Exhibit 10.1
FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
PREAMBLE
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This Tax Sharing and Indemnification Agreement (this "Agreement"),
dated as of _____________, 1999, is made and entered into by and among
Columbia/HCA Healthcare Corporation, a Delaware corporation ("Columbia/HCA"),
LifePoint Hospitals, Inc., a Delaware corporation ("LifePoint"), and Triad
Hospitals, Inc., a Delaware corporation ("Triad") (collectively, the "Parties").
RECITALS
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WHEREAS, the Parties have entered into the Distribution Agreement
dated as of _____________, 1999 (the "Distribution Agreement"), pursuant to
which Columbia/HCA will distribute to its stockholders all of the issued and
outstanding common stock of LifePoint and Triad (the "Public Distribution");
WHEREAS, in order to consummate the Public Distribution, it is
necessary and desirable for HealthTrust, Inc. -- The Hospital Company, a
Delaware corporation that is wholly-owned by Columbia/HCA and that is currently
the direct parent of LifePoint and Triad, to distribute to Columbia/HCA all of
the issued and outstanding common stock of LifePoint and Triad (the "Internal
Distribution") (the Public Distribution and the Internal Distribution together,
the "Distributions");
WHEREAS, the Distributions are intended to qualify as tax-free
distributions under section 355 of the Code (as defined below);
WHEREAS, in connection with the Distributions, the Parties and certain
of their Affiliates (as defined below) have engaged and will engage in certain
internal restructuring transactions (the "Internal Restructuring") (the
Distributions and the Internal Restructuring, collectively, the
"Reorganization");
WHEREAS, Columbia/HCA has received an advance letter ruling from the
Internal Revenue Service setting forth certain United States federal income tax
consequences of the Reorganization;
WHEREAS, the Parties wish to (a) provide for the payment of tax
liabilities and entitlement to refunds thereof, (b) allocate responsibility for
and cooperation in the filing of tax returns and provide for certain other
matters relating to taxes, and (c) set forth certain covenants and indemnities
relating to the preservation of the tax treatment of the Reorganization set
forth in the Letter Ruling (as defined below);
NOW, THEREFORE, in consideration of their mutual promises, the Parties
hereby agree as follows:
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ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.01. Certain Definitions. As used in this Agreement, the
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following terms shall have the following meanings:
"Affiliate" means, with respect to a specified Person, any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with such Person (including any
Person that is a member of the same consolidated group as the specified Person
for Tax purposes).
"Agreement" has the meaning set forth in the Preamble hereof.
"Ancillary Agreements" has the meaning set forth in the Distribution
Agreement.
"Benefited Party" has the meaning set forth in Section 3.04 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable period in question.
"Columbia/HCA" has the meaning set forth in the Preamble of this
Agreement.
"Columbia/HCA Approval" means the advance, written consent of
Columbia/HCA, which consent may be granted or withheld in its sole and absolute
discretion.
"Columbia/HCA Group" means, with respect to any taxable period or
portion thereof, Columbia/HCA and its Affiliates.
"Columbia/HCA Return" has the meaning set forth in Section 2.02(a) of
this Agreement.
"Distribution Agreement" has the meaning set forth in the Recitals of
this Agreement.
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"Distribution Date" means the date as of which the Public Distribution
will be effected, as determined by the Board of Directors of Columbia/HCA.
"Distributions" has the meaning set forth in the Recitals of this
Agreement.
"Federal Income Tax" means any Tax imposed under Subtitle A of the
Code (including the Taxes imposed by sections 11, 55, 59A, 1201(a) and 1502 of
the Code and the Treasury Regulations promulgated thereunder), and any other
income-based United States federal Tax that is hereinafter imposed, plus any
interest, additions to tax or penalties applicable or related thereto.
"Final Determination" means the final resolution of liability for any
Tax for a taxable period (i) by Internal Revenue Service Form 870 or 870-AD (or
any successor forms thereto), on the date of acceptance by or on behalf of the
IRS, or by a comparable form under the laws of other jurisdictions, on the date
of acceptance by or on behalf of the Taxing Authority of such jurisdiction,
except that a Form 870 or 870-AD or comparable form that reserves (whether by
its terms or by operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the IRS or other Taxing Authority to assert a further
deficiency shall not constitute a Final Determination; (ii) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (iii) by a closing agreement or accepted offer in
compromise under section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (iv) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the expiration of all
periods during which such refund may be recovered (including by way of offset)
by the jurisdiction imposing the Tax; or (v) by any other final disposition,
including by reason of the expiration of the applicable statute of limitations.
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"Gross Assets" means, when used with respect to a specified Person,
the fair market value of such Person's assets unencumbered by any liabilities.
"Group" means any of the Columbia/HCA Group, the LifePoint Group or
the Triad Group, as the context may require.
"Indemnified Parties" has the meaning set forth in Section 5.02 of
this Agreement.
"Indemnifying Parties" has the meaning set forth in Section 5.02 of
this Agreement.
"Internal Distribution" has the meaning set forth in the Recitals of
this Agreement.
"Internal Restructuring" has the meaning set forth in the Recitals of
this Agreement.
"IRS" means the Internal Revenue Service.
"Letter Ruling" means the advance letter ruling issued by the IRS to
Columbia/HCA setting forth certain Federal Income Tax consequences of the
Reorganization, and any supplemental or additional letter rulings that may be
issued by the IRS to any of the Parties or their Affiliates with respect to the
Reorganization or any part thereof, provided that any such supplemental or
additional letter ruling is issued in response to a ruling request by
Columbia/HCA or a ruling request that received Columbia/HCA Approval.
"Liability Issue" has the meaning set forth in Section 6.01(b) of this
Agreement.
"LifePoint" has the meaning set forth in the Preamble of this
Agreement.
"LifePoint ESOP" means the employee stock ownership plan to be adopted
by LifePoint, as described in the Ruling Request.
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"LifePoint Group" means, with respect to any taxable period or portion
thereof, LifePoint and its Affiliates.
"LifePoint Return" has the meaning set forth in Section 2.02(b) of
this Agreement.
"Non-Qualified Vested Options" means all options to acquire stock of
Columbia/HCA, LifePoint or Triad that are vested at the time of the
Distributions.
"Notifying Party" has the meaning set forth in Section 6.01(b) of this
Agreement.
"Opinion of Counsel" means an opinion of independent tax counsel of
recognized national standing and experienced in the issues to be addressed and
otherwise acceptable to Columbia/HCA, in its sole and absolute discretion, that
is in form and substance satisfactory to Columbia/HCA, in its sole and absolute
discretion.
"Original Ruling Request" means the ruling request submissions
(together with all exhibits and appendices thereto) that were submitted to the
IRS on behalf of Columbia/HCA, dated August 14, 1998, October 16, 1998, November
20, 1998, December 23, 1998, January 13, 1999, February 8, 1999, February 10,
1999, March 2, 1999, March 16, 1999, March 23, 1999, March 26, 1999, March 29,
1999 and March 30, 1999.
"Parties" has the meaning set forth in the Preamble of this Agreement.
