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ITEM 2.01
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COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
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On November 15, 2017, pursuant to four separate Membership Interest Purchase Agreements (the “Purchase Agreements”), Northstar Healthcare Surgery Center - Houston, LLC ("NHSC") and Nobilis Health Corp. (the "Company"), (NHSC and the Company are each a "Buyer" and collectively "Buyers") and Elite Surgical Affiliates ("Elite") and other membership interests, (Elite and other membership interests are each a "Seller" and collectively "Sellers") finalized the Purchase Agreements dated as of November 15, 2017.
The material provisions of the Purchase Agreements and related transactions include the $50.0 million in financing made available through Amendment No. 2 to the BBVA Compass Credit Facility (the "Amendment"), the $3.6 million in cash on hand paid to Elite as a part of the purchase price at closing, the $3.5 million convertible promissory note (the "Note") to Elite and a $3.0 million hold back. The Purchase Agreements, the Amendment and the Note are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 to this Current Report on Form 8-K and are incorporated herein by reference.
The descriptions of the Purchase Agreements, the Amendment and the Note in this Current Report are summaries and are qualified in their entirety by reference to the complete text of such documents.
Purchase Agreements
The Buyers acquired 50.1% of the Sellers’ ownership interests in three ambulatory surgery centers and one surgical hospital in the greater Houston area. The Buyers paid approximately $60.1 million, comprised of $53.6 million in cash, $3.5 million in the form of a Note, $2.5 million in form of unfunded escrow and $0.5 million in shares of common stock.
As part of the Purchase Agreements, $3.0 million of the cash purchase price was held back and is subject to certain indemnification provisions. Of the hold back, $2.5 million is a portion of the purchase price, and $0.5 million is being held in escrow at BBVA Compass Bank. On the twelve-month anniversary of closing, 100% of the amount held back, less unresolved claims, less any amounts paid as, or claimed as, indemnification, will be paid to the Sellers.
At closing, on behalf of the Sellers, the Company issued to the Sellers’s agent in the form of shares of the Company’s common stock equal to $0.5 million, or 0.4 million common shares at $1.32 per share. The share price was based on the New York Stock Exchange's ("NYSE MKT") ten day variable weighted average of the Company's common shares' closing prices. The issued common shares are restricted for a period of six months.
The Amendment
On November 15, 2017, Northstar Healthcare Acquisitions, L.L.C. (the “Borrower”), a Delaware limited liability company and wholly owned subsidiary of Nobilis Health Corp. (the “Company”) and Northstar Healthcare Holdings, Inc. a Delaware corporation entered into the Amendment, by and among the Borrower, the Company, certain subsidiaries of the Company parties thereto, the lenders from time to time parties thereto (the “Lenders”), BBVA Compass Bank as Administrative Agent, LC Issuing Lender and Swingline Lender and other lenders party thereto. The purpose of the Amendment was to finance the aforementioned acquisition, and thereby increased the aggregate principal amount by $50,000,000 (“Term Loan B”). The maturity date of Term Loan B is November 15, 2022 and payments are due quarterly.
The Note
The Note in the principal amount of $3.5 million bears interest at the simple rate of 6.75% per annum and is payable in three installments over a two year period. The interest payments are due quarterly. The Note (outstanding principal but excluding accrued and unpaid interest) may be converted into the Company's common shares (the "Conversion Shares"), only upon the occurrence of both (i) default by Maker, as defined in the Note, and (ii) the election of the Sellers. The number of Conversion Shares will be based on a price per share equal to the quotient obtained by dividing the conversion amount by the lessor of (i) the closing bid price of the common shares on the trading day immediately prior to the conversion date, or (ii) the volume weighted average price of the common shares on NYSE MKT in the trailing ten trading days prior to the Maturity Date. There are no pre-payment penalties.