.
(a) Except as otherwise expressly set forth in this Agreement, all
expenses of the preparation of this Agreement and of the purchase of the
Shares, including counsel fees, accounting fees, brokerage or finder fees and
commissions, investment advisor's fees and disbursements, shall be borne by the
party incurring such expense, whether or not such transactions are consummated.
(b) Seller shall pay all stock transfer and stamp taxes arising out of
the transfer of the Shares. Buyer shall pay any HSR Act filing fee.
(c) In the event any party incurs legal expenses to enforce any provision
of this Agreement, the prevailing party will be entitled to recover such legal
expenses, including attorney's fees, costs and necessary disbursements, in
addition to any other relief to which such party shall be entitled at law or in
equity.
12.7 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to such
state's conflicts of laws rules.
12.8 Benefit/Assignment. Subject to provisions herein to the contrary,
this Agreement shall inure to the benefit of and be binding upon the parties
and their respective legal representatives, successors and assigns; provided
that no party may assign this Agreement or any part hereof, or delegate any
duty or obligation to be performed hereunder, to another Person without the
prior written consent of the other party; provided further that, prior to
Closing Buyer may, without the prior written consent of Seller, assign this
Agreement, or any part hereof, and delegate its duties and obligations to be
performed hereunder, to one or more Persons controlled by Guarantor which
Person shall become Buyer hereunder.
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12.9 Accounting Date. The transactions contemplated hereby shall be
effective for accounting purposes as of the Effective Time, unless otherwise
agreed in writing by Seller and Buyer.
12.10 No Third Party Beneficiary. The terms and provisions of this
Agreement (including Section 6.5) are intended solely for the benefit of Buyer
and Seller and their respective successors or assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other Person.
12.11 Waiver of Breach. The waiver by either party of a breach or
violation by another party of any provision of this Agreement shall not operate
as, or be construed to constitute, a waiver of any subsequent breach or
violation of the same, or a breach or violation of any other, provision hereof.
All remedies, either under this Agreement, or by law or otherwise afforded,
will be cumulative and not alternative.
12.12 Notices. Any notice, demand or communication required, permitted
or desired to be given hereunder shall be deemed effectively given when
personally delivered, when received by facsimile or other electronic means,
including telegraph and telex (other than for a Claim Notice or Indemnity
Notice) , when delivered by overnight courier, or five (5) days after being
deposited in the United States mail, with postage prepaid thereon, certified
or registered mail, return receipt requested, in any event addressed as follows:
Buyer: c/o OrNda HealthCorp
3401 West End Avenue
Suite 700
Nashville, Tennessee 37203
Attn: General Counsel
Facsimile: 615/783-1232
Seller (prior to Closing):
Fountain Valley Medical Development Co
11180 Warner Avenue
Fountain Valley, California 92708
Attn: Thomas M. Ways - Chief Executive Office
Facsimile: 714/435-1225
Seller (after Closing):
Fountain Valley Medical Development Co.
c/o BDO Seidman
1900 Avenue of the Stars, 11th Floor
Los Angeles, California 90067
Attention: Arthur R. Nemiroff
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In either case, with a copy to:
Sherwin L. Memel, Esq.
Manatt, Phelps & Phillips
11355 West Olympic Blvd.
Los Angeles, California 90064-4267
Facsimile: 310/312-4224
or to such other address or number, or to the attention of such other Person,
as any party may designate, at any time, in writing in conformity with these
notice provisions.
12.13 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of Buyer or Seller under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
12.14 Gender and Number. Whenever the context of this Agreement
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.
12.15 Divisions and Headings. The Table of Contents, the divisions of
this Agreement 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 Agreement.
12.16 Entire Agreement/Amendment. This Agreement supersedes all
previous contracts, and constitutes the entire agreement of whatsoever kind or
nature existing between or among the parties representing 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 statement or prior written
material not specifically incorporated herein shall be of any force and effect.
The parties specifically acknowledge that in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements
contained in this Agreement and no others. All prior representations or
agreements, whether written or verbal, not expressly incorporated herein are
superseded unless and until made in writing and signed by the parties. The
representations and warranties set forth in this Agreement shall survive the
Closing and remain in full force and effect as provided in Article 11, and
shall survive the execution and delivery of all other agreements, instruments
or other documents described, referenced or contemplated herein and shall not
be merged herewith or therewith. This Agreement may be executed in two or more
counterparts, each and all of which shall be deemed an
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original and all of which together shall constitute but one and the same
instrument. This Agreement may not be amended or otherwise modified except in
a writing duly executed by the parties.