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company or other
entity (regardless of whether such entity is disregarded as an entity for
Federal Income Tax purposes).
"Post-Distribution Period" means a taxable period (or portion of a
taxable period) that begins after the Distribution Date.
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"Pre-Distribution Period" means a taxable period (or a portion of a
taxable period) that ends on or before the Distribution Date.
"Public Distribution" has the meaning set forth in the Recitals of
this Agreement.
"Reorganization" has the meaning set forth in the Recitals of this
Agreement.
"Representative" means with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys, and representatives.
"Restricted Period" means the three year period following the
Distribution Date.
"Ruling Request" means the Original Ruling Request and any
supplemental letter ruling requests submitted to the IRS, pursuant to which the
Letter Ruling is issued.
"Spinco" means LifePoint or Triad, as the context may require.
"Spinco Group" means the LifePoint Group or the Triad Group, as the
context may require.
"Straddle Period" means a taxable period that begins on or before and
ends after the Distribution Date.
"Subsequent Benefit Decrease Event" has the meaning set forth in
Section 3.07 of this Agreement.
"Subsequent Benefit Increase Event" has the meaning set forth in
Section 3.07 of this Agreement.
"Tainting Act" has the meaning set forth in Section 5.02 of this
Agreement.
"Tax" means any form of taxation imposed by a national, municipal,
governmental, administrative, judicial, state, federal, foreign, or other body
(a "Taxing Authority"), regardless of when such form of taxation was or is
created or imposed, including
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any net income, alternative or add-on minimum, gross income, sales, use, ad
valorem, escheat, gross receipts, value added, franchise, profits, license,
transfer, recording, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profit, custom duty, or other tax,
government fee or other like assessment or charge of any kind whatsoever,
together with any related interest, penalties, or other additions to tax, or
additional amount imposed by any such Taxing Authority.
"Tax Benefit" means an amount by which the Tax liability of an
Indemnified Party is reduced (including, without limitation, by deduction,
reduction of income by virtue of increased tax basis or otherwise, or
entitlement to a refund, credit or otherwise).
"Tax Controversy" has the meaning set forth in Section 6.02(a) of this
Agreement.
"Tax Detriment" means an amount by which the Tax liability of an
Indemnified Party is increased (including, without limitation, decreases in tax
refunds and credits).
"Tax Item" means any item of income, gain, loss, deduction, credit,
recapture of credit, or any other item that may have the effect of increasing or
decreasing Taxes paid or payable.
"Tax Practices" has the meaning set forth in Section 2.01 of this
Agreement.
"Tax Return" means any return, filing, questionnaire or other document
required to be filed or that may be filed (including requests for extensions of
time, filings made with estimated Tax payments, claims for refund, elections or
amended returns) for any taxable period with any Taxing Authority in connection
with any Tax (whether or not a payment is required to be made with respect to
such return, filing, questionnaire or other document).
"Taxing Authority" has the meaning set forth in the definition of the
term "Tax" in this Section 1.01.
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"Transitional Services Agreements" means the Transitional Services
Agreements entered into by and between Columbia/HCA and each of LifePoint and
Triad dated as of __________, 1999.
"Treasury Regulations" means the regulations promulgated under the
Code, and any successor provisions thereof, as in effect for the relevant
taxable period.
"Triad" has the meaning set forth in the Preamble of this Agreement.
"Triad ESOP" means the employee stock ownership plan to be adopted by
Triad, as described in the Ruling Request.
"Triad Group" means, with respect to any taxable period or portion
thereof, Triad and its Affiliates.
"Triad Return" has the meaning set forth in Section 2.02(c) of this
Agreement.
Section 1.02. Interpretation and Construction of this Agreement. The
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definitions in Section 1.01, above, shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine or neuter form. The
words "include," "includes" and "including" when used in this Agreement shall be
deemed to be followed by the phrase "without limitation." The headings
contained in this Agreement are inserted for convenience only and shall not
constitute a part hereof. This Agreement shall be construed in accordance with
its fair meaning and shall not be construed strictly against the drafter.
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ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
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Section 2.01. Manner of Filing. All Tax Returns filed by any Party
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(including any Affiliate of any Party) after the date of this Agreement shall be
prepared on a basis that is consistent with the Letter Ruling and shall be filed
on a timely basis (including extensions) by the Party responsible for such
filing under this Agreement. All Tax Returns filed after the date of this
Agreement by the Spincos and their Affiliates shall (except to the extent of a
Spinco's receipt of Columbia/HCA Approval) be prepared in a manner that is
consistent with past practices, elections, accounting methods, conventions, and
principles of taxation (collectively, "Tax Practices") used by Columbia/HCA and
its Affiliates for the most recent taxable period ending on or before December
31, 1999 for which Tax Returns involving similar items have been filed by the
applicable member of the Columbia/HCA Group.
Section 2.02. Responsibility for Filing. (a) Columbia/HCA shall have the
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sole and exclusive responsibility for the preparation and filing of (i) all Tax
Returns for Pre-Distribution Periods and, except as provided to the contrary in
Section 2.02(b) or (c), below, Straddle Periods, and (ii) all Tax Returns for
(or that relate to the businesses, assets and activities of) the Columbia/HCA
Group for Post-Distribution Periods (the Tax Returns described in (i) and (ii),
collectively, the "Columbia/HCA Returns").
(b) LifePoint shall have the sole and exclusive responsibility for the
preparation and filing of all Tax Returns for (or that relate to the businesses,
assets or activities of) the LifePoint Group (i) for Post-Distribution Periods
and (ii) for any Straddle Period, provided that such Tax Return does not relate
to or include any business, asset or activity of any member of the Columbia/HCA
Group or Triad Group, and provided, further, that
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Columbia/HCA shall be permitted to review (at least 30 days prior to the due
date thereof (including extensions)) and approve prior to filing all such
Straddle Period Tax Returns (the Tax Returns described in (i) and (ii),
collectively, the "LifePoint Returns").
(c) Triad shall have the sole and exclusive responsibility for the
preparation and filing of all Tax Returns for (or that relate to the businesses,
assets or activities of) the Triad Group (i) for Post-Distribution Periods and
(ii) for any Straddle Period, provided that such Tax Return does not relate to
or include any business, asset or activity of any member of the Columbia/HCA
Group or LifePoint Group, and provided, further, that Columbia/HCA shall be
permitted to review (at least 30 days prior to the due date thereof (including
extensions)) and approve prior to filing all such Straddle Period Tax Returns
(the Tax Returns described in (i) and (ii), collectively, the "Triad Returns").
(d) The preparation and/or filing by Columbia/HCA or one of its Affiliates
of any LifePoint Return or Triad Return under the Transitional Services
Agreements or any other Ancillary Agreement shall not cause such Tax Return to
be characterized as a Columbia/HCA Return for purposes of this Agreement, and
shall not otherwise affect the rights, responsibilities, obligations or
liabilities of the Parties under this Agreement.
Section 2.03. Matters Pertaining to Taxes for Pre-Distribution Periods.
