EXHIBIT 10.1
Purchase and Sale Agreement
By and Among
Baptist Health System,
VHS San Antonio Partners, L.P.,
and
Vanguard Health Systems, Inc.
Dated as of October 8, 2002
List of Schedules and Exhibits
Schedule 1.1 Permitted Life Safety Repair Report
Schedule 1.2(g)(i) Seller's Knowledgeable Persons
Schedule 1.2(g)(ii) Buyer's Knowledgeable Persons*
Schedule 2.1(a) Real Property
Schedule 2.1(b) Personal Property
Schedule 2.1(c) Net Working Capital
Schedule 2.1(e) Assumed Contracts
Schedule 2.1(f) Transferred Permits and Licenses
Schedule 2.1(g) Intellectual Properties and Information Systems
Schedule 2.2(a) Seller's Retained Records
Schedule 2.2(h) Seller, Foundation or New Foundation Retained Assets
Schedule 2.2(m) Excluded Intellectual Properties and Information Systems
Schedule 2.2(o) Excluded Claims Against Third Persons
Schedule 2.2(p) Other Excluded Assets
Schedule 2.3(a) Assumed Debt
Schedule 23(b) Assumed Liabilities
Schedule 2.3 Certain Assumed Liabilities
Schedule 2.7 Allocation of Purchase Price
Schedule 3.2 Powers; Consents; Absence of Conflicts; Etc.
Schedule 3.4 Subsidiaries and Third Party Rights
Schedule 3.5 Legal and Regulatory Compliance
Schedule 3.6 Financial Statements*
Schedule 3.7 Operation of the Hospital Businesses
Schedule 3.8 Recent Activities
Schedule 3.9 Accounts Receivable; Inventory
Schedule 3.10 Equipment
Schedule 3.11 Personal Property Encumbrances
Schedule 3.12 Real Property Encumbrances
Schedule 3.13 Environmental Matters
Schedule 3.15 Insurance
Schedule 3.16 Permits and Licenses
Schedule 3.17 Hospital Accreditations
Schedule 3.18 Agreements and Commitments
Schedule 3.19 Contracts
Schedule 3.20 Employees and Employee Relations
Schedule 3.21 Seller's Employee Benefit Plans
Schedule 3.22 Litigation and Proceedings
Schedule 3.23 Taxes
Schedule 3.24 Medical Staff; Physician Relations
Schedule 3.25 Restricted Assets
Schedule 3.26 Brokers and Finders
Schedule 5.5 Buyer's Employee Benefit Plans*
Schedule 5.11 Legal and Regulatory Compliance*
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Schedule 5.12 Government Payment Programs; Accreditations*
Schedule 5.13 Litigation and Proceedings*
Schedule 6.1 Exceptions to Seller's Operations
Schedule 6.2 Exceptions to Seller's Negative Covenants
Schedule 6.10 The Real Property in Respect of the Special Synthetic Lease
Schedule 9.3 Seller Required Consents
Schedule 12.2 Noncompetition Exceptions*
Schedule 13.2 Buyer's Charity Care Commitment*
Schedule 13.3 Core Services
Exhibit A Certificate of Preferred Stock Designations, Preferences and
Rights
Exhibit B 8.18% Convertible Subordinated Note due 2012
Exhibit C Joinder in Purchase and Sale Agreement
Exhibit D Agreement between the Shareholders
Exhibit E License Agreement
Exhibit F Seller's Charity Care Policy
* See Section 17.1(b)
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Purchase and Sale Agreement
This Purchase and Sale Agreement, made and entered into
effective as of October 8, 2002, is by and among Baptist Health
System, a Texas non-profit corporation ("Seller"), VHS San
Antonio Partners, L.P., a Delaware limited partnership ("Buyer"),
and Vanguard Health Systems, Inc., a Delaware corporation
("Vanguard").
