4.03[4] Due Diligence Document Request List for Hospital AcquisitionPlease provide copies of the materials listed below. Requests for
documentation concerning "Seller" also seek documentation concerning any
related-party affiliates of Seller, where such documentation is materially relevant.
I. Corporate Matters
A. Organization and Good Standing1. Articles or Certificates of Incorporation of Seller, as amended
to date.
2. Corporate bylaws (or other organizational documents) of Seller,
as amended to date.
3. Good-standing certificates and documents as to tax status.
4. Minutes of the corporation, including minutes of executive and
other committees (board and non-board), for the last five years.
5. A list of all jurisdictions in which the Seller is qualified to
do business.
6. List of all subsidiaries and related-party affiliates of Seller,
and any Partnership or joint venture affiliations.
7. Chart of management organization and personnel and Seller
structure, including list of current directors and officers of Seller, and
members of Board of Trustees of Seller.
8. Summary of business and personal relationships and affiliations
among directors, officers, shareholders, creditors, customers, suppliers and
other business affiliates of the Seller.
9. Conflict of interest policy and all statements submitted pursuant
thereto for last three years.
10. List of all consultants and legal counsel used in last three
years.
11. Corporate history chart depicting all mergers, acquisitions,
divestitures, restructurings and name changes of Seller, including dates of each.
B. Members/Shareholders
1. List of the members or shareholders of Seller.
2. Shareholder's or stockholder's agreement, voting trusts and other
agreements relating to the sale or voting of shares of or membership interests
in Seller.
C. Authorizations1. Any authorizing resolutions/approvals pertaining to sale by
Seller's governing body.D. Financial Statements and Matters1. Consolidated and consolidating financial statements for past five
years.
2. Unaudited statements for past two years.
3. Written budgets, feasibility studies, and financial projections
for past three years.
4. Written budgets, feasibility studies, and financial projections
already in existence for the current and next two years.
5. Long-range planning reports for past three years.
6. Debt schedule summarizing short-term and long-term debt and
capital lease obligations with original principal amounts, interest rates,
outstanding balances and maturity dates.
7. Auditor's letters to management and replies for past five years.
8. Auditors' inquiry letters and replies for past five years.
9. Any waivers or agreements canceling claims or rights of
substantial value other than in the ordinary course of business and any
documents relating to material write-downs and write-offs of notes or accounts
receivable other than in the ordinary course of business.
10. Documentation relating to accounting policies and procedures,
record-keeping procedures, aging and write-off polices, bad debt policies, and
formal and informal controls.
11. Instruments defining terms of all restricted gifts and
endowments.
12. List of pending gifts, charitable pledges and bequests.
13. List of all specific purpose trust funds, the documents defining
such trusts, and actuarial reports relating to such trusts for the past three years.
14. List of all discounts regularly given.
15. Evidence of ownership of all subsidiaries.
E. Tax Matters 1. Federal, state, and local tax and annual information returns for
the latest closed tax year and all open tax years for Seller, all subsidiaries
and controlled corporations, and all partnerships, joint ventures, or other
business enterprises in which any of the foregoing entities has an equity
interest (collectively such entities are sometimes referred to as "Seller
Affiliates").
2. Any audit or revenue agents' reports (federal, state, and local)
for the last five years.3. Any tax-related closing or settlement agreements and related
correspondence for the past five years (federal, state, and local).
4. Any agreements waiving or extending the statute of limitations
regarding the assessment or collection of any tax (federal, state, or local).
5. Any tax-sharing or other tax-related agreements and a complete
description of how expenses are allocated among Seller Affiliates and how such
allocations are determined (including any allocation of financing costs among
Seller Affiliates).
6. For personal and/or real property, state franchise and similar
tax liabilities, a schedule setting forth, for each jurisdiction in which such
payments are made, the most recent period for which a payment was made and the
date on which such payment is due and payable each year.
7. Federal, state, and local determinations of exemption from
income, franchise, real and/or personal property, sales and use, and any other
taxes (or copies of any applicable group ruling letters) and determinations of
federal public charity status, and any other correspondence to and/or from
governmental taxing authorities (federal, state, and local) concerning the same.
8. Identify the amount and source of all income that has been
reported to the Internal Revenue Service (IRS) as unrelated business taxable income.