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Unless requested by Columbia/HCA (in which event each Spinco shall comply with
such request), neither the Spincos nor any of their Affiliates shall file or
permit to be filed any amended Tax Return with respect to any Tax for any Pre-
Distribution Period or Straddle Period or any portion thereof without obtaining
Columbia/HCA Approval and neither the Spincos nor any of their Affiliates shall,
with respect to any Tax relating to (i) any Pre-Distribution Period or Straddle
Period or any portion thereof or (ii) any matter that is the subject of this
Agreement, the
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Distribution Agreement or any of the Ancillary Agreements, take any position,
initiate (or permit to be initiated) any claim or otherwise take (or fail to
take) any action that might adversely affect Columbia/HCA or its Affiliates with
respect to Taxes. Without limiting the generality of the foregoing, neither of
the Spincos, nor any of their Affiliates, shall (unless requested by
Columbia/HCA, in which event each Spinco shall comply with such request) take
any action that affects the assessment, collection or refund (including the
filing of an amended Tax Return or the application of any overpayment of sales
or use tax for a Pre-Distribution Period to reduce the amount of sales or use
tax owed by a Spinco or any of its Affiliates for any Post-Distribution Period)
of any sales or use tax for Pre-Distribution Periods.
Section 2.04. Treatment of Payments. The Parties agree that any payments
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made among the Parties pursuant to this Agreement, the Distribution Agreement or
the Ancillary Agreements with respect to periods prior to the Public
Distribution, or as the result of an event or action (or failure to act)
occurring prior to the Public Distribution, shall be treated for all Tax and
financial accounting purposes as nontaxable payments (dividends or capital
contributions, as the case may be) made immediately prior to the Public
Distribution, unless, and then only to the extent, otherwise required by a Final
Determination.
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ARTICLE III
ALLOCATION AND PAYMENT OF TAXES
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Section 3.01. In General. The Parties agree to allocate their respective
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shares of Taxes as provided in this Agreement. Payments to Taxing Authorities
and among the Parties, as the case may be, shall be made in accordance with such
Tax allocations and/or as provided in this Agreement.
Section 3.02. Allocation and Payment of Taxes, Generally. Except as
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otherwise provided in this Agreement:
(a) Columbia/HCA shall pay or cause to be paid to the relevant Taxing
Authority, shall indemnify and hold the LifePoint Group and the Triad Group
harmless against, and shall be entitled to all refunds of (i) all Taxes for Pre-
Distribution Periods (including the portion of Taxes that are allocated to Pre-
Distribution Periods pursuant to Section 3.03, below) and (ii) all Taxes for
Post-Distribution Periods (including the portion of Taxes that are allocated to
Post-Distribution Periods pursuant to Section 3.03, below) that are attributable
to the Columbia/HCA Group; provided, however, that LifePoint shall pay or cause
to be paid to the relevant Taxing Authority any Taxes with respect to LifePoint
Returns for Straddle Periods, and Triad shall pay or cause to be paid to the
relevant Taxing Authority any Taxes with respect to Triad Returns for Straddle
Periods;
(b) LifePoint shall pay or cause to be paid to the relevant Taxing
Authority, shall indemnify and hold the Columbia/HCA Group and the Triad Group
harmless against, and shall be entitled to all refunds of all Taxes for Post-
Distribution Periods (including the portion of
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Taxes that are allocated to Post-Distribution Periods pursuant to Section 3.03,
below) that are attributable to the LifePoint Group; and
(c) Triad shall pay or cause to be paid to the relevant Taxing
Authority, shall indemnify and hold the Columbia/HCA Group and the LifePoint
Group harmless against, and shall be entitled to all refunds of all Taxes for
Post-Distribution Periods (including the portion of Taxes that are allocated to
Post-Distribution Periods pursuant to Section 3.03, below) that are attributable
to the Triad Group.
Section 3.03. Allocation and Payment of Taxes. (a) For purposes of this
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Agreement, periodic Taxes that are not based on income or receipts (e.g.,
property taxes) shall be allocated between a Pre-Distribution Period and a Post-
Distribution Period based upon the ratio of (x) the number of days in the
taxable period (i) before and including the Distribution Date (with respect to
the Pre-Distribution Period) or (ii) following the Distribution Date (with
respect to the Post-Distribution Period) and (y) the number of days in the
entire taxable period. With respect to Taxes that are allocated to a Post-
Distribution Period in accordance with this Section 3.03(a), (i) LifePoint shall
pay or cause to be paid (to Columbia/HCA, with respect to any Columbia/HCA
Returns, and to the relevant Taxing Authority, with respect to any LifePoint
Returns for Straddle Periods), and shall indemnify and hold the Columbia/HCA
Group and the Triad Group harmless against, the amount of Taxes that is
attributable to the LifePoint Group and (ii) Triad shall pay or cause to be paid
(to Columbia/HCA, with respect to any Columbia/HCA Returns, and to the relevant
Taxing Authority, with respect to any Triad Returns for Straddle Periods), and
shall indemnify and hold the Columbia/HCA Group and the LifePoint Group harmless
against, the amount of Taxes that is attributable to the Triad Group.
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(b) For purposes of this Agreement, Taxes that are not described in Section
3.03(a), above, shall be allocated between a Pre-Distribution Period and a Post-
Distribution Period by allocating Tax Items between the relevant Pre-
Distribution Period and Post-Distribution Period based upon (i) an actual
closing of the books as of the close of business on April 30, 1999 and (ii) a
ratable allocation election as described in Treasury Regulation section 1.1502-
76(b)(2)(iii) with respect to the month of May 1999; provided, however, that any
Tax Items attributable to transactions or events not in the ordinary course of
business occurring on the Distribution Date prior to or at the time of the
Public Distribution will be allocated to the Pre-Distribution Period, and any
Tax Items attributable to transactions or events not in the ordinary course of
business occurring on the Distribution Date after the Public Distribution shall
be allocated to the Post-Distribution Period, in each case in accordance with
the principles of Treasury Regulation section 1.1502-76(b)(1). With respect to
Tax Items that are allocated to a Pre-Distribution Period in accordance with
this Section 3.03(b), (i) Columbia/HCA shall pay or cause to be paid to
LifePoint with respect to LifePoint Returns for Straddle Periods, and shall
indemnify and hold the LifePoint Group harmless against, the amount of Taxes
that is attributable to those Tax Items, and (ii) Columbia/HCA shall pay or
cause to be paid to Triad with respect to Triad Returns for Straddle Periods,
and shall hold the Triad Group harmless against, the amount of Taxes that is
attributable to those Tax Items. With respect to Tax Items that are allocated
to a Post-Distribution Period in accordance with this Section 3.03(b), (i)
LifePoint shall pay or cause to be paid (to Columbia/HCA, with respect to any
Columbia/HCA Returns, and to the relevant Taxing Authority, with respect to any
LifePoint Returns for Straddle Periods), and shall indemnify and hold the
Columbia/HCA Group and the Triad Group harmless against, the amount of Taxes
that is attributable to the LifePoint Group, computed as if the taxable period
for LifePoint and its Affiliates for such Taxes began immediately following the
Distribution Date, and (ii) Triad shall pay or cause to be paid (to
Columbia/HCA, with respect to any Columbia/HCA Returns, and to the relevant
Taxing Authority, with respect to any Triad Returns for Straddle Periods), and
shall indemnify and hold the Columbia/HCA Group and the LifePoint Group harmless
against, the amount of Taxes that is attributable to the Triad Group, computed
as if the
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taxable period for Triad and its Affiliates for such Taxes began immediately
following the Distribution Date.
