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EXHIBIT 2.2
ASSET SALE AGREEMENT
between
TENET HEALTHCARE CORPORATION,
a Nevada corporation
and
JLL HOSPITAL, LLC,
a Delaware limited liability company
DATED: August 15, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING..............................................................................1
1.1 Definitions.............................................................................1
1.2 Purchase and Sale of Assets; Purchase Price.............................................3
1.3 Inventory...............................................................................4
1.4 Post-Closing Adjustment to Purchase Price...............................................5
1.5 Closing Date............................................................................6
1.6 Items to be Delivered by Seller at Closing..............................................6
1.7 Items to be Delivered by Purchaser at Closing...........................................8
1.8 Prorations and Utilities................................................................9
1.9 Transfer of Seller Assets...............................................................9
1.10 Excluded Assets........................................................................11
1.11 Assumed Obligations....................................................................12
1.12 Excluded Liabilities...................................................................13
1.13 [Intentionally Omitted]................................................................15
1.14 Disclaimer of Warranties...............................................................15
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................16
2.1 Authorization..........................................................................16
2.2 Binding Agreement......................................................................16
2.3 Organization and Good Standing; No Violation...........................................16
2.4 Contracts and Leases...................................................................17
2.5 Required Consents......................................................................17
2.6 Compliance With Laws and Contracts.....................................................18
2.7 Title; Sufficiency.....................................................................19
2.8 Certain Representations With Respect to the Hospitals..................................20
2.9 Brokers and Finders....................................................................21
2.10 Financial Statements...................................................................21
2.11 Legal Proceedings......................................................................21
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TABLE OF CONTENTS
(CONTINUED)
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2.12 Employee Benefits......................................................................22
2.13 Taxes and Tax Returns..................................................................23
2.14 Personnel..............................................................................24
2.15 Insurance..............................................................................24
2.16 Solvency...............................................................................24
2.17 No Untrue or Inaccurate Representations or Warranties..................................25
2.18 Absence of Undisclosed Liabilities.....................................................25
2.19 Y2K....................................................................................25
2.20 Capitalization of Beaumont Newco.......................................................25
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................26
3.1 Authorization..........................................................................26
3.2 Binding Agreement......................................................................26
3.3 Organization and Good Standing.........................................................26
3.4 No Violation...........................................................................26
3.5 Brokers and Finders....................................................................26
3.6 Legal Proceedings......................................................................27
3.7 Solvency...............................................................................27
3.8 Intentionally Omitted..................................................................27
3.9 Intentionally Omitted..................................................................27
3.10 No Other Business or Operations........................................................27
ARTICLE 4
COVENANTS OF SELLER................................................................................27
4.1 Access and Information; Inspections....................................................27
4.2 Preserve Accuracy of Representations and Warranties....................................28
4.3 Conduct of Business....................................................................28
4.4 Negative Covenants.....................................................................28
4.5 Required Approvals.....................................................................29
4.6 Additional Financial Information.......................................................29
4.7 No-Shop................................................................................29
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TABLE OF CONTENTS
(CONTINUED)
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4.8 Seller's Efforts to Close; Audited Financial Statements................................30
4.9 Title Matters..........................................................................31
4.10 Termination of Hospitals' Employees....................................................31
4.11 Termination Cost Reports...............................................................31
4.12 Hart-Scott-Rodino Act Filings..........................................................31
4.13 Environmental Survey...................................................................32
4.14 Noncompetition.........................................................................32
4.15 Enforceability.........................................................................32
4.16 [Intentionally Omitted]................................................................33
4.17 Sale of Odessa Regional Hospital.......................................................33
4.18 Y2K Compliance Program.................................................................34
4.19 Supplements to Disclosure Schedule.....................................................34
4.20 Mesa Lease Adjustment..................................................................34
ARTICLE 5
COVENANTS OF PURCHASER.............................................................................35
5.1 Purchaser's Efforts to Close...........................................................35
5.2 Required Approvals.....................................................................35
5.3 Certain Employee Matters...............................................................35
5.4 Use of Business Names..................................................................37
5.5 Excluded Assets........................................................................37
5.6 Confidentiality........................................................................37
5.7 Enforceability.........................................................................38
5.8 Hart-Scott-Rodino Act Filings..........................................................38
5.9 Group Purchasing Contract..............................................................38
5.10 Acknowledgement Regarding Year 2000 Compliance.........................................38
5.11 Waiver of Bulk Sales Law Compliance....................................................39
5.12 Beaumont Assets........................................................................39
5.13 Preserve Accuracy of Representations and Warranties....................................39
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER......................................................39
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TABLE OF CONTENTS
(CONTINUED)
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6.1 Warranties True and Correct............................................................39
6.2 Signing and Delivery of Instruments....................................................39
6.3 Unfavorable Action or Proceeding.......................................................40
6.4 Performance of Covenants...............................................................40
6.5 Opinion of Counsel for Purchaser.......................................................40
6.6 Hart-Scott-Rodino Filings..............................................................40
6.7 Consents, Approvals and Authorizations.................................................40
6.8 Exhibits and Schedules.................................................................40
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...................................................40
7.1 Warranties True........................................................................41
7.2 Consents, Approvals and Authorizations.................................................41
7.3 Signing and Delivery of Instruments....................................................41
7.4 Performance of Covenants...............................................................41
7.5 Unfavorable Action or Proceeding.......................................................41
7.6 Hart-Scott-Rodino Filings..............................................................41
7.7 Governmental Concurrences..............................................................41
7.8 Opinion of Counsel.....................................................................42
7.9 Exhibits and Schedules.................................................................42
7.10 Title Insurance Policy.................................................................42
7.11 Financing..............................................................................42
7.12 Material Adverse Change................................................................42
7.13 Audit..................................................................................42
7.14 Odessa Closing.........................................................................42
ARTICLE 8
TERMINATION........................................................................................43
8.1 Termination............................................................................43
8.2 Termination Consequences...............................................................43
8.3 Costs..................................................................................44
ARTICLE 9
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TABLE OF CONTENTS
(CONTINUED)
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POST-CLOSING MATTERS...............................................................................44
9.1 Excluded Assets and Excluded Liabilities...............................................44
9.2 Preservation and Access to Records After the Closing...................................44
ARTICLE 10
SURVIVAL AND INDEMNIFICATION.......................................................................46
10.1 Survival...............................................................................46
10.2 Indemnification of Purchaser by Seller.................................................46
10.2.1 Indemnification................................................................46
10.2.2 Indemnification Limitations....................................................47
10.3 Indemnification of Seller by Purchaser.................................................48
10.3.1 Indemnification................................................................48
10.3.2 Indemnification Limitations....................................................48
10.4 Method of Asserting Claims.............................................................49
10.5 Exclusive..............................................................................52
10.6 Reduction of the Purchase Price........................................................52
ARTICLE 11
TAX AND COST REPORT MATTERS........................................................................52
11.1 Tax Matters; Allocation of Purchase Price..............................................52
11.2 Cost Report Matters....................................................................53
11.3 Transition Services....................................................................54
ARTICLE 12
MISCELLANEOUS PROVISIONS...........................................................................55
12.1 Further Assurances and Cooperation.....................................................55
12.2 Successors and Assigns.................................................................55
12.3 Governing Law..........................................................................55
12.4 Amendments.............................................................................56
12.5 Exhibits, Schedules and Disclosure Schedule............................................56
12.6 Notices................................................................................56
12.7 Headings...............................................................................57
12.8 Confidentiality and Publicity..........................................................57
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12.9 Fair Meaning...........................................................................57
12.10 Gender and Number; Construction........................................................57
12.11 Third Party Beneficiary................................................................57
12.12 Expenses and Attorneys' Fees...........................................................57
12.13 Counterparts...........................................................................58
12.14 Entire Agreement.......................................................................58
12.15 No Waiver..............................................................................58
12.16 Severability...........................................................................59
12.17 Arbitration............................................................................59
12.17.1 Forum.........................................................................59
12.17.2 Law...........................................................................59
12.17.3 Selection.....................................................................59
12.17.4 Administration................................................................59
12.17.5 Rules.........................................................................59
12.17.6 Award.........................................................................59
12.18 Time is of the Essence.................................................................59
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LIST OF SCHEDULES
SCHEDULE DESCRIPTION
A-1 Subsidiaries
A-2 Acute Care Hospitals
A-3 MOBs
A-4 Other Businesses
1.2(c) Interim Balance Sheet
1.9(a) Owned Real Property
1.9(b) Leased Real Property
1.9(c) Personal Property
1.9(d) Licenses
1.9(e) Leases
1.9(f) Contracts
1.9(g) Prepaids
1.9(m) Names of Hospitals
1.9(p) Equity Interests
1.10(d) Excluded Proprietary Assets
1.10(o) Other Excluded Assets
1.11(c) Capital Leases
1.11(i) Other Assumed Obligations
2.3(b) Governmental Notices and/or Approvals
2.4(a) Material Contracts
2.4(b) Incomplete Contracts
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SCHEDULE DESCRIPTION
2.5 Required Consents
2.6(a) Compliance with Law
2.6(b) Compliance with Environmental Laws
2.7(a) Title to Real Property
2.7(b) Title; Sufficiency
2.8(a) Licenses Exceptions
2.8(b) JCAHO Accreditation Periods
2.8(c) Medicare and Medicaid Certification
2.8(d) Audit Periods
2.8(g) Medical Staff Matters
2.10 Financial Statements
2.11 Legal Proceedings
2.12 Employee Benefits
2.13 Taxes
2.13(c) Tax Liens
2.14 Personnel List
2.14 Insurance
2.18 Undisclosed Liabilities
2.19 Y2K Compliance
3.4 Third Party Consents - Purchaser
3.5 Brokers - Purchaser
3.7 Legal Proceedings - Purchaser
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SCHEDULE DESCRIPTION
7.10 Permitted Title Exceptions
11.1(b) Allocation of Purchase Price
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LIST OF EXHIBITS
EXHIBIT DESCRIPTION
1.6.1 Bills of Sale
1.6.2 Real Estate Assignments
1.6.3 Limited Warranty Deeds
1.6.9 Transitional Services Agreements
-Information Technology Transition
Services Agreement
-License Agreement for Policy and
Procedure Manuals
-Management Services Agreement
1.6.10 Business Services Agreement
1.6.11 Employee Leasing Agreement
1.6.13 Landlord Estoppel Certificate
4.13 Environmental Survey
4.17 Odessa Asset Sale Agreement
5.9 Group Purchasing Contract
5.12 Beaumont Asset Sale Agreement
6.5 Opinion of Purchaser's Counsel
7.8 Opinion of Seller's In-House Counsel
7.11 Financing Letter
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ASSET SALE AGREEMENT
This Asset Sale Agreement (the "Agreement") is made and entered into as of
the fifteenth (15th) day of August, 1999 (the "Effective Date") by and between
Tenet Healthcare Corporation, a Nevada corporation ("Seller"), and JLL Hospital,
LLC, a Delaware limited liability company ("Purchaser").
R E C I T A L S:
A. Through the wholly-owned subsidiary corporations and majority-owned
partnerships identified on Schedule A-1 (the "Subsidiaries"), Seller (I) engages
in the business of delivering acute care services to the public through the
acute care hospitals identified on Schedule A-2 (the "Acute Care Hospitals"),
(II) owns and operates certain medical office buildings incident to the
operation of the Acute Care Hospitals as specifically identified on Schedule A-3
(the "MOBs"), and (III) owns and operates other healthcare businesses incident
to the operation of the Acute Care Hospitals as specifically identified on
Schedule A-4 (the "Other Businesses") (the Acute Care Hospitals, MOBs and the
Other Businesses are referred to herein collectively as the "Hospitals").
B. Purchaser desires to purchase from the Subsidiaries, and Seller desires
to cause the Subsidiaries to sell to Purchaser, substantially all of the assets
with respect to the operation of the Hospitals, for the consideration and upon
the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants contained in this Agreement, and for their mutual
reliance, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS; SALE AND TRANSFER OF ASSETS;
CONSIDERATION; CLOSING
1.1 Definitions. The terms listed below are defined elsewhere in this
Agreement and, for ease of reference, the section containing the definition of
each such term is set forth opposite such term.
TERM SECTION
---- -------
Accounts Receivable..................................Section 1.10(l)
Acute Care Hospital..................................Recitals
Agency Settlement....................................Section 11.2(a)
Aggregate Amount.....................................Section 10.2.2(ix)
Agreement............................................Preamble
Assets...............................................Section 1.9
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Assumed Capital Lease Obligations ...................Section 1.2(a)
Assumed Obligations..................................Section 1.11
Audit Periods........................................Section 2.8(d)
Beaumont Assets .....................................Section 5.12
Beaumont Newco.......................................Section 5.12
Beaumont Shares......................................Section 2.20
Bills of Sale........................................Section 1.6.1
Breaching Party......................................Section 8.1(b)
Cash Purchase Price..................................Section 1.2
CEO..................................................Section 2.10
Claim Notice.........................................Section 10.4(a)
Closing Date.........................................Section 1.5
Closing..............................................Section 1.5
Code.................................................Section 2.12(b)
Confidential Information ............................Section 5.6
Confidentiality Agreement............................Section 5.6
Consultants..........................................Section 4.13
Contracts............................................Section 1.9(f)
COO..................................................Section 2.10
Damages..............................................Section 10.2.1
Disclosure Schedule..................................Section 2
Document Retention Period............................Section 9.2(a)
DOJ..................................................Section 4.12
DON..................................................Section 2.10
Effective Date.......................................Preamble
Effective Time.......................................Section 1.5
Environmental Permits................................Section 2.6(b)
Environmental Survey.................................Section 4.13
Excluded Assets......................................Section 1.10
Excluded Liabilities.................................Section 1.12
Final Balance Sheet..................................Section 1.4
Financial Statements.................................Section 2.10
Fraction.............................................Section 11.3(a)
FTC..................................................Section 4.12
GAAP.................................................Section 1.2
Group Purchasing Contract............................Section 1.6.8
Hired Employees......................................Section 5.3(a)
Hospitals............................................Recitals
Hospitals' Employees.................................Section 5.3(a)
HSR Act..............................................Section 2.3(b)
Indemnified Party....................................Section 10.4
Indemnifying Party...................................Section 10.4(a)
Indemnity Notice.....................................Section 10.4(a)
Independent Auditor..................................Section 1.4
Interim Balance Sheet................................Section 1.2
Inventory............................................Section 1.9(h)
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Leased Real Property...........................Section 1.9(b)
Leases.........................................Section 1.9(e)
Licenses.......................................Section 1.9(d)
Liens..........................................Section 1.2(a)
Meditrust Lease ...............................Section 5.14
Meditrust Real Property .......................Section 1.2
MOBs...........................................Recitals
Nondefaulting Party............................Section 8.1(b)
Notice Period..................................Section 10.4(a)
Odessa Asset Sale Agreement....................Section 4.17
Odessa Assets .................................Section 4.17
Odessa Partnership ............................Section 4.17
Odessa Right of First Refusal .................Section 4.17
Other Businesses...............................Recitals
Owned Real Property............................Section 1.9(a)
Permitted Exceptions...........................Section 7.10
Permitted Liens ...............................Section 2.7(b)
Personal Property..............................Section 1.9(c)
Post Closing Adjustment Date...................Section 1.4
Prepaids.......................................Section 1.9(g)
Purchase Price.................................Section 1.2
Purchaser......................................Preamble
Purchaser's Plan...............................Section 5.3(d)
Real Estate Assignments........................Section 1.6.2
Real Property..................................Section 1.9(b)
Receivable Records.............................Section 1.10(m)
Reconciliation.................................Section 11.3(a)
Relevant Claim.................................Section 10.2.2(ix)
Retained Management Employees..................Section 5.3(a)
Seller.........................................Preamble
Sick Pay Amount................................Section 1.2
Subsidiaries Cost Reports......................Section 11.2(a)
Subsidiaries...................................Recitals
Surveys........................................Section 4.9
Third Party Claim..............................Section 10.4(a)
Title Commitment...............................Section 4.9
Title Company..................................Section 4.9
Title Instruments..............................Section 4.9
Title Policy...................................Section 4.9
Transition Date................................Section 5.3(a)
Transition Services............................Section 11.3
Transitional Services Agreement................Section 1.6.9
1.2 Purchase and Sale of Assets; Purchase Price.
(a) Subject to the terms and conditions of this Agreement, Seller
shall sell to Purchaser, and Purchaser shall purchase from Seller, the Assets,
free and clear of all liens,
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pledges, claims, charges, security interests or other encumbrances ("Liens")
other than Permitted Liens. Subject to the terms and conditions of this
Agreement, the aggregate purchase price to be paid by Purchaser to Seller for
the purchase of the Assets shall be (i) Four Hundred Five Million Two Hundred
Thousand Dollars ($405,200,000) (a) (the "Purchase Price"), plus or minus (ii)
the amount of Net Working Capital (as defined below) on the Closing Date, minus
(iii) the amount of Seller's capital lease obligations with respect to the
Hospitals, if any, that are assumed by Purchaser pursuant to Section 1.11 of
this Agreement (the "Assumed Capital Lease Obligations"), minus (iv) 16.17
percent (16.17%) of the Sick Pay Amount (the sum of (i), (ii), (iii), and (iv)
being referred to for purposes of this Agreement as the "Cash Purchase Price").
(b) For purposes of this Section 1.2, "Net Working Capital," as of any
date, shall be defined as an amount equal to the difference between the (i)
current assets of the Subsidiaries with respect to the operation of the
Hospitals, which for purposes of this calculation shall include only (a) the
value of the Prepaids, (b) the value of the Inventory, (c) other current assets
associated with the Hospitals to the extent they have value and are reflected on
the Financial Statements, and (d) notes receivable held by any Subsidiary as to
which the borrower thereunder is a physician providing professional medical
services at a Hospital, which notes are not otherwise included in Net Working
Capital as current assets under (a), (b) or (c) immediately above (the
"Physician Notes"), and (ii) the current liabilities of the Subsidiaries with
respect to the operation of the Hospitals, which for purposes of this
calculation shall only include, to the extent assumed, (a) Accounts Payable, (b)
Accrued Expenses, (c) Accrued Payroll, (d) Accrued Paid Time Off, and (e) Other
Current Liabilities (as such terms are utilized on the Interim Balance Sheet).
For purposes of this Section 1.2, "Sick Pay Amount" shall be defined as the
amount of accumulated sick pay and extended sick pay obligations of the
Subsidiaries to the Hired Employees.
(c) At least three (3) calendar days but no more than ten (10)
calendar days prior to the Closing Date, Seller shall prepare and deliver to
Purchaser the latest available unaudited balance sheet of the Subsidiaries with
respect to the operation of the Hospitals (the "Interim Balance Sheet"). The
Interim Balance Sheet shall (i) be prepared in conformity with generally
acceptable accounting principles consistently applied ("GAAP") to the extent
described in Section 2.10 of this Agreement, (ii) include a calculation of Net
Working Capital, Assumed Capital Lease Obligations and the Sick Pay Amount, and
(iii) shall be attached hereto as Schedule 1.2(c). The amounts set forth in the
Interim Balance Sheet shall be subject to adjustment as provided in Sections 1.3
and 1.4 below. The Cash Purchase Price shall be payable by wire transfer of
immediately available funds to Seller to the account(s) specified by Seller to
Purchaser in writing, subject to the terms of Section 1.7.1 below.
1.3 Inventory. Seller shall cause an inventory to be taken of the Inventory
by employees or representatives of Seller or its affiliates, with said inventory
to be taken in accordance with the Subsidiaries' respective policies and
procedures and the policies and procedures used in connection with determining
inventory for purposes of the preparation of the Financial Statements dated as
of May 31, 1999, as near in time as possible to the Closing Date and with the
results extended and adjusted through the Closing Date. Seller shall permit
representatives or employees of Purchaser to observe such inventory process. The
cost of conducting the inventory shall be borne by Seller. All inventory items
shall be valued at the lesser of cost or current market value. The parties
acknowledge that the inventory to be taken
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pursuant to this Section 1.3 will not be conducted until immediately prior to
the Closing Date and, as such, the results of such inventory will not be
available until some time after the Closing Date. Accordingly, the parties agree
that for purposes of the Interim Balance Sheet, Net Working Capital shall
include the value of the Inventory with respect to the operation of the
Hospitals as reflected by the latest available unaudited balance sheet of the
applicable Subsidiary. For purposes of the Final Balance Sheet, the portion of
Net Working Capital attributable to the Inventory shall be the value of the
Inventory as determined pursuant to this Section 1.3.