9. Any powers of attorney executed by any Seller Affiliate regarding
any tax.
10. A list of all persons currently treated by any Seller Affiliate
as an independent contractor for income tax purposes, and for whom the Seller
Affiliate has not withheld applicable taxes, and a description of the duties of
such persons.
11. All charitable solicitation registration documents.
12. All documentation concerning any significant dispute or claim
asserted or threatened by any taxing authority against any Seller Affiliate or
any person or entity for whose taxes any Seller Affiliate could be liable,
whether directly or indirectly, as transferee, or under any tax indemnity, tax-
sharing, or similar agreement.
13. All loans, leases, or other financial transactions with non-
charitable entities or individuals at rates or values below market.
14. To the extent not shown on federal information returns, a list
of all officers and directors (and trustees, where applicable) and a complete
description of all business relationships that such persons (and entities they
control) have with any Seller Affiliate, past and present (including situations
where a Seller Affiliate purchases goods from entities controlled by such
persons), and all business relationships that such persons have with each other.
For any partnership in which a Seller Affiliate is a partner, this information
is needed for all partners.
15. A copy of any private letter ruling received by any Seller
Affiliate from the IRS and any opinions or memoranda of counsel regarding the
federal income tax consequences of any financial arrangement entered into by any
Seller Affiliate within the last seven years.16. A schedule of the salary and fees paid in the most recent
calendar year to any officer, director, trustee, physician or physician group
practice performing services for any Seller Affiliate. Please attach a copy of
the applicable Forms W-2 or 1099.
17. To the extent not separately set forth in tax or information
returns, please attach schedules, if applicable, setting forth:
¥ The amount, terms, and conditions of any loans to officers,
directors, trustees, physicians (or physician groups), or other controlling
persons or substantial contributors. Note the balance due on such loans for the
past two years. ¥ Write-offs of debts or other obligations of officers,
directors, trustees, physicians (or physician groups), or other controlling
persons or substantial contributors. ¥ Assumption of any personal or business liabilities of
officers, directors, trustees, physicians (or physician groups), or other
controlling persons or substantial contributors.
¥ Any account indicating the purchase of goodwill.
¥ Any Seller Affiliate assets that are in the possession of
officers, directors, trustees, physicians (or physician groups), or other
controlling persons or substantial contributors. For example, this would include
equipment or leasehold improvements paid for by the Seller Affiliate but used in
a private medical practice. ¥ Investments in any type of partnership, joint venture, or
managed care arrangement to the extent not otherwise described above.
18. To the extent not otherwise described herein, a description (or
copy) of any other financial arrangement with officers, directors, trustees,
physicians (or physician groups), or other controlling persons or substantial
contributors. If a standard contract is used for rental of medical office space
or similar arrangements, only one copy of the standard contract is needed, along
with a list of all persons or entities with whom the contract is applicable.
Consider all the following types of arrangements:
¥ physician subsidy arrangements
¥ employee or independent contractor incentive compensation
arrangements
¥ any asset or lease agreements in the past three years
¥ any purchase or sale of a medical practice in the past three
years ¥ any agreement providing a letter of credit or loan guarantee
¥ any master lease agreement between a Seller Affiliate and an
outside person or entity where the property is subleased or licensed to a
control person or entity ¥ any agreement to provide billing, collection, personnel,
maintenance, or other services to a control person or entity ¥ any other arrangement for the provision of goods or services
not otherwise set forth above.
19. All federal, state, and local employment tax returns for the
last three years and a list of any persons receiving both a Form W-2 and a Form
1099 during such period.
F. Contracts and Commitments
Please produce copies of all written contracts or other agreements to which
Seller is a party, including the following:
1. Limited partnership or joint venture agreements.
2. Loan, credit, mortgage, and indenture agreements.
3. Supply and/or requirements contracts.
4. Deeds, contracts, and options to purchase land.
5. Leases and subleases of real property, equipment, and significant
personal property.
6. Closing documents, agreements, correspondence and any other
documents pertaining to any material transactions of Seller in the last three years.
7. Compensating balance arrangements.
8. Contracts or other arrangements with related organizations,
including all evidences of intercompany debt.
9. Written agreements with physicians, including hospital-based
physician agreements, recruitment and retention materials, loans, leases, income
guarantees, joint venture agreements, etc.
