Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into as of
January 6th, 2011 (the “Execution Date”), by and between RHA Tishomingo, LLC, an
Oklahoma limited liability company d/b/a Johnston Memorial Hospital (“Seller”),
and Mercy Tishomingo Hospital Corporation, an Oklahoma not for profit
corporation (“Buyer”).
WITNESSETH
A. Seller is the owner of Johnston Memorial Hospital, a licensed critical access
hospital located in the City of Tishomingo, Oklahoma (the “Hospital”).
B. As of the Effective Date (as defined herein) Seller and R.S.E. Enterprises,
Inc., an Oklahoma corporation (“RSE”), will enter into a transaction whereby
Seller will sell, transfer and assign to RSE the following (the “RSE
Transaction”): (i) all of the real estate, fixtures and all additions and/or
improvements related to the Hospital, and (ii) all equipment (including x-ray,
CT, PET, MRI and other imaging or diagnostic equipment), computers (and all
associated software), vehicles, machinery, furnishings, beds, furniture,
appliances and trade fixtures used in the operation of the Hospital.
C. RSE, Seller and Buyer have determined that it is in the best interests of the
community served by the Hospital if Buyer operates and manages the Hospital from
and after the Effective Date, and as of the Effective Date Buyer shall lease the
Hospital from RSE.
D. To facilitate the transition and continued operation and management of the
Hospital from Seller to Buyer, Seller desires to transfer to Buyer certain of
the assets utilized in connection with the operation of the Hospital.
NOW, THEREFORE, in consideration of the premises and the agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged and subject to and upon
the conditions and terms of this Agreement, the parties hereto, intending to be
legally bound, agree as follows:
1. Transfer of Certain Operational Assets. As of the Effective Date, Seller
hereby transfers, sells, conveys, assigns and delivers to Buyer, and Buyer, in
reliance upon the representations, warranties and agreements and subject to the
conditions set forth in this Agreement, agrees to purchase, accept and acquire
all of Seller’s right, title and interest in and to the following assets (the
“Purchased Assets”):
(a) the Medicare Provider Number (the “MPN”) and the Medicare National Provider
Identifier (the “NPI”) issued to Seller from the Centers for Medicare & Medicaid
Services, to operate the Hospital;

 

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(b) all inventory and supplies of every kind and description used or useful in
the operation of the Hospital, including without limitation, the inventory and
supplies identified on Schedule 1(b) hereto;
(c) to the extent permitted by law and not otherwise assigned to or separately
obtained by Buyer, all permits, licenses, approvals, and other intangible
property or any interest therein now or hereafter owned or held by Seller in
connection with the Hospital and necessary for the operation of the Hospital,
including all trade names, trademarks, service marks, logos, books and records,
water rights and reservations, zoning rights and warranties (including those
relating to construction or fabrication of any portion of the Hospital) related
to the Hospital or any part thereof, specifically including the right to the use
of the name “Johnston Memorial Hospital” and any derivatives thereof and all
other trade names and trademarks used in connection with the continuing acute
care medical/surgical services provided by the Hospital;
(d) All medical charts and records of the patients and patient care with respect
to patients for whom the Seller or its predecessor in interest provided services
to patients prior to the Effective Date; and
(e) each of the contracts and agreements identified in accordance with the
Transition Services Agreement (as defined herein), subject to Lessee obtaining
all required consents (the “Assumed Contracts”).
2. Assumption of Liabilities. Except for the Assumed Contracts, Buyer does not
and shall not assume, or in any way be liable or responsible for, any
liabilities or obligations of Seller whether known or unknown, whether now
existing or hereafter accruing. With respect to the Assumed Contracts, Buyer
shall assume and agree to pay or perform, as the case may be, only those Seller
obligations under the Assumed Contracts that relate to or arise from the period
from and after the Effective Date.
3. Purchase Price. On the Effective Date (as hereinafter defined), Buyer shall
pay to Seller Fifty Seven Thousand Thirteen Dollars and Sixty Cents ($57,013.60)
in the form of a cashier’s check (the “Cash Payment”).
4. Effective Date. Subject to and contingent upon the satisfaction of each of
the requirements described in Section 8, the consummation of the transactions
contemplated by this Agreement (the “Effective Date”) shall for all purposes
hereunder be deemed to have occurred at 12:01 a.m. on January 1, 2011, or at
such other time as may be mutually agreed upon by the parties.
5. Seller Representations. Seller hereby makes the representations and
warranties set forth below in this Section 5 to Buyer, as of the Execution Date.
For purposes of this Section 5, “Seller’s Knowledge,” “to the Knowledge of
Seller” and similar phrases shall mean to the actual knowledge of Mary Owen and
Rick Rentsch as of such date without independent investigation.