Recitals:
Whereas, Seller owns and operates the Hospitals (defined
herein) and, directly and through various Affiliates, owns,
leases, manages or otherwise operates the Hospital Business
(defined herein) located in San Antonio, Texas;
Whereas, Seller desires to sell and Buyer desires to
purchase substantially all of the operating assets, real,
personal and mixed, tangible and intangible, owned by Seller and
associated with or employed in the conduct of the Hospital
Businesses, including the Hospitals (other than the Excluded
Assets (as defined herein)); and
Whereas, Seller has concluded that the transactions
contemplated by this Agreement are in its best interests and
consistent with its charitable mission of the promotion of health
to the community served by the Hospitals.
Now, Therefore, for and in consideration of the premises,
and the agreements, covenants, representations and warranties
hereinafter set forth, and other good and valuable consideration,
the receipt and adequacy of which are forever acknowledged and
confessed, the Parties, intending to be legally bound, agree as
follows:
1.0. Definitions and References
1.1. Definitions: As used in this Agreement, and unless the
context requires a different meaning, the following terms have
the meanings given:
Accounts Receivable: all accounts receivable of the
Hospital Businesses, accrued and unaccrued, including
Government Payment Program receivables and accounts that
have been written off, but excluding all Cost Report
settlement amounts, risk pools (whether a credit balance or
a debit balance) and amounts due from Affiliates;
Accrued PTO: as of Closing, the unused sick leave,
personal day and vacation accumulations of the Hired
Employees (whether in such form or in the form of paid time
off or extended illness bank plans), and the estimated
employer share of FICA Tax thereon, but only to the extent
accrued in the Closing Balance Sheet;
ADR: defined in Section 16.3;
Advisory Board: defined in Section 13.1;
Affiliate: any Person that, directly or indirectly
through one or more intermediaries, controls, is controlled
by, or is under common control with another Person and
includes the power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of securities, election or appointment of
directors, by contract or otherwise;
Affiliated Group: any affiliated group within the
meaning of section 1504 of the Code or any similar group
defined under a similar provision of state, local or foreign
law;
Agreement: this Purchase and Sale Agreement and all
Exhibits and Schedules attached hereto, as amended,
consolidated, supplemented, novated or replaced by the
Parties from time to time;
Alternative Proposal: defined in Section 6.4(a);
Articles: articles of the Agreement;
Assets: all assets, real property, personal and mixed
property of every kind, character or description, known or
unknown, tangible or intangible, other than the Excluded
Assets, owned or leased by Seller and its Subsidiaries in
connection with their operation of the Hospital Businesses,
wherever located and whether or not reflected in the
Financial Statements, including Seller's or any of Seller's
Subsidiaries' interest in the Joint Ventures;
Assumed Contracts: the Contracts listed or described
on Schedule 2.1(e), the Immaterial Contracts, and the
Omitted Contracts, but excluding Omitted Contracts that are
determined pursuant to Section 17.1(d) to not be Assumed
Contracts;
Assumed Debt: the outstanding amount as of the Closing
Date of any long-term indebtedness and capitalized lease
obligations of Seller (including the current portions
thereof) described on Schedule 2.3(a);
Assumed Liabilities: (i) the current liabilities in Net
Working Capital, including Accrued PTO, but only to the
extent accrued on the Closing Balance Sheet; (ii) Unbooked
Employee Benefits; (iii) all obligations of Seller arising
on or after the Closing Date with respect to any period
commencing on or after the Closing Date under the Assumed
Contracts; (iv) all liabilities relating to Buyer's
operation of the Hospital Businesses arising on or after the
Closing Date with respect to any period on or after the
Closing Date; (v) liabilities initially allocable to Seller
to the extent of amounts paid by Seller to Buyer with
respect to such liability for any proration under
Section 2.6; and (vi) the other liabilities and obligations,
if any, described on Schedule 2.3(b) if and to the extent
Buyer receives a credit against the Purchase Price as
provided in Section 2.5;
Audited Financial Statements: the audited consolidated
balance sheets of Seller as of August 31, 2000, 2001 and