10. All agreements, agreements in principle, or plans for mergers,
consolidations, reorganizations, acquisitions or the purchase or sale of assets
or stock involving Seller.
11. Samples of all forms of purchase orders, invoices, warranties,
and other standard form agreements used by Seller.
12. Samples of admissions forms and consent forms.
13. Installment sale agreements.
14. Confidentiality and non-compete agreements.
15. Membership agreements or other relations with trade
associations.
16. Loan guarantees.
17. Affiliation, general and educational services agreements.
18. All banking resolutions and list of individuals authorized to
use accounts.
19. Joint purchase agreements.
20. Sales, marketing, advertising, agency and commission agreements.
21. Service and maintenance agreements.
22. Membership agreements or other relations with groups or entities
which engage in peer review, quality review, or rate review procedures.
23. Membership agreements or other relations with groups formed to
coordinate facilities or services planning.
24. Patient or customer referral agreements.
25. Contracts under which Seller directly or indirectly receives
funds from manufacturers or suppliers for patient-care related studies.
G. Product/Equipment Licenses1. License agreements running to and from Seller.
2. Permits or governmental consents.
H. Insurance and Self-Insurance 1. Insurance contracts and policies, including key-man, product
liability, casualty, liability, title and workers' compensation insurance of Seller.
2. Loss summaries for the last five years for general, products,
automobile liability, and workers' compensation insurance.
3. Reservations of rights and substantial denials of coverage
received from any insurance carrier relating to pending claims.
4. List of all liability claims and reserves established for them.
I. Litigation
1. List of all pending or threatened litigation, including pending
or threatened administrative proceedings and arbitration proceedings. The list
should contain the following information:
a. the parties to the proceeding,
b. the nature of the proceeding,
c. the date and method the proceeding was commenced, and
d. the amount of damages or other relief sought.
2. List of all counsel retained to represent Seller in connection
with pending litigation, administrative proceedings or arbitration.
3. All opinions by counsel to the Seller as to any pending
litigation against the Seller (including letters to auditors).
4. Copies of all complaints, counterclaims, answers, decrees,
injunctions, orders, judgments, settlement agreements, dismissals, and
arbitration findings for last three years.
5. Documentation and correspondence concerning all investigations
concerning Seller that are being conducted or have been conducted by any
governmental agency within the last three years.J. Patents, Trademarks, and Copyrights1. Copy of policy on employee work products and list of reports
filed thereunder.
2. List of patents, trademarks, service marks, and copyrights owned
by Seller.
3. Licensing and royalty agreements to which Seller is a party.
4. Copy of any Federal patent waiver agreement.
K. Inventory 1. Existing inventory schedules and valuations.
L. Financings 1. Copies of all debt instruments, including all guaranty
agreements, of Seller.
II. Properties
A. Real Estate
1. A list of all land, buildings, and leasehold improvements held by
the Seller, including a legal description of real estate owned and leased. The
list should include the state and county of each site where land, leaseholds and
equipment are located. For any owned or leased real property for which a title
report or title policy is not available, the address and tax block and lot
information for such property to enable a title report to be ordered.
2. Copies of all documents evidencing title to the Seller's real
property and copies of policies of title insurance relating thereto.
3. Copies of all documents concerning exceptions, if any, to fee
simple title pertaining to real estate owned
4. The most recent surveys of owned or leased real estate.
5. Copies of all contracts with third parties or affiliates of the
Seller providing for the management of any facility or real property owned or
leased by the Seller.
6. Recent title and appraisal reports, if any, concerning all real
property owned or leased by the Seller.
7. List of zoning classifications for all real estate owned or
leased by Seller.
8. Current engineer's report on all properties.
9. Lien waivers for all construction pending or completed in last
four months.
B. Non-Real Estate Properties1. Recent title and appraisal reports, if any, concerning all non-
real estate property owned or leased by the Seller (including UCC searches in
all state and local jurisdictions in which filings might be made regarding the Seller).
2. Existing schedules of fixed assets and major medical equipment
for the Seller (including valuation data regarding each asset, if available).
3. Description and age of principal items or classes of equipment
and a schedule of costs, depreciation reserve, depreciation rates and methods,
present book value, and all liens and encumbrances applicable to each.
4. A schedule, as of a recent date, of all marketable securities
held by the Seller together with purchase price and carrying value of such
securities.