1.4 Post-Closing Adjustment to Purchase Price. Within ninety (90) calendar
days after the Closing Date, the final unaudited balance sheet of the Hospitals
as of the Closing Date (the "Final Balance Sheet"), which shall include a
calculation of Net Working Capital, Assumed Capital Lease Obligations and the
Sick Pay Amount as of the Closing Date, shall be prepared by Seller and
delivered to Purchaser. Purchaser, in connection with its review of the Final
Balance Sheet, shall be permitted to review workpapers of Seller or its
accountants with respect to the preparation of the Final Balance Sheet and the
books and records of Seller and its Subsidiaries reasonably related thereto. The
Interim Balance Sheet and the Final Balance Sheet shall be prepared in a manner
consistent with the terms of Section 2.10. If Purchaser disputes any entry on
the Final Balance Sheet that affects the calculation of Net Working Capital,
Purchaser shall notify Seller in writing (which writing shall contain
Purchaser's determination of the amount of the disputed entry) within thirty
(30) business days after Purchaser's receipt of the Final Balance Sheet from
Seller. If the difference between Seller's and Purchaser's respective
calculations of Net Working Capital is equal to or less than five percent (5%)
of the amount of Seller's calculation, Seller's calculation shall be conclusive
and binding as between Purchaser and Seller. If the difference between Seller's
and Purchaser's respective calculations is greater than five percent (5%) of
Seller's calculation, and Purchaser and Seller cannot resolve such dispute
within thirty (30) business days after Purchaser notifies Seller in writing of
such dispute, then the parties shall mutually select a "Big Six" financial
accounting firm other than the two firms then being used by the parties (the
"Independent Auditor"). The Independent Auditor shall review the matter in
dispute and, acting as experts and not as arbitrators, shall promptly decide the
proper amounts of such disputed entries (which decision shall also include a
final recalculation of the Purchase Price). Such decision of the Independent
Auditor shall be conclusive and binding as between Purchaser and Seller, and the
costs of such review shall be borne by both Seller and Purchaser in proportion
to the relevant amount each party's determination has been modified. In the
event that Purchaser disputes the Sick Pay Amount and/or the Assumed Capital
Lease Obligation, the parties shall resolve such dispute in substantially the
same manner as set forth in this Section 1.4.
Within thirty-five (35) business days after Purchaser's receipt of the
Final Balance Sheet from Seller or, if disputed by Purchaser, within five (5)
business days after the earlier of (a) the date Purchaser and Seller finally
resolve such dispute and recalculate the Purchase Price accordingly, or (b) the
date of receipt of a decision from the Independent Auditor (the "Post-Closing
Adjustment Date"), either (i) Seller shall pay Purchaser in cash or in other
immediately available funds the amount of any decrease in the Purchase Price, or
(ii) Purchaser shall pay Seller in cash or in other immediately available funds
the amount of any increase in the Purchase Price. If Purchaser or Seller, as the
case may be, shall fail to make such payment to the other on the Post-Closing
Adjustment Date, then the party failing to receive such amount due to it shall
be
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entitled to receive interest on such unpaid amount at a per annum rate equal to
the prime rate reported by the Wall Street Journal under "Money Rates" on the
Post-Closing Adjustment Date plus two percent (2%) (or the maximum rate allowed
by law, whichever is less) from such defaulting party, such interest accruing on
each calendar day after the Post-Closing Adjustment Date until payment of such
amount and all interest thereon is made.
1.5 Closing Date. The consummation of the transactions contemplated by this
Agreement ("Closing") shall take place at 9:00 a.m. on the later to occur of (i)
the twenty-eighth (28th) calendar day following the delivery of the audited
financial statements by Seller pursuant to Section 4.8(b) of this Agreement and
(ii) the forty-fifth (45th) calendar day following the Effective Date, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York 10022 or
such other date, time and place as the parties shall mutually agree (the
"Closing Date"), provided that all conditions precedent and other matters
required to be completed as of the Closing Date have been or will be completed
on such date. In the event all conditions precedent and other matters required
to be completed as of the Closing Date have not been completed on such date, the
Closing Date shall occur on the third (3rd) business day following the last to
occur of such conditions or matters. The Closing with respect to the Hospitals
shall be deemed to have occurred and to be effective as between the parties as
of 12:01 a.m. (determined by reference to the local time zone in which such
Hospital is located) on the next day after the Closing Date (the "Effective
Time").
1.6 Items to be Delivered by Seller at Closing.
At or before the Closing, Seller shall cause each Subsidiary to
deliver to Purchaser the following, duly executed by Seller and such Subsidiary
where appropriate:
1.6.1 General Assignment, Bill of Sale and Assumption of Liabilities
in the form of Exhibit 1.6.1 attached hereto (the "Bills of Sale");
1.6.2 Assignment and Assumption of Real Estate Leases in the form of
Exhibit 1.6.2 attached hereto (the "Real Estate Assignments") with respect to
each Leased Real Property;
1.6.3 Limited Warranty Deed(s) (or such other deed comparable to
limited warranty deed(s) as is applicable to the jurisdiction at issue) in the
form of Exhibit 1.6.3 attached hereto;
1.6.4 favorable original certificates of good standing, or comparable
status, of Seller and the Subsidiary, issued by the State of Nevada with respect
to Seller and the respective states of incorporation and organization of such
Subsidiary, dated no earlier than a date which is seven (7) calendar days prior
to the Closing Date;
1.6.5 an opinion of Seller's in-house counsel in substantially the
form attached hereto as Exhibit 7.8;
1.6.6 a certificate of the President or any Vice President of Seller
certifying to Purchaser (i) the accuracy in all material respects of the
representations and warranties set forth in Article 2 hereof and compliance with
Seller's covenants set forth in this Agreement, (ii) that all material consents
and approvals that are required from any person, entity, governmental body
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or regulatory agency in connection with the consummation of the transactions
contemplated by this Agreement by Seller and the Subsidiaries have been
obtained, and (iii) that all of the conditions contained in Article 6 have been
satisfied or waived;
1.6.7 a certificate of the corporate Secretary of Seller (and of the
corporate Secretary of each Subsidiary and the corporate Secretary of each
general partner of any Subsidiary which is a partnership) certifying to
Purchaser (i) the incumbency of the officers of Seller (and of each Subsidiary
and of each such general partner) on the Effective Date and on the Closing Date
and bearing the authentic signatures of all such officers who shall execute this
Agreement and any additional documents contemplated by this Agreement and (ii)
the due adoption and text of the resolutions of the Board of Directors of
Seller, the sole director of each corporate Subsidiary, the sole director of the
general partner(s) of each partnership Subsidiary and of the shareholder(s)
and/or partners, as applicable of each Subsidiary authorizing (a) the transfer
of the Assets and Assumed Obligations by each Subsidiary to Purchaser and (b)
the execution, delivery and performance of this Agreement and all ancillary
documents and instruments by Seller and each Subsidiary, and that such
resolutions have not been amended or rescinded and remain in full force and
effect on the Closing Date;
1.6.8 the Group Purchasing Contract which, except as noted in Section
5.9, shall be substantially in the form of Exhibit 5.9 attached hereto (the
"Group Purchasing Contract");
1.6.9 if requested by Purchaser, the Transitional Services Agreements,
which shall be substantially in the form set forth on Exhibit 1.6.9 attached
hereto with respect to the License Agreement for Policy and Procedure Manuals,
and which are to be negotiated by the parties hereto within five (5) business
days of the Effective Date with respect to the Information Technology Transition
Services Agreement and the Management Services Agreement (the "Transitional
Services Agreements");
1.6.10 the Business Services Agreement, which shall be substantially
in the form of Exhibit 1.6.10 attached hereto (the "Business Services
Agreement"), pursuant to which Purchaser will bill Seller's accounts receivable
for sixty (60) days following the Closing Date;
1.6.11 the Employee Leasing Agreement, which shall be substantially in
the form of Exhibit 1.6.11 attached hereto (the "Employee Lease Agreement")
pursuant to which Seller shall lease the Hospital Employees to Purchaser, as
contemplated by Section 5.3(a) of this Agreement;
1.6.12 UCC termination statements for any and all financing statements
(which do not correspond to an Assumed Obligation) filed with respect to the
Assets;
1.6.13 an estoppel certificate from the landlord with respect to each
Real Property Lease of any Acute Care Hospital or an entire MOB (as opposed to
an office or unit in a MOB), or a Real Property Lease that constitutes a
material ground lease, as to which Seller or any Subsidiary is lessee in the
form of Exhibit 1.6.13 hereto;
1.6.14 a certificate of Seller to the extent required under the
Foreign Investment and Real Property Tax Act (FIRPTA); and
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1.6.15 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
1.7 Items to be Delivered by Purchaser at Closing.
At or before the Closing, Purchaser shall execute and deliver or cause
to be delivered to Seller the following, duly executed by Purchaser where
appropriate:
1.7.1 payment of the Cash Purchase Price based upon the Interim
Balance Sheet (subject to adjustment as described in Section 1.4), as adjusted
to reflect the prorations provided in Section 1.8 of this Agreement.
1.7.2 a certificate of the President or any Vice President of
Purchaser certifying to Seller (i) the accuracy in all material respects of the
representations and warranties set forth in Article 3 hereof and compliance with
Purchaser's covenants set forth in this Agreement, (ii) that all material
consents and approvals that are required from any person, entity, governmental
body or regulatory agency in connection with the consummation of the
transactions contemplated by this Agreement by Purchaser have been obtained, and
(iii) that all of the conditions contained in Article 7 have been satisfied or
waived;
1.7.3 a certificate of the Secretary of Purchaser certifying to Seller
(i) the incumbency of the officers of Purchaser on the Effective Date and on the
Closing Date and bearing the authentic signatures of all such officers who shall
execute this Agreement and any additional documents contemplated by this
Agreement and (ii) the due adoption and text of the resolutions of the governing
board of Purchaser authorizing the execution, delivery and performance of this
Agreement and all ancillary documents and instruments by Purchaser, and that
such resolutions have not been amended or rescinded and remain in full force and
effect on the Closing Date;
1.7.4 an opinion of Purchaser's counsel in substantially the form
attached hereto as Exhibit 6.5;
1.7.5 favorable original certificate of good standing, or comparable
status, of Purchaser, issued by the Delaware Secretary of State dated no earlier
than a date which is seven (7) calendar days prior to the Closing Date;
1.7.6 the Group Purchasing Contract;
1.7.7 if requested by Purchaser, the Transitional Services Agreements;
1.7.8 the Business Services Agreement;
1.7.9 the Employee Lease Agreement; and
1.7.10 such other instruments, certificates, consents or other
documents as may be reasonably necessary to carry out the transactions
contemplated by this Agreement and to comply with the terms hereof.
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1.8 Prorations and Utilities. To the extent not otherwise prorated pursuant
to this Agreement, or as reflected in Net Working Capital on the Interim Balance
Sheet or the Final Balance Sheet (provided that any category of proration
reflected on the Interim Balance Sheet shall also be reflected on the Final
Balance Sheet), Purchaser and Seller shall prorate (as of the Effective Time),
if applicable, real estate and personal property lease payments, real estate and
personal property taxes, assessments and other similar charges against real
estate, plus all other income and expenses which are normally prorated upon the
sale of assets of a going concern. As to power and utility charges, "final
readings" as of the Closing Date shall be ordered from the utilities; the cost
of obtaining such "final readings," if any, to be paid for equally by Seller and
Purchaser.
1.9 Transfer of Seller Assets. On the Closing Date, Seller shall cause each
Subsidiary to assign, transfer, convey and deliver to Purchaser, and Purchaser
shall acquire, all of each Subsidiary's right, title and interest in and to only
the following assets and properties, free and clear of all Liens (other than
Permitted Liens) as such assets shall exist on the Closing Date with respect to
the operation of any Hospital, such transfer being deemed to be effective at the
Effective Time (collectively, the "Assets"):
(a) all of the real property that is owned by such Subsidiary and used
with respect to the operation of any Hospital that is described in Schedule
1.9(a) (such description to include a legal description and address), and
appurtenances belonging thereto (collectively, the "Owned Real Property");
(b) all of the real property that is leased by such Subsidiary and
used with respect to the operation of any Hospital that is described in Schedule
1.9(b) together with all buildings, improvements and fixtures located thereupon
and all construction in progress (collectively, the "Leased Real Property") (the
Owned Real Property and the Leased Real Property are collectively referred to
herein as the "Real Property");
(c) all of the tangible personal property owned by such Subsidiary
with respect to the operation of any Hospital, including all equipment,
furniture, fixtures, machinery, vehicles, office furnishings, and leasehold
improvements (the "Personal Property"), including, without limitation, the
Personal Property described in Schedule 1.9(c);
(d) all of such Subsidiary's rights, to the extent assignable or
transferable, to all licenses, permits, approvals, certificates of need,
certificates of exemption, franchises, accreditations and registrations and
other governmental licenses, permits or approvals issued to such Subsidiary with
respect to the operation of any Hospital (the "Licenses"), including, without
limitation, the Licenses described in Schedule 1.9(d);
(e) all of such Subsidiary's interest, to the extent assignable or
transferable, in and to all real property and personal property leases with
respect to the operation of any Hospital (the "Leases"), including, without
limitation, those leases described in Schedule 1.9(e);
(f) all of such Subsidiary's interest in and to all contracts and
agreements (including, but not limited to, purchase orders) with respect to the
operation of any Hospital (the "Contracts") including, without limitation, those
Contracts described in Schedule 1.9(f);
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provided, however, that with respect to multi-hospital contracts as to which one
or more of the three Acute Care Hospitals located in Arizona and one or more of
Seller's other acute care hospitals located in Arizona (collectively, the "Five
Arizona Hospitals") participate, the parties shall make a joint determination
whether it is appropriate to assign such contracts to Purchaser or allow them to
remain as is, provided in either case that the parties shall use commercially
reasonable efforts to cause the benefits of all such contracts to continue to be
realized following the Closing Date by all Five Arizona Hospitals in the same
manner as was realized prior to the Closing Date, subject to the concomitant
obligations of each of the Five Arizona Hospitals under the relevant
multi-hospital contracts;
(g) all of those advance payments, prepayments, prepaid expenses,
deposits and the like which exist as of the Closing Date, subject to the
prorations provided in Section 1.8 of this Agreement, which were made with
respect to the operation of any Hospital and with respect to which Purchaser
will receive the benefit after the Closing Date (the "Prepaids"), the current
categories and amounts of which are set forth on Schedule 1.9(g);
(h) except as excluded by Section 1.10(j), all inventories of
supplies, drugs, food, janitorial and office supplies and other disposables and
consumables located at any of the Hospitals, or used with respect to the
operation of any of the Hospitals (the "Inventory");
(i) all documents, records, operating manuals, files and computer
software with respect to the operation of any of the Hospitals, including,
without limitation, all patient records, medical records, employee records,
financial records with respect to the operation of any of the Hospitals,
equipment records, construction plans and specifications, and medical and
administrative libraries;
(j) to the extent assignable, all rights in all warranties of any
manufacturer or vendor in connection with the Personal Property;
(k) all goodwill of the businesses evidenced by the Assets;
(l) all insurance proceeds arising in connection with property damage
to the Assets occurring after the Effective Date and on or prior to the Closing
Date, to the extent not expended on the repair or restoration of the Assets;
(m) the names, symbols and telephone numbers used with respect to the
operation of any of the Hospitals, including, without limitation, the names of
the Hospitals set forth on Schedule 1.9(m) and all variants thereof;
(n) any current assets of the Subsidiaries with respect to the
operation of any of the Hospitals (which are not otherwise specifically
described above in this Section 1.9) which are included in Net Working Capital,
as determined pursuant to Sections 1.2 and 1.4;
(o) all claims of Seller or any Subsidiary against third parties with
respect to the Assets (whether known or unknown, contingent or otherwise)
arising after the Effective Date and on or prior to the Closing Date, other than
those claims as to which Seller or such Subsidiary has a right to money damages
based on a prior expenditure of money with respect to such Assets; and
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(p) all equity interests held by the Subsidiaries that are described
on Schedule 1.9(p), including the capital stock of Beaumont Newco as
contemplated by Section 5.12;
PROVIDED, HOWEVER, that the Assets shall not include the Excluded Assets as
defined in Section 1.10 below.
1.10 Excluded Assets. Notwithstanding anything to the contrary in Section
1.9, Seller and the Subsidiaries shall retain all assets owned directly or
indirectly by them (or any of their respective affiliates) which are not among
the Assets, including without limitation the following assets of Seller or any
Subsidiary (collectively, the "Excluded Assets"):
(a) cash and short-term investments;
(b) all intercompany receivables of Seller or any Subsidiary with any
of their affiliates;
(c) any current assets of the Subsidiaries with respect to the
operation of any of the Hospitals which are not included in Net Working Capital,
as determined pursuant to Sections 1.2 and 1.4;
(d) computer software, programs and hardware which is proprietary to
Seller, any Subsidiary and/or their respective affiliates, data processing
system manuals and licensed software materials, as more particularly described
in Schedule 1.10(d);
(e) all of Seller's, any Subsidiary's, or any affiliate of Seller's
proprietary manuals, marketing materials, policy and procedure manuals, standard
operating procedures and marketing brochures, data and studies or analyses;
(f) any asset which would revert to the employer upon the termination
of any Seller Plan, including assets representing a surplus or overfunding of
any Seller Plan, including, without limitation, any asset under the AMI defined
benefit plan;
(g) all national or regional contracts of Seller, any Subsidiary or
any respective affiliate thereof which are made available to any of the
Hospitals by virtue of the Hospitals being an affiliate of Seller;
(h) the names "Tenet Healthcare Corporation," "Tenet," "Tenet
HealthSystem," "OrNda HealthCorp," and any other names or symbols not used
primarily at any of the Hospitals, all abbreviations and variations thereof and
service marks, symbols and logos related thereto, together with any promotional
material, stationery, supplies or other items of inventory bearing such names or
symbols or abbreviations or variations thereof;
(i) all current contracts between any Subsidiary and any affiliate of
Seller with respect to the operation of any Hospital, except those approved in
writing by Seller and Purchaser to be assigned to Purchaser after the Closing
Date;
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(j) the portions of Inventory, Prepaids and other Assets disposed of,
expended or canceled, as the case may be, by any Subsidiary after the Effective
Date and on or prior to the Closing Date in the ordinary course of business;
(k) assets owned and provided by vendors of services or goods to any
of the Hospitals;
(l) all accounts, notes, interest and other receivables of Seller and
any Subsidiary (other than the Physician Notes), and all claims, rights,
interests and proceeds related thereto, including all accounts and other
receivables, and cost report settlements related thereto, arising from the
rendering of services to inpatients and outpatients at any Hospital, billed and
unbilled, recorded and unrecorded, for services provided by Seller or any
Subsidiary while owner of the Assets whether payable by private pay patients,
private insurance, third party payors, Medicare, Medicaid, CHAMPUS, Blue Cross,
or by any other source ("Accounts Receivable");
(m) all documents, records, correspondence, workpapers and other
documents relating to the Accounts Receivable, the Subsidiaries' Cost Reports or
Subsidiaries' Agency Settlements (the "Receivable Records");
(n) all claims, rights, interests and proceeds with respect to state
or local tax refunds (including but not limited to property tax) resulting from
periods ending on or before the Closing Date, and the right to pursue appeals of
same;
(o) any assets identified in Schedule 1.10(o); and
(p) any Contract identified by Purchaser as likely to present a
significant risk of noncompliance with applicable federal or state healthcare
laws, provided, however, that Seller shall be afforded reasonable notice of, and
an opportunity to cure, any such legal issues prior to Closing.