 

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(a) Seller is the owner of the Purchased Assets as of the date hereof. Seller
has and shall convey to Buyer all of its rights, title and interest in and to
the Purchased Assets free and clear of all liens and encumbrances.
(b) Seller is a limited liability limited company duly organized and validly
existing under the laws of the State of Oklahoma. Seller is duly authorized,
qualified and licensed under all applicable laws, regulations, ordinances and
orders of governmental authorities having jurisdiction over the operations of
the Hospital, to own its properties and conduct its business in the place and in
the manner now conducted.
(c) This Agreement has been duly executed and delivered and constitutes a
lawful, valid and legally binding obligation of Seller enforceable in accordance
with its terms, except to the extent that enforceability may be subject to, and
limited by the effect of (i) any applicable bankruptcy, insolvency,
reorganization, moratorium, receivership or other similar laws affecting the
enforcement of creditors’ rights generally, and (ii) general equitable
principles, regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(d) Except as described on Schedule 5(d), there are no audits or investigations
by any federal, state or local government, any political subdivision thereof or
any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, body, agency, department, bureau, commission or entity
(“Governmental Body”) pending or, to the Knowledge of Seller, threatened against
or affecting the Hospital or Seller or relating to the operations of the
Hospital. To the Seller’s Knowledge, no event has occurred or circumstance
exists that would reasonably be expected to give rise to or serve as the basis
for the commencement of any action, suit or proceeding against Seller or the
Hospital. Seller has not received any notice in writing that Seller or any
partner of Seller or any individual who holds a direct or indirect equity
interest in a partner of Seller is the target of any investigation or proceeding
by any governmental body. To the Knowledge of Seller, no such investigation or
proceeding is pending or threatened.
(e) Assuming that Buyer has obtained as of the Effective Date all applicable
regulatory approvals required for Buyer to lawfully operate the Hospital and to
acquire the assets to be acquired and to assume the liabilities to be assumed
hereunder, no consent, approval, authorization or order of, and no exemption by
or filing with, any court or governmental agency is required on behalf of Seller
in connection with the execution and delivery of this Agreement or any other
agreement contemplated hereby or executed in connection herewith or for the
consummation and fulfillment by Seller of the transactions contemplated hereby
or thereby or performance by Seller of each and every one of its obligations
hereunder or thereunder.
(f) All the inventory and supplies constituting any part of the Purchased Assets
are of a quality and quantity usable and salable in the ordinary course of
business of the Hospital. The Hospital’s inventory level is and at the Effective
Date will be

 

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maintained at normal levels for a hospital of comparable size and utilization.
(g) Seller has provided Buyer with a true and complete list of all material
commitments, contracts, leases and agreements, whether written or oral, that
relate to or may affect the Hospital or the operation thereof, to which Seller
is a party or by which Seller or the Purchased Assets are bound (including,
without limitation, agreements with physicians or physician groups, agreements
with health maintenance organizations, preferred provider organizations or other
alternative delivery systems, joint venture or partnership agreements,
employment agreements, contracts, tenant leases, equipment leases, equipment
maintenance agreements, agreements with municipalities and labor organizations,
loan agreements, bonds, mortgages, liens or other security agreements). Seller
has delivered or made available to Buyer true and correct copies of all such
material commitments, contracts, leases and agreements. The commitments,
contracts, leases and agreements constitute valid and legally binding
obligations of the parties thereto and are enforceable in accordance with their
terms. All obligations required to be performed under the terms of the Assumed
Contracts have been performed, to Seller’s Knowledge, 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 or breach of any Assumed Contract and
each of such Assumed Contracts is now, and will be upon and immediately after
the Effective Date in full force and effect without default or breach on the
part of any party thereto. Seller has not received notice in writing to the
effect that any party to any of the Assumed Contracts intends to cancel,
terminate or amend any of the Assumed Contracts or to exercise or not exercise
any outstanding options under any of the Assumed Contracts.
(h) Seller has within the time and in the manner prescribed by law, filed or
properly requested extensions for all federal, state and local tax and other
information returns and reports (“Tax Returns”) required to be filed by it and
has collected and remitted all payroll taxes required by federal and state law,
and, if required, has paid in full or made adequate provisions for the payment
of all taxes (including, without limitation, income, franchise, sales and use,
excise, severance, property, gross receipts and payroll taxes, together with any
interest, penalties, assessments or deficiencies, hereinafter referred to
collectively as “Taxes” or singularly as a “Tax”), for all periods ending on or
before the date hereof and on or before the Effective Date. All such Tax Returns
are and will be true, correct and complete in all material respects and in
compliance in all material respects with the laws, rules and regulations
applicable to such Tax Returns. Seller is not a party to, or as of the Effective
Date will not be a party to, any action or proceeding by a government authority
for the assessment or collection of Taxes that may adversely affect the Hospital
or affect future rights in or use of the Hospital, and no such claim against
Seller for additional Taxes, penalties or interest is or, as of the Effective
Date will be, pending or threatened.
(i) Seller is eligible to receive payment under Titles XVIII and XIX of the
Social Security Act and is a “supplier” under existing supplier agreements with
the Medicare and Medicaid programs (the “Programs”) through the applicable
intermediaries.