Section 3.04. Adjustments. If any adjustment is made to any Tax Return
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relating to a Party or any of its Affiliates (whether such adjustment is the
result of or in settlement of any audit, other administrative proceeding or
judicial proceeding or the filing of an amended return to reflect the
consequences of any determination made in connection with any such audit or
proceeding or otherwise) and there is a correlative adjustment applicable to
another Party or any of its Affiliates for any taxable period (or portion
thereof) ending after the Distribution Date, the Party whose adjustment is
favorable (i.e., the Party to which there inures, directly or indirectly, a net
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Tax benefit as a result of any adjustment) (the "Benefited Party") shall pay to
the other Party the amount of such net Tax benefit at such time or times as and
to the extent that such benefit is realized through a refund of Tax or actual
reduction in the amount of Tax that the Benefited Party otherwise would have
paid if such adjustment had not been made.
Section 3.05. Manner of Payment. Except as otherwise provided in this
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Agreement, any payment required to be made among the Parties pursuant to this
Article III with respect to any Tax Return shall be made by the Party obligated
to make such payment (i) in the case of a refund of Tax, within 30 business days
after receipt (whether by way of payment, credit, or offset against any payments
due or otherwise) of such refund or (ii) in the case of the payment of Tax
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with respect to any Tax Return, within 30 days after the later of such payment
of Tax to the relevant Taxing Authority and the delivery of written demand for
the payment hereunder to the Party obligated to make such payment. Any payment
described in clause (i) and any demand for payment described in clause (ii)
shall be accompanied by a calculation setting forth the basis for the amount
paid or demanded. Any payment that is required under this Agreement that is not
made within the prescribed time period shall thereafter bear interest at a
fluctuating rate per annum equal to the prime commercial lending rate publicly
announced by The Chase Manhattan Bank or any successor thereto at its principal
office (or any alternative rate substituted therefor by such bank).
Section 3.06. Carrybacks. A Spinco shall be entitled to any refund for any
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Tax obtained by the Columbia/HCA Group (or any member of the Columbia/HCA Group)
as a result of the carryback of losses or credits of any member of such Spinco's
Group from any taxable period beginning on or after the Distribution Date to any
taxable period ending on or before the Distribution Date, provided that the
Spinco has received Columbia/HCA Approval with respect to such carryback. Such
refund shall be limited to the net amount received by the Columbia/HCA Group (by
refund, offset against other Taxes or otherwise), net of any net Tax cost and
other expenses incurred by the Columbia/HCA Group with respect to such refund,
and shall be paid within 30 days after payment is received (or deemed received
by reason of the reduction of Taxes otherwise payable) by Columbia/HCA from a
Taxing Authority. The application of any such carrybacks by a Spinco and/or any
Affiliate of a Spinco shall be in accordance with the Code and the consolidated
return regulations promulgated thereunder or other applicable Tax laws. The
Spinco shall indemnify Columbia/HCA for any costs (including any interest, fines
and penalties) resulting from the carryback of any item under this paragraph.
Notwithstanding this Section 3.06, each Spinco and any member of a Spinco Group
shall have the right, in its sole discretion, to make any election regarding any
such carrybacks, including the
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election under section 172(b)(3) of the Code, that would eliminate or limit the
carryback of any loss or credit to any taxable period ending before or including
the Distribution Date.
Section 3.07. Deductions Attributable to Non-Qualified Vested Options.
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Each Spinco agrees to pay to Columbia/HCA any benefit received by its Spinco
Group that is attributable to any transaction or items relating to the Non-
Qualified Vested Options. The benefit payable by a Spinco to Columbia/HCA under
this Section 3.07 with respect to any taxable period shall equal the excess of
(i) the amount of Taxes that such Spinco Group would have paid in the absence of
any transactions or items under the Non-Qualified Vested Options over (ii) the
amount of Taxes actually payable by such Spinco Group. Payment of such benefit
shall be made within 30 days after the filing of the Spinco Group's Federal
Income Tax Return for any taxable period in which a benefit is realized
(including through the use of a net operating loss that is created or increased
by any transaction or item under the Non-Qualified Vested Options). If
subsequent to the Spinco's payment of any such amount, there is (A) a Final
Determination under applicable law to the effect that all or part of the
deduction giving rise to such payment was not allowable or available, or (B) a
reduction in the amount of the benefit the Spinco realizes as a result of a
Final Determination increasing the amount of income or gain associated with
those transactions, Columbia/HCA shall repay to the Spinco within 30 days of any
event described in (A) or (B) (a "Subsequent Benefit Decrease Event") any amount
that would have not been payable to Columbia/HCA pursuant to this Section 3.07
had the amount of the benefit been initially determined in light of the
Subsequent Benefit Decrease Events, together with the amount of any interest and
penalties payable to any Taxing Authority with respect to those amounts. If
subsequent to the Spinco's payment of any amount under this Section 3.07, there
is (A) a Final Determination under applicable law to the effect that a deduction
giving rise to such payment
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exceeded the amount claimed or (B) an increase in the amount of the benefit the
Spinco realizes as a result of a Final Determination decreasing the amount of
income or gain associated with those transactions, the Spinco shall pay to
Columbia/HCA within 30 days of any event described in (A) or (B) (a "Subsequent
Benefit Increase Event") any additional amount that would have been payable to
Columbia/HCA pursuant to this Section 3.07 had the amount of the benefit been
initially determined in light of the Subsequent Benefit Increase Events. Each
Spinco shall take all actions as shall be necessary to maximize the amounts
payable by the Spinco to Columbia/HCA under this Section 3.07 and shall
coordinate with, and follow the instruction of, Columbia/HCA with respect to the
taking of such actions.
Section 3.08. Certain Disputes Regarding Tax Liabilities. In the event of
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a dispute regarding (i) the allocation of liability pursuant to the provisions
of this Article III, (ii) a payment for the use of losses or credits
attributable to a Spinco Group pursuant to Section 3.06, above, or (iii) a
payment pursuant to Section 3.07, above, attributable to a deduction arising
from a transaction or item relating to the Non-Qualified Vested Options, the
parties to the dispute shall employ (and equally share the expense of) a
mutually acceptable and jointly engaged nationally recognized public accounting
firm to determine the proper allocation of such liability or amount of such
payment. In the event the Parties are unable to agree to a mutually acceptable
nationally recognized accounting firm within 10 days, the parties shall each
select a nationally recognized accounting firm, which accounting firms shall
select a third nationally recognized accounting firm, which third nationally
recognized accounting firm shall be jointly engaged by the parties to determine
the proper allocation of such liability or amount of such payment.