1.11 Assumed Obligations. On the Closing Date, Seller and the Subsidiaries
shall assign, and Purchaser shall assume and agree to discharge after the
Closing, the following liabilities and obligations of Seller and/or any
Subsidiary and only the following liabilities and obligations (collectively, the
"Assumed Obligations"):
(a) all current liabilities of the Subsidiaries with respect to the
operation of any of the Hospitals on or prior to the Closing Date to the extent
included in Net Working Capital, as determined pursuant to Sections 1.2 and 1.4;
(b) the Contracts, but only to the extent of the obligations arising
thereunder with respect to events or periods after the Closing Date; provided,
however, that with respect to multi-hospital contracts in which the Five Arizona
Hospitals participate, the parties shall make a joint determination whether it
is appropriate to assign such contracts to Purchaser or allow them to remain as
is, provided in either case that the parties shall use commercially reasonable
efforts to cause the benefits of all such contracts to continue to be realized
following the Closing Date by all Five Arizona Hospitals in the same manner as
was realized prior to the Closing Date, subject to the concomitant obligations
of each of the Five Arizona Hospitals under the relevant multi-hospital
contracts;
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(c) the Leases, including the capital lease obligations of Seller with
respect to the Hospitals listed on Schedule 1.11(c), but only to the extent of
the obligations arising thereunder with respect to events or periods after the
Closing Date;
(d) any and all obligations of Seller and the Subsidiaries under the
Worker Adjustment and Retraining Notification Act ("WARN") with respect to the
operation of the Hospitals as a result of (i) the acts of Purchaser or any
affiliate of Purchaser after the Transition Date or (ii) Purchaser's breach of
its covenant with respect to the Hired Employees as set forth in Section 5.3;
(e) the Sick Pay Amount, and all accrued vacation and holiday pay
liabilities of the Subsidiaries (and their respective affiliates) with respect
to the Hired Employees (the "Accrued Paid Time Off"); provided, however, that
with respect to the Accrued Paid Time Off, only to the extent accrued in Net
Working Capital;
(f) all utilities being furnished to the Assets, subject to the
prorations provided in Section 1.8;
(g) [INTENTIONALLY OMITTED]
(h) [INTENTIONALLY OMITTED]; and
(i) any other obligations and liabilities identified in Schedule
1.11(i).
1.12 Excluded Liabilities. Notwithstanding anything to the contrary in this
Agreement, Purchaser shall not assume or become responsible for any of Seller's
or the Subsidiaries' duties, obligations or liabilities that are not assumed by
Purchaser pursuant to the terms of this Agreement, the Bills of Sale or the Real
Estate Assignment(s), regardless of whether such obligation or liability is
known or unknown, fixed or contingent, and regardless of whether such liability
arises from contract, tort or otherwise (the "Excluded Liabilities"), and Seller
and the Subsidiaries shall remain fully and solely responsible for, and
indemnify Purchaser from and against in accordance with Section 10.2 of this
Agreement, all debts, liabilities, contract obligations, expenses, obligations
and claims of any nature whatsoever related to the Assets or the Hospitals
unless assumed by Purchaser under this Agreement, in the Bills of Sale or in the
Real Estate Assignment(s). The Excluded Liabilities shall include, without
limitation:
(a) any current liabilities of the Subsidiaries with respect to the
operation of any of the Hospitals on or prior to the Closing Date (i) which are
not included in Net Working Capital, as determined pursuant to Sections 1.2 and
1.4 and (ii) which are not otherwise specifically included in the Assumed
Obligations;
(b) all liabilities arising out of or relating to any act, omission,
event or occurrence connected with the use, ownership or operation of any of the
Hospitals or any of the Assets on or prior to the Closing Date (including,
without limitation, any liabilities arising from pre-Closing violations of
Environmental Laws or release of Hazardous Substances), other than as
specifically included in the Assumed Obligations;
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(c) other than as specifically included in the Assumed Obligations,
all liabilities arising out of or relating to any act, omission, event or
occurrence connected with Seller, the Subsidiaries or the operations or
activities of Seller or any of the Subsidiaries, (including all liabilities
arising out of or relating to any claim, proceeding or investigation
(collectively, "Litigation") arising out of or relating to any such act,
omission, event or occurrence including without limitation the Litigation set
forth on Schedule 2.11);
(d) all liabilities of Seller or any of the Subsidiaries in connection
with claims of professional malpractice to the extent arising out of or relating
to acts, omissions, events or occurrences on or prior to the Closing Date;
(e) subject to reimbursement by Purchaser to the extent contemplated
by the Employee Leasing Agreement, all liabilities of Seller or any of the
Subsidiaries for their respective shares of matching contributions for eligible
beneficiaries' 401(k) plans, Section 125 plans and other Seller Plans and all
administrative costs associated with such welfare benefit plans arising on or
prior to the Transition Date;
(f) all liabilities of Seller and/or any Subsidiary relating to the
Subsidiaries' Cost Reports with respect to periods ending on or prior to the
Closing Date;
(g) all liabilities of Seller or any of the Subsidiaries for
violations of any law, regulation or rule to the extent arising from acts or
omissions on or prior to the Closing Date, including, without limitation, those
pertaining to Medicare and Medicaid fraud or abuse;
(h) all liabilities of Seller or any of the Subsidiaries for
commissions or fees owed to any finder or broker in connection with the
transactions contemplated hereunder, or for any other expenses incurred
hereunder, except to the extent expressly provided in this Agreement to the
contrary (including but not limited to Section 12.12 of this Agreement);
(i) all liabilities due to third party payors, including without
limitation, private insurers, private pay parties, governmental payors,
including Medicare, Medicaid, CHAMPUS, FEHBA, RRRB or other third party payors
("Third Party Payors"), including cost report reimbursements and settlements,
repayments, fines or other liabilities or obligations, to the extent they relate
to the periods ending on or prior to and including the Closing Date, and any
liability arising pursuant to a Third Party Payor program as a result of the
consummation of the transactions contemplated herein, including, without
limitation, recapture of previously reimbursed expenses;
(j) subject to Sections 1.8 and 12.12 of this Agreement, all federal,
state, foreign or local tax liabilities or obligations of Seller or any of the
Subsidiaries, or attributable to any capital Asset, in respect of periods ending
on or prior to Closing, including, without limitation, any income tax, any
franchise tax, any tax recapture, any sales and/or use tax, any state and local
recording fees and taxes which may arise upon the consummation of the
transaction contemplated herein and any FICA, FUTA, workers' compensation and
any and all other taxes or amounts due and payable as a result of the exercise
by any of Seller's employees of such employees' right to vacation, sick leave
and holiday benefits accrued while in the employ of Seller (to the extent not
included in the Net Working Capital adjustment);
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(k) subject to reimbursement by Purchaser to the extent contemplated
by the Employee Leasing Agreement, all liability for any and all claims by or on
behalf of Seller's or any of the Subsidiaries' employees to the extent such
liability relates to the period ending on or prior to the Transition Date,
including, without limitation, liability for any pension, profit sharing,
deferred compensation or any other employee health and welfare benefit plans,
liability for any EEOC claim, wage and hour claim, unemployment compensation
claim or workers' compensation claim, and liability for all employee wages and
benefits, including, without limitation, accrued vacation, sick leave and
holiday pay and taxes or other liability related thereto in respect of Seller's
employees (to the extent not included in the Net Working Capital adjustment);
(l) all liabilities or obligations arising at any time under any
contract or commitment that is not assumed by Buyer;
(m) all liabilities or obligations arising out of Seller's breach of
any Contract prior to Closing; and
(n) any obligation or liability asserted under the federal Hill-Burton
program or other restricted grant and loan programs with respect to the
ownership or operation of the Hospitals.
1.13 [INTENTIONALLY OMITTED]
1.14 Disclaimer of Warranties. Except as expressly set forth in Article 2
hereof, the Assets transferred to Purchaser will be sold by Seller and the
Subsidiaries and purchased by Purchaser in their physical condition on the
Closing Date, "AS IS," WITH NO WARRANTY OF HABITABILITY OR FITNESS FOR
HABITATION, with respect to the Real Property, land, buildings and improvements,
and WITH NO WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, with respect to the
physical condition of the Personal Property and Inventory, any and all of which
warranties (both express and implied) Seller hereby disclaims. All of the
foregoing real and personal property shall be further subject to normal wear and
tear on the land, buildings, improvements and equipment and normal and customary
use of the inventory and supplies in the ordinary course of business up to the
Closing.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, Seller hereby
represents, warrants and covenants to Purchaser as to the following matters,
except as disclosed in the disclosure schedule as of the Effective Date, as
amended pursuant to the terms of this Agreement (the "Disclosure Schedule")
hereby delivered by Seller to Purchaser. Except as otherwise provided herein,
Seller shall be deemed to remake all of the following representations,
warranties and covenants as of the Closing:
2.1 Authorization. Seller has full corporate power and authority to enter
into this Agreement, and Seller has, and each Subsidiary has or will have prior
to the Closing, full power and authority to carry out the transactions
contemplated hereby.
2.2 Binding Agreement. All corporate and other actions required to be taken
by Seller and each Subsidiary to authorize their respective execution, delivery
and performance of this Agreement, all documents executed by each of Seller and
any Subsidiary which are necessary to give effect to this Agreement, and all
transactions contemplated hereby, have been duly and properly taken or obtained
by Seller, and have been taken or obtained or will be duly and properly taken or
obtained prior to the Closing Date, by each Subsidiary. No other corporate or
other action on the part of the Seller or any Subsidiary, as applicable, is
necessary to authorize the execution, delivery and performance of this
Agreement, all documents necessary to give effect to this Agreement and all
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and, assuming due and valid execution by
Purchaser, this Agreement constitutes a valid and binding obligation of Seller
enforceable in accordance with its terms subject to (a) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and (b) limitations on the
enforcement of equitable remedies.
2.3 Organization and Good Standing; No Violation.
(a) Except with respect to the Subsidiaries which are partnerships,
each of Seller and the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada with respect
to Seller and in the state of its incorporation (which is indicated in Schedule
A-1) with respect to each Subsidiary. Each Subsidiary which is a partnership is
duly organized and validly existing under the laws of the state of its
organization (which is indicated in Schedule A-1). Each of Seller and the
Subsidiaries has full power and authority to own, operate and lease its
properties and to carry on its businesses as now conducted.
(b) Neither the execution and delivery by Seller of this Agreement nor
the consummation of the transactions contemplated hereby by Seller or any of the
Subsidiaries nor compliance with any of the material provisions hereof by Seller
or any of the Subsidiaries, will (i) violate, conflict with or result in a
breach of any material provision of Seller's or any of the Subsidiaries'
articles of incorporation or bylaws, respectively or other organizational
documents
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with respect to Subsidiaries which are partnerships, (ii) violate any order,
writ, injunction, ruling or material law of any court or governmental authority,
United States or foreign, or cause the suspension or revocation of any
governmental license or authorization applicable to or binding upon or affecting
Seller, any of the Subsidiaries, any of the Assets or the operation of the
businesses of the Hospitals or (iii) except for the applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act"), and as otherwise described
in Section 2.3(b) of the Disclosure Schedule, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority.
2.4 Contracts and Leases.
(a) Schedule 2.4(a) sets forth each Contract to which Seller or any
Subsidiary with respect to the operations of the Hospitals) is a party or is
bound or by which any of the Assets is bound or subject, other than (i) such
Contracts as may be terminated by Purchaser at any time after the Closing
without liability, penalty or premium upon notice of thirty (30) days or less
and (ii) such Contracts which will not result in future annual expenditures or
receipts by the Hospitals at any time of $10,000 or more (the Contracts set
forth on Schedule 2.4(a) are referred to herein as "Material Contracts").
Notwithstanding the foregoing, each of the following Contracts is set forth on
Schedule 2.4(a):
(i) employment agreements and severance agreements
with individuals that are not physicians;
(ii) all agreements with physicians;
(iii) collective bargaining agreements and other
Contracts with any labor union;
(iv) covenants not to compete or restrictive covenants;
(v) equipment leases treated as capital leases for
financial accounting purposes;
(vi) leases relating to real property or interests in
real property as to which Seller or any Subsidiary
is lessee; or
(vii) joint ventures in the form of partnerships,
limited liability companies, corporations in which
Seller or any Subsidiary has at least a 20% equity
interest.
(b) Each Material Contract is in full force and effect and is the
valid and binding obligation of Seller or such Subsidiary and, to the knowledge
of Seller, of each other party thereto, except where a failure of the Material
Contracts to be in full force and effect is not material, individually or in the
aggregate, to the operation of any particular Hospital.
2.5 Required Consents. Neither Seller nor any Subsidiary is a party to or
bound by, nor are any of the Assets subject to, any mortgage, material Lien,
deed of trust, or any material
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lease, agreement or instrument, or any material order, judgment or decree which
(a) requires the consent of another to the execution of this Agreement, (b)
requires the consent of another to consummate the transactions contemplated by
this Agreement, or (c) makes unduly burdensome the consummation of the
transactions contemplated by this Agreement. For purposes of clause (b)
immediately above, "material" leases as to which Seller or a Subsidiary is
lessee shall include only those leases as to which Seller will deliver landlord
estoppels as contemplated by Section 1.6.13 of this Agreement. The consummation
of the transactions contemplated by this Agreement will not result in a breach
of any term or provision of, or constitute (with or without notice or lapse of
time or both) a default under, any material agreement or instrument to which
Seller or any Subsidiary is a party, or which is binding on Seller or any
Subsidiary, or to which the Assets are subject. The consummation of the
transactions contemplated by this Agreement will not give any other party to any
such material agreement or instrument a right to cancel or terminate the same, a
right to modify or amend the terms thereof, or result in an acceleration of the
maturity or performance of any obligation under any such material agreement or
instrument. No such breach, default, cancellation, termination, modification or
amendment or acceleration described in this Section 2.5 would prevent Seller or
any Subsidiary from consummating the transactions contemplated by this
Agreement, or would result in the creation of any lien, security interest,
encumbrance, charge, loss or liability on any material assets of Seller or any
Subsidiary, including without limitation the Assets.
2.6 Compliance With Laws and Contracts.
(a) Except as set forth in Schedule 2.6(a), with respect to the
operation of the Hospitals, Seller and each Subsidiary has the lawful authority
and all material state, federal, special or local governmental authorizations,
licenses or permits in good standing required to conduct their respective
businesses, and such businesses presently are being conducted in compliance with
all applicable laws, statutes, ordinances, orders, rules, regulations, policies,
guidelines, licenses, certificates, certificates of need, judgments or decrees
of all judicial or governmental authorities (federal, state, local, foreign or
otherwise), except where the failure to be in such compliance would not be
material to the operation of any particular Hospital. Neither Seller nor any
Subsidiary has, with respect to the operation of the Hospitals, been charged
with or given notice of, and to the best knowledge of Seller, neither Seller nor
any Subsidiary, with respect to the operation of the Hospitals, is under
investigation with respect to, any violation of, or any obligation to take
remedial action under, any applicable (i) material law, statute, ordinance,
rule, regulation, policy or guideline promulgated, (ii) material license,
certificate or certificate of need issued, or (iii) order, judgment or decree
entered, by any federal, state, local or foreign court or governmental authority
relating to any Hospital or the business of any particular Hospital.
(b) Seller's and each Subsidiary's ownership and operation of the
respective Hospitals and the Assets are and have been in compliance with all
Environmental Laws (as defined in Section 2.6(c) below), except where the
failure to be in such compliance would not be material to the operation of any
particular Hospital. Each Subsidiary has obtained all licenses, permits and
approvals necessary or required under all applicable Environmental Laws (the
"Environmental Permits") for the ownership and operation of its respective
Hospitals and the Assets. All such Environmental Permits are in effect and, to
Seller's knowledge, no action to revoke or modify any of such Environmental
Permits is pending. There is not now pending or, to
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Seller's knowledge, threatened, any claim, investigation or enforcement action
by any governmental authority (whether judicial, executive or administrative)
concerning Seller's or any Subsidiary's potential liability under Environmental
Laws in connection with the ownership or operation of the Hospitals or the
Assets. To Seller's knowledge, there has not been a release or threatened
release of any Hazardous Substance at, upon, in, under or from the Hospitals or
the Assets at any time. At no time during each Subsidiary's ownership of its
respective Real Property, and to Seller's knowledge at no time during others'
ownership of the Real Property, have any Hazardous Substances been present on
the Real Property except as may be utilized as a matter of course in hospital
operations and in accordance with applicable Environmental Laws.
(c) For the purposes of this Agreement, the term "Environmental Laws"
shall mean all state, federal or local laws, ordinances, codes or regulations
relating to Hazardous Substances or to the protection of the environment,
including, without limitation, laws and regulations relating to the storage,
treatment and disposal of medical and biological waste. For purposes of this
Agreement, the term "Hazardous Substances" shall mean (i) any hazardous or toxic
waste, substance, or material defined as such in (or for the purposes of) any
Environmental Laws, (ii) asbestos-containing material, (iii) medical and
biological waste, (iv) polychlorinated biphenyls, (v) petroleum products,
including gasoline, fuel oil, crude oil and other various constituents of such
products, and (vi) any other chemicals, materials or substances, exposure to
which is prohibited, limited or regulated by any Environmental Laws.
(d) Seller and each Subsidiary have performed all material obligations
relating to the Assets and the business of the Hospitals (including under all
Material Contracts), and are not in breach or default, nor do any circumstances
exist which with or without notice or lapse of time, or both, would result in
breach or default, nor to Seller's knowledge, is there any claim of such breach
or default with respect to any obligation to be performed, under any contract,
lease, guaranty, indenture, loan agreement, document or other agreement or
arrangement relating to the Assets or the business of the Hospitals, including
the Leases and Contracts, which breach or default or its consequences might be
material to the operation of any particular Hospital.
2.7 Title; Sufficiency.
(a) Each Subsidiary has good and marketable fee simple or leasehold
title, as the case may be, to its respective Real Property. Each Subsidiary has
good and valid title to its respective Personal Property, which individually or
in the aggregate is material to the condition (financial or otherwise),
operations or the business of any particular Hospital.
(b) The Real Property and the Personal Property is held by each
respective Subsidiary free and clear of all Liens, and is not, in the case of
the Real Property, subject to any rights-of-way, building or use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever
except, with respect to such properties, (i) liens for current real property
taxes and assessments not yet due and payable, (ii) mechanics', carriers',
workmen's, repairmen's and other statutory liens, rights of way, building or use
restrictions, exceptions, easements, covenants, variances, reservations and
other limitations of any kind, if any, which do not materially impair the
ordinary business operations of any particular Hospital or for which, in respect
of matters affecting title to the Real Property, title insurance coverage has
been obtained, and (iii) other such encumbrances as are set forth in Schedule
2.7(b) (collectively, "Permitted
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Liens"). None of the Real Property is subject to a pending, or to Seller's
knowledge threatened, condemnation or similar proceeding. None of the Real
Property is subject to any option, right of first refusal or other contractual
right to sell, dispose of or lease such Real Property, except as set forth in
Schedule 2.7(b).
(c) The Inventory with respect to each Hospital is, and at the Closing
will be, maintained in such quality and quantities as is consistent with such
Hospital's historical practices.
(d) The Assets and the Excluded Assets comprise substantially all of
the property, assets, licenses, rights and agreements used in the conduct of the
businesses and operation of the Hospitals.
2.8 Certain Representations With Respect to the Hospitals.
(a) [INTENTIONALLY OMITTED]
(b) The Hospitals are duly accredited by the Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO") for the periods set forth in
Schedule 2.8(b). With respect to each Hospital, Seller has previously delivered
to Purchaser or will promptly deliver after the Effective Date, a true and
complete copy of the most recent JCAHO accreditation survey report and
deficiency list, if any; the most recent Statement and Deficiencies and Plan of
Correction on Form HCFA-2567; the most recent state licensing report and list of
deficiencies, if any; the most recent fire marshall's survey and deficiency
list, if any, and the corresponding plans of correction or other responses.
(c) The Hospitals are certified for participation in the Medicare,
Medicaid and CHAMPUS programs, have current and valid provider contracts with
each of such programs, are in substantial compliance with the conditions of
participation of each of such programs and have received all approvals or
qualifications necessary for capital reimbursement of the Assets. Neither Seller
nor any of the Subsidiaries have received notices from the regulatory
authorities which enforce the statutory or regulatory provisions in respect of
any of the Medicare, Medicaid or CHAMPUS programs of any pending or threatened
investigations with respect to the operation of the Hospitals. Neither Seller
nor the Subsidiaries have been excluded from the Medicare, Medicaid or CHAMPUS
programs or any state health care program, and there is no pending or, to
Seller's knowledge, threatened exclusion action against Seller or the
Subsidiaries.
(d) Seller has delivered or will promptly deliver to Purchaser true
and exact copies of (i) all cost reports which Seller or any of the Subsidiaries
filed with Medicare and Medicaid for the last three (3) years, as well as all
material correspondence and other material documents relating to any disputes
and/or settlements with Medicare or Medicaid within the last three (3) years.
Notices of Program Reimbursement have been issued by the applicable fiscal
intermediary with respect to the cost reports of the Hospitals for Medicare,
Medicaid (if required) and Blue Cross (if required) through the periods set
forth in Schedule 2.8(d) (the "Audit Periods"). Each of such reports was timely
filed. Neither Seller nor any Subsidiary has received notice of any material
dispute between any Hospital and the applicable governmental agency or private
entity, or their intermediaries or representatives, regarding such cost reports
for
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periods subsequent to the periods specified in Schedule 2.8(d) and, to the
knowledge of Seller, there are no pending or threatened material claims by any
of such programs against any Hospital with respect to the Audit Periods or any
period thereafter. To Seller's knowledge, none of Seller or the Subsidiaries is
subject to any pending but unassessed Medicare or Medicaid claim payment
adjustments, except to the extent Seller or the Subsidiaries have established
adequate reserves for such adjustments.
(e) With respect to the operation of the Hospitals, neither Seller nor
any Subsidiary has any outstanding loan, grant or loan guarantee pursuant to the
Hill-Burton Act (42 USC Section 291a, et seq.) and the transaction contemplated
hereby will not result in any obligation on the part of the Purchaser or the
Hospitals to repay any such loans, grants, or loan guarantee or provide
uncompensated care in consideration thereof.
(f) Seller has previously delivered to Purchaser, with respect to each
Hospital, a copy of the blank forms generally used with respect to medical staff
privilege and membership application or delineation or privilege; all current
medical staff bylaws, rules and regulations and amendments thereto; and all
written contracts with physicians, physicians groups, or other members of the
medical staff of each Hospital.
(g) Except as set forth in a writing delivered by Seller to Purchaser
which specifically makes reference to this Section, there are no material
pending or threatened disciplinary or corrective actions or appeals with respect
to the medical or other staff members of any Hospital. Schedule 2.8(g) sets
forth a complete and accurate list of (a) the name of each member of the medical
staff of the Hospitals as of the Effective Date, and (b) the specialty, if any,
of each medical staff member. Notwithstanding the foregoing provisions of this
Section 2.8(g), Seller shall not be required to disclose any information
pursuant to this Section 2.8(g) where such disclosure is prohibited by state
law.
2.9 Brokers and Finders. Other than Merrill Lynch, neither Seller, any
Subsidiary, nor any affiliate thereof, nor any officer or director thereof, has
engaged any finder or broker in connection with the transactions contemplated
hereunder.
2.10 Financial Statements. The unaudited financial statements of each
Subsidiary with respect to the operation of the Hospitals for the three years
ended May 31, 1999 attached as Schedule 2.10, the Interim Balance Sheet and the
Final Balance Sheet (collectively, the "Financial Statements") have been or will
be prepared from the books and records of each Subsidiary. The balance sheets
included in the Financial Statements fairly present, or will fairly present, the
financial position of each Subsidiary with respect to the operation of the
Hospitals as of the respective dates thereof and the other financial statements
included therein present or will present fairly the results of operations for
the periods indicated, in each case in conformity with generally accepted
accounting principles consistently applied during such periods, except that the
Financial Statements may not fully reflect federal, state and local income or
franchise taxes.
2.11 Legal Proceedings. There are no material claims, proceedings or
investigations ("Litigation") pending or, to the best knowledge of Seller,
threatened relating to or affecting Seller or any Subsidiary with respect to the
operation of the Hospitals or any of the Assets before any court or governmental
body (whether judicial, executive or administrative). Neither Seller
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nor any Subsidiary with respect to the operation of the Hospitals is subject to
any judgment, order, decree or other governmental restriction specifically (as
distinct from generically) applicable to it or its assets, including the Assets,
which would be material to the operation of any particular Hospital. There is no
claim, proceeding or investigation pending, or to the knowledge of Seller
threatened, which challenges the validity of this Agreement or which, if
adversely determined, could reasonably be expected to (i) adversely affect the
ability of Seller to consummate the transactions contemplated by this Agreement,
(ii) result in a material adverse effect on any of the Hospitals, or (iii)
impair the ability of Purchaser to operate the Hospitals or the Assets after the
Closing in substantially the same manner as they are presently conducted.
2.12 Employee Benefits.
(a) Schedule 2.12 contains a list of (i) each pension, profit sharing,
bonus, deferred compensation, or other retirement plan or arrangement of Seller
or any Subsidiary with respect to the operation of the Hospitals, whether oral
or written, which constitutes an "employee pension benefit plan" as defined in
Section 3(2) of ERISA, (ii) each medical, health, disability, insurance or other
plan or arrangement of Seller or any Subsidiary with respect to the operation of
the Hospitals, whether oral or written, which constitutes an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, and (iii) each other employee
benefit or perquisite provided by Seller or any Subsidiary (with respect to the
operation of the Hospitals), in which any employee of Seller or any Subsidiary
participates in his capacity as such (collectively, the "Seller Plans"). Copies
of the summary plan descriptions and brochures with respect to the Seller Plans
have previously been furnished to Purchaser.
(b) Neither Seller nor any Subsidiary (with respect to the operation
of the Hospitals) is a participant in any multiemployer plan within the meaning
of Section 4001(a)(3) of ERISA in which employees of Seller or any Subsidiary
participate and no withdrawal liability has been incurred by or asserted against
Seller or any Subsidiary or an ERISA Affiliate with respect to a multiemployer
plan.
(c) With respect to each Seller Plan, to Seller's knowledge, neither
Seller nor any Subsidiary has any direct or indirect, actual or contingent
liability, other than to make payments for contributions, premiums or benefits
when due in the ordinary course, all of which payments that are due having been
made. Neither the Hospitals nor any of the Assets are subject to any lien under
ERISA or the Internal Revenue Code of 1986, as amended (the "Code").
(d) No amounts payable under any contract, agreement or arrangement
will fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, alone or in connection
with a related event, will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any employee of Seller or any Subsidiary from the
Seller or any Subsidiary under any Seller Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Seller Plan or otherwise or
(iii) result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
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(e) All of the Seller Plans have been administered in material
compliance with ERISA and the applicable provisions of the Code. There are no
"accumulated funding deficiencies" within the meaning of ERISA or the Code or
any federal excise tax or other liability on account of any deficient fundings
in respect of the Seller Plans. No reportable event(s) (within the meaning of
ERISA) or prohibited transaction(s) (within the meaning of the Code), has
occurred in respect of any of the Seller Plans that would result in any material
liability to Seller or any Subsidiary. Other than claims for benefits, there are
not pending or, to Seller's knowledge, threatened any claims relating to the
Seller Plans by any employee of Seller or any Subsidiary with respect to the
operation of the Hospitals, alleging a breach or breaches of fiduciary duties or
violations of other applicable state or federal law which could result in
liability on the part of Seller, any Subsidiary or any of the Seller Plans under
ERISA or any other law that would have a material adverse effect on Seller or
any Subsidiary. To Seller's knowledge, none of the Seller Plans discriminates in
operation in favor of employees who are officers or who are highly compensated,
except as permitted under the Code and ERISA. To Seller's knowledge, all
material returns, reports, disclosure statements and premium payments required
to be made under ERISA and the Code with respect to any of the Seller Plans have
been timely filed or delivered. Except for routine random audits or submissions
by Seller to the Voluntary Compliance Resolution Program, none of the Seller
Plans have been audited or investigated by either the Internal Revenue Service,
the Department of Labor or the Pension Benefit Guaranty Corporation within the
last five (5) years, and there are no outstanding issues with reference to any
of the Seller Plans pending before such governmental agencies.
2.13 Taxes and Tax Returns.
(a) To Seller's knowledge, the Subsidiaries have duly filed all
federal, state, foreign and local tax returns required to be filed by them (all
of which are true and correct in all material respects) and have duly paid or
made provision for the payment of all taxes (including any interest or
penalties) which are due and payable, whether or not in connection with such
returns. Seller and the Subsidiaries (with respect to the operation of the
Hospitals) have withheld proper and accurate amounts from their employees'
compensation, and made deposits of all such withholdings, in material compliance
with all withholding and similar provisions of the Code and any and all other
applicable laws.
(b) Seller and the Subsidiaries (with respect to the operation of the
Hospitals) have complied in all material respects with all Applicable Laws
relating to withholding Taxes and have paid over to the proper governmental
entities all amounts required to be so withheld and paid over under all
Applicable Laws.
(c) There are no Liens for Taxes upon the Assets, except for statutory
Liens for current Taxes not yet due and payable or which may hereafter be paid
without penalty or which are being contested in good faith by appropriate
proceedings.
(d) For purposes of this Agreement, "Tax" or "Taxes" shall mean (i)
any tax of any kind, including, without limitation, all income, property, sales,
use, occupation, payroll, transfer, estimated, franchise, excise, value added,
employees' income withholding and social security taxes, and related to such
taxes, charges, fees, levies, penalties or other assessments of any kind,
together with any interest and penalties, addition to tax or additional amounts
imposed
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by any taxing authority, whether disputed or not, imposed by the United States
or by any foreign country, or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, and (ii) any interest thereon. For purposes of this Agreement,
"Tax Return" shall mean any return, report, information return or amendment or
other document (including any related or supporting information) with respect to
Taxes.
2.14 Personnel.
(a) Schedule 2.14 sets forth a complete list (as of the date set forth
therein) of names, positions and current annual salaries or wage rates, bonus
and other compensation and/or benefit arrangements, accrued sick and vacation
days, and period of service credited for vesting as of the date thereof of all
full-time and part-time employees of Seller and the Subsidiaries with respect to
the operation of the Hospitals and indicating whether such employee is a
part-time or full-time employee.
(b) Since May 31, 1998, there have been, and there are now, no labor
union or collective bargaining agreements in effect with respect to the
employees of Seller or the Subsidiaries with respect to the operation of the
Hospitals. There is no unfair labor practice complaint against Seller or any of
the Subsidiaries pending, or to the best knowledge of Seller threatened, before
the National Labor Relations Board with respect to the operation of the
Hospitals. Since May 31, 1998, there has been, and there is now, no labor
strike, arbitration, dispute, slowdown or stoppage, and no union organizing
campaign, pending, or to the best knowledge of Seller threatened by or involving
the employees of Seller or the Subsidiaries with respect to the operation of the
Hospitals.
(c) There is no charge or complaint pending or, to the knowledge of
Seller, threatened against Seller or the Subsidiaries relating to the Hospitals
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment practices.
2.15 Insurance. Seller and the Subsidiaries maintain, and have maintained,
without interruption, at all times during the Subsidiaries' respective ownership
of the Hospitals, self-insurance or policies or binders of insurance covering
such risks and events, including personal injury, property damage, malpractice
and general liability, to provide adequate and sufficient insurance coverage for
all the assets and operations of the Hospitals. Such insurance meets all
requirements of Applicable Law and the Contracts. Schedule 2.15 contains a list
of all such insurance maintained by Seller and the Subsidiaries with respect to
the operation of the Hospitals as of the Effective Date.
2.16 Solvency. Neither Seller nor any Subsidiary is insolvent and neither
Seller nor any Subsidiary will be rendered insolvent as a result of any of the
transactions contemplated by this Agreement. For purposes hereof, the term
"solvency" means that: (i) the fair salable value of Seller's and each
Subsidiary's tangible assets is in excess of the total amount of its respective
liabilities (including for purposes of this definition all liabilities, whether
or not reflected on a balance sheet prepared in accordance with generally
accepted accounting principles, and whether direct or indirect, fixed or
contingent, secured or unsecured, and disputed or undisputed); (ii) Seller and
each Subsidiary is able to pay its respective debts or obligations in the
ordinary
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course as they mature; and (iii) Seller and each Subsidiary has capital
sufficient to carry on its respective businesses and all businesses which it is
respectively about to engage.
2.17 No Untrue or Inaccurate Representations or Warranties. The
representations and warranties of Seller contained in this Agreement, and each
exhibit, schedule, certificate or other written statement delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby, are
accurate, correct and complete, and in the aggregate do not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements and information contained therein not misleading.
References in this Agreement to "knowledge of Seller", the "best knowledge of
Seller", "known to Seller" or "upon Seller knowing" mean the actual knowledge of
the CEOs, CFOs, COOs and DONs of each Hospital and of Seller, without
independent investigation.
2.18 Absence of Undisclosed Liabilities. Except for liabilities and
obligations (i) set forth in Schedule 2.18 attached hereto, (ii) reflected on
the audited balance sheet for the year ended May 31, 1999 included in the
Financial Statements (the "1999 Balance Sheet") or (iii) incurred in the
ordinary course of business since the date of the 1999 Balance Sheet, neither
Seller nor any Subsidiary with respect to the operation of the Hospitals has any
material liabilities or obligations of whatsoever nature, direct or indirect,
whether accrued, fixed, contingent or otherwise.
2.19 Y2K. Within five business days following the Effective Date, Seller
shall deliver to Purchaser as Schedule 2.19 a list as of the Effective Date of
compliance procedures (a) taken, (b) being taken and (c) to be taken by Seller
to attempt to make or assure that the Assets are Y2K compliant. The procedures
described on Schedule 2.19 are consistent with procedures applicable to all
other hospitals operated by Seller. Seller shall update periodically and deliver
to Purchaser updates to Schedule 2.19; provided that such updates shall not for
any purpose be or be deemed to be a basis for indemnification of Purchaser by
Seller. Seller's Y2K compliance process includes taking out of service Assets
which Seller believes are not Y2K compliant by September 30, 1999. Seller does
not represent that its Y2K compliance process will make any Asset used in its
operations Y2K compliant.
2.20 Capitalization of Beaumont Newco. As of the Closing Date, all of the
shares of Beaumont Newco (the "Beaumont Shares") will have been duly authorized
and validly issued, will have been fully paid and nonassessable, and will have
been sold and delivered by Seller to Purchaser free of preemptive rights or
rights of first refusal and in compliance with all applicable federal and state
securities laws. There will be no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon
Purchaser for the purchase or acquisition of any of the Beaumont Shares or any
securities convertible or exchangeable for shares of Beaumont Newco capital
stock. No agreements or understandings will exist with respect to the voting or
sale of the Beaumont Shares. Seller will have and on the Closing Date Seller
shall transfer to Purchaser, good and marketable title to the Beaumont Shares
free and clear of all liens, pledges, security interest, rights of first
refusal, options, restrictions (other than those imposed by federal or state
securities laws), encumbrances and liabilities.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated by this Agreement, Purchaser hereby represents,
warrants and covenants to Seller as to the following matters as of the Effective
Date and, except as otherwise provided herein, shall be deemed to remake all of
the following representations, warranties and covenants as of the Closing:
3.1 Authorization. Purchaser has full power and authority to enter into
this Agreement and has full power and authority to carry out the transactions
contemplated hereby.
3.2 Binding Agreement. All actions required to be taken by Purchaser to
authorize the execution, delivery and performance of this Agreement, all
documents executed by Purchaser which are necessary to give effect to this
Agreement, and all transactions contemplated hereby, have been duly and properly
taken or obtained by Purchaser prior to the Closing Date. No other action on the
part of Purchaser is necessary to authorize the execution, delivery and
performance of this Agreement, all documents necessary to give effect to this
Agreement and all transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and, assuming due and valid
execution by Seller, this Agreement constitutes, or will constitute prior to
Closing, a valid and binding obligation of Purchaser enforceable in accordance
with its terms subject to (a) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally from time to
time in effect and (b) limitations on the enforcement of equitable remedies.
3.3 Organization and Good Standing. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has full power and authority to own, operate and
lease its properties and to carry on its business as now conducted.
3.4 No Violation. Neither the execution and delivery by Purchaser of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance with any of the material provisions hereof by Purchaser will (i)
violate, conflict with or result in a breach of any material provision of the
Articles of Organization, Operating Agreement or other organizational documents
of Purchaser, (ii) violate any order, writ, injunction, ruling or material law
of any court or governmental authority, United States or foreign, applicable to
Purchaser, or cause the suspension or revocation of any governmental license or
authorization applicable to or binding upon or affecting Purchaser, or (iii)
except for the applicable requirements of the HSR Act, and as otherwise
described on Schedule 3.4 attached hereto, require any material consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority.
3.5 Brokers and Finders. Except as described on Schedule 3.5, neither
Purchaser nor any controlled affiliate thereof nor any officer or director
thereof has engaged any finder or broker in connection with the transactions
contemplated hereunder.
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3.6 Legal Proceedings. Except as described on Schedule 3.7, there are no
claims, proceedings or investigations pending or, to the best knowledge of
Purchaser, threatened relating to or affecting Purchaser or any controlled
affiliate of Purchaser before any court or governmental body (whether judicial,
executive or administrative) in which an adverse determination would materially
adversely affect the properties, business condition (financial or otherwise) of
Purchaser or any controlled affiliate of Purchaser. Neither Purchaser nor any
controlled affiliate of Purchaser is subject to any judgment, order, decree or
other governmental restriction specifically (as distinct from generically)
applicable to Purchaser or any controlled affiliate of Purchaser which
materially adversely affects the condition (financial or otherwise), operations
or business of Purchaser or any controlled affiliate of Purchaser.
3.7 Solvency. Purchaser is not insolvent and will not be rendered insolvent
as a result of any of the transactions contemplated by this Agreement. For
purposes hereof, the term "solvency" means that: (i) the fair salable value of
Purchaser's tangible assets is in excess of the total amount of its liabilities
(including for purposes of this definition all liabilities, whether or not
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, and whether direct or indirect, fixed or contingent,
secured or unsecured, and disputed or undisputed); (ii) Purchaser is able to pay
its debts or obligations in the ordinary course as they mature; and (iii)
Purchaser has capital sufficient to carry on its businesses and all businesses
which it is about to engage.
3.8 INTENTIONALLY OMITTED.
3.9 INTENTIONALLY OMITTED.
3.10 No Other Business or Operations. Purchaser is engaged in no business
or operations at the time of execution of this Agreement, and immediately
following the Closing will be engaged in no business or operations other than as
is contemplated to be acquired pursuant to this Agreement or as disclosed to
Seller prior to the Effective Date.
ARTICLE 4
COVENANTS OF SELLER
4.1 Access and Information; Inspections. From the Effective Date until
Closing, Seller shall, and shall cause the Subsidiaries to, afford to the
officers and agents of Purchaser (which shall include accountants, attorneys,
bankers and other consultants and agents of Purchaser) full and complete access
during normal business hours to and the right to inspect the plants, properties,
books, accounts, records and all other relevant documents and information with
respect to the assets, liabilities and business of the Hospitals. From the
Effective Date until Closing, Seller shall, and shall cause the Subsidiaries to,
furnish Purchaser with such additional financial and operating data and other
information in Seller's or any Subsidiary's possession as to businesses and
properties of the Hospitals as Purchaser or its representatives may from time to
time reasonably request, without regard to where such information may be
located. Purchaser's right of access and inspection shall be exercised in such a
manner as not to interfere unreasonably with the operations of the Hospitals.
Such access may include consultations with the personnel of Seller or the
Subsidiaries. Further, Purchaser may, at its sole cost and expense
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(except as otherwise provided in Section 12.12), undertake environmental,
mechanical and structural surveys of the Hospitals. Purchaser acknowledges that
it shall coordinate its inspection activities contemplated by this Section 4.1
through David R. Mayeux or his designee.
4.2 Preserve Accuracy of Representations and Warranties. Seller shall, and
shall cause the Subsidiaries to, refrain from any action or inaction that would
render any representation or warranty contained in Article 2 of this Agreement
inaccurate as of the Closing Date.
4.3 Conduct of Business. On and after the Effective Date and prior to the
Closing, and except to the extent the prior written consent of Purchaser is
obtained in accordance with the procedures set forth in Section 4.4 below or
required by this Agreement, Seller shall, and shall cause each Subsidiary to,
with respect to the operation of the Hospitals:
(a) carry on its respective businesses with respect to the operation
of the Hospitals in substantially the same manner as presently conducted and not
make any material change in personnel, operations, finance, accounting policies,
or real or personal property;
(b) maintain each Hospital and all parts thereof and all other Assets
in operating condition in a manner consistent with past practices, ordinary wear
and tear excepted;
(c) perform all of its material obligations under agreements relating
to or affecting each Hospital, its respective operations or the Assets;
(d) keep in full force and effect present insurance policies or other
comparable self-insurance; and
(e) use its reasonable efforts to maintain and preserve its respective
business organizations intact, retain its respective present employees at each
Hospital and maintain its respective relationships with physicians, suppliers,
customers and others having business relationships with each Hospital and take
such actions as are necessary and use its reasonable efforts to cause the
smooth, efficient and successful transition of business operations and employee
and other relations to the Purchaser as of Closing.
4.4 Negative Covenants. From the Effective Date until Closing, with respect
to the operation of the Hospitals, Seller shall not, and Seller shall cause each
Subsidiary to not, without the prior written consent of Purchaser in accordance
with the procedures set forth below or except as may be required by law:
(a) amend or terminate any of the Contracts, enter into any new
contract or commitment, or incur or agree to incur any liability, except in the
ordinary course of business (which ordinary course of business shall include
renewals of any Contract), and in no event with respect to any such contract,
commitment or liability as to which the total to be paid in the future under the
contract, commitment or liability exceeds $50,000;
(b) increase compensation payable or to become payable or make any
bonus payment to or otherwise enter into one or more bonus agreements with any
employee, except in
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the ordinary course of business in accordance with Seller's and any Subsidiary's
customary personnel policies;
(c) create, assume or permit to exist any new debt, mortgage, deed of
trust, pledge or other lien or encumbrance upon any of the Assets;
(d) acquire (whether by purchase or lease) or sell, assign, lease, or
otherwise transfer or dispose of any property, plant or equipment, except in the
ordinary course of business with comparable replacement thereof;
(e) except with respect to previously budgeted expenditures, purchase
capital assets or incur costs in respect of construction in progress;
(f) take any action outside the ordinary course of business; or
(g) reduce Inventory except in the ordinary course of business.
For purposes of obtaining Purchaser's prior written consent under Sections 4.3
and 4.4 of this Agreement, Seller shall forward requests for such consent to
Frank Coyle at Purchaser. Such requests shall be deemed approved by Purchaser if
not specifically approved or denied by Purchaser with ten (10) business days of
delivery.
4.5 Required Approvals. Seller shall reasonably cooperate with Purchaser
and its representatives and attorneys: (i) in obtaining all consents, approvals,
authorizations, clearances, certificates of need and licenses required to carry
out the transactions contemplated by this Agreement (including, without
limitation, those of governmental and regulatory authorities) or which Purchaser
reasonably deems necessary or appropriate, and (ii) in the preparation of any
document or other material which may be required by any governmental agency as a
predicate to or result of the transactions contemplated herein; provided,
however, that it shall be Purchaser's responsibility to obtain the certificates
of need and licenses required to carry out the transactions contemplated by this
Agreement. As soon as practicable after the Effective Date, Seller will make all
governmental filings required to be made by it in order to consummate the
transactions contemplated herein (including all filings under the
Hart-Scott-Rodino Act, as more particularly described below).
4.6 Additional Financial Information. Within thirty (30) calendar days
following the end of each calendar month prior to Closing, Seller shall deliver
to Purchaser complete copies of the unaudited balance sheet and related
unaudited statements of income relating to each Subsidiary with respect to the
operation of the Hospitals for each month then ended, together with a
year-to-date compilation and the notes, if any, related thereto, which
presentation shall be consistent with the provisions of Section 2.10 which are
applicable to the Financial Statements.
4.7 No-Shop.
(a) From and after the Effective Date until the earlier of the Closing
or the termination of this Agreement, Seller shall not, and shall cause the
Subsidiaries to not, without the prior written consent of Purchaser: (i) offer
for sale or lease the assets of the Hospitals or the Assets (or any material
portion thereof) or of any stock or other securities or other interest owned
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by Seller or its affiliates in any Subsidiary; (ii) solicit offers to buy all or
any material portion of any of the Hospitals or the Assets, or any stock or
other securities or other interest owned by Seller or its affiliates in any
Subsidiary; (iii) hold discussions with any party (other than Purchaser) looking
toward such an offer or solicitation or looking toward a merger or consolidation
of any Subsidiary; or (iv) enter into any agreement with any party (other than
Purchaser) with respect to the sale or other disposition of any of the Hospitals
or the Assets or of any stock or other securities or other interest owned by
Seller or its affiliates in any Subsidiary, or with respect to any merger,
consolidation, or similar transaction involving any Subsidiary. Seller shall
promptly advise Purchaser of any inquiry, proposal, solicitation or
communication of any kind relating to, or contemplating any of the foregoing.
Notwithstanding the foregoing, this Section 4.7 shall not be construed to
prohibit Seller from engaging in discussions regarding corporate transactions
involving its or its affiliates' stock or securities, including macro-level
mergers, reorganizations or other transactions, so long as the terms thereof do
not contemplate the sale or lease or other disposition of the Hospitals or the
Assets or otherwise impair the ability of Seller or any of the Subsidiaries to
consummate the transactions contemplated herein.
(b) Any reference in this Agreement to an "affiliate" shall mean any
Person directly or indirectly controlling, controlled by or under common control
with a second Person; provided, however, an "affiliate" shall not include the
stockholders of Seller or any officer or director of any Person. The term
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. A "Person" shall mean
any natural person, partnership, corporation, limited liability company,
association, trust or other legal entity.
4.8 Seller's Efforts to Close; Audited Financial Statements.
(a) Seller shall use its reasonable commercial efforts to promptly
satisfy all of the conditions precedent set forth in Articles 6 and 7 to its or
Purchaser's obligations under this Agreement to the extent that Seller's action
or inaction can control or influence the satisfaction of such conditions.
(b) As soon as reasonably practicable after the Effective Date, Seller
shall provide Purchaser with audited combined financial statements of the
Hospitals, which combined financial statements will include combined balance
sheets for the years ended May 31, 1999 and 1998, and combined statements of
operations, shareholder's equity and cash flows for each of the years in the
three year period ended May 31, 1999. The balance sheets included in such
financial statements will fairly present the financial position of each
Subsidiary with respect to the operation of the Hospitals as of the respective
dates thereof and the other financial statements included therein will present
fairly the results of operations for the periods indicated, in each case in
conformity with GAAP consistently applied. Such financial statements shall meet
the requirements of Regulation S-X promulgated under the Securities Exchange Act
of 1934, as amended, and shall be accompanied by the unqualified opinion of KPMG
Peat Marwick.
(c) Seller shall reasonably cooperate in Purchaser's efforts to obtain
financing and fund the Cash Purchase Price, and otherwise to consummate the
transaction contemplated by this Agreement. Notwithstanding the foregoing,
Purchaser shall indemnify, defend, and hold
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Seller harmless from all costs, damages, expenses or losses incurred by Seller
as a result of being named in any securities litigation involving Purchaser and
the financing contemplated by this Agreement, other than to the extent arising
out of any gross negligence, willful misconduct of Seller or its employees, or
false or intentionally misleading statements of Seller or its employees.
4.9 Title Matters. No less than twenty (20) days prior to the Closing Date,
Seller shall deliver to Purchaser (a) a preliminary binder or title
commitment(s) (the "Title Commitment") sufficient for the issuance of an
A.L.T.A. Extended Coverage Owner's Title Insurance Policy with respect to the
Owned Real Property and an A.L.T.A. Extended Coverage Leasehold Title Policy
with respect to that Leased Real Property as to which a ground lease is at issue
(the "Title Policy"), issued by Chicago Title Insurance Company (the "Title
Company"), together with true, correct and legible copies of all instruments
referred to therein as conditions or exceptions to title (the "Title
Instruments") and (b) A.L.T.A. surveys of the Owned Real Property complying with
the Minimum Standard Detail Requirements for ALTA/ASCM Land Title Surveys for
the Owned Real Property (the "Surveys"). Section 12.12 shall govern which party
or parties hereto shall bear the costs and expenses of the Title Commitment, the
Title Policy and the Surveys.
4.10 Termination of Hospitals' Employees. Effective on the Transition Date,
the Hospitals' Employees (other than the Retained Management Employees) shall
cease to be employees of Seller and Seller's affiliates including the
Subsidiaries, and shall be removed from such entities' respective payrolls.
Seller shall, and shall cause the Subsidiaries to, terminate effective as of the
Transition Date the active participation of all of the Hospitals' Employees
(other than the Retained Management Employees) in all of the Seller Plans, and
shall cause each Seller Plan to comply with all applicable laws. After the
Transition Date, Seller shall, and shall cause the Subsidiaries to, timely make
or cause to be made by their affiliates appropriate distributions to, or for the
benefit of, all of the Hospitals' Employees (other than the Retained Management
Employees) prior to the Transition Date in respect of the Seller Plans which are
in force and effect with respect to the Hospitals' Employees (other than the
Retained Management Employees) at the Hospitals immediately prior to the
Transition Date in accordance with ERISA, the Code and the terms and conditions
of the Seller Plans; provided, however, no such distribution shall be required
to the extent it is among the Assumed Obligations.
4.11 Termination Cost Reports. Seller shall, and shall cause the
Subsidiaries to, file all Medicare, Medicaid, CHAMPUS, Blue Cross and any other
termination cost reports required to be filed as a result of the consummation of
(a) the transfer of the Assets to Purchaser and (b) the transactions
contemplated by this Agreement. All such termination cost reports shall be filed
by Seller or the applicable Subsidiary in a manner that is consistent with
current laws, rules and regulations.
4.12 Hart-Scott-Rodino Act Filings. Seller will (a) take promptly all
actions necessary to make the filings required of Seller or its affiliates under
the HSR Act, (b) comply at the earliest practicable date with any request for
additional information received by Seller or its affiliates from the Federal
Trade Commission (the "FTC") or Antitrust Division of the Department of Justice
(the "DOJ") pursuant to the HSR Act, and (c) cooperate with Purchaser in
connection with Purchaser's filings under the HSR Act and in connection with
resolving any investigation or other regulatory inquiry concerning the
transactions contemplated by this
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Agreement commenced by either the FTC or the DOJ. Except as provided by Section
12.12, all fees and expenses of Seller incurred in connection with Seller's
filing under the HSR Act shall be borne by Seller.
4.13 Environmental Survey. Seller shall promptly obtain from an
environmental consulting firm (the "Consultant") a written environmental survey
of the Owned Real Property (the "Environmental Survey") and shall deliver the
Environmental Survey to Purchaser, which survey shall be identified on Exhibit
4.13 hereto. Section 12.12 shall govern which party or parties hereto shall bear
the costs and expenses of the Environmental Survey.
4.14 Noncompetition. As an inducement to Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, neither
Seller, any Subsidiary, nor any of their affiliates, nor any of their
successors, shall, for a period of three (3) years following the Closing Date,
without the prior written consent of Purchaser, directly or indirectly, invest
in, own, manage, operate, control or participate in the ownership, management,
operation or control of, or serve as a consultant or lender to, any Competing
Business within the Seller Business Service Area. For purposes of this
Agreement, the term "Competing Business" means the business of owning and
operating general acute care hospitals, and the term "Seller Business Service
Area" means the area within a twenty-five (25) mile radius of any Hospital.
Notwithstanding the foregoing, the following shall be excluded from the
foregoing provisions of this Section 4.14: (a) the general acute care hospital
activities of Seller and its affiliates as of the Closing Date (other than the
activities of the Hospitals) and (b) Seller's or any affiliate of Seller's
acquisition and operation of a general acute care hospital within the Seller
Business Service Area after the Closing Date so long as such hospital was
acquired in a transaction in which the amount of consideration allocated to such
hospital is less than twenty percent (20%) of the total consideration necessary
to consummate such transaction. Seller shall not actively solicit any individual
Purchaser employee to remain or become an employee of Seller between the Closing
Date and the one year anniversary of the Closing Date; provided, however, that
at any time Seller may make a general solicitation not directed specifically at
Purchaser employees to recruit employees through any means and shall have the
right to hire Purchaser employees who respond to such permitted solicitation
efforts or seek such employment unsolicited by Seller. For a period of one year
after the Closing Date, Purchaser shall not actively solicit any individual
employee of Seller or affiliates thereof who had been a member of the senior
management (i.e., the "A Team") at a Hospital prior to the Effective Date, but
was not employed by Tenet at a Hospital as of the Effective Date. Seller shall
not, and shall use its reasonable commercial efforts to cause its directors,
officers, employees and agents to not, use for any purpose any confidential
information which specifically relates to any of the Hospitals. Seller shall
cause each of its affiliates, and any successors to its affiliates, to comply
with the obligations imposed by this Section 4.14. In the event that the
provisions contained in this Section 4.14 shall ever be deemed to exceed the
time or geographic limits or any other limitations permitted by applicable law
in any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum extent permitted by applicable law.
4.15 Enforceability. Seller hereby acknowledges that the covenant contained
in Section 4.14 above is a condition precedent to Purchaser's entering into this
Agreement, and that such restrictions are reasonable and necessary to protect
the legitimate interests of Purchaser following the Closing. Seller also hereby
acknowledges that any violation of Section 4.14 would
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result in irreparable injury to Purchaser and the remedy at law for any breach
of Section 4.14 would be inadequate. Seller specifically acknowledges and agrees
that Purchaser shall be entitled to an equitable accounting of all earnings,
profits and other benefits arising from such breach and further agrees to pay
the reasonable fees and expenses, including attorneys' fees, incurred by
Purchaser in enforcing the restrictions contained in Section 4.14.
4.16 [INTENTIONALLY OMITTED]
4.17 Sale of Odessa Regional Hospital
(a) Purchaser and Seller agree and acknowledge that the sale of the
Assets to Purchaser hereunder, and the sale of Odessa Regional Hospital and
certain assets related thereto (collectively, the "Odessa Assets") by Odessa
Hospital Ltd., a Texas limited partnership (the "Odessa Partnership"), to
Purchaser pursuant to an asset sale agreement, as described below (the "Odessa
Asset Sale Agreement"), are part of the overall transaction between Seller and
Purchaser that is the subject of this Agreement. The Odessa Assets are owned by
the Odessa Partnership; Seller or a Subsidiary owns seventy-eight percent (78%)
of the ownership interest in the Odessa Partnership as general partner. The
limited partners in the Odessa Partnership have a right of first refusal (the
"Odessa Right of First Refusal") with respect to any sale of substantially all
of the assets of the Odessa Partnership; the Odessa Right of First Refusal will
be triggered by the proposed sale of the Odessa Assets to Purchaser.
(b) As required by the terms and conditions of the Odessa Right of
First Refusal, Seller intends to present the transaction contemplated by this
Agreement to the Odessa Partnership limited partners. If the Odessa Partnership
limited partners exercise the Odessa Right of First Refusal, Seller will convey
the Odessa Assets to the limited partners.
(c) In the event the limited partners of the Odessa Partnership do not
exercise the Odessa Right of First Refusal, Seller shall cause the Odessa
Partnership to convey the Odessa Assets to Purchaser pursuant to the Odessa
Asset Sale Agreement which will be attached as Exhibit 4.17 hereto. At the
request of Purchaser, Seller shall explore alternative structures for effecting
the sale of the Odessa Assets including but not limited to through a sale of
Seller's general partner interest in the Odessa Partnership to Purchaser;
provided, however, that Seller shall not be required to restructure the
acquisition of the Odessa Assets unless Seller determines, in its reasonable
discretion, that such alternative transaction structure would have no adverse
consequences to Seller.
(d) Within five (5) business days following execution of this
Agreement the parties shall in good faith negotiate, draft and enter into the
Odessa Asset Sale Agreement. The Odessa Sale Agreement shall be substantially in
the form of this Agreement, except: (i) the purchase price for the Odessa Assets
shall be Forty-Two Million Dollars ($42,000,000) plus or minus a net working
capital adjustment; (ii) the parties acknowledge that such sale and purchase is
subject to the Odessa Right of First Refusal held by the limited partners of the
Odessa Partnership, which right be waived or not exercised; (iii) Purchaser's
right to terminate the Odessa Sale Agreement for a material breach of
representations and warranties made by Seller shall be considered together with
all representations and warranties of Seller under this
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Agreement taken as a whole to determine materiality; and (iv) a condition to
closing the Odessa Sale Agreement shall be the concurrent completion of the
Closing hereunder.
4.18 Y2K Compliance Program. Seller shall continue to implement its Y2K
compliance program with respect to the Hospitals through January 1, 2000, and
beyond that date, consistent with implementation of such program for all of
Seller's (and its subsidiaries') hospitals. As part of Seller's continuing
implementation of such program, Seller shall:
(a) provide Purchaser reasonable access to and copies of all data
regarding Seller's Y2K compliance program being implemented at the Hospitals;
(b) continue to provide a corporate level coordinator and help desk
assistance in the same manner as is provided to all of Seller's (and its
subsidiaries') hospitals; and
(c) shall provide all such services without charge to Purchaser,
except for out of pocket costs for site visits.
4.19 Supplements to Disclosure Schedule. Seller shall have the continuing
obligation to promptly supplement or amend the Disclosure Schedule with respect
to any matter hereafter arising or discovered which, if existing or known at the
Effective Date, would have been required to have been set forth or described in
the Disclosure Schedule. No supplement or amendment of the Disclosure Schedule
after the Effective Date with respect to the events or circumstances existing
before the Effective Date or resulting from the transactions contemplated hereby
shall be deemed to have been disclosed as of the date of this Agreement unless
Purchaser specifically agrees thereto in writing. Notwithstanding the foregoing,
the parties agree that Seller shall have the right to attach Schedule 2.14(c)
and Schedule 2.19 within five (5) business days of the Effective Date, and
Schedule 7.10 within ten (10) business days of the Effective Date. Supplements
or amendments of the Disclosure Schedule with respect to events or circumstances
occurring after the Effective Date shall, for purposes of this Agreement and the
agreements contemplated (other than for the purpose of determining whether the
conditions set forth in Article 7 are satisfied), be deemed to have been
disclosed as of the date of this Agreement.
4.20 Mesa Lease Adjustment. The parties acknowledge that Seller is
currently renegotiating the current lease between Sierra Equities, Inc. and
Seller with respect to Mesa General Hospital (the "Mesa Lease") and the amount
of the lease payments required to be made thereunder. In connection therewith
and until the Mesa Lease is amended by the parties thereto to provide for a
revised lease payment, beginning on the Closing Date, Seller shall reimburse
Purchaser, on or before the fifth (5th) business day of each calendar month, for
the amount that is required to be paid by Purchaser as monthly "Fixed Rent"
pursuant to the Mesa Lease that is in excess of $118,668 (the aggregate of all
such payments being referred to herein as the "Excess Amount"). (The parties
shall pro rate Seller's obligation to pay such amount to reflect any partial
months.) Within ten (10) business days following the amendment of the Mesa Lease
by the parties thereto to provide for a revised lease payment (or a judgment or
settlement in litigation, or otherwise with the same effect), Seller shall pay
to Purchaser an amount, in cash, equal to (a) the product of (i) eight (8) and
(ii) the difference between (A) the annual rental
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payment required to be made pursuant to the Mesa Lease, as amended to reflect
the revised lease payment, and (B) $1,424,016, less (b) the Excess Amount.
ARTICLE 5
COVENANTS OF PURCHASER
5.1 Purchaser's Efforts to Close. Purchaser shall use its reasonable
commercial efforts to satisfy all of the conditions precedent set forth in
Articles 6 and 7 to Purchaser's or Seller's obligations under this Agreement to
the extent that Purchaser's action or inaction can control or influence the
satisfaction of such conditions.
5.2 Required Approvals. Purchaser (a) shall use its reasonable best efforts
to secure, as promptly as practicable, before the Closing Date, all consents,
approvals, authorizations, clearances, certificates of need and licenses
required to carry out the transactions contemplated by this Agreement
(including, without limitation, those of governmental and regulatory
authorities) and to cause all of its covenants and agreements to be performed,
satisfied and fulfilled; and (b) will provide such other information and
communications to governmental and regulatory authorities as Seller or such
authorities may reasonably request.
5.3 Certain Employee Matters.
(a) During the period (the "Transition Period") commencing at the
Effective Time and ending immediately prior to January 1, 2000 or such earlier
date as determined by Purchaser (such date being the "Transition Date"), each
Hospital Employee (as defined in paragraph (b) of this Section 5.3) shall remain
an employee of its employer as of the Effective Time (whether such employer is
Seller, one of the Subsidiaries or an affiliate of Seller), subject to normal
personnel actions occurring in the ordinary course of business. During the
Transition Period, or until such earlier time as any such Hospital Employee
ceases to be an employee of such employer, each such Hospital Employee shall be
leased by Purchaser from Seller or the employing Subsidiary or affiliate, on
substantially the terms and conditions as are set forth in the form of Employee
Leasing Agreement attached as Exhibit 1.6.11 hereto. During the Transition
Period, each leased Hospital Employee shall continue to participate in all
Seller Plans on the same basis as in effect immediately prior to the Effective
Time, subject to the terms of the Employee Leasing Agreement.