III. Employment Matters
A. Employment contracts and related documents
1. Copies of all employee contracts, consulting agreements or
similar agreements to which the Seller or any of its subsidiaries is a party,
including professional staff and other employment or service agreements. Include
correspondence with prospective employees describing terms and conditions of
employment.
2. Copies of all employee or management compensation plans and
incentive plans, and documentation of actual payments made or accrued under such
plans in the last three years.
3. Medical and nursing staff bylaws, including departmental bylaws.
4. All documents relating to affirmative action programs, if any,
applicable to the Seller.
5. Brochures, information, booklets, policies and procedures manuals
or other written material given to employees or potential employees of the
Seller to acquaint them with the Seller's business and with services,
compensation, and benefits offered to employees.
6. Copies of all current job or job classification descriptions.
7. Copies of all employment application forms, forms used to
evaluate applicants or employees, and any written tests administered to
applicants or employees.
8. Copies of any standard agreements employees are requested or
required to sign (e.g., confidentiality, noncompete, conflict of interest
agreements, etc.).
9. List of all employee terminations within last twelve months
including name, position, date of termination, and reason for termination.
10. List of current wage rates by job classification.
B. Key Employee Matters1. List of all current material transactions or arrangements
involving the Seller and any officer or director of the Seller, and copies of
any agreements or other documents respecting the foregoing. The list should
include all outstanding loans and advances (other than routine travel and
business expense advances) by the Seller to any officer or director of the
Seller, and should append all documentation relevant to such transactions or
arrangements, including information as to interest rate, security, maturity, and
any delinquencies or deficiencies.
2. List detailing all fringe benefits and perquisites of each
officer and director of the Seller, with information on the cost thereof to the
Seller and the value thereof to the recipient for the last two years.
3. List of all officers, directors, members, parties with a security
interest in 5% or more of Seller's assets, and managing employees, who have been
sanctioned or are the subject of any proceeding regarding patientcare related
crimes, patient abuse, civil monetary penalty proceedings, exclusion
proceedings, or any crime involving financial misconduct or controlled
substances.
C. Employee Benefit and Welfare Plans1. Copies of all employee benefit plans sponsored by, or to which
contributions are made, by Seller, including (but not limited to) all bonus,
severance, savings, stock purchase, stock option, money purchase, pension,
multi-employer pension, profit sharing, deferred compensation, and tax sheltered
or other annuity plans currently in effect and drafts of any similar proposed
plans. Copies of all amendments to such plans and all trust agreements,
investment management agreements, or insurance contracts related to such plans, if any.
2. Copies of most recent IRS qualification letters for each
qualified plan and copies of all related correspondence.
3. Copies of any funding waiver requests to IRS and IRS responses.
4. For each plan, copies of summary descriptions, related summaries
of material modifications, annual reports and summary annual reports to
participants for last three years.
5. Reports by independent actuaries or auditors respecting the
Seller and any of its benefit plans.
6. Copies of all communications regarding withdrawal liabilities
under multi-employer pension plans.
7. Copies of all life, health, disability, accidental-death, salary
continuance, and other employee welfare plans.
8. For each employee benefit or welfare plan, a list of the plan's
administrator, and the plan's trustees and fiduciaries, if applicable.
9. Where applicable, a summary of annualized cost to the Seller and
its subsidiaries of any insurance provided to retired or former employees.
10. Copies of the IRS Forms 5500 filed with the Department of Labor
for each employee benefit plan (i.e., pension plans and welfare plans) for the
last two years.
11. All notices to the Pension Benefit Guaranty Corporation (PBGC)
concerning reportable events under ERISA, and all documentation of any audits,
investigations or reviews being conducted by the IRS, Department of Labor or
PBGC with respect to any plan and any administrative proceedings in connection
therewith.
12. Summary of liability for termination payments to employees.
D. Labor Relations 1. Summary of the number of Seller's employees, and turnover and
absentee rates.
2. A schedule listing and copies of all collective bargaining
agreements to which employees of the Seller are subject, together with a list of
the expiration dates of such agreements and the number of employees covered by
each respective agreement. All waivers or amendments to any collective
bargaining agreement, if any.
3. All correspondence with labor unions and all memoranda regarding
communication with such labor unions or union employees.
4. Summary of the history for the last three years of any union
negotiations.