12.17 Press Releases. At all times at or prior to the Closing, Seller,
on the one hand, and Buyer, on the other hand, will consult with the other
before issuing or making any reports, statements or releases to the public with
respect to this Agreement or the transactions contemplated hereby and will use
good faith efforts to obtain the other party's approval of the text of any
public report, statement or release to be made on behalf of such party. If
either party is unable to obtain the approval of its public report, statement,
or release from the other party and such report, statement, or release is, in
the opinion of legal counsel to such party, required by law to discharge such
party's disclosure obligations, then the party may make or issue the legally
required report, statement, or release and promptly furnish the other party
with a copy thereof.
12.18 Drafting. No provision of this Agreement shall be interpreted
for or against any party hereto on the basis that such party was the draftsman
of such provision, both parties having participated equally in the drafting
hereof, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
12.19 Waiver of Trial by Jury. Each party hereby knowingly,
voluntarily and irrevocably waives any and all rights it may have to demand
that any action, proceeding or counterclaim arising out of or in any way
related to this Agreement or the relationships of the parties be tried by a
jury. This waiver extends to any and all rights to demand a trial by jury
arising from any source including, but not limited to, the Constitution of the
United States, the Constitution of the State of California, common law or any
applicable law, rule, or regulation.
[Rest of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple originals by their authorized officers, all as of the date
and year first above written.
BUYER:
SUMMIT HEALTH, LTD.
a California corporation
By: /s/ Keith B. Pitts
---------------------------------
Keith B. Pitts
Executive Vice President &
Chief Financial Officer
SELLER:
FOUNTAIN VALLEY MEDICAL
DEVELOPMENT CO.,
a California limited partnership
By: /s/ Richard W. Ayres
--------------------------------------
Printed Name: Richard W. Ayres
------------------------
Title: General Partner
By: /s/ Rudolph C. Baldoni
--------------------------------------
Printed Name: Rudolph C. Baldoni
------------------------
Title: General Partner
By: /s/ Christoper Smith
--------------------------------------
Printed Name: Christoper Smith
------------------------
Title: General Partner
By: /s/ Anthony D. Lodonne
--------------------------------------
Printed Name: Anthony D. Lodonne
------------------------
Title: General Partner
By: /s/ Stanley R. Mayberg
--------------------------------------
Printed Name: Stanley R. Mayberg
------------------------
Title: General Partner
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GUARANTY OF BUYER'S OBLIGATIONS
In consideration of Fountain Valley Medical Development Co., a California
limited partnership (the "Seller") entering into the Stock Purchase Agreement,
dated as of July 20, 1994 (the "Agreement"), between Seller and Summit Health,
Ltd. (the "Buyer"), OrNda HealthCorp, a Delaware corporation and the ultimate
parent entity of Buyer (the "Parent"), as principal obligor and not merely as a
surety, hereby unconditionally guarantees full, punctual and complete
performance by Buyer of all of Buyer's obligations under or arising out of or
in connection with the Agreement and so undertakes to Seller that, if and
whenever Buyer is in default, the Parent:
(a) will on demand duly and promptly perform or procure the
performance of Buyer's obligations; and
(b) will indemnify and at all times hold harmless Seller against all
costs, charges and expenses which it may sustain or incur by reason of the
failure of Buyer to perform any of its obligations in whole or in part.
The foregoing guarantee:
(a) is a continuing guarantee and will remain in full force and
effect until the obligations and liabilities of Buyer under or arising out
of or in connection with the Agreement have been duly performed or been
discharged;
(b) will continue to be effective or will be reinstated, as the case
may be, if at any time any sum which has become payable to Seller
hereunder and has been paid has to be restored by it upon the bankruptcy,
liquidation or reorganization of Buyer or otherwise; and
(c) will continue and survive any assignment of Buyer's rights,
duties or obligations pursuant to Section 12.8.
ORNDA HEALTHCORP
By: /s/ Keith B. Pitts
-------------------------------------------------
Executive Vice President, Chief Financial Officer
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