 

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Seller is in compliance with the conditions of participation in the Programs,
and Seller has received all approvals or qualifications necessary for capital
reimbursement on the Purchased Assets. There is not pending, nor to the best of
Seller’s Knowledge threatened, any proceeding or investigation under the
Programs involving Seller or the Hospital. There are no claims, actions or
appeals pending (and Seller has not filed any claims or reports that should
result in any such claims, actions or appeals) before any Governmental Body,
including, without limitation, any fiscal intermediary or carrier or the
Administrator of the Centers for Medicare & Medicaid Services (“CMS”), with
respect to any state or federal Medicare or Medicaid claims filed on behalf of
Seller on or before the date hereof. No validation review or program integrity
review related to the Hospital, the operation thereof, or the consummation of
the transactions contemplated herein, has been conducted by any Governmental
Body in connection with the Programs, and to the best of Seller’s Knowledge, no
such reviews are scheduled, pending or threatened against or affecting the
Hospital, or any of the Purchased Assets, or the consummation of the
transactions contemplated hereby.
(j) All billing practices of Seller with all third party payors, including the
Programs, the TRICARE program and private insurance companies, are and have been
in material compliance with all applicable laws and/or billing guidelines of the
Programs, the TRICARE program and all other third party payors. To the Knowledge
of Seller, Seller has not billed or received any payment or reimbursement in
excess of any amounts allowed by Law.
(k) Seller has previously provided Buyer with true and correct copies of the
most recent state licensure, Medicare, Medicaid or other accreditation survey
reports and licensing reports and all plans of correction which Seller was
required to submit in response to such survey and licensing reports. Seller has
corrected any material deficiencies noted therein.
(l) Seller has received no notice in writing that (i) any person providing
services in connection with the Hospital, or (ii) any employee or contractor, in
either case of (i) or (ii), is charged with or has been convicted of a criminal
offense related to the Medicare, Medicaid or TRICARE programs, or the provision
of health care items or services but has not yet been excluded, debarred or
otherwise declared ineligible to participate in such programs or is proposed for
exclusion therefrom. Neither Seller, nor any equity holder of Seller, nor any of
their respective directors, officers or employees is (x) currently excluded,
debarred or otherwise ineligible to participate in the Medicare, Medicaid or
TRICARE programs; (y) convicted of a criminal offense related to the provision
of health care items or services but has not yet been excluded, debarred or
otherwise declared ineligible to participate in the Medicare, Medicaid or
TRICARE programs; or (z) to the Knowledge of Seller, under investigation by, or
otherwise aware of any circumstances that may result in Seller being excluded
from participation in, the Medicare, Medicaid or TRICARE programs. To the
Knowledge of Seller, Seller is not in violation in any material respect of any
Law applicable to the Medicare, Medicaid or TRICARE programs for which criminal
penalties, civil monetary penalties or exclusion

 