(b) Purchaser covenants and agrees that it shall make offers of
employment effective as of the Transition Date (in substantially equivalent
positions) to all of the persons who are employees of (i) the Subsidiaries with
respect to the operation of the Hospitals or (ii) any affiliate of Seller which
employs individuals at any of the Hospitals (whether such employees are full
time employees, part-time employees, on short-term or long-term disability or on
leave of absence pursuant to Seller's policies, or the Family and Medical Leave
Act of 1993 or other similar local law (such laws being collectively referred to
herein as the "FMLA") immediately prior to the Transition Date (the "Hospitals'
Employees"), provided, however, that no Hospital Employee who is on any
disability or leave of absence on the Transition Date other than Hospital
Employees on leave of absence to the extent required pursuant to the FMLA shall
become a Hired Employee unless and until such Hospital Employee reports back to
work in
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accordance with Seller's practices at such time. Notwithstanding the foregoing,
Purchaser acknowledges that Seller has the right, but is not required, to retain
any management-level Hospital Employee who does not accept Purchaser's
employment offer made under this Section 5.3(a), which individuals will remain
employed by Seller or its applicable affiliate as of Transition Date (the
"Retained Management Employees"); provided, however, that beginning on the
Effective Date, Seller shall not solicit management level Hospital Employees or
otherwise interfere with Purchaser's attempt to employ same until the fifteenth
(15th) day following the Transition Date. Any of the Hospitals' Employees who
accept an offer of employment with Purchaser as of or after the Transition Date
shall be referred to herein as the "Hired Employees." Purchaser covenants and
agrees that it shall continue to employ in comparable positions the Hired
Employees for a period of no less than ninety (90) calendar days following the
Closing Date, unless Purchaser sooner terminates the employment of any Hired
Employee for cause or any Hired Employee voluntarily resigns or retires.
Purchaser shall ensure that the terms and conditions of employment (including
level of compensation and benefits, including without limitation health
insurance plans containing a waiver of pre-existing conditions clause) for a
period of one year following the Closing Date for each of the Hired Employees
are no less favorable in the aggregate than those provided the Hospitals'
Employees as of the Effective Date.
(c) Purchaser shall give all Hired Employees full credit for
accumulated sick pay and for all of the accrued vacation and holiday pay of such
employees, either by (i) crediting such employees the accrued time off reflected
in the employment records of Seller as of day immediately prior to the
Transition Date or (ii) by making full payments to such employees of the amounts
which such employees would have received had they taken their accrued or
accumulated holiday or vacation time, provided, however, that no payment to such
employees shall be required with respect to accumulated sick time except to the
extent required by Seller's policies with respect to accumulated sick time.
Immediately following the Transition Date and as a result of the transactions
completed by this agreement, Purchaser shall assume liability and obligation to
make COBRA benefits available to former employees (and their dependants) who are
employed by Purchaser. Subject to reimbursement by Purchaser pursuant to the
Employee Leasing Agreement, Seller shall be responsible for any claims incurred
(whether or not reported) prior to the Transition Date by any Hospital Employee
under medical and health plans of Seller, its Subsidiaries and affiliates.
(d) On the Transition Date, Purchaser shall sponsor an employee health
benefit plan for the benefit of all Hired Employees with terms and conditions
that are no less favorable in the aggregate than the benefit plans enjoyed by
the Hired Employees immediately prior to Closing, and shall allow all Hired
Employees to participate therein immediately upon its adoption, with no waiting
period and no limitation on coverage for preexisting conditions. On and after
the Transition Date, Purchaser shall provide COBRA coverage under its own group
health plan referenced above to all Hospital Employees or dependents whose
qualifying event occurred after Closing and shall indemnify and hold Seller
harmless from any cost or liabilities with respect to same.
(e) Within two (2) years after Closing, Purchaser's Plan shall (i) be
amended to provide for a plan-to-plan transfer from Seller's (or its
affiliate's) plan with respect to the Hired Employees (other than the Retained
Management Employees) that is qualified under Section 401(a) and 401(k) of the
Code, (ii) accept a transfer of assets (both vested and unvested) from the
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above plan, (iii) file any required returns relating to the transfer with the
Internal Revenue Service, and (iv) be amended to provide protected withdrawal
and distribution rights relating to the transferred assets in accordance with
Section 411(d)(6) of the Code. For purposes of this Agreement, "Purchaser's
Plan" shall mean a retirement plan qualified under Section 401(a) of the Code
that is sponsored by Purchaser or one of its controlled group or affiliated
service group members, as defined in Section 414 of the Code.
(f) Any applicable employee of Seller or any Subsidiary with respect
to the operation of the Hospitals who is identified as a current or former
participant (and any eligible dependent thereof) of the Seller Plans who is
eligible to receive continuation coverage (within the meaning of Section 4980B
of the Code and Part 6 of Subtitle B of Title 1 of ERISA) will remain covered
through Seller's and its affiliates' COBRA provider. Immediately following the
Transition Date and as a result of the transactions contemplated by this
Agreement, Seller, its affiliates and the Subsidiaries shall not offer COBRA
benefits with respect to any of the Seller Plans to Hired Employees (and their
dependents) as of the date such Hired Employees become eligible for Purchaser's
medical and dental plans. Seller, its affiliates and the Subsidiaries will
thereby be released of COBRA responsibility and liability for such employees.
(g) After the Transition Date, Purchaser or Purchaser's representative
will give reasonable assistance to Seller's (and its affiliates') human
resources department with respect to Seller's, Seller's affiliates' and the
Subsidiaries' post-Closing administration of Seller's, Seller's affiliates' and
the Subsidiaries' pre-Closing employee pension benefit plans and employee health
or welfare benefit plans for the Hospitals' Employees (other than the Retained
Management Employees).
5.4 Use of Business Names. Purchaser covenants that it and its affiliates
shall not use in their respective trades or businesses the names "Tenet
Healthcare Corporation", "Tenet", "Tenet HealthSystem", "OrNda HealthCorp", and
any other names or symbols not used primarily at any of the Hospitals on or
prior to Closing, any abbreviations or variations thereof or service marks,
symbols or logos related thereto, nor any promotional material, stationery,
supplies or other items of inventory bearing either such names, symbols or
abbreviations or variations thereof.
5.5 Excluded Assets. As soon as practicable after the Closing, Purchaser
shall deliver to Seller or Seller's designee any Excluded Assets found at any of
the Hospitals after the Closing Date, without imposing any charge on Seller for
Purchaser's storage or holding of same after the Closing Date.
5.6 Confidentiality. From the Effective Date until the Closing Date,
Purchaser shall, and shall 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 Purchaser's counsel, by other
requirements of law, all Confidential Information (as hereinafter defined), and
Purchaser shall not disclose the 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 diligence review by or
on behalf of Purchaser. For the purposes hereof, "Confidential Information"
shall mean all information of any kind concerning Seller, any Subsidiary or the
business of the Hospitals, in connection with the transactions contemplated by
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this Agreement except information (i) ascertainable or obtained from public or
published information, (ii) received from a third party not known by Purchaser
to be under an obligation to Seller or any Subsidiary to keep such information
confidential, (iii) which is or becomes known to the public (other than through
a breach of this Agreement), or (iv) which was in Purchaser's possession prior
to disclosure thereof to Purchaser in connection herewith. The rights of Seller
under this Section 5.6 shall be in addition and not in substitution for the
rights of Seller under that certain Confidentiality Agreement between Seller and
Purchaser, dated February 18, 1999 (the "Confidentiality Agreement"), which
Confidentiality Agreement shall survive Closing.
5.7 Enforceability. Purchaser hereby acknowledges that the covenant
contained in Section 5.6 above is a condition precedent to Seller's entering
into this Agreement, and that such restrictions are reasonable and necessary to
protect the legitimate interests of Seller following the Closing. Purchaser also
hereby acknowledges that any violation of Section 5.6 would result in
irreparable injury to Seller and the remedy at law for any breach of Section 5.6
would be inadequate. Purchaser specifically acknowledges and agrees that Seller
shall be entitled to an equitable accounting of all earnings, profits and other
benefits arising from such breach and further agrees to pay the reasonable fees
and expenses, including attorneys' fees, incurred by Seller in enforcing the
restrictions contained in Section 5.6.
5.8 Hart-Scott-Rodino Act Filings. Purchaser shall (a) take promptly all
actions necessary to make the filings required of Purchaser or its affiliates
under the HSR Act, (b) comply at the earliest practicable date with any request
for additional information received by Purchaser or its affiliates from the FTC
or the DOJ pursuant to the HSR Act, and (c) cooperate with Seller in connection
with Seller's or its affiliates' filings under the HSR Act and in connection
with resolving any investigation or other regulatory inquiry concerning the
transactions contemplated by this Agreement commenced by either the FTC or the
DOJ.
5.9 Group Purchasing Contract. Following the Closing, Purchaser shall cause
the Hospitals to participate in specified national purchasing contracts of
Seller and its affiliates. Seller agrees that it will make available to
Purchaser the opportunity for other health care facilities owned or operated by
Purchaser or its affiliates to participate in such contracts. At Closing,
Purchaser shall execute a "Group Purchasing Contract" substantially in the form
of Exhibit 5.9 for such purpose; provided, however, that the assignment
provision and monthly information provision thereof remain subject to the mutual
reasonable agreement of both parties. The Group Purchasing Contract to be
executed by the parties shall provide, among other things, that either party
thereto may terminate such Contract without cause on sixty (60) days prior
written notice. Included as part of Exhibit 5.9 is a list of all of the national
purchasing contracts of Seller and its affiliates in effect as of the Effective
Date which do not preclude participation by persons or entities which are not
affiliates of Seller.
5.10 Acknowledgement Regarding Year 2000 Compliance. Subject to the
accuracy of the representation and warranties set forth in Section 2.19 and
Seller's compliance with its obligations under Section 4.18 of this Agreement,
Purchaser acknowledges that Purchaser assumes all liability with respect to Year
2000 compliance relating to the Assets. As used herein, the term "Year 2000
compliance" includes the ability to perform any of the following functions: (i)
to consistently handle date information before, at and after January 1, 2000,
including accepting date input, providing date output, and performing
calculations on dates or portions of
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dates; (ii) to function accurately without interruption (or disruption of other
software or systems) before, at and after January 1, 2000, without any change in
operations associated with the advent of the new century; (iii) to respond to
two-digit date input in a way that resolves any ambiguity as to century; and
(iv) to store and provide output of date information in ways that are
unambiguous as to century.
5.11 Waiver of Bulk Sales Law Compliance. Purchaser hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which the
Assets are located and all other similar laws applicable to bulk sales and
transfers.
5.12 Beaumont Assets. Notwithstanding Section 1.9 of this Agreement,
Purchaser acknowledges that Seller has the right to effect the assignment,
transfer and conveyance of the Acute Care Hospitals known as Park Place Medical
Center and Mid-Jefferson Hospital, and certain Assets related thereto
(collectively, the "Beaumont Assets"), to Purchaser in accordance with this
Section 5.12. The parties intend that Seller shall transfer the Beaumont Assets
to Purchaser by contributing such Assets to a newly-formed wholly-owned
Subsidiary ("Beaumont Newco"), and then selling all issued and outstanding stock
of Beaumont Newco to Purchaser, pursuant to the terms of this Agreement. At the
request of Purchaser, Seller shall explore alternative structures for effecting
the sale of the Beaumont Assets including but not limited to through a
contribution of the Beaumont Assets into corporations that are themselves
partners in a newly-formed limited partnership; provided, however, that Seller
shall not be required to restructure the acquisition of the Beaumont Assets
unless Seller determines, in its reasonable discretion, that such alternative
transaction structure would have no adverse consequences to Seller.
5.13 Preserve Accuracy of Representations and Warranties. Purchaser shall
refrain from any action or inaction that would render any representation or
warranty contained in Article 3 inaccurate as of the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Seller's and the Subsidiaries' obligation to sell the Assets and to close
the transactions as contemplated by this Agreement shall be subject to the
satisfaction of each of the following conditions, as to the Assets taken as a
whole on or prior to the Closing Date unless specifically waived in writing by
Seller in whole or in part at or prior to the Closing:
6.1 Warranties True and Correct. The representations and warranties made by
Purchaser and set forth in this Agreement and in the exhibits and schedules
attached hereto shall be true and correct in all material respects, as to the
Assets taken as a whole, when made and as of the Closing Date.
6.2 Signing and Delivery of Instruments. Purchaser shall have executed and
delivered all documents, instruments and certificates required to be executed
and delivered pursuant to the provisions of this Agreement.
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6.3 Unfavorable Action or Proceeding. On the Closing Date, no orders,
decrees, judgments or injunctions of any court or governmental body shall be in
effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement.
6.4 Performance of Covenants. Purchaser shall have in all respects
performed or complied with each and all of the obligations, covenants,
agreements and conditions required to be performed or complied with by it on or
prior to Closing.
6.5 Opinion of Counsel for Purchaser. Seller shall have received the
favorable opinion of Purchaser's counsel, dated the Closing Date, in
substantially the form set forth in Exhibit 6.5 attached to this Agreement.
6.6 Hart-Scott-Rodino Filings. All filings required to be made and notices
required to be given pursuant to the HSR Act shall have been made, all approvals
or consents required thereby shall have been obtained and the waiting periods
required thereby, if any, shall have expired or terminated.
6.7 Consents, Approvals and Authorizations. The parties shall have obtained
all material consents, licenses, approvals, permits, certificates of need,
waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement.
6.8 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were not
attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the exhibits and schedules
attached to this Agreement as of the Effective Date (or were deemed to be
attached to this Agreement as of the Effective Date pursuant to Section 4.19 of
this Agreement) were updated after the Effective Date (or the date on which
schedules and exhibits addressed by Section 4.19 were agreed upon by the
parties), such updates shall not be material as to the Assets taken as a whole.
6.9 Odessa Closing. In the event the Odessa Right of First Refusal shall
have been waived or expired unexercised, the parties hereto shall have effected
the sale and purchase contemplated by the Odessa Asset Sale Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Purchaser's obligation to purchase the Assets and to close the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the following conditions as to the Assets and operations of the Hospitals taken
as a whole on or prior to the Closing Date unless specifically waived in writing
by Purchaser in whole or in part at or prior to the Closing.
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7.1 Warranties True. Each of the representations and warranties made by
Seller and set forth in this Agreement and in the Disclosure Schedule, exhibits
and schedules attached hereto shall be true and correct in all material
respects, as to the Assets taken as a whole, when made and as of the Closing
Date.
7.2 Consents, Approvals and Authorizations. The parties shall have obtained
all material consents, licenses, approvals, permits, certificates of need,
waivers and authorizations from governmental agencies or bodies and third
parties that are necessary or required for completion of the transactions
contemplated by this Agreement or the operation of the business of the Acute
Care Hospitals; provided, however that the landlord consents contemplated to be
obtained by Section 1.6.13 hereof shall be deemed the "material" landlord
consents for this purpose.
7.3 Signing and Delivery of Instruments. Seller and the Subsidiaries shall
have executed and delivered all documents, instruments and certificates required
to be executed and delivered pursuant to all of the provisions of this
Agreement.
7.4 Performance of Covenants. Seller and the Subsidiaries shall have in all
material respects performed or complied with the material obligations,
covenants, agreements and conditions required to be performed or complied with
by Seller and the Subsidiaries on or prior to Closing.
7.5 Unfavorable Action or Proceeding. On the Closing Date, no orders,
decrees, judgments or injunctions of any court or governmental body shall be in
effect, and no claims, actions, suits, proceedings, arbitrations or
investigations shall be pending or threatened, which challenge or seek to
challenge, or which could prevent or cause the rescission of, the consummation
of the transactions contemplated in this Agreement, or materially and adversely
impair Purchaser's rights to own or operate the Acute Care Hospitals, after the
Closing Date.
7.6 Hart-Scott-Rodino Filings. All filings required to be made and notices
required to be given pursuant to the HSR Act shall have been made, all approvals
or consents required thereby shall have been obtained and the waiting periods
required thereby, if any, shall have expired or terminated.
7.7 Governmental Concurrences. Purchaser shall have obtained assurances
from all of the necessary governmental authorities, in form and substance
reasonably satisfactory to Purchaser, that Purchaser will be granted all
material governmental approvals, licenses, clearances, certifications and/or
provider numbers necessary or appropriate for the continued, uninterrupted
operation of the Acute Care Hospitals following the Closing. Purchaser shall
have received approvals, consents or commitments from Medicare, Medicaid, and
the fiscal intermediary with respect to each Acute Care Hospital, to the extent
any such approvals, consents or commitments are reasonably needed, for
Purchaser's continued participation in each program and providing satisfactory
assurances that there shall be no material interruptions in program payments.
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7.8 Opinion of Counsel. Purchaser shall have received the favorable opinion
of Seller's in-house counsel dated the Closing Date, in substantially the form
attached hereto as Exhibit 7.8.
7.9 Exhibits and Schedules.
(a) The provisions of the exhibits and schedules that were not
attached to this Agreement at the Effective Date, or such later date as is
expressly contemplated by this Agreement, shall not be material as to the Assets
taken as a whole.
(b) To the extent the provisions of the Disclosure Schedule and the
exhibits and schedules attached to this Agreement as of the Effective Date (or
were deemed to be attached to this Agreement as of the Effective Date pursuant
to Section 4.19 of this Agreement) were updated after the Effective Date (or the
date on which schedules and exhibits addressed by Section 4.19 were agreed upon
by the parties), such updates shall not be material as to the Assets taken as a
whole.
7.10 Title Insurance Policy. Purchaser shall have received a fully
effective Title Policy issued to Purchaser by the Title Company covering the
Owned Real Property and of the Leased Real Property subject to ground leases in
the amount of the full insurable value of the Owned Real Property and such
Leased Real Property, respectively (which amount shall be set forth in Schedule
11.1(b)). The Title Policy shall show fee simple title to the Owned Real
Property vested in Purchaser, or valid leasehold title to the Leased Real
Property subject to ground leases, subject only to: (i) current real estate
taxes not yet due and payable; and (ii) the permitted title exceptions listed in
Schedule 7.10 hereto (the "Permitted Exceptions"). Purchaser's counsel has
reviewed the title commitments and identified certain issues related thereto
prior to the Effective Date; Purchaser's counsel shall use its commercially
reasonable efforts to identify any additional issues within ten (10) business
days following the Effective Date and bring such issues promptly to Seller's
attention. The Title Policy shall have all standard and general exceptions
deleted so as to afford full "extended form coverage" and include all
endorsements reasonably requested by Purchaser.
7.11 Financing. The Purchaser shall have available to it the proceeds of
the financing described in the letters included in Exhibit 7.11 attached hereto
or other financing agreements. The Purchaser shall use its best efforts to cause
all conditions in such letters and any related credit facility agreement to be
timely satisfied.
7.12 Material Adverse Change. Since May 31, 1999, (i) Seller shall have
operated the Hospitals and the Assets in the ordinary course of business,
consistent with past practice, and (ii) there shall not have occurred any event,
change or development which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on the consolidated business,
assets, financial condition or operation of the Hospitals taken as a whole.
7.13 Audit. Seller shall have delivered the Audit with respect to the
Financial Statements referred to in Section 4.8(b) hereto.
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7.14 Odessa Closing. In the event the Odessa Right of First Refusal shall
have been waived or expired unexercised, the parties hereto shall have effected
the sale and purchase contemplated by the Odessa Asset Sale Agreement.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by the mutual written consent of the parties;
(b) by either Purchaser or Seller (the "Nondefaulting Party") if a
material breach of any provision of this Agreement has been committed by the
other party (the "Breaching Party") and such breach has not been (i) waived in
writing by the Nondefaulting Party or (ii) cured by the Breaching Party to the
reasonable satisfaction of the Nondefaulting Party within fifteen (15) business
days after service by the Nondefaulting Party upon the Breaching Party of a
written notice which describes the nature of such breach;
(c) by Purchaser if any of the conditions in Article 7 have not been
satisfied as of the Closing Date or if satisfaction of any such condition is or
becomes impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived such
condition in writing on or before the Closing Date;
(d) by Seller if any of the conditions in Article 6 have not been
satisfied as of the Closing Date or if satisfaction of any such condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition in
writing on or before the Closing Date;
(e) by either Purchaser or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before November
30, 1999.
8.2 Termination Consequences.
(a) If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement shall terminate, except
that the obligations in Sections 5.6, 12.3, 12.8, and 12.12 shall survive;
provided, however, that nothing contained herein shall relieve any party from
liability for any intentional breach of this Agreement.
(b) If this Agreement is terminated by Seller pursuant to 8.1(b), and
at the time of such termination Seller is in material compliance with all of its
obligations hereunder, then Purchaser shall pay to Seller Twenty Million Dollars
($20,000,000) within 30 days following such termination. Said payment shall (x)
constitute liquidated damages, and not a penalty, which represents the
reasonable endeavor by the parties hereto to estimate a fair compensation to
Seller for the foreseeable and unforeseeable losses that might result to Seller
from the failure of the
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transactions contemplated by this Agreement to close and (y) constitute the full
settlement, accord and satisfaction of all or any claims which Seller may have
against Purchaser and its affiliates arising out of the failure of the
transactions contemplated by this Agreement to close.