19
ARTICLE IV
REPRESENTATIONS AND COVENANTS
-----------------------------
Section 4.01. LifePoint Representations. (a) LifePoint has reviewed the
-------------------------
Ruling Request and the Letter Ruling and, to the best of LifePoint's knowledge,
these materials, including any representations and statements concerning
LifePoint, its business operations, capital structure and/or organization, are
complete and accurate in all material respects. LifePoint shall, and shall
cause each member of the LifePoint Group to, comply in all material respects
with each such representation and statement concerning LifePoint and the
LifePoint Group made in the Ruling Request and in the Letter Ruling, including
statements relating to actions intended to facilitate (i) LifePoint's adoption
of the LifePoint ESOP and other line-of-sight compensation and (ii) LifePoint's
improvement of operations and management focus with respect to its facilities.
Without limiting the generality of the foregoing, with respect to any
representation or statement made by, on behalf of, or with respect to LifePoint
or the LifePoint Group in connection with the Ruling Request or the Letter
Ruling, and to the extent such representation or statement relates to future
actions or events under their control, neither LifePoint nor any member of the
LifePoint Group will take (or fail to take) any action during the Restricted
Period that would have caused such representation or statement to be untrue if
LifePoint or any member of the LifePoint Group had planned or intended to take
(or fail to take) such action at the time such representation or statement was
made by or on behalf of LifePoint or the LifePoint Group.
(b) LifePoint hereby represents and warrants that it has no intention to
undertake any of the transactions set forth in Section 4.02(a)(ii), below, nor
does LifePoint or any member of the LifePoint Group have any intention to cease
to engage in the active conduct of its trade or business (within the meaning of
section 355(b)(2) of the Code), including the
20
ownership and operation of the following hospitals and the assets associated
therewith: Castleview Hospital (located in Price, Utah), Ashley Valley Medical
Center (located in Vernal, Utah) and Riverton Memorial Hospital (located in
Riverton, Wyoming).
Section 4.02. LifePoint Covenants. (a) LifePoint covenants and agrees on
-------------------
behalf of itself and each other member of the LifePoint Group that during the
Restricted Period:
(i) LifePoint and the members of the LifePoint Group will continue to
engage in the business of owning and operating hospitals and related health
care facilities and will continue to maintain a substantial portion of
their respective assets and business operations as they existed immediately
prior to the Distributions.
(ii) Except as provided in Section 4.02(d), below, neither LifePoint nor
any of its Affiliates nor any of its or their respective Representatives
will undertake, authorize, approve, recommend, permit, facilitate, or enter
into any contract, or consummate any transaction with respect to:
(1) the issuance of stock of LifePoint or any Affiliate thereof or
instrument that could constitute equity for Federal Income Tax
purposes (or any instrument or contract with respect thereto,
including options, warrants, rights or securities exercisable for, or
convertible into, stock of LifePoint or an Affiliate of LifePoint) in
a single transaction or in a series of related or unrelated
transactions other than (A) options and stock issued pursuant to
option and other equity plans as approved by the Board of Directors of
Columbia/HCA on April 15, 1999 (without regard to subsequent
amendments thereto), in an amount not to exceed 6,850,000 shares of
LifePoint common stock, (B) stock sold to the LifePoint ESOP, as
described in the Ruling Request and (C) options pledged to a private
foundation
21
to be established by LifePoint (and the issuance of stock pursuant to
the exercise of such options), as described in the Ruling Request, in
an amount not to exceed 100,000 shares of LifePoint common stock;
(2) any transaction or series of related or unrelated transactions
with respect to the capital stock of, or other equity interest in,
LifePoint or any of its Affiliates, including any redemptions,
repurchases, stock acquisitions or stock dispositions or the
dissolution, merger, consolidation or complete or partial liquidation
of LifePoint or any of its Affiliates, (or any announcement of any
such action) other than (A) transactions pursuant to the "Odd-Lot
Programs" described in the Ruling Request, (B) stock acquisitions
described in Section 4.02(a)(ii)(1)(A) and (B), above, and (C) normal
market trading;
(3) the transfer of assets received by LifePoint or its Affiliates
in the Reorganization to any Person in which LifePoint or any of its
Affiliates holds, directly or indirectly, any stock, option, debt or
other interest;
(4) any disposition of assets that (A) is outside the ordinary
course of business or (B) is of assets that are held, directly or
indirectly, by LifePoint of Kentucky, LLC and (C) is not of assets
that were identified as "Held For Sale Assets" or "Potential Held For
Sale Assets" in the Ruling Request submission dated March 2, 1999;
(5) the effectuation of any recapitalization of LifePoint or any of
its Affiliates, including any stock split, reverse stock split, stock
dividend or other change in capital structure (other than the
repayment of any indebtedness outstanding immediately after the
Distributions).
22
(ii) LifePoint will take the actions related to the LifePoint ESOP
detailed in the Ruling Request within the time period specified in the
Letter Ruling.
(b) LifePoint covenants and agrees, on behalf of itself and each other
member of the LifePoint Group, that neither LifePoint nor any other member of
the LifePoint Group will take any position (on a Tax Return, in a Tax proceeding
or audit, or otherwise) that is inconsistent with the Letter Ruling or the
Ruling Request.
(c) In addition to the other representations, warranties, covenants and
agreements set forth in this Agreement, LifePoint and each member of the
LifePoint Group will take, or refrain from taking, as the case may be, such
actions as Columbia/HCA may require as necessary to insure that the
Reorganization qualifies for the intended Tax treatment, including such actions
as Columbia/HCA determines may be necessary to preserve the Tax treatment set
forth in the Letter Ruling. Without limiting the generality of the foregoing,
LifePoint and the LifePoint Group shall cooperate with Columbia/HCA if
Columbia/HCA determines to obtain additional IRS rulings with respect to the
Reorganization or any portion thereof, including rulings pertaining to whether
any actual or proposed change in facts and circumstances affects the Tax
treatment of the Reorganization or any portion thereof.
(d) Following the Distribution Date, LifePoint and its Affiliates may take
any action or engage in conduct otherwise prohibited by this Section 4.02 so
long as prior to such action or conduct, as the case may be, LifePoint obtains
Columbia/HCA Approval and, if Columbia/HCA so requires, Columbia/HCA or
LifePoint receives (A) a ruling from the IRS in form and substance satisfactory
to Columbia/HCA, in its sole discretion, and upon which Columbia/HCA can rely,
to the effect that the proposed action or conduct, as the case may be, will not
cause the Reorganization or any portion thereof to fail to qualify for the Tax
treatment
23
stated in the Letter Ruling, or (B) an Opinion of Counsel that is satisfactory
to Columbia/HCA in its sole and absolute discretion, and on which Columbia/HCA
can rely, to the effect that the proposed action or conduct, as the case may be,
will not cause the Reorganization or any portion thereof to fail to qualify for
the Tax treatment stated in the Letter Ruling.