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may be authorized.
(m) Seller (i) is not a party to a corporate integrity agreement with the Office
of the Inspector General of the Department of Health and Human Services,
(ii) does not have reporting obligations pursuant to any settlement agreement
entered into with any governmental authority, (iii) has not been a defendant in
any qui tam/False Claims Act litigation, (iv) has not been served with or
received any search warrant, subpoena, civil investigation demand, contact
letter, or, to the Knowledge of Seller, telephone or personal contact by or from
any federal or state enforcement agency, and (v) has not received any complaints
in writing from employees, independent contractors, vendors, physicians, or any
other person that would indicate, after due inquiry by Seller, that Seller has
violated any Law.
(n) Seller (i) has undertaken all necessary surveys, audits, inventories,
reviews, analyses and/or assessments (including any necessary risk assessments)
of all areas of its business and operations required by Title II, Subtitle F, of
the federal Health Insurance Portability and Accountability Act of 1996 (Pub.
Law 104-191) (“HIPAA”), and (ii) is in compliance in all material respects with
HIPAA and all rules and regulations promulgated thereunder, including the
electronic data interchange regulations, the health care privacy regulations and
the healthcare security regulations.
(o) Seller and the operations of the Hospital are 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 Governmental Bodies
having jurisdiction over the Hospital and of the operations thereof; and Seller
has timely filed all reports, data and other information required to be filed on
behalf of the Hospital with such Governmental Bodies. Neither Seller nor any
Affiliate thereof has, with respect to the operation of the Hospital, received
written notice of, and to Seller’s Knowledge, Seller is not under investigation
with respect to, any violation or alleged violation of, or any obligation to
take remedial action under, any applicable (i) state, federal or local statute,
ordinance, rule or regulation, (ii) license or certificate issued or
(iii) order, judgment or decree entered, by any Governmental Body relating to
Seller or the operations of the Hospital.
(p) This Agreement and the Schedules hereto and all other documents and
information furnished to Buyer and its respective 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 herein and therein not misleading
6. Buyer Representations. Buyer hereby represents and warrants to Seller, as of
the date hereof:
(a) Buyer is a not for profit corporation duly organized and validly existing
under the laws of the State of Oklahoma. Buyer is duly authorized, qualified and
licensed to own its properties and conduct its business in the place and in the
manner now

 

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conducted.
(b) This Agreement has been duly executed and delivered and constitutes a
lawful, valid and legally binding obligation of Buyer enforceable in accordance
with its terms.
7. Intentionally omitted.
8. Conditions to Closing. The obligations of Buyer and Seller to consummate this
Agreement and to effect the transactions contemplated hereby shall, to the
extent herein provided, be subject to fulfillment on the Effective Date of each
of the following express conditions precedent hereinafter stated.
8.01. Buyer’s obligations to consummate this Agreement and to effect the
transactions contemplated hereby shall be subject to the following conditions;
subject to the right of Buyer to waive any one or more of such conditions:
(a) All representations and warranties of Seller contained in this Agreement
shall be true and correct at and as of the Execution Date and the Effective
Date, and Seller shall have performed and satisfied all covenants, conditions,
and agreements required or contemplated by this Agreement to be performed and
satisfied by them, respectively, on or prior to the Effective Date.
(b) Seller shall have delivered to Buyer copies, certified by a duly authorized
officer, of (i) Seller’s articles of organization and operating agreement, and
(ii) resolutions of Seller’s members and board of managers authorizing the
execution of this Agreement and authorizing the transactions contemplated
hereby; and Seller shall have delivered to Buyer a certificate (dated not less
than five (5) business days prior to the Effective Date) of the Secretary of
State of the State of Oklahoma as to the good standing of the Seller in such
state.
(c) The RSE Transaction shall have been completed.
(d) Buyer and RSE shall have entered into a lease agreement whereby Buyer would
lease the Hospital from RSE (the “Hospital Lease Agreement”).
(e) Buyer and Seller shall have executed and delivered the Transition Services
Agreement in the form attached hereto as Exhibit A (the “Transition Services
Agreement”).
(f) Buyer, Seller and First Physicians Bank (the “Escrow Agent”) shall have
executed and delivered the Escrow Agreement attached hereto as Exhibit B (the
“Escrow Agreement”).

 

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(g) Except as contemplated by the RSE Transaction, there shall not have occurred
any material adverse change in the business, assets, liabilities or condition,
financial or otherwise, of Seller or the Hospital between the Execution Date and
the Effective Date.
(h) Buyer shall have received such further instruments and documents as may
reasonably be required to carry out the transaction contemplated hereby and to
evidence the fulfillment of the agreements herein contained and the performance
of all conditions to the consummation of such transactions.
8.02. Seller’s obligations to consummate this Agreement and to effect the
transactions contemplated hereunder shall be subject to the following
conditions:
(a) All representations and warranties of Buyer contained in this Agreement, or
in any agreement, instrument, document, or certificate furnished by Buyer in
connection herewith, except to the extent otherwise indicated by the context
thereof or except for changes permitted or contemplated by the terms of this
Agreement, shall be true and correct at and as of the Effective Date, and Buyer
shall have performed and satisfied all covenants, conditions, and agreements
required or contemplated by this Agreement to be performed and satisfied by it
on or prior to the Effective Date.
(b) The RSE Transaction shall have been completed.
(c) Buyer and RSE shall have entered the Hospital Lease Agreement.
(d) Buyer shall have paid to Seller the Cash Payment.
(e) Buyer and Seller shall have executed and delivered the Transition Services
Agreement.
(f) Buyer, Seller and the Escrow Agent shall have executed and delivered the
Escrow Agreement.
(g) Buyer shall have received a fully executed Guaranty whereby First Physicians
Capital Group, Inc. shall agree to unconditionally guaranty Seller’s obligations
pursuant to Section 12 of this Agreement.
9. Affirmative Covenants of Seller. From the Execution Date until the earlier of
the Effective Date or the termination of this Agreement, unless the prior
written consent of Buyer shall have been obtained which such consent shall not
be unreasonably withheld or delayed, and except as otherwise expressly
contemplated herein, Seller shall:
(a) Operate the Hospital only in the usual, regular, and ordinary course of
business, consistent with past practices, including, without limitation,
maintaining the inventory and supplies in quantities and at such levels that are
consistent with past