8.3 Costs. In the event of a termination of this Agreement pursuant to
Section 8.1(a) or 8.1(c) through 8.1(e) hereof, (a) each party shall pay the
costs and expenses incurred by it in connection with this Agreement, except as
provided in Section 12.12, and (b) no party shall be liable to any other party
for any costs, expenses, damage or loss of anticipated profits hereunder other
than the liquidated damages provided to Seller pursuant to Section 8.2. In the
event of a termination of this Agreement pursuant to Section 8.1(b), except
under circumstances in which 8.2(b) would apply, then the parties shall have the
right to pursue all remedies available at law or in equity.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Excluded Assets and Excluded Liabilities. Subject to Section 11.2
hereof, any asset (including Accounts Receivable) or any liability, all other
remittances and all mail and other communications that are determined by the
parties' agreement, or, absent such agreement, determined by litigation, to be
or otherwise relate to an Excluded Asset or an Excluded Liability and that is or
comes into the possession, custody or control of Purchaser (or its successors in
interest or assigns, or its respective affiliates) shall forthwith be
transferred, assigned or conveyed by Purchaser (or its respective successors in
interest or assigns and its respective affiliates) to Seller at Seller's cost.
Until such transfer, assignment and conveyance, Purchaser (and its respective
successors in interest and assigns and its respective affiliates) shall not have
any right, title or interest in or obligation or responsibility with respect to
such asset or liability except that Purchaser shall hold such asset in trust for
the benefit of Seller. Purchaser (and its respective successors in interest and
assigns and its respective affiliates) shall have neither the right to offset
amounts payable to Seller under this Section 9.1 against, nor the right to
contest its obligation to transfer, assign and convey to Seller because of,
outstanding claims, liabilities or obligations asserted by Purchaser against
Seller including but not limited to pursuant to the post-Closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
The terms of this Article 9 shall not be subject to the time limitations
contained in Section 10.1 of this Agreement.
9.2 Preservation and Access to Records After the Closing.
(a) From the Closing Date until seven (7) years after the Closing or
such longer period as required by law (the "Document Retention Period"),
Purchaser shall keep and preserve all medical records, patient records, medical
staff records and other books and records of the Subsidiaries and the Hospitals
existing as of the Closing relating to tax or other liabilities of Seller prior
to the Closing, but excluding any records which are among the Excluded Assets.
Purchaser will afford to the representatives of Seller, including its counsel
and accountants, full and complete access to, and copies of, such records with
respect to time periods on or prior to the Closing Date (including, without
limitation, access to records of patients treated at the Hospitals on or prior
to the Closing Date) during normal business hours after the Closing Date, to the
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extent reasonably needed by Seller (or its affiliates) for business purposes.
Purchaser acknowledges that, as a result of entering into this Agreement and
operating the Hospitals, it will gain access to patient records and other
information which are subject to rules and regulations concerning
confidentiality. Purchaser shall abide by any such rules and regulations
relating to the confidential information it acquires. Purchaser shall maintain
the patient and medical staff records at the Hospitals in accordance with
applicable law and the requirements of relevant insurance carriers. After the
expiration of the Document Retention Period, if Purchaser intends to destroy or
otherwise dispose of any of the documents described in this Section 9.2(a),
Purchaser shall provide written notice to Seller of Purchaser's intention no
later than thirty (30) calendar days prior to the date of such intended
destruction or disposal. Seller shall have the right, at its sole cost, to take
possession of such documents during such forty-five (45) calendar day period. If
Seller does not take possession of such documents during such forty-five (45)
calendar day period, Purchaser shall be free to destroy or otherwise dispose of
such documentation upon the expiration of such forty-five (45) day period.
(b) Purchaser shall give reasonable cooperation to Seller and its
affiliates and its insurance carriers in respect of the defense of claims by
third parties against Seller or any Subsidiary, in respect of events occurring
on or prior to the Closing with respect to the operation of the Hospitals. Such
cooperation shall include, without limitation, making the Hired Employees
available for interviews, depositions, hearings and trials. Such cooperation
shall also include making all of its employees available to assist in the
securing and giving of evidence and in obtaining the presence and cooperation of
witnesses (all of which shall be done without payment of any fees or expenses to
Purchaser or to such employees). In addition, Seller and its affiliates shall be
entitled to access any such records, but only for purposes of pending litigation
involving the persons to whom such records refer, as certified in writing by
counsel retained by Seller or any of its affiliates in connection with such
litigation. Such records shall be, at Purchaser's option either (i) copied by
Purchase for Seller at Seller's expense or (ii) removed from the premises by
Seller, copied by Seller and promptly returned to Purchaser unless the originals
of such records must be introduced into evidence in which case Seller shall
return them as soon as practicable.
(c) In connection with (i) the transition of the Hospitals pursuant to
the transaction contemplated by this Agreement, (ii) Seller's and the
Subsidiaries' rights to the Excluded Assets, (iii) Seller's and the
Subsidiaries' obligations under the Excluded Liabilities and (iv) Seller's
preparation of the Final Balance Sheet pursuant to Section 1.4, Purchaser shall
after the Closing Date give Seller, Seller's affiliates and their respective
representatives reasonable access during normal business hours to Purchaser's
books, accounts and records and all other relevant documents and information
with respect to the assets, liabilities and business of the Hospitals as
representatives of Seller and Seller's affiliates may from time to time
reasonably request, all in such manner as not to unreasonably interfere with the
operations of the Hospitals. Seller acknowledges that it shall coordinate its
activities contemplated by this Section 9.2(c) through Frank Coyle, or his
designee.
(d) Purchaser and its representatives shall be given access by Seller
during normal business hours to the extent reasonably needed by Purchaser for
business purposes to all documents, records, correspondence, work papers and
other documents retained by Seller or any Subsidiary pertaining to any of the
Assets or with respect to the operation of the Hospitals on or
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prior to the Closing Date, all in such manner as to not interfere unreasonably
with Seller's and each Subsidiary's business. Such documents and other materials
shall be, at Seller's option, either (i) copied by Seller for Purchaser at
Purchaser's expense, or (ii) removed by Purchaser from the premises, copied by
Purchaser and promptly returned to Seller.
ARTICLE 10
SURVIVAL AND INDEMNIFICATION
10.1 Survival. Except as expressly set forth in this Agreement to the
contrary, all representations and warranties of Purchaser and Seller,
respectively, contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by Purchaser
and Seller, respectively, and shall continue to be fully effective and
enforceable following the Closing Date for two years, and shall thereafter be of
no further force and effect. Notwithstanding the foregoing, the representations
and warranties set forth in Section 2.7(a) and (b) and Section 2.13 shall
continue to be fully effective and enforceable following the Closing Date for
the applicable statutes of limitations periods, plus 30 days, and the
indemnification provisions contained in Sections 10.2.1(ii), (iii), (iv), (v),
(vi), (vii) and (viii), and 10.3.1(iv) shall continue to be fully effective and
enforceable following the Closing Date until the expiration of any applicable
statute of limitations period, or, if none, without any time limitation;
provided, however, that if there is an outstanding notice of a claim at the end
of any such applicable period in compliance with the terms of Section 10.4, such
applicable period shall not end in respect of such claim until such claim is
resolved. All covenants of Purchaser and Seller herein shall survive Closing in
accordance with their terms. The parties acknowledge and agree that the
provisions of Section 10.2.1(ii), (iii), (iv), (v), (vi), (vii) and (viii) shall
remain in full force and effect notwithstanding the expiration of any survival
period referred to in this Section 10.1 and that Purchaser's right to bring any
claims for damages under such provisions shall be unimpaired by the expiration
of any such survival period (notwithstanding the fact that such claims could
have been brought under Section 10.2.1(i).
10.2 Indemnification of Purchaser by Seller.
10.2.1 Indemnification. Seller shall keep and save Purchaser, its
controlled affiliates and their respective directors, officers, employees,
agents and other representatives (the "Purchaser Group"), forever harmless from
and shall indemnify and defend the Purchaser Group against any and all
obligations, judgments, liabilities, penalties, violations, fees, fines, claims,
losses, costs, demands, damages, liens, encumbrances and expenses including
reasonable attorneys' fees (collectively, "Damages"), whether direct or
consequential and no matter how arising, to the extent, connected with or
arising or resulting from or proximately related to (i) any breach of any
representation or warranty of Seller under this Agreement, (ii) any breach or
default by Seller of any covenant or agreement of Seller under this Agreement,
(iii) the Excluded Liabilities, (iv) the Excluded Assets, (v) all Taxes relating
to Seller or any Subsidiary or (for any period ending on or prior to the Closing
Date) the Assets ("Seller Tax Claims"), (vi) any professional or general
liability claim arising out of the business operations of the Hospitals on or
prior to the Closing Date, (vii) any act, conduct or omission of Seller or any
Subsidiary, or any event or circumstance pertaining to Seller, any Subsidiary or
the Assets, that has accrued, arisen, occurred or come into existence at any
time on or prior to the Closing Date, including without
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limitation failure to comply with bulk sales laws and (viii) the sale of the
Beaumont Assets. No provision in this Agreement shall prevent Seller from
pursuing any of its legal rights or remedies that may be granted to Seller by
law against any person or legal entity other than any other member of the
Purchaser Group.
10.2.2 Indemnification Limitations. (a) Seller shall be under no
liability to indemnify the Purchaser Group under Section 10.2.1 and no claim
under Section 10.2.1 of this Agreement shall:
(i) be made unless notice thereof shall have been
given by or on behalf of Purchaser to Seller in
the manner provided in Section 10.4, unless
failure to provide such notice in a timely manner
does not materially impair Seller's ability to
defend its rights, mitigate damages, seek
indemnification from a third party or otherwise
protect its interests;
(ii) be made to the extent that such claim relates to a
liability arising out of or relating to any act,
omission, event or occurrence connected with:
(A) the use, ownership or operation of any
of the Hospitals, or
(B) the use, ownership or operation of any
of the Assets,
after the Closing Date; other than as specifically
included in the Excluded Liabilities;
(iii) be made to the extent that such claim (or the
basis therefor) is set forth in the Disclosure
Schedule unless Seller's indemnification of
Purchaser is based on a provision hereof other
than Section 10.2.1(i);
(iv) be made if and to the extent that proper provision
or reserve was made for the matter giving rise to
the claim in Net Working Capital;
(v) be made to the extent such claim relates to an
obligation or liability for which Purchaser has
agreed to indemnify Seller pursuant to Section
10.3; and
(vi) to the extent such claim is made pursuant to
Section 10.2.1(i), accrue to Purchaser unless and
only to the extent that (A) Damages in respect of
any single claim under Section 10.2.1(i) exceeds
Five Thousand Dollars ($5,000) (a "Relevant
Claim") and (B) the total actual liability of
Seller in respect of all Relevant Claims in the
aggregate exceeds Three Million Six Hundred
Twenty-Eight Dollars ($3,628,000) (the "Aggregate
Amount"), in which event Purchaser shall be
entitled to seek indemnification under Section
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10.2.1(i) for all Relevant Claims only in an
amount of Damages which exceed the Aggregate
Amount; provided, however, that with respect
to claims made pursuant to Section 10.2.1(i)
based on Damages incurred as a result of any
breach of Section 2.4(a), any single claim or
series of related claims for amounts in excess
of $100,000 shall be paid in full by Seller
without regard to the provisions of this
clause (vi).
(b) Notwithstanding any other provision of this Agreement to the
contrary, the maximum aggregate liability of Seller to Purchaser under this
Agreement shall not exceed the Purchase Price.
(c) If Purchaser is entitled to recover any sum (whether by payment,
discount, credit or otherwise) from any third party (other than an insurance
carrier) in respect of any matter for which a claim of indemnity could be made
against Seller hereunder, Purchaser either shall, at its option, use its
reasonable endeavors to recover such sum from such third party and any sum
recovered will reduce the amount of the claim or shall assign to Seller the
right of Purchaser to pursue such third party. If Seller pays to Purchaser an
amount in respect of a claim, and Purchaser subsequently recovers from a third
party a sum which is referable to that claim, Purchaser shall forthwith repay to
Seller so much of the amount paid by it as does not exceed the sum recovered
from the third party less all reasonable costs, charges and expenses incurred by
Purchaser in obtaining payment in respect of that claim and in recovering that
sum from the third party.
10.3 Indemnification of Seller by Purchaser.
10.3.1 Indemnification. Purchaser shall keep and save Seller and the
Subsidiaries, and their respective directors, officers, employees, agents and
other representatives, forever harmless from and shall indemnify and defend
Seller and the Subsidiaries against any and all Damages, whether direct or
consequential and no matter how arising, in any way related to, connected with
or arising or resulting from (i) any breach of any representation or warranty of
Purchaser under this Agreement, (ii) any breach or default by Purchaser under
any covenant or agreement of Purchaser under this Agreement, (iii) cost reports
(and all claims with respect thereto) relating to Purchaser with respect to
Medicare, Medicaid, CHAMPUS or Blue Cross programs or any other third-party
payor for all periods beginning after the Closing Date, (iv) the Assumed
Obligations, (v) any professional or general liability claim arising out of the
business operations of the Hospitals after the Closing Date, (vi) any Assumed
Obligations, (vii) liabilities to the Hired Employees arising out of actions of
Purchaser based wholly or in part upon the contents of the personnel records of
such employees, and (viii) involuntary termination of the Hired Employees after
the Transition Date, which termination would constitute a "mass layoff" or a
"plant closing" within the meaning of WARN. No provision in this Agreement shall
prevent Purchaser from pursuing any of its legal rights or remedies that may be
granted to Purchaser by law against any person or legal entity other than Seller
or any affiliate of Seller.
10.3.2 Indemnification Limitations. (a) Purchaser shall be under no
liability to indemnify Seller under 10.3.1 and no claim under Section 10.3.1 of
this Agreement shall:
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(i) be made unless notice thereof shall have been
given by or on behalf of Seller to Purchaser in
the manner provided in Section 10.4, unless
failure to provide such notice in a timely manner
does not materially impair Seller's ability to
defend its rights, mitigate damages, seek
indemnification from a third party or otherwise
protect its interests;
(ii) be made to the extent that any loss may be
recovered under a policy of insurance in force on
the date of loss; provided, however, that this
Section 10.3.2(ii) shall not apply to the extent
that coverage under the applicable policy of
insurance is denied by the applicable insurance
carrier;
(iii) be made to the extent that such claim relates to a
liability arising out of or relating to any act,
omission, event or occurrence connected with:
(A) the use, ownership or operation of any
of the Hospitals, or
(B) the use, operation or ownership of any
of the Assets,
on or prior to the Closing Date, other than as
specifically included in the Assumed Obligations;
and
(iv) be made to the extent such claim relates
to an obligation or liability for which
Seller has agreed to indemnify Purchaser
pursuant to Section 10.2.
(b) If Seller or any Subsidiary is entitled to recover any sum
(whether by payment, discount, credit or otherwise) from any third party in
respect of any matter for which a claim of indemnity could be made against
Purchaser hereunder, Seller shall, and shall cause the applicable Subsidiary to,
use its reasonable endeavors to recover such sum from such third party and any
sum recovered will reduce the amount of the claim. If Purchaser pays to Seller
an amount in respect of a claim, and Seller or any Subsidiary subsequently
recovers from a third party a sum which is referable to that claim, Seller shall
forthwith repay to Purchaser so much of the amount paid by it as does not exceed
the sum recovered from the third party less all reasonable costs, charges and
expenses incurred by Seller or any Subsidiary in obtaining payment in respect of
that claim and in recovering that sum from the third party.
10.4 Method of Asserting Claims. All claims for indemnification by any
person entitled to indemnification hereunder (the "Indemnified Party") under
this Article 10 will be asserted and resolved as follows:
(a) In the event any claim or demand, for which a party hereto (an
"Indemnifying Party") would be liable for the Damages to an Indemnified Party,
is asserted against or sought to be collected from such Indemnified Party by a
person other than Seller, Purchaser or their affiliates (a "Third Party Claim"),
the Indemnified Party shall deliver a notice of its claim (a "Claim Notice") to
the Indemnifying Party within thirty (30) calendar days after the Indemnified
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Party receives notice of such Third Party Claim; provided, however, that notice
shall be provided to the Indemnifying Party within fifteen (15) calendar days
after receipt of a complaint, petition or institution of other formal legal
action by the Indemnified Party. If the Indemnified Party fails to provide the
Claim Notice within such applicable time period after the Indemnified Party
receives notice of such Third Party Claim and thereby materially impairs the
Indemnifying Party's ability to protect its interests, the Indemnifying Party
will not be obligated to indemnify the Indemnified Party with respect to such
Third Party Claim. The Indemnifying Party will notify the Indemnified Party
within thirty (30) calendar days after receipt of the Claim Notice (the "Notice
Period") whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
10.4(a), then, subject to the immediately succeeding sentence, the Indemnifying
Party will have the right to defend, at its sole cost and expense, such Third
Party Claim by all appropriate proceedings, which proceedings will be prosecuted
by the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party. To the extent the Claim is solely for
money damages, the Indemnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof. Notwithstanding the
foregoing, the Indemnified Party may, at its sole cost and expense, file during
the Notice Period any motion, answer or other pleadings that the Indemnified
Party may deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and which is not prejudicial, in the reasonable judgment of
the Indemnifying Party, to the Indemnifying Party. Except as provided in Section
10.4(a)(ii) hereof, if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party will be relieved of its obligations hereunder with
respect to the portion of such Third Party Claim prejudiced by the Indemnified
Party's action. If requested by the Indemnifying Party, the Indemnified Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnified Party or any of its affiliates). The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
10.4(a)(i), and except as specifically provided in this Section 10.4(a)(i), the
Indemnified Party will bear its own costs and expenses with respect to such
participation.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party pursuant to this Section 10.4(a), or if the Indemnifying Party
gives such notice but fails to prosecute diligently 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 to defend, at
the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be promptly and reasonably
prosecuted by the Indemnified Party to a final conclusion or will be 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, however, that if requested by the Indemnified
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Party, the Indemnifying Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is contesting, or,
if appropriate and related to the Third Party Claim in question, in making any
counterclaim against the person asserting the Third Party Claim, or any
cross-complaint against any person (other than the Indemnifying Party or any of
its affiliates). Notwithstanding the foregoing provisions of this Section
10.4(a)(ii), if the Indemnifying Party has notified the Indemnified Party with
reasonable promptness that the Indemnifying Party disputes its liability to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved 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 10.4(a)(ii) 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 reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
Subject to the above terms of this Section 10.4(a)(ii), the Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 10.4(a)(ii), and the Indemnifying
Party will bear its own costs and expenses with respect to such participation.
The Indemnified Party shall give sufficient prior notice to the Indemnifying
Party of the initiation of any discussions relating to the settlement of a Third
Party Claim to allow the Indemnifying Party to participate therein.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that either (i) does not involve a Third Party
Claim being asserted against or sought to be collected from the Indemnified
Party or (ii) is a Seller Tax Claim, the Indemnified Party shall deliver an
Indemnity Notice (as hereinafter defined) to the Indemnifying Party. (The term
"Indemnity Notice" shall mean written notification of a claim for indemnity
under Article 10 hereof (which claim does not involve a Third Party Claim or is
a Seller Tax Claim) by an Indemnified Party to an Indemnifying Party pursuant to
this Section 10.4, specifying the nature of and specific basis for such claim
and the amount or the estimated amount of such claim.) The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been prejudiced thereby.
(c) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) calendar days following its receipt of a Claim Notice or an
Indemnity Notice that the Indemnifying Party disputes its liability to the
Indemnified Party hereunder, such claim specified by the Indemnified Party will
be conclusively deemed a liability of the Indemnifying Party hereunder and the
Indemnifying Party shall pay the amount of such liability to the Indemnified
Party on demand, or on such later date (i) in the case of a Third Party Claim,
as the Indemnified Party suffers the Damages in respect of such Third Party
Claim, (ii) in the case of an Indemnity Notice in which the amount of the claim
is estimated, when the amount of such claim becomes finally determined or (iii)
in the case of a Seller Tax Claim, within fifteen (15) calendar days following
final determination of the item giving rise to the claim for indemnity. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
as provided above, the Indemnifying Party and the Indemnified Party agree to
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations, such dispute will be resolved pursuant to Section
12.17 hereof.
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(d) The Indemnified Party agrees to give the Indemnifying Party
reasonable access to the books and records and employees of the Indemnified
Party in connection with the matters for which indemnification is sought
hereunder, to the extent the Indemnifying Party reasonably deems necessary in
connection with its rights and obligations hereunder.
(e) The Indemnified Party shall assist and cooperate with the
Indemnifying Party in the conduct of litigation, the making of settlements and
the enforcement of any right of contribution to which the Indemnified Party may
be entitled from any person or entity in connection with the subject matter of
any litigation subject to indemnification hereunder. In addition, the
Indemnified Party shall, upon request by the Indemnifying Party or counsel
selected by the Indemnifying Party (without payment of any fees or expenses to
the Indemnified Party or an employee thereof), attend hearings and trials,
assist in the securing and giving of evidence, assist in obtaining the presence
or cooperation of witnesses, and make available its own personnel; and shall do
whatever else is necessary and appropriate in connection with such litigation.
The Indemnified Party shall not make any demand upon the Indemnifying Party or
counsel for the Indemnifying Party in connection with any litigation subject to
indemnification hereunder, except a general demand for indemnification as
provided hereunder. If the Indemnified Party shall fail to perform such
obligations as Indemnified Party hereunder or to cooperate fully with the
Indemnifying Party in Indemnifying Party's defense of any suit or proceeding,
such cooperation to include, without limitation, attendance at all relevant
depositions and the provision of all documents (subject to appropriate
privileges) relevant to the defense of any claim, then, except where such
failure does not materially impair the Indemnifying Party's defense of such
claims after notice from the Indemnified Party and 15 days to cure, the
Indemnifying Party shall be released from all of its obligations under this
Agreement with respect to that suit or proceeding and any other claims which had
been raised in such suit or proceeding.
(f) Following indemnification as provided for hereunder, the
Indemnifying Party shall be subrogated to all rights of the Indemnified Party
with respect to all persons or entities relating to the matter for which
indemnification has been made.
10.5 Exclusive. Other than claims for fraud or equitable relief, any
dispute arising under this Agreement or in connection with or as a result of the
transactions contemplated by this Agreement or any Damages or injury alleged to
be suffered by either party as a result of the actions or failure to act by any
other party shall, unless otherwise specifically stated in this Agreement, be
governed solely and exclusively by the provisions of this Article 10.
10.6 Reduction of the Purchase Price. If Seller pays any sum to Purchaser
in respect of a claim under Article 10, the Purchase Price and total
consideration received by Seller for the sale of the Assets shall be deemed to
be reduced by the amount of such payment.
ARTICLE 11
TAX AND COST REPORT MATTERS
11.1 Tax Matters; Allocation of Purchase Price.
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(a) After the Closing, the parties shall cooperate fully with each
other and shall make available to each other, as reasonably requested, all
information, records or documents relating to tax liabilities or potential tax
liabilities attributable to Seller or any Subsidiary with respect to the
operation of the Hospitals for all periods on or prior to the Closing Date and
shall preserve all such information, records and documents at least until the
expiration of any applicable statute of limitations or extensions thereof. The
parties shall also make available to each other as reasonably required, and at
the reasonable cost of the requesting party (for out-of-pocket costs and
expenses only), personnel responsible for preparing or maintaining information,
records and documents in connection with tax matters.
(b) The Purchase Price shall be allocated among each of the Assets
(or, where more practical, each category of Assets) and among each of the
Hospitals in accordance with Schedule 11.1(b), which will be agreed upon within
five (5) business days prior to the Closing Date by Seller and Purchaser. Seller
and Purchaser hereby agree to allocate the Purchase Price in accordance with
Schedule 11.1(b), to be bound by such allocations for all purposes, to account
for and report the purchase and sale of the Assets contemplated hereby for all
purposes (including, without limitation, financial reporting, accounting,
Medicare reimbursement and federal and state tax purposes) in accordance with
such allocations, and not to take any position (whether in financial statements,
cost reports, tax returns, cost report or tax audits, or otherwise), which is
inconsistent with such allocations without the prior written consent of the
other party.
11.2 Cost Report Matters.
(a) Seller shall, and shall cause the Subsidiaries to, prepare and
timely file all cost reports relating to the periods ending on or prior to the
Closing Date or required as a result of the consummation of the transactions
described herein, including, without limitation, those relating to Medicare,
Medicaid, Blue Cross and other third party payors which settle on a cost report
basis (the "Subsidiaries' Cost Reports"). Purchaser shall forward to Seller any
and all correspondence relating to the Accounts Receivable, the Subsidiaries'
Cost Reports or rights to settlements and retroactive adjustments on the
Subsidiaries' Cost Reports ("Agency Settlements") within five (5) business days
of receipt by Purchaser. Purchaser shall not reply to any such correspondence
without Seller's written approval. Purchaser shall remit any receipts relating
to the Accounts Receivable, the Subsidiaries' Cost Reports or the Agency
Settlements within five (5) business days after receipt by Purchaser (except
those receipts to be retained by Purchaser pursuant to Section 11.3) and will
forward any demand for payments within five (5) business days. Purchaser (and
its respective successors in interest and assigns and its respective affiliates)
shall have neither the right to offset amounts payable to Seller under this
Section 11.2 against, nor the right to contest its obligation to transfer,
assign and convey to Seller because of, outstanding claims, liabilities or
obligations asserted by Purchaser against Seller including but not limited to
pursuant to the post-closing Purchase Price adjustment of Section 1.4 and the
indemnification provisions of Section 10.2. Seller shall retain all rights to
the Subsidiaries' Cost Reports and to the Accounts Receivable including, without
limitation, any payables resulting therefrom or receivables relating thereto and
the right to appeal any Medicare determinations relating to the Agency
Settlements and the Subsidiaries' Cost Reports. Seller will furnish copies of
the Receivables Records to Purchaser upon request and allow Purchaser and its
representatives reasonable access to such documents.
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(b) Upon reasonable notice and during normal business office hours,
Purchaser will cooperate with Seller and the Subsidiaries in regard to the
preparation, filing, handling, and appeals of the Subsidiaries' Cost Reports.
Upon reasonable notice and during normal business office hours, Purchaser will
cooperate with Seller and the Subsidiaries in connection with any cost report
disputes and/or other claim adjudication matters relative to governmental
program reimbursement. Such cooperation shall include the providing of
statistics and obtaining files at the Hospitals and the coordination with Seller
and the Subsidiaries pursuant to adequate notice of Medicare and Medicaid exit
conferences or meetings. Purchaser will, upon reasonable notice, during normal
business office hours and at the sole cost and expense of Seller, and subject to
applicable law regarding confidentiality of patient records, provide Seller and
the Subsidiaries reasonable access to all records of the Hospitals and will
allow Seller, the Subsidiaries and their respective representatives to copy any
documents relating to the Subsidiaries' Cost Reports and appeals thereof.
11.3 Transition Services. To compensate Seller and the Subsidiaries for
services rendered and medicine, drugs, and supplies provided on or before the
Closing Date at any of the Hospitals (the "Transition Services") with respect to
patients whose medical care is paid for, in whole or in part, by Medicare,
Medicaid, CHAMPUS, Blue Cross or any other third party payor who pays on a DRG,
case rate or other similar arrangement, and who are admitted to any of the
Hospitals on or before the Closing Date but who are not discharged until after
the Closing Date ("Governmental Program Transition Patients"), the parties shall
take the following action:
(a) As soon as practicable after the Closing Date, Seller shall
deliver to Purchaser a statement itemizing the inpatient hospital Transition
Services provided by the Subsidiaries with respect to the operation of the
Hospitals on or prior to the Closing Date to Governmental Program Transition
Patients. For the Transition Services, Purchaser shall pay to Seller an amount
equal to the DRG and outlier payments, the case rate payment or other similar
payment received by Purchaser on behalf of a Governmental Program Transition
Patient, multiplied by a fraction (the "Fraction"), the numerator of which shall
be the total charges for the Transition Services provided to such Governmental
Program Transition Patient by Seller and the Subsidiaries and the denominator of
which shall be the sum of the total charges for the Transition Services provided
to such Governmental Program Transition Patient by Seller and the Subsidiaries
plus the total charges for the Transition Services provided to such Governmental
Program Transition Patient by Purchaser after the Closing Date. The parties
shall reconcile the payments within ninety (90) calendar days after both the
tentative and final Medicare cost report settlement and any other payor
settlement affecting the Governmental Program Transition Patients (the
"Reconciliation").
(b) Subject to Section 11.3(d), payments made pursuant to Section
11.3(a) shall be made to Seller monthly, on the twenty-fifth (25th) day of each
month, for payments received by Purchaser during the previous month, accompanied
by copies of remittances and other supporting documentation as is reasonably
requested by Seller. Any other payments required to be made by Seller to
Purchaser, or by Purchaser to Seller, as the case may be, as a result of (i) the
Reconciliation, (ii) a notice of program reimbursement with respect to the
operations of any Hospital or (iii) other notice from a governmental agency or
third party payor with respect to Transition Services shall be made within
thirty (30) calendar days after the Reconciliation or the receipt of any such
notice, as applicable. In the event that Purchaser and Seller are unable to
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agree on the amount to be paid to Seller or Purchaser, as the case may be, under
this Section 11.3, then such amount shall be determined by the Independent
Auditor at their joint expense.
(c) The parties acknowledge that all charges for outpatient and other
cost-based services shall be made (i) by Seller and the Subsidiaries for all
periods on or prior to the Closing Date and (ii) by Purchaser for all periods
after the Closing Date.
(d) Notwithstanding the first sentence of Section 11.3(b), Purchaser
shall make a distribution to Seller within three (3) business days if at any
time during the applicable calendar month the funds to be distributed to Seller
pursuant to Section 11.3(a) exceed One Hundred Fifty Thousand Dollars
($150,000). The amount of such distribution shall be all amounts payable to
Seller pursuant to Section 11.3(a) which have not been previously distributed to
Seller. All such distributions shall be made by wire transfer of immediately
available funds to Seller to the account(s) specified by Seller to Purchaser in
writing from time to time.
(e) Purchaser (and its respective successors in interest and assigns
and its respective affiliates) shall have neither the right to offset amounts
payable to Seller under this Section 11.3 against, nor the right to contest its
obligation to transfer, assign and convey to Seller because of, outstanding
claims, liabilities or obligations asserted by Purchaser against Seller
including but not limited to pursuant to the post-closing Purchase Price
adjustment of Section 1.4 and the indemnification provisions of Section 10.2.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Further Assurances and Cooperation. Seller shall, and shall cause the
Subsidiaries to, execute, acknowledge and deliver to Purchaser any and all other
assignments, consents, approvals, conveyances, assurances, documents and
instruments reasonably requested by Purchaser at any time and shall take any and
all other actions reasonably requested by Purchaser at any time for the purpose
of more effectively assigning, transferring, granting, conveying and confirming
to Purchaser, the Assets. After consummation of the transaction contemplated
herein, the parties agree to cooperate with each other in regards to all matters
arising from the transition of ownership of the Assets and the business of the
Hospitals from Seller and the Subsidiaries to Purchaser.
12.2 Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto;
provided, however, that no party hereto may assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of the
other party, except that Purchaser may assign any of its rights or delegate any
of its duties under this Agreement to any controlled affiliate of Purchaser upon
Seller's receipt of Purchaser's guaranty of such controlled affiliate's
obligations, in a form reasonably acceptable to Seller, and Purchaser may assign
its rights (but not its obligations) under this Agreement to any of its
financing sources.
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12.3 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York as applied to
contracts made and performed within the State of New York.
12.4 Amendments. This Agreement may not be amended other than by written
instrument signed by the parties hereto.
12.5 Exhibits, Schedules and Disclosure Schedule. The Disclosure Schedule
and all exhibits and schedules referred to in this Agreement shall be attached
hereto and are incorporated by reference herein. Any matter disclosed in this
Agreement or in the Disclosure Schedule with reference to any Section of this
Agreement shall be deemed a disclosure in respect of all sections as to which
the relevance of such disclosure is reasonably apparent.
12.6 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 telegraphic or other electronic means (including
facsimile) or overnight courier, or five (5) calendar days after being deposited
in the United States mail, with postage prepaid thereon, certified or registered
mail, return receipt requested, addressed as follows:
If to Seller: Tenet Healthcare Corporation
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: David R. Mayeux
Facsimile No.: (972) 789-2385
With a copy to: Tenet Healthcare Corporation
c/o Tenet HealthSystem
14001 Dallas Parkway
Dallas, Texas 75240
Attention: William A. Barrett, Esq.
Facsimile No.: (972) 789-6164
With a copy to: McDermott, Will & Emery
2049 Century Park East
Suite 3400
Los Angeles, California 90067
Attention: Ira J. Rappeport, Esq.
Facsimile No.: (310) 277-4730
If to Purchaser: JLL Hospital, LLC
Attn: Jeffrey C. Lightcap
450 Lexington Ave.
Suite 3350
New York, NY 10017
Facsimile No.: (212) 286-8626
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With copies to: Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
Attention: Robert Pincus
Facsimile No.: (302) 651-3001
Iasis Healthcare
104 Woodmont, Suite 101
Nashville, Tennessee 37205
Attention: Frank A. Coyle
(615) 846-3006
or at such other address as one party may designate by notice hereunder to the
other parties.
12.7 Headings. The section and other headings contained in this Agreement
and in the Disclosure Schedule, exhibits and schedules to this Agreement are
included for the purpose of convenient reference only and shall not restrict,
amplify, modify or otherwise affect in any way the meaning or interpretation of
this Agreement or the Disclosure Schedule, exhibits and schedules hereto.
12.8 Confidentiality and Publicity. The parties hereto shall hold in
confidence the information contained in this Agreement, and all information
related to this Agreement, which is not otherwise known to the public, shall be
held by each party hereto as confidential and proprietary information and shall
not be disclosed without the prior written consent of the other party.
Accordingly, Purchaser and Seller shall not discuss with, or provide nonpublic
information to, any third party (except for such party's attorneys, accountants,
directors, officers and employees, the directors, officers and employees of any
affiliate of any party hereto, and other consultants and professional advisors)
concerning this transaction prior to the Closing, except: (i) as required in
governmental filings or judicial, administrative or arbitration proceedings,
including without limitation the filings to be made by the parties with respect
to the HSR Act; (ii) pursuant to public announcements made with the prior
written approval of Seller and Purchaser; or (iii) as required in connection
with the Financing by Purchaser. The rights of Seller under this Section 12.8
shall be in addition and not in substitution for the rights of Seller under the
Confidentiality Agreement, which shall survive Closing.
12.9 Fair Meaning. This Agreement shall be construed according to its fair
meaning and as if prepared by all parties hereto.
12.10 Gender and Number; Construction. All references to the neuter gender
shall include the feminine or masculine gender and vice versa, where applicable,
and all references to the singular shall include the plural and vice versa,
where applicable. Unless otherwise expressly provided, the word "including"
followed by a listing does not limit the preceding words or terms and shall mean
"including, without limitation."
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12.11 Third Party Beneficiary. None of the provisions herein contained are
intended by the parties, nor shall they be deemed, to confer any benefit on any
person not a party to this Agreement.
12.12 Expenses and Attorneys' Fees. Except as otherwise provided in this
Agreement, each party shall bear and pay its own costs and expenses relating to
the preparation of this Agreement and to the transactions contemplated by, or
the performance of or compliance with any condition or covenant set forth in,
this Agreement, including without limitation, the disbursements and fees of
their respective attorneys, accountants, advisors, agents and other
representatives, incidental to the preparation and carrying out of this
Agreement, whether or not the transactions contemplated hereby are consummated.
The parties expressly agree that each of Seller and Purchaser shall bear 50
percent (50%) of the aggregate amount of the following categories of expenses:
(a) expenses relating to the preparation and delivery by Seller of the audited
combined financial statements of the Hospitals contemplated by Section 4.8(b) of
this Agreement (including the opinion of KPMG Peat Marwick with respect
thereto); (b) all costs of the Title Commitment and the Title Policy; (c) all
documentary transfer, sales and similar taxes and recording charges in
connection with the conveyance of the Assets to Purchaser; (d) all costs of the
Surveys; (e) all costs of the Environmental Survey; (f) the cost of an
environmental compliance audit to be conducted by Purchaser at the Hospitals;
and (g) all filing fees imposed in connection with Seller's and Purchaser's
filings under the HSR Act. As and when either party receives an invoice or other
evidence of incurrence or payment with respect to any expense described in the
foregoing categories, such party shall forward promptly to the other party a
copy of such invoice or other evidence. The parties shall each calculate the net
balance owed from one party to the other under this Section 12.12, exchange such
calculations and agree on such amount and to whom it is owed within fifteen (15)
business days of the first to occur of (i) the Closing Date or (ii) the
termination of this Agreement. The party owing such net balance shall deliver to
the party to whom the balance is owed the payor's check in payment of such net
balance within twenty-five (25) business days following the first to occur of
(i) the Closing Date or (ii) the termination of this Agreement. The covenants
set forth in the preceding sentence shall be binding upon the parties
notwithstanding failure to consummate the transaction contemplated hereby;
provided, however, that Seller agrees to reimburse Purchaser for any amounts
payable by it under this Section 12.12 to the extent attributable to a Hospital
or Hospitals sold by Seller within the twelve (12) months immediately following
the termination of this Agreement. Notwithstanding the foregoing, Seller shall
bear 100 percent (100%) of the amount of said expenses in excess of an aggregate
of Three Million Dollars ($3,000,000). If any action is brought by any party to
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover its court costs, arbitration expenses and reasonable attorneys' fees.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement, binding on all of the
parties hereto.
12.14 Entire Agreement. This Agreement, the Disclosure Schedule, the
exhibits and schedules, and the documents referred to herein contain the entire
understanding between the parties with respect to the transactions contemplated
hereby and supersede all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, between the parties on the
subject matter hereof, and shall be of no further force or effect.
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12.15 No Waiver. Any term, covenant or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof but
only by a written notice signed by the party expressly waiving such term or
condition. The subsequent acceptance of performance hereunder by a party shall
not be deemed to be a waiver of any preceding breach by the other party of any
term, covenant or condition of this Agreement, other than the failure of such
party to perform the particular duties so accepted, regardless of such party's
knowledge of such preceding breach at the time of acceptance of such
performance. The waiver of any term, covenant or condition shall not be
construed as a waiver of any other term, covenant or condition of this
Agreement.
12.16 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstance shall be held
to be invalid or unenforceable to any extent in any jurisdiction, then the
remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to persons or circumstances
other than those as to whom or which it is held to be invalid or unenforceable,
shall not be affected thereby, and each term, provision, condition and covenant
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
12.17 Arbitration. Any disagreement, dispute or claim arising out of or
relating to this Agreement which cannot be settled by the parties hereto shall
be settled by arbitration in accordance with the following provisions:
12.17.1 Forum. Forum for arbitration shall be Manhattan, New York.
12.17.2 Law. Governing law shall be the law of the State of New York.
12.17.3 Selection. The number of arbitrators shall be three (3),
unless the parties hereto are able to agree on a single arbitrator. In the
absence of such agreement within ten (10) business days after the initiation of
an arbitration proceeding, Seller shall select one (1) arbitrator and Purchaser
shall select one (1) arbitrator, and those two arbitrators shall then select,
within ten (10) business days, a third arbitrator. If those two (2) arbitrators
are unable to select a third arbitrator within such ten (10) business day
period, a third arbitrator shall be appointed by the commercial panel of the
American Arbitration Association. The decision in writing of at least two (2) of
the three (3) arbitrators shall be final and binding upon the parties.
12.17.4 Administration. Arbitration shall be administered by the
American Arbitration Association.
12.17.5 Rules. Rules of arbitration shall be the Commercial
Arbitration Rules of the American Arbitration Association, as modified by any
other instructions that the parties hereto may agree upon at the time, except
that each party hereto shall have the right to conduct discovery in any manner
and to the extent authorized by the Federal Rules of Civil Procedure as
interpreted by the federal courts in New York. The arbitrators shall not modify
the terms of this Agreement.
12.17.6 Award. The award rendered by arbitration shall be final and
binding upon the parties hereto, and judgment upon the award may be entered in
any court of competent jurisdiction in the United States.
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12.18 Time is of the Essence. Time is of the essence for all dates and time
periods set forth in this Agreement and each performance called for in this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been entered into as of the day
and year first above written.
PURCHASER:
JLL Hospital, LLC, a Delaware limited
liability company
By: /s/ J.C. Lightcap
-----------------------------------
Name: Jeffrey C. Lightcap
---------------------------------
Its: Authorized Person
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SELLER:
TENET HEALTHCARE CORPORATION, a
Nevada corporation
By: /s/ David R. Mayeux
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Name: David R. Mayeux
---------------------------------
Its: Executive Vice President
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