(e) LifePoint covenants, on behalf of itself and each other member of the
LifePoint Group, that neither LifePoint nor any member of the LifePoint Group
will apply for any additional IRS ruling pertaining to the Reorganization or any
portion thereof without Columbia/HCA Approval. Columbia/HCA shall be entitled to
review and approve any request for, or document relating to, any such ruling
prior to its submission to the IRS.
(f) LifePoint covenants that it will not terminate, or take or fail to take
any action that causes the termination of, all or part of the LifePoint ESOP.
Section 4.03. Triad Representations. (a) Triad has reviewed the Ruling
---------------------
Request and the Letter Ruling and, to the best of Triad's knowledge, these
materials, including any representations and statements concerning Triad, its
business operations, capital structure and/or organization, are complete and
accurate in all material respects. Triad shall, and shall cause each member of
the Triad Group to, comply in all material respects with each such
representation and statement concerning Triad and the Triad Group made in the
Ruling Request and in the Letter Ruling, including statements relating to
actions intended to facilitate (i) Triad's adoption of the Triad ESOP and other
line-of-sight compensation and (ii) Triad's improvement of operations and
management focus with respect to its facilities. Without limiting the generality
of the foregoing, with respect to any representation or statement made by, or on
behalf of, Triad or the Triad Group in connection with the Ruling Request or the
Letter Ruling, and to the extent such representation or statement relates to
future actions or events under their control, neither Triad
24
nor any member of the Triad Group will take (or fail to take) any action during
the Restricted Period that would have caused such representation or statement to
be untrue if Triad or any member of the Triad Group had planned or intended to
take (or fail to take) such action at the time such representation or statement
was made by or on behalf of Triad or the Triad Group.
(b) Triad hereby represents and warrants that it has no intention to
undertake any of the transactions set forth in Section 4.04(a)(ii), below, nor
does Triad or any member of the Triad Group have any intention to cease to
engage in the active conduct of its trade or business (within the meaning of
section 355(b)(2) of the Code), including the ownership and operation of the
following hospitals and the assets associated therewith: Northwest Hospital
(located in Tucson, Arizona), San Leandro Hospital (located in San Leandro,
California) and Williamette Valley Medical Center (located in McMinnville,
Oregon).
Section 4.04. Triad Covenants. (a) Triad covenants and agrees on behalf
---------------
of itself and each other member of the Triad Group that during the Restricted
Period:
(i) Triad and the members of the Triad Group will continue to engage in
the business of owning and operating hospitals and related health care
facilities and will continue to maintain a substantial portion of their
respective assets and business operations as they existed immediately prior
to the Distributions;
(ii) Except as provided in Section 4.04(d), below, neither Triad nor any
of its Affiliates nor any of its or their respective Representatives will
undertake, authorize, approve, recommend, permit, facilitate, or enter into
any contract, or consummate any transaction with respect to:
(1) the issuance of stock of Triad or any Affiliate thereof or
instrument that could constitute equity for Federal Income Tax
purposes (or any instrument or
25
contract with respect thereto, including options, warrants, rights or
securities exercisable for, or convertible into, stock of Triad or an
Affiliate of Triad) in a single transaction or in a series of related
or unrelated transactions other than (A) options and stock issued
pursuant to option and other equity plans as approved by the Board of
Directors of Columbia/HCA on April 15, 1999 (without regard to
subsequent amendments thereto), in an amount not to exceed 6,850,000
shares of Triad common stock, (B) stock sold to the Triad ESOP, as
described in the Ruling Request and (C) options pledged to a private
foundation to be established by Triad (and the issuance of stock
pursuant to the exercise of such options), as described in the Ruling
Request, in an amount not to exceed 100,000 shares of Triad common
stock;
(2) any transaction or series of related or unrelated transactions
with respect to the capital stock of, or other equity interest in,
Triad or any of its Affiliates, including any redemptions,
repurchases, stock acquisitions or stock dispositions or the
dissolution, merger, consolidation or complete or partial liquidation
of Triad or any of its Affiliates, (or any announcement of any such
action), other than (A) transactions pursuant to the "Odd-Lot
Programs" described in the Ruling Request, (B) stock acquisitions
described in Section 4.04(a)(ii)(1)(A) and (B), above, and (C) normal
market trading;
(3) the transfer of assets received by Triad or its Affiliates in
the Reorganization to any Person in which Triad or any of its
Affiliates holds, directly or indirectly, any stock, option, debt or
other interest;
26
(4) any disposition of assets that is (A) outside the ordinary
course of business and (B) is not of assets that were identified as
"Held for Sale Assets" or "Potential Held for Sale Assets" in the
Ruling Request submission dated March 2, 1999;
(5) the effectuation of any recapitalization of Triad or any of its
Affiliates, including any stock split, reverse stock split, stock
dividend or other change in capital structure (other than the
repayment of any indebtedness outstanding immediately after the
Distributions).
(iii) Triad will take the actions related to the Triad ESOP detailed in
the Ruling Request within the time period specified in the Letter Ruling.
(b) Triad covenants and agrees, on behalf of itself and each other member
of the Triad Group, that neither Triad nor any other member of the Triad Group
will take any position (on a Tax Return, in a Tax proceeding or audit, or
otherwise) that is inconsistent with the Letter Ruling or the Ruling Request.
(c) In addition to the other representations, warranties, covenants and
agreements set forth in this Agreement, Triad and each member of the Triad Group
will take, or refrain from taking, as the case may be, such actions as
Columbia/HCA may require as necessary to insure that the Reorganization
qualifies for the intended Tax treatment, including such actions as Columbia/HCA
determines may be necessary to preserve the Tax treatment set forth in the
Letter Ruling. Without limiting the generality of the foregoing, Triad and the
Triad Group shall cooperate with Columbia/HCA if Columbia/HCA determines to
obtain additional IRS rulings with respect to the Reorganization or any portion
thereof, including rulings pertaining to whether any actual or proposed change
in facts and circumstances affects the Tax treatment of the Reorganization or
any portion thereof.
27
(d) Following the Distribution Date, Triad and its Affiliates may take any
action or engage in conduct otherwise prohibited by this Section 4.04 so long as
prior to such action or conduct, as the case may be, Triad obtains Columbia/HCA
Approval and, if Columbia/HCA so requires, Columbia/HCA or Triad receives (A) a
ruling from the IRS in form and substance satisfactory to Columbia/HCA, in its
sole discretion, and upon which Columbia/HCA can rely, to the effect that the
proposed action or conduct, as the case may be, will not cause the
Reorganization or any portion thereof to fail to qualify for the Tax treatment
stated in the Letter Ruling, or (B) an Opinion of Counsel that is satisfactory
to Columbia/HCA in its sole and absolute discretion, and on which Columbia/HCA
can rely, to the effect that the proposed action or conduct, as the case may be,
will not cause the Reorganization or any portion thereof to fail to qualify for
the Tax treatment stated in the Letter Ruling.