 

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practices.
(b) Use reasonable commercial efforts to preserve intact the organization,
licenses, permits, government programs, private programs and patients of the
Hospital.
(c) Use reasonable commercial efforts to retain the services of the employees,
agents and consultants of the Hospital on terms and conditions not less
favorable than those existing prior to the Execution Date and to use
commercially reasonable efforts to ensure that there are no material or adverse
changes to employee relations of the Hospital.
(d) Except as contemplated by the RSE Transaction, keep and maintain the assets
of the Hospital in their present condition, repair and working order, except for
normal depreciation and wear and tear, and maintain its insurance, rights and
licenses.
(e) Confer on a regular and frequent basis with one or more designated
representatives of Buyer to report material operational matters related to the
Hospital and to report the general status of ongoing operations of the Hospital.
(f) Make available to Buyer true and correct copies of applicable internal
management and control reports and financial statements directly related to the
Hospital and furnished to management of Seller.
(g) Perform in all material respects all obligations under agreements relating
to or affecting the assets, properties or rights of Seller or the Hospital,
except for the failure of which performance would not have a material adverse
effect on the Hospital or Seller.
(h) Keep in full force and effect present insurance policies or other comparable
insurance coverage insuring the assets and properties used by the Hospital.
(i) Except to the extent protected by the attorney-client privilege, notify
Buyer of (i) any event or circumstance which is reasonably likely to have a
material adverse effect on the Hospital or would cause or constitute a breach of
any of Seller’s representations, warranties or covenants contained herein;
(ii) any unexpected change in the normal course of business or in the operation
of the assets of the Hospital and (iii) any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving any aspect of the Hospital.
Seller shall keep Buyer fully informed of such events and to permit Buyer’s
representatives prompt access to all materials prepared in connection therewith,
except to the extent protected by the attorney-client privilege.
10. Negative Covenants of Seller. From the Execution Date until the earlier of
the Effective Date or the termination of this Agreement, Seller will not do any
of the following without the prior written consent of Buyer, which consent shall
not be unreasonably withheld:

 

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(a) Knowingly take any action that would (a) adversely affect the ability of
Seller to obtain any consents required for the transactions contemplated
thereby, or (b) adversely affect the ability of any party hereto to perform any
of its covenants and agreements under this Agreement.
(b) Impose, or suffer the imposition, on any asset of the Hospital of any lien
or encumbrance or permit any such lien or encumbrance to exist.
(c) Except as contemplated by the RSE Transaction and for sales of inventory in
the ordinary course of business, sell, pledge or encumber, or enter into any
contract to sell, pledge or encumber, any interest in the assets of the
Hospital.
(d) Except as contemplated by the RSE Transaction, purchase or acquire any
assets or properties related to the Hospital, whether real or personal, tangible
or intangible, or sell or dispose of any assets or properties, whether real or
personal, tangible or intangible, except in the ordinary course of business and
consistent with past practices.
(e) Commence any litigation involving any asset or liability of the Hospital
other than in the ordinary course of business consistent with past practice, or
settle any litigation involving any asset or liability of the Hospital for
material money damages or restrictions upon the operations of the Hospital.
(f) Except in the ordinary course of business and in a manner that is not
material, modify, amend or terminate any contract related to or benefiting the
Hospital or waive, release, compromise or assign any rights or claims related to
or benefiting the Hospital.
(g) Make or commit to make any capital expenditure, or enter into any lease of
capital equipment as lessee or lessor, related to the Hospital in an amount in
excess of $5,000 for all such items.
(h) Take any action, or omit to take any action, which would cause any of
Seller’s representations and warranties in this Agreement to be untrue or
incorrect.
11. Transition of Employees. (a) As of the Effective Date, Seller shall
terminate all employees of Seller or any affiliate thereof at the Hospital, and
Buyer shall make offers of full-time or part-time employment (as applicable) to
those individuals employed by Seller and identified in the Transition Services
Agreement (the “Seller Employees”). Buyer shall not assume any liabilities or
obligations with respect to the Seller Employees as a result of their employment
with Seller including, without limitation, any liability or obligation for the
payment of wages or other benefits such as vacation or sick days which have been
earned but not taken as of the Effective Date.
12. Indemnification.