2002, and the audited consolidated statements of revenue and
expenses, and audited consolidated statements of cash flows
for the fiscal years then ended,
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together with the notes thereto and the report thereon of
BDO ▇▇▇▇▇▇▇, LLP, independent certified public accountants to be provided
pursuant to Section 6.3(b);
Authorized Individuals: defined in Section 16.2;
Basket Amount: defined in Section 15.2(b);
BCFS: Baptist Child and Family Services, a Texas non-
profit corporation;
BGCT: The Baptist General Convention of Texas or any
committee thereof duly authorized to take action with
respect to approval of the matters contemplated by this
Agreement;
Buyer: VHS San Antonio Partners, L.P., a Delaware
limited partnership;
Buyer Employee Benefit Plans: defined in Section 5.5;
Buyer's Indemnified Persons: Buyer, Vanguard, and their
Affiliates, successors and assigns from time to time, and
their respective partners, Affiliates, directors, trustees,
officers, employees, agents and representatives;
Cash Portion of the Purchase Price: defined in Section
2.5(c);
Closing: defined in Section 11.1;
Closing Balance Sheet: the unaudited consolidated
balance sheet of Seller as it relates to the Hospital
Businesses as of the close of business on the day
immediately prior to the Closing Date;
Closing Date: the date as of which the Closing occurs;
Closing Documents: the Shareholders' Agreement,
certificates representing the General Partner Shares,
certificates representing the Preferred Shares, the
Subordinated Note and all other instruments, agreements,
certificates or other documents executed or delivered by any
Party to another Party at Closing;
COBRA: the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended;
Code: the Internal Revenue Code of 1986, as amended;
Commercially Reasonable Efforts: means efforts that
are designed to enable a Party, directly or indirectly, to
satisfy a condition to, or otherwise assist in the
consummation of, the transactions provided for by this
Agreement and that do not require the performing Party to
expend any funds or assume liabilities other than
expenditures and liabilities that are customary and
reasonable in nature and amount in the context of the
transaction.
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Contracts: all written or oral contracts, leases,
licenses and agreements relating to the Assets or the
operation of the Hospital Businesses to which Seller is a
party or by which Seller or any of the Assets are bound,
including agreements with payers, physicians and other
providers, agreements with health maintenance organizations,
independent practice associations, preferred provider
organizations and other managed care plans and alternative
delivery systems, joint venture and partnership agreements,
management, employment, retention and severance agreements,
vendor agreements, real and personal property leases and
schedules, maintenance agreements and schedules, agreements
with municipalities and labor organizations, and bonds,
mortgages and other loan agreements;
Controlled Group: with respect to Seller, a group
consisting of each trade or business (whether or not
incorporated) which, together with Seller, would be deemed a
"single employer" within the meaning of section 4001(a)(14)
of ERISA;
Core Services: those core hospital services described
in Section 13.3;
Cost Reports: all cost and other reports filed pursuant
to the requirements of the Government Payment Programs for
payment or reimbursement of amounts due from them;
Draft Schedules: defined in Section 17.1;
EBITDA: for any period, the net income or loss of the
Hospital Businesses for such period plus interest expense
(net of interest income) during such period, plus the
provision for income taxes for such period, and plus the
amount of all amortization and depreciation deducted in such
period;
Effective Date: the date as of which this Agreement was
entered into by the Parties, as set forth on the first page
of this Agreement;
Employee Benefit Plan: any (1) nonqualified deferred
compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan; (2) qualified defined
contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer
Plan), (3) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (4) Employee Welfare
Benefit Plan or material fringe benefit plan or program;
Employee Pension Benefit Plan: defined in section 3(2)
of ERISA;
Employee Welfare Benefit Plan: defined in section 3(1)
of ERISA;
Encumbrances: liabilities, levies, claims, charges,
assessments, mortgages, security interests, liens, pledges,
conditional sales agreements, title retention contracts,