(e) Triad covenants, on behalf of itself and each other member of the Triad
Group, that neither Triad nor any member of the LifePoint Group will apply for
any additional IRS ruling pertaining to the Reorganization or any portion
thereof without Columbia/HCA Approval. Columbia/HCA shall be entitled to review
and approve any request for, or document relating to, any such ruling prior to
its submission to the IRS.
(f) Triad covenants that it will not terminate, or take or fail to take any
action that causes the termination of, all or part of the Triad ESOP.
28
ARTICLE V
INDEMNITY OBLIGATIONS
---------------------
Section 5.01. Breach. Columbia/HCA, LifePoint and Triad shall each
------
indemnify and hold harmless the other Parties and their Affiliates from and
against any payment required to be made under this Agreement as a result of the
breach by a member of the Columbia/HCA Group, LifePoint Group or Triad Group, as
the case may be, of any obligation under this Agreement.
Section 5.02. Tax Indemnification. Not withstanding any other provision of
-------------------
this Agreement to the contrary:
(a) If any Party or any of its Affiliates (collectively, jointly and
severally, the "Indemnifying Parties") takes any action prohibited by Article
IV, above, or violates a representation or covenant contained in Article IV,
above, or takes or fails to take any other action (any such action, failure to
act or violation, a "Tainting Act") and the Reorganization or any portion
thereof fails to qualify for the Tax treatment stated in the Letter Ruling in
whole or in part as a result of such Tainting Act, then the Indemnifying Parties
shall (jointly and severally) indemnify and hold harmless each of the other
Parties and their Affiliates (collectively, the "Indemnified Parties") against
any and all Taxes and any other costs and liabilities imposed upon or incurred
by the Indemnified Parties as a result of the Tainting Act, including any
liability of the Indemnified Parties arising from Taxes imposed on shareholders
of a Party to the extent any shareholder or the IRS or other Taxing Authority
successfully seeks recourse against the Indemnified Parties on account of any
such Tainting Act, or any liability for such Taxes or other costs or liabilities
that the Indemnified Parties may assume or otherwise incur;
(b) Each Spinco and its Affiliates shall (jointly and severally) indemnify
and hold harmless Columbia/HCA and its Affiliates for any Tax imposed upon or
incurred by
29
Columbia/HCA and its Affiliates as a result of any action taken after the
Distributions by such Spinco or any of its Affiliates.
Section 5.03. Gross-Up. Any payment under this Agreement shall be (i)
--------
increased to take account of any Tax Detriment incurred from the receipt or
accrual of payments hereunder (i.e., grossed-up for any Tax incurred on such
payment, accrual and/or increase) and (ii) reduced to take account of any Tax
Benefit attributable to the items to which such payments relate.
Section 5.04. Tender Offer Or Purchase Offer. Notwithstanding anything to
------------------------------
the contrary set forth in this Agreement, if, during the Restricted Period, any
Person or group of Persons acquires beneficial ownership of LifePoint or Triad
common stock (or any other class of outstanding LifePoint or Triad stock) or
commences a tender or other purchase offer for the capital stock of LifePoint or
Triad or initiates any other form of transaction to acquire directly or
indirectly LifePoint or Triad capital stock, upon consummation of which such
Person or group of Persons would acquire beneficial ownership of LifePoint or
Triad common stock (or any other class of outstanding LifePoint or Triad stock)
such that the Reorganization or any portion thereof shall fail to qualify for
the Tax treatment stated in the Letter Ruling as a result of such acquisition,
tender or other purchase offer, or other form of transaction, then the
Indemnifying Parties shall indemnify and hold harmless the Indemnified Parties
against any and all Taxes and any other costs and liabilities imposed upon or
incurred by the Indemnified Parties and/or its shareholders as a result of the
failure of the Reorganization or any portion thereof to so qualify.
Section 5.05. Tax Indemnity Payments. An Indemnifying Party shall make any
----------------------
payment or indemnity required by this Article V no later than 30 days after
receipt of written notice from the Indemnified Parties of such payment or
indemnity obligation, which notice shall be accompanied by a computation of the
amounts due.
30
Section 5.06. Effect Of Sections 4.02(d) and 4.04(d) of This Agreement.
--------------------------------------------------------
The Indemnified Parties shall be indemnified and held harmless under this
Article V without regard to the fact that any Indemnifying Party or Indemnified
Party may have received Columbia/HCA Approval, a supplemental ruling from the
IRS or an Opinion of Counsel, as contemplated by Sections 4.02(d) and 4.04(d)
above or otherwise. The Indemnified Parties shall be indemnified and held
harmless under Section 5.04, above, without regard to whether an acquisition of
beneficial ownership results from a transaction that is not prohibited under
Article IV, above.
31
ARTICLE VI
COOPERATION AND EXCHANGE OF INFORMATION
---------------------------------------
Section 6.01. Cooperation. (a) Each Party shall cooperate (and shall
-----------
cause its Affiliates to cooperate) fully at such time and to the extent
reasonably requested by any other Party in connection with the preparation and
filing of any Tax Return or the conduct of any audit, dispute, proceeding, suit
or action concerning any issues or any other matter contemplated hereunder.
Such cooperation shall include (1) the retention and provision on demand of
books, records, documentation, other information, or copies thereof relating to
any Tax Return until the later of (x) a Final Determination regarding liability
for Taxes to which such Tax Return relates and (y) in the event any claim has
been made under this Agreement for which such information is relevant, a final
resolution with respect to such claim; (2) the provision of additional
information with respect to an explanation of Tax Practices and material
provided under clause (1) of this Section 6.01(a); (3) the execution of any
document (including powers of attorney) that may be necessary or reasonably
helpful in connection with the filing of any Tax Return by any member of the
Columbia/HCA Group or a Spinco Group, or in connection with any audit, dispute,
proceeding, suit or action addressed in the preceding sentence; (4) the use of
the Party's reasonable best efforts to obtain any documentation from a
governmental authority or a third party that may be necessary or helpful in
connection with the foregoing; and (5) the completion of such tax packages and
other work papers as requested, and within the time specified, by Columbia/HCA.
Each Party shall make its employees and facilities available on a mutually
convenient basis to facilitate such cooperation.
(b) Each Party (a "Notifying Party") shall use reasonable efforts to keep
each other Party advised as to the status of Tax audits and litigation involving
any issue (a "Liability
32
Issue") that (i) relates to a Tax of the other Party (or its Affiliates), or
(ii) could give rise to the liability of the other Party (or its Affiliates)
under this Agreement. The Notifying Party shall promptly furnish such other
Party or Parties copies of any inquiries or requests for information from any
Taxing Authority concerning any Liability Issue. If applicable under Section
6.02, below, the other Party or Parties shall have the right to consult with the
Notifying Party regarding any responses to such requests and the Notifying Party
shall provide such other Party or Parties with copies of any such written
responses before such responses are given to any Taxing Authority. Without
limiting the foregoing, each Party shall promptly furnish to the other Party or
Parties, upon receipt, a copy of any revenue agent's report or similar report,
notice of proposed adjustment or notice of deficiency received by such Party or
any of its Affiliates, as the case may be, relating to any Liability Issue or
any adjustment referred to in Section 6.01(c), below.