5. Summary of labor concerns, including whether any strikes are
threatened or pending, all current disputes and negotiations, and all Equal
Employment Opportunity Commission (EEOC) and Occupational Safety and Health
Administration (OSHA) issues and complaints, together with relevant material
documents.
IV. Governmental Regulations and Filings
A. Lists or copies of all licenses, permits, consents, approvals,
authorizations, registrations, and filings (other than those specified below as
to health provider matters) from, with or to any federal, state or local
governmental authority relating to Seller.
B. Any filings made pursuant to the Hart-Scott-Rodino Antitrust
Improvement Act within the last five years.
V. Health Provider Matters
A. Licensure1. Institutional licenses of Seller (federal, state, and/or local).
2. Licensure survey, condition of participation, and proficiency
testing reports, and any plans of correction, for last five years.
3. Reports to and correspondence with state licensing agencies, peer
review organizations, and any other federal, state or local reviewing agencies
or organizations for last three years pertaining to Seller.4. All certificates of need, letters of nonreviewability,
certificates of exemption, other certification documents, and correspondence
related thereto pertaining to Seller's assets currently in use.
5. All pending certificate of need or certificate of exemption
applications and related documentation and correspondence.
B. Accreditations1. Last three Joint Commission on Accreditation of Health
Organizations accreditation survey reports and Seller's responses to noted
deficiencies or conditional accreditations, if any.
2. List of all accreditations of Seller and all memberships in any
trade or professional associations.
C. Payment/Reimbursement Matters1. As-filed and audited Medicare cost reports (and any comparable
Medicaid or other state reports) for past five years.
2. Medicare Credit Balance Reports (Forms HCFA-838) for last three
years.
3. List of any pending disputes or appeals before federal or state
administrative agencies, or with other thirdparty payors, including a
description of the issues and estimated amounts in controversy.
4. All correspondence from federal or state rate-setting and other
regulatory agencies pertaining to rates, pending appeals or adjustments, open
years, or other rate-setting, coverage, reimbursement, and/or compliance issues
for last five years.
5. Five most recent Medicare notices of program reimbursement and
intermediary audit adjustment reports, and any comparable reports by other payors.
6. Medicare/Medicaid and other participating provider and managed
care contracts, including agreements with Blue Cross/Blue Shield, insurance
companies, health maintenance organizations, etc.
7. Seller's current charge schedules.
8. Any Hill-Burton agreement and correspondence from the last five
years relating to Hill-Burton obligations.
D. Medical Staffs1. List of all medical staff members, including name, specialty,
licensure and certification status, and number of admissions per year.
2. List of formal medical staff grievance proceedings for last three
years.
3. List of medical staff members who are shareholders, members,
trustees or directors of Seller.
VI. Environmental MattersA. Environmental permits (including air, water, underground storage, waste
and sewer permits), if any, under which Seller's facilities operate.
B. Documentation and correspondence regarding environmental regulation
compliance history under federal, state and local rules and regulations.
C. All notices and demands of environmental authorities relating to the
operations or property of Seller for last three years.
D. List of all assets or property of Seller that have ever been or are now
being used for the generation, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous substance, as those terms are
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. ¤¤ 9601 et seq. (CERCLA).
E. List of all on-site waste disposal sites.
F. Summary of current disposal practices and historical relationships and
practices with waste haulers and waste disposal facilities with respect to the
storage, treatment, and disposal of wastes.
G. Summaries of all environmental testing done at any location involved in
the business of Seller, including all written reports made in the last five
years regarding such testing or other environmental matters affecting Seller.
H. All written estimates prepared in the last three years regarding
expenditures for environmental clean-up or other environmental programs.
VII. Miscellaneous
A. Copies of all news releases, press releases or brochures issued by or
relating to Seller for last three years.
B. Complaints or demands of customers or independent contractors received
by Seller within the last twelve months.
C. Complaints or demands of residents and business establishments located
near any of Seller's facilities received by Seller within the last twelve months.
D. Internal reports and studies concerning matters which are material to
the ongoing business of Seller.
E. All other documents viewed by the officers and directors of Seller as
material to the business, financial condition, or operations of Seller.
F. Anti-fraud and abuse compliance programs and policies, and internal
investigation reports relating to anti-fraud and abuse issues for last three years.