 

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(a) Seller shall defend, indemnify and hold Buyer harmless from, against, and in
respect of, any and all claims, demands, lawsuits, proceedings, losses,
obligations, assessments, fines, penalties, administrative or judicial orders,
costs, expenses, liabilities and damages, including interest, penalties and
reasonable attorneys’ fees Buyer may incur (collectively, “Damages”), which
arise or result from or relate to: (i) Seller’s operation of the Hospital prior
to the Effective Date, (ii) Seller’s breach of, or failure to perform, any of
their respective representations, warranties, covenants, obligations,
liabilities, commitments or agreements under this Agreement (including, without
limitation, any misrepresentation in, or omission from, any schedule, exhibit,
statement, certificate, writing, list, instrument or report or other document
furnished or to be furnished pursuant to this Agreement); or (ii) any claim by
any governmental authority, agency, fiscal intermediary, medical administrative
contractor or third-party payor (each, a “Medicare Payor”) with respect to any
alleged overpayment under the Medicare program for any services performed during
the period ending before the Effective Date, in each case in accordance with the
provisions and limitations set forth in this Section 12.
(b) Immediately at the Effective Date, Seller shall deposit or cause to be
deposited with the Escrow Agent in an escrow account (the “Escrow Account”)
established pursuant to the terms of the Escrow Agreement an amount equal to
(the “Initial Deposit”): (i) the proceeds received by Seller in the RSE
Transaction minus (ii) an amount equal to (A) all liabilities of Seller related
to the realty and personalty transferred in the RSE Transaction plus (B) all
costs and expenses of the RSE Transaction and the transactions contemplated by
this Agreement (as increased, or reduced as permitted, pursuant to this
Section 12, the “Escrow Amount”). In the event that Seller or Buyer receives any
payments (the “Makeup Payments”) from a Medicare Payor in respect of prior
underpayments for services provided by Seller prior to the Effective Date, such
Makeup Payments shall promptly be deposited in the Escrow Account, and the
Escrow Amount on such date shall be increased by such Makeup Payments deposited.
Seller shall not be required to deposit any amounts into the Escrow Account
other than the Initial Deposit and any Makeup Payments. The Escrow Account shall
be maintained until the third anniversary of the settlement of the last cost
report with a Medicare Payor by or on behalf of Seller with respect to any
services provided prior to the Effective Date (the “Final Settlement Date”),
after which date the requirement to maintain the Escrow Account shall terminate
and all amounts therein shall be distributed to Seller; provided, further, that
during the pendency of any claim for Damages, Seller shall maintain in the
Escrow Account an amount not less than any amounts claimed in any such pending
claims.
(c) When Buyer becomes aware of a situation which may result in Damages for
which it would be entitled to be indemnified hereunder, Buyer shall submit a
written notice (the “Initial Claim Notice”) to Seller to such effect with
reasonable promptness after it first becomes aware of such matter and shall
furnish Seller with such information as it has available demonstrating its right
or possible right to receive indemnity. If the potential claim is predicated on,
or later results in, the filing by a third party of any action at law or in
equity (a “Third Party Claim”), Buyer shall provide the Seller with a
supplemental Initial Claim Notice not later than ten (10) days prior to the date
on which a responsive pleading must be filed, and shall also furnish a copy of
such claim (if made in writing) and of all documents received from the third

 