(c) Columbia/HCA shall advise and consult with each of the Spincos with
respect to any proposed Tax adjustments relating to the Columbia/HCA Group that
are the subject of an audit or investigation of a Taxing Authority or are the
subject of litigation, that may affect any Tax Item of any member of such
Spinco's Group after the Distribution Date.
Section 6.02. Contest Provisions. (a) Subject to the cooperation
------------------
provisions in Section 6.01, above, Columbia/HCA shall have the full
responsibility and control over the handling of any Tax controversy, including
an audit, a protest to the Appeals Division of the IRS, litigation in the Tax
Court or any other court of competent jurisdiction, and any other federal,
state, local or foreign hearing or administrative proceeding, (a "Tax
Controversy"), involving (i) any Columbia/HCA Return or (ii) the Reorganization
or any portion thereof. Upon request by a Spinco, however, and subject to
Columbia/HCA Approval and the cooperation provisions in
33
Section 6.01, above, the Spinco shall, at the Spinco's expense, be allowed to
participate in the handling of any Tax Controversy with respect to any item that
would give rise to a payment of Tax for which such Spinco would be liable, or a
refund of Tax for which such Spinco would be entitled to receive payment, under
this Agreement.
(b) Subject to the cooperation provisions in Section 6.01, above, LifePoint
shall have the full responsibility and control over the handling of any Tax
Controversy involving any LifePoint Return; provided, however, that Columbia/HCA
shall, at Columbia/HCA's expense and in its sole discretion, be allowed to
participate in or assume full responsibility and control over the handling of
any Tax Controversy with respect to any item that would give rise to a payment
of Tax for which Columbia/HCA would be liable, or a refund of Tax for which
Columbia/HCA would be entitled to receive payment, under this Agreement.
(c) Subject to the cooperation provisions in Section 6.01, above, Triad
shall have the full responsibility and control over the handling of any Tax
Controversy involving any Triad Return; provided, however, that Columbia/HCA
shall, at Columbia/HCA's expense and at its sole discretion, be allowed to
participate in or assume full responsibility and control over the handling of
any Tax Controversy with respect to any item that would give rise to a payment
of Tax for which Columbia/HCA would be liable, or a refund of Tax for which
Columbia/HCA would be entitled to receive payment, under this Agreement.
(d) Each Party shall promptly notify the other Parties of any inquiries by
any Taxing Authority that relate to any Tax that may be imposed on the other
Parties or any of their Affiliates or that might give rise to any liability on
the part of any Party under this Agreement.
Section 6.03. Notices. Any notice, demand, claim or other communication
-------
under this Agreement shall be in writing and shall be deemed given upon delivery
if delivered personally,
34
upon mailing if sent by certified mail, return receipt requested, postage
prepaid, or upon completion of transmission if sent by telecopy or facsimile, to
the Parties at the following address:
To Columbia/HCA or any member of the Columbia/HCA Group:
Columbia/HCA Healthcare Corporation
βββ ββββ βββββ
β.β. βββ βββ
βββββββββ, βββββββββ βββββ
Attention: ββββββ βββ ββββββ, ββ.
Vice President/Tax
To LifePoint or any member of the LifePoint Group:
LifePoint Hospitals, Inc.
ββββ βββββββ ββββ
βββββββββ, βββββββββ βββββ
Attention: βββββββββ β. βββββββββ
Director of Tax
To Triad or any member of the Triad Group:
Triad Hospitals, Inc.
βββββ ββββ ββββ, ββββ βββββ
ββββββ, βββββ βββββ
Attention: ββββββ β. ββββββββ
Director of Tax
In each case, with a copy to:
βββββ ββββββββββ LLP
ββββ ββββββ ββ βββ ββββββββ
βββ ββββ, βββ ββββ βββββ-ββββ
Attention: ββββββ β. ββββββ, Esq.
Section 6.04. Complete Agreement. This Agreement, together with the
------------------
Distribution Agreement, constitutes the entire agreement of the Parties
concerning the subject matter hereof, and supersedes all other agreements,
whether or not written, in respect of any Tax between or among any member or
members of the Columbia/HCA Group, LifePoint Group and Triad
35
Group. In the event and to the extent there is a conflict between the provisions
of this Agreement and Distribution Agreement, the provisions of this Agreement
shall control. This Agreement may not be amended except by an agreement in
writing, signed by the Parties.
Section 6.05. Disputes. Except as otherwise provided in Section 3.09,
--------
above, resolution of any and all disputes arising from or in connection with
this Agreement shall be in accordance with the provisions of Section 11.3 of the
Distribution Agreement.
Section 6.06. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the state of Delaware.
Section 6.07. Parties in Interest, Successors and Assigns. This Agreement
-------------------------------------------
is being entered into by Columbia/HCA, LifePoint and Triad on behalf of
themselves and their respective Affiliates immediately following the
Distributions. This Agreement shall constitute a direct obligation of each such
Person and shall be deemed to have been readopted and affirmed on behalf of any
Person that becomes a member of the Columbia/HCA Group, LifePoint Group or Triad
Group in the future. All of the provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties and their Affiliates and their
respective successors and permitted assigns. A Party's rights and obligations
under this Agreement may not be assigned without the prior written consent of
the other Parties.
Section 6.08. No Third-Party Beneficiaries. This Agreement is solely for
----------------------------
the benefit of the Parties and their respective Affiliates and should not be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without this
Agreement.
Section 6.09. Legal Enforceability. Any provision of this Agreement that
--------------------
is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of
36
the prohibition or unenforceability without invalidating the remaining
provisions. Any prohibition or unenforceability of any provision of this
Agreement in any jurisdiction shall not invalidate or render unenforceable the
provision in any other jurisdiction.
Section 6.10. Expenses. Unless otherwise expressly provided in this
--------
Agreement or in the Distribution Agreement, each Party shall bear any and all
expenses that arise from its respective obligations under this Agreement.
Section 6.11. Confidentiality. Except as required by law or with the prior
---------------
written consent of the other Parties, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, and any
other information that is obtained by a Party or any of its Affiliates pursuant
to this Agreement, shall be kept confidential by such Party and its Affiliates
and Representatives, shall not be disclosed to any other Person and shall be
used only for the purposes provided herein. If a Party or any of its Affiliates
is required by law to disclose any such information, such Party shall give
written notice to the other Parties prior to making such disclosure.
Section 6.12. Privileged Matters. Except as otherwise provided in this
------------------
Agreement, matters of privilege that arise under or in connection with this
Agreement or the matters addressed herein shall be governed by Section 9.6 of
the Distribution Agreement.
Section 6.13. Counterparts. This Agreement may be signed in any number of
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counterparts, each of which shall be an original, with the same effect as if the
signature thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the date first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By:
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Name:
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Title:
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LIFEPOINT HOSPITALS, INC.
By:
--------------------------------
Name:
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Title:
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TRIAD HOSPITALS, INC.
By:
--------------------------------
Name:
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Title:
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38