rights of first refusal, options to purchase and other
encumbrances (including limitations on pledging or
mortgaging any of the Assets), and Contracts to create in
the future any such Encumbrance or suffer any of the
foregoing;
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Environmental Laws: any and all Legal Requirements
relating to pollution or protection of human health or the
environment (including ground water, land surface or
subsurface strata), including Legal Requirements relating to
emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, recycling, reporting or
handling of Materials of Environmental Concern;
ERISA: the Employee Retirement Income Security Act of
1974, as amended;
ERISA Fiduciary: defined in section 3(21) of ERISA;
Exchange Act: the Securities Exchange Act of 1934, as
amended from time to time;
Excluded Assets: defined in Section 2.2;
Excluded Liabilities: any and all liabilities of Seller
other than the Assumed Liabilities, whether known or
unknown, fixed or contingent, recorded or unrecorded, and
whether arising prior to or after Closing;
Final Schedules: defined in Section 17.1;
Financial Statements: the Audited Financial Statements,
Unaudited Financial Statements, Special Audited Financial
Statements, Closing Balance Sheet, and the financial
statements described in Section 6.3(b);
Foundation: Baptist Health System Foundation, a Texas
non-profit corporation;
General Partner: VHS Acquisition Subsidiary Number 5,
Inc., a Delaware corporation;
General Partner Shares: the shares of common stock of
the General Partner to be issued to Seller at Closing
pursuant to the Shareholders' Agreement;
Governmental Authorities: all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities,
legislatures and offices of any nature whatsoever of any
federal, state, county, district, municipal, city, foreign
or other government or quasi-government unit or political
subdivision;
Government Payment Programs: federal and state
Medicare, Medicaid and Tricare plan programs, and similar or
successor programs with or for the benefit of Governmental
Authorities;
▇▇▇▇-▇▇▇▇▇▇ Act: the Public Health Service Act, 42
U.S.C. 291, et seq.;
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Hired Employees: those employees of Seller or its
Affiliates who accept in writing Buyer's written offer of
employment as of the Closing Date and those employees of
Seller or its Affiliates employed by Buyer under written
Assumed Contracts;
Hospitals: the following hospitals located in San
Antonio, Texas: the Baptist Medical Center, a general acute
care hospital at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇; Northeast Baptist Hospital, a general acute care
hospital at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇;
Southeast Baptist Hospital, a general acute care hospital at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; North Central
Baptist Hospital, a general acute care hospital at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; and St. Luke's
Baptist Hospital, a general acute care hospital at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇;
Hospital Businesses: all healthcare businesses owned,
leased or otherwise operated or conducted by Seller,
including the business of the Hospitals; provided that
Hospital Businesses shall not include the businesses
operated by the Joint Ventures;
HSR Act: the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended;
Immaterial Contract: Any Contract not otherwise
described in any of paragraphs (a) through (g) of Section
3.18 that (i) requires the future payment by Seller of
$75,000 or less or the future performance by Seller of
services having a value of $75,000 or less, or (ii) is
terminable by Seller at any time without cause upon notice
of 90 days or less, and that requires during the period
prior to termination the payment of $75,000 or less or the
future performance of services having a value of $75,000 or
less;
Indemnified Party: any Person entitled to
indemnification under Article 15;
Indemnifying Party: any Person obligated to indemnify
another Person under Article 15;
Independent Accountant: defined in Section 2.5(c);
Information Systems: the software, hardware,
application programs and similar systems described in
Schedule 2.1(g) that are owned, licensed or leased by Seller
or its Subsidiaries for use in the Hospital Businesses;
Initiating Party: defined in Section 16.2;
Institute of Health Education: an operating division of
Seller that provides allied professional health training
through its Schools of Professional Nursing, Surgical