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party in support of such claim. Every Initial Claim Notice shall, if feasible,
contain a reasonable estimate by Buyer of the losses, costs, liabilities and
expenses (including, but not limited to, costs and expenses of litigation and
attorneys’ fees) which Buyer may incur. In addition, each Initial Claim Notice
shall name, when known, the person or persons making the assertions that are the
basis for such claim. Failure by Buyer to deliver an Initial Claim Notice or an
update thereof in a timely manner shall not relieve Seller of any of its
obligations under this Agreement except to the extent that actual monetary
prejudice to Seller can be demonstrated.
(d) Seller will have the right at any time after its receipt of the Initial
Claim Notice to assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to Buyer, and Seller
shall settle, compromise or litigate in good faith such claim; provided,
however, that Seller shall not consent to any judgment or enter into any
settlement with respect to a Third Party Claim without the prior written consent
of Buyer (not to be withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages by Seller and does not
impose any injunction or other equitable relief on Buyer. If Seller elects to
settle, compromise or litigate such claim, all reasonable expenses, including
but not limited to all amounts paid in settlement or to satisfy judgments or
awards and reasonable attorneys fees and costs, incurred by Seller in settling,
compromising or litigating such claim shall be secured to the reasonable
satisfaction of Buyer. Buyer shall cooperate fully to make available to the
Seller and its attorneys, representatives and agents, all pertinent information
under its control. Buyer shall have the right to elect to settle or compromise
all Third Party Claims and all other claims with respect to which Seller has
not, assumed the defense thereof and for which Seller has not acknowledged in
writing (i) its liability to defend, and (ii) its election to assume full
responsibility for the settlement, compromise and litigation of such claim. In
the event Seller fails timely to defend, contest or otherwise protect against
any Third Party Claim, Buyer shall have the right, but not the obligation, to
defend, contest, assert cross-claims or counterclaims or otherwise protect
against the same, and may make any compromise or settlement thereof and recover
and be indemnified for its Damage, to the fullest extent of its indemnity rights
under this Section 12 from Seller, including, without limitation, reasonable
legal expenses, disbursements, and all amounts paid as a result of the Third
Party Claim, or the compromise or settlement thereof.
(e) At such time as Damages for which Seller is liable hereunder are incurred by
Buyer by actual payment thereof or by entry of a final judgment, Buyer shall
forward a Final Claims Statement to Seller setting forth the amount of such
Damages in reasonable detail on an itemized basis. Buyer shall supplement the
Final Claim Statement with such supporting proof of loss (e.g., vouchers,
canceled checks, accounting summaries, judgments, settlement agreements, etc.)
as Seller may reasonably request in writing within thirty (30) days after
receipt of a Final Claims Statement.
(f) The obligations of Seller pursuant to Section 12(a)(i) shall survive the
Effective Date indefinitely, the obligations of Seller pursuant to
Section 12(a)(ii) shall survive the Effective Date for a period of twelve
(12) months, and the obligations of Seller pursuant to Section 12(a)(iii) shall
survive the Effective Date for a period of three (3) years after the Final
Settlement Date. All amounts reflected on Final Claims Statements shall be paid
promptly out of

 

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the Escrow Account.
(g) Buyer shall indemnify and hold harmless Seller from and against any claims
for Damages against Seller with respect to Buyer’s operation of the Hospital
after the Effective Date, generally in accordance with the rights, obligations
and procedures set forth in paragraphs (c), (d) and (e) of this Section 12.
13. Right of Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Effective Date:
(a) By the mutual written consent of Buyer and Seller.
(b) By Buyer in the event that the conditions set forth in Section 8.01 of this
Agreement shall not have been satisfied or waived by January 31, 2011, unless
such satisfaction shall have been frustrated or made impossible by any act or
failure to act of Buyer.
(c) By Seller in the event that the conditions set forth in Section 8.02 of this
Agreement shall not have been satisfied or waived by January 31, 2011, unless
such satisfaction shall have been frustrated or made impossible by any act or
failure to act of Seller.
In the event of termination in accordance with this Section 13 this Agreement
shall become void and of no further force or effect, without any liability on
the part of any of the Parties hereto or their respective owners, members,
directors, officers or employees, except the obligations of each Party to
preserve the confidentiality of documents, certificates and information
furnished to such Party pursuant thereto and for any obligation or liability of
any Party based on or arising from any breach or default by such Party with
respect to its representations, warranties, covenants or agreements contained in
the Acquisition Documents to which it is a party.
14. Noncompete.
(a) During the period commencing at the Effective Date and ending on the fifth
(5th) anniversary of the Effective Date, Seller agrees that it shall not, and
shall cause each of its Affiliates not to, directly or indirectly, (i) engage in
the operation or management of any Competing Business (as defined herein)
located within a fifty (50) mile radius of the Hospital (the “Territory”),
(ii) acquire, lease, construct, develop or own any Competing Business located
within the Territory, (iii) induce or attempt to induce any employee of the
Hospital to leave the employ of the Hospital or Buyer, or in any way interfere
with the relationship between the Hospital, Buyer and their respective
employees, or (iv) be a controlling shareholder, controlling partner,
controlling member or controlling equity holder of, exercise management control
over, or acquire or maintain a controlling interest in, any Competing Business
that is located within the Territory.

 

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For purpose of the this Section 14, the term “Competing Business” means the
business of owning, leasing, managing or operating one or more general acute
care hospitals, ambulatory surgery centers, imaging or diagnostic centers or
services located in the Territory, or any business located in the Territory that
competes with the services provided by the Hospital as such services are
provided at the Effective Date.
(b) Seller recognizes that the covenants in this Section 14, and the
territorial, time and other limitations with respect thereto, are reasonable and
properly required for the adequate protection of Buyer, and agrees that such
limitations are reasonable with respect to its activities, business and public
purpose. Seller agrees and acknowledges that the violation of the covenants or
agreements in this Section 14 would cause irreparable injury to Buyer and that
the remedy at law for any violation or threatened violation thereof would be
inadequate and that, in addition to whatever other remedies may be available at
law or in equity, Buyer shall be entitled to temporary and permanent injunctive
or other equitable relief without the necessity of proving actual losses or
posting bond. The parties hereto also waive any requirement of proving actual
losses in connection with the obtaining of any such injunctive or other
equitable relief.
(c) It is the intention of each party hereto that the provisions of this
Section 14 shall be enforced to the fullest extent permissible under the laws
and the public policies of the State of Oklahoma, but that the unenforceability
(or the modification to conform with such laws or public policies) of any
provisions hereof shall not render unenforceable or impair the remainder of this
Agreement. Accordingly, if any term or provision of this Section 14 shall be
determined to be illegal, invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as necessary, the
offending provisions and to alter the balance of this Agreement in order to
render the same valid and enforceable to the fullest extent permissible as
aforesaid.
15. Miscellaneous.
15.01 Amendments and Waiver. No amendment, waiver or consent with respect to any
provision of this Agreement shall in any event be effective, unless the same
shall be in writing and signed by the parties hereto, and then such amendment,
waiver or consent shall be effective only in the specific instance and the
specific purpose for which given.
15.02 Notices. Any notice required or permitted hereunder shall be given in
writing and shall be effective for all purposes if hand delivered to the party
designated below, or if sent by telecopy (provided that such telecopy is
confirmed by telecopy confirmation slip) addressed to the addresses set forth
below, or to such other address and persons as shall be designated from time to
time by any party hereto in a written notice to the other in the manner provided
for in this paragraph. The notice shall be deemed to have been given at the time
of delivery if hand delivered, or if by telecopy, at the time of telecopy on a
business day. A party receiving notice which does not comply with the technical
requirements for notice under this paragraph may elect to waive any deficiencies
and treat the notice as having been properly given.

     
If to Seller:
  Richard Rentsch

 

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  3555 NW 58th Suite 700
 
  OKC, OK 73112
 
  Telecopy: 405.917.0324
 
   
with a copy to:
  Duane Morris LLP
 
  30 S. 17th Street
 
  Philadelphia, PA 19103
 
  Attention: C. Mitchell Goldman, Esq.
 
  Telecopy: (215) 689-2407
 
   
If to Buyer:
  Mercy Tishomingo Hospital Corporation
 
  C/o Mercy Health Center Inc.
 
  4300 West Memorial Road
 
  Oklahoma City, OK 73120
 
  Attention: Chief Executive Officer
 
  Telecopy:                                         
 
   
with a copy to:
  Mercy Tishomingo Hospital Corporation
 
  C/o Mercy Health Center Inc.
 
  4300 West Memorial Road
 
  Oklahoma City, OK 73120
 
  Attention: General Counsel
 
  Telecopy: (405) 936 5750

15.03 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.04 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the State of Oklahoma.
15.05 Further Assurances. The parties hereto agree to deliver such additional
instruments and documents and take such further actions as may be required to
consummate the transactions contemplated hereby.
15.06 Entire Agreement. All Schedules attached to this Agreement are by
reference made a part hereof. This Agreement and the Schedules, certificates and
other documents delivered pursuant hereto or incorporated herein by reference,
contain and constitute the entire agreement among the Parties and supersede and
cancel any prior agreements, representations, warranties, or communications,
whether oral or written, among the Parties relating to the transactions
contemplated by this Agreement. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by an
agreement in writing signed by the Party against whom or which the enforcement
of such change, waiver, discharge or termination is sought.

 

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15.07 Expenses. Each of the Parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder. Neither Party knows of the existence of any person
entitled to a finders’ or brokers’ fee as a result of the negotiations relative
to or consummation of the transactions contemplated by this Agreement.

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
as of the date first written above.

                          SELLER   BUYER    
 
                        RHA Tishomingo, LLC   Mercy Tishomingo Hospital
Corporation    
 
                        By:   /s/ Richard Rentsch   By:   /s/ Paul A. Foster    
                 
 
  Name:   Richard Rentsch       Name:   Paul A. Foster    
 
  Title:   Vice President       Title:   CFO    

 

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