Exhibit 10.3





Exhibit
10.3
 

TRANSITION AGREEMENT




This Transition Agreement (this “Agreement”) is entered into and effective as of January
6th, 2011 (the “Effective Date”) by and between RHA Tishomingo, LLC, an Oklahoma limited
liability company d/b/a Johnston Memorial Hospital (“Seller”) and Mercy Hospital Tishomingo, an
Oklahoma nonprofit corporation (“Buyer”).



RECITALS




A. Buyer and Seller have entered into that certain Asset Purchase Agreement dated
January 6th, 2011 (the “Purchase Agreement”), pursuant to which Buyer purchased certain
assets owned by Seller and utilized in connection with the operation of Johnston Memorial Hospital,
a licensed critical access hospital located in the City of Tishomingo, Oklahoma (the “Hospital”).



B. Seller has agreed to provide Buyer with the services described in this Agreement to
facilitate the transition of the operation of the Hospital from Seller to Buyer.




NOW, THEREFORE, the parties agree as follows:



1. Computer Hardware. Commencing on the Effective Date and continuing until the
earlier of (i) June 30, 2011, or (ii) the date on which Buyer provides notice to Seller that it no
longer needs the services contemplated by this Agreement (the “Transition Period”), Seller shall
continue to provide Buyer with the use of and access to the computer servers that are located at
3555 NW 58th Street, Suite 700, Oklahoma City, OK 73112 and support Seller’s critical
access hospitals, including the Hospital, until such time as the server can be relocated to the
Hospital campus.




2. Personnel.




2.1 During the Transition Period Buyer shall provide Seller with the services of those
individuals who are employees of Buyer and are identified on Exhibit 1 (the
“Personnel”). The Personnel shall dedicate approximately 2/3 of their working time to
providing services to Seller.




2.2 Buyer shall furnish all supplies and equipment necessary for the Personnel to
perform their respective duties.




2.3 During the Transition Period, the Personnel shall at all times and for all purposes
remain and be considered employees of Buyer, and not employees of Seller.




2.4 Buyer shall be solely responsible for ensuring that proper deductions are made from
the Personnel’s pay for federal, state, and local income taxes, and the employee’s portion
for FICA payments.




2.5 In exchange for Buyer providing the services of the Personnel to Buyer on the terms
and conditions described in this Agreement, Seller shall, on a monthly basis, pay Buyer an
amount that results from multiplying (a) 125%, times (b) two-thirds (2/3) of Buyer’s
payroll costs for the Personnel (inclusive of the employer’s portion of amounts


 


 









 





payable under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act,
unemployment taxes and/or contributions and all applicable federal, state and local payroll
taxes, and all fringe benefit costs for the Personnel). Buyer shall provide Seller with an
invoice setting forth the amount of the payroll costs for the Personnel, and Seller shall
pay the amount of such invoice within 10 days of Buyer’s receipt of the invoice.



3. Contracts/Agreements. During the Transition Period, Buyer and Seller will work to
identify the Assumed Contracts (as defined in the Purchase Agreement). Until such time as the
Assumed Contracts can be identified and properly assigned to Buyer, any such assignment shall be
deferred until all required consents have been obtained (each a “Deferred Contract”).



Buyer and Seller shall cooperate with and provide access to each other of all equipment,
employees and other assets and personnel necessary or required to perform the obligations under and
receive the benefits of, as applicable, any Deferred Contract, in any reasonable and lawful
arrangements designed to provide to Buyer the benefits of use of the Deferred Contract for its term
(or any right or benefit arising thereunder, including the enforcement for the benefit of Buyer of
any and all rights of Seller against a third party thereunder). Once the required consent for the
sale, assignment, assumption, transfer, conveyance and delivery of a Deferred Contract is obtained,
Seller shall promptly assign, transfer, convey and deliver such Deferred Contract to Buyer, and
Buyer shall assume the obligations under such Deferred Contract assigned to Buyer from and after
the date of assignment to Buyer pursuant to a special-purpose assignment and assumption agreement
(which special-purpose agreement the parties shall prepare, execute and deliver in good faith at
the time of such transfer, all at no additional cost to Buyer).



If Buyer is not able to obtain the required consent for a Deferred Contract then Buyer may
reject the assignment of such Deferred Contract, in which case, notwithstanding anything set forth
in the Purchase Agreement or this Agreement to the contrary, neither this Agreement nor any
document contemplated by the Purchase Agreement shall constitute a sale, assignment, assumption,
conveyance or delivery or an attempted sale, assignment, assumption, transfer, conveyance or
delivery of such Deferred Contract, and (B) Seller shall retain such Deferred Contract and all
liabilities arising therefrom or relating thereto.




4. Bank Account/Receivables.



4.1 Buyer shall establish new bank accounts in Buyer’s name (the “Buyer Accounts”) that will
be utilized to “sweep” Seller’s bank accounts relating to the Hospital’s operations (the “Seller
Hospital Accounts”) and the funds from the Seller Hospital Accounts will be swept daily into the
Buyer Accounts.



4.2 On the Closing Date, Buyer and Seller shall, in good faith, identify Seller’s then
outstanding accounts receivable (the “Accounts Receivable”) and shall prepare Schedule 4.2 which sets forth in reasonable detail the amount of the Accounts Receivable. During the 180-day
period immediately following the Closing (the “Collection Period”), Buyer will use its reasonable
business efforts to collect the Accounts Receivable, but Seller may also make its own reasonable
business efforts to collect the Accounts Receivable. Reasonable business efforts would include
calls and the issuance of periodic statements but would not include filing suit against any account
payor or taking any actions in the bankruptcy of an account payor. Buyer will not discount the
Accounts Receivable or charge a fee to Seller for this collection activity. Buyer acknowledges that
it has no interest in or claim to any of the Accounts Receivable. Seller


 


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acknowledges that although Buyer will be collecting the Account Receivable, Buyer does not hereby
guarantee or otherwise make any assurances regarding the collectability of the Accounts Receivable.
Buyer agrees to remit the amounts of the Accounts Receivable to Seller as they are received by
Buyer. Any accounts receivable funds collected by Buyer on behalf of Seller would be designated as
trust funds for the benefit of the Seller, without commingling the proceeds of said receivables
with other assets of the Buyer.



In order to facilitate Buyer’s collection of the Accounts Receivable, Seller does hereby
designate and appoint Buyer and its authorized officers and agents as Seller’s agent and
attorney-in-fact, to endorse the name of Seller upon any and all checks, drafts, money orders, and
other instruments for the payment of money in satisfactions of the Accounts Receivable with the
same legal effect as if executed by Seller.



5. Status of Parties. The parties further agree and acknowledge that the relationship
created by this Agreement is that of independent contractor. Except as contemplated by Section 4,
neither party is an agent for nor shall any of their respective employees be considered employees
of the other party and neither of the parties employees are entitled to the benefits provided by
the other party to their respective employees, including, but not limited to, workers’ compensation
insurance and unemployment insurance.



6. Non-Assignability. This Agreement shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.



7. Notice. Any written notice to be given by either party hereunder shall be mailed by
certified or registered mail with return receipt requested or personally delivered, and shall be
addressed (or delivered) to the address indicated below or to such other persons or addresses as
Buyer or Seller may provide by notice to the other.



8. Governing Law. This Agreement shall be governed by and construed and interpreted in
accordance with the internal laws of the State of Oklahoma without reference to conflicts of law
principles.



9. Entire Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter and terms of this Agreement and supersedes all oral or
written communications or agreements between the parties relating to such subject matter.



10. Severability. If any one or more provisions of this Agreement or any application
thereof shall be declared or become invalid, illegal or unenforceable in any respect, the legality,
validity and enforceability of the remaining provisions of this Agreement shall not be affected or
impaired in any manner.



[Remainder of Page Intentionally Left Blank]



 


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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first
set forth above.



	 	 	 	 	 	 	 	 	 
	SELLER	 	 	 	BUYER
	 
	 	 	 	 	 	 	 	 
	RHA Tishomingo, LLC	 	 	 	Mercy Hospital Tishomingo
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Richard Rentsch
	 	 	 	By:
	 	/s/ Paul A. Foster
	 

	 	 
	 	 	 	 	 	 
	 

	 	Name: Richard Rentsch
	 	 	 	 
	 	Name: Paul A. Foster
	 

	 	Title:   Vice President
	 	 	 	 
	 	Title:   CFO
	 
	 	 	 	 	 	 	 	 
	Address:

	 	3555 NW 58th Suite 700

OKC, OK 73112
	 	 	 	Address:
	 	4300 W. Memorial Rd

OK 73120






[Signature Page to Transition Agreement]



 


 









 





Exhibit 1




Employees





	1.	 	Benjamin, Gail
	 
	2.	 	Seeley, Donald
	 
	3.	 	Calhoun, Ann-Margaret
	 
	4.	 	McCumber, Debbie
	 
	5.	 	McMillin, Sharon
	 
	6.	 	Stephens, Amanda