Technology, Medical Imaging and Vocational Nursing;
Intellectual Properties: the marks, names, trademarks,
service marks, patents, patent rights, assumed names, logos
and copyrights owned by Seller and its Subsidiaries
(including variants of and applications for the foregoing);
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Inventory: all supplies, inventory and materials used
or consumed in the Hospital Businesses, including inventory
included in the physical count described in Section 2.5(b)
that was expensed but not consumed, but excluding inventory
held on consignment;
Investments: shares of capital stock of any
corporation, interests in partnerships or limited liability
companies, or other equity or debt instruments in any other
Person, and proceeds from the sale thereof;
Joinder Agreement: defined in Section 4.1;
Joint Ventures: North Central Baptist Imaging Center,
Northeast Baptist Imaging Center, Southeast Baptist Imaging
Center, Baptist Imaging Center, Lexington MR, Ltd., South
Texas MRI, Ltd., Northeast Baptist Ambulatory Surgery
Center, LLC, Medical Center Towers, Ltd., and Stone Oak
Medical Office Building, Ltd., Texas Airlife (subject to the
provisions of Section 6.11), and, subject to consummation
prior to Closing of the transaction described in clause (i)
of Section 6.10, the PHO;
Laundry Cooperative: Hospital Laundry Cooperative
Association, a Texas non-profit corporation;
Legal Requirements: with respect to any Person, all
statutes, ordinances, by-laws, codes, rules, regulations,
restrictions, and final and uncontested orders, judgments,
writs, injunctions, decrees, determinations or awards of any
Governmental Authority having jurisdiction over such Person
or any of such Person's assets or businesses;
License Agreement: defined in Section 11.3(b)(ii);
Losses: any and all damages, claims, costs, losses,
liabilities, expenses or obligations (including Taxes,
interest, penalties, court costs and reasonable attorneys'
and accountants' fees and expenses);
Material Adverse Effect: a material adverse effect,
either individually or in the aggregate, on the business,
assets, liabilities, financial condition or results of
operations of Seller or the Hospital Businesses or Vanguard,
as the case may be, taken as a whole, but excluding the
effect of (i) matters described in any Schedule, other than
any supplemental Schedule delivered pursuant to Section
17.1, or in the case of Vanguard, matters described in the
Vanguard SEC Documents filed on or before the Effective
Date, (ii) events or circumstances affecting or relating to
the future prospects of Seller and the Hospital Businesses
or Vanguard, as the case may be, (iii) changes in the
economy of the United States in general, and (iv) changes in
Legal Requirements or Government Payment Programs generally
applicable to owners or operators of general acute care
hospitals in San Antonio, Texas, in the case of Seller and
in the areas of Vanguard's operations, in the case of
Vanguard, and without limiting the generality of the
foregoing, a Material Adverse Effect shall be deemed to have
occurred if there is any event, occurrence, development or
state of circumstances or facts which, individually or in
the aggregate, has resulted in or could
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reasonably be expected to result in either (i) net patient revenue
of the Hospital Businesses for any three-month period (commencing
with the three month period ended September 30, 2002) being
less than 90% of the net patient revenue of the Hospital
Businesses, as the case may be, for the comparable three-
month period in the prior year, or (ii) adjusted days of the
Hospital Businesses for any three-month period (commencing
with the three month period ended September 30, 2002) being
less than 88% of the adjusted days of the Hospital
Businesses, as the case may be, for the comparable three-
month period in the prior year (in each case as net patient
revenue and adjusted days are reported in the Financial
Statements of Seller);
Materials of Environmental Concern: chemicals,
pollutants, contaminants, wastes (including medical waste),
toxic substances, petroleum and petroleum products,
including hazardous wastes under the Resource, Conservation
and Recovery Act, 42 U.S.C. 6903 et seq., hazardous
substances under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et
seq., asbestos, polychlorinated biphenyls and urea
formaldehyde, and low-level nuclear materials, special
nuclear materials or nuclear-byproduct materials, all within
the meaning of the Atomic Energy Act of 1954 as amended, and
any rules, regulations or policies promulgated thereunder;
Multiemployer Plan: defined in section 3(37) of ERISA
or section 4001(a)(3) of ERISA;
Net Working Capital: the difference between (i) those
certain current assets identified on Schedule 2.1(c) as
being acquired by Buyer and (ii) those certain current
liabilities identified on Schedule 2.3(a) or Schedule 2.3(b)
as being assumed by Buyer, but excluding from such
calculation any Excluded Assets and Excluded Liabilities;
New Foundation: a new foundation that Seller may decide
to form between the Effective Date and the Closing Date
which, if so formed, will be funded with a portion of the
proceeds of the transactions described in this Agreement;
Neutral: defined in Section 16.4;
Omitted Contracts: those Contracts of Seller relating
to the Hospital Businesses (i) that are not listed or
described on Schedule 2.1(e), (ii) that are not Immaterial
Contracts, and (iii) that are discovered after Closing;
Other Plan: any Contract, program or arrangement which
provides cash or non-cash benefits or perquisites to current
or former employees of Seller or Buyer, as the case may be,
but which is not an Employee Benefit Plan;
Party: any party to this Agreement, its successors and
assigns;
Party in Interest: a "party in interest" as defined in
section 3(14) of ERISA, and a "disqualified person" as
defined in the Code or Treasury Regulations issued pursuant
thereto;
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PBGC: the Pension Benefit Guaranty Corporation;
Permits: defined in Section 3.16;
Permitted Encumbrances: the Permitted Personal Property
Encumbrances and the Permitted Real Property Encumbrances;
Permitted Life Safety Repairs: those capital
expenditures relating to life and safety repair issues set
forth on a report attached as Schedule 1.1, provided that
Seller shall give Buyer reasonable prior written notice of
its intent to make each such repair and coordinate
reasonably with Buyer's Vice President - Facilities
Development in the actual manner of making each such repair;
Permitted Personal Property Encumbrances: those
Encumbrances described in Schedule 3.11 that are described
therein as being Permitted Personal Property Encumbrances;
Permitted Real Property Encumbrances: those
Encumbrances described in Schedule 3.12 that are described
therein as being Permitted Real Property Encumbrances;
Permitted Transferee: any one or more of (i) Vanguard,
(ii) any Subsidiary of Vanguard, (iii) any Person that
acquires all or substantially all of the shares of capital
stock of Vanguard and its Subsidiaries (including by merger
with or consolidation into such other Person), (iv) any
Person that acquires all or substantially all of the assets
and properties of Vanguard and its Subsidiaries, and (v) any
Person who is a lender or other "Secured Creditor" under and
pursuant to the Principal Credit Agreement;
Person: any individual, company, body corporate,
association, partnership, firm, joint venture, trust or
trustee;
PHO: the BHS Physician Hospital Organization, a Texas
non-profit corporation in which the Memorial Health
Foundation has a 50% interest;
Post-Closing Adjustments: defined in Section 2.5(c);
Preferred Shares: 30,000 shares of Vanguard Payable in
Kind Cumulative Redeemable Convertible Preferred Stock,
Series B, $0.01 par value per share, having the rights,
designations and preferences described in Exhibit A;
Prepaids: the prepaid expenses and deposits of the
Hospital Businesses identified on Schedule 2.1(c) as being
included in Net Working Capital;
Principal Credit Agreement: that certain Credit
Agreement, dated as of July 30, 2001, by and among Vanguard,
as borrower, the lenders from time to time party thereto,
Bank of America, N.A., as Administrative Agent, and Wachovia
Bank, National Association (formerly known as First Union
National Bank) and General Electric Capital Corporation, as
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Co-Documentation Agents, as the same may be amended, modi
fied, extended, renewed, replaced, restated, supplemented or
refinanced from time to time, and includes any agreement
extending the maturity of, refinancing or restructuring
(including but not limited to including additional borrowers
or guarantors or increasing the amount borrowed under such
agreement) all or any portion of the indebtedness under such
agreement or any successor agreements, whether or not with
the same agent, trustee, representative lenders or holders,
and all notes, guarantees, pledge agreements, security
agreements, mortgages and other instruments, agreements,
certificates or documents executed pursuant to any of the
foregoing by Vanguard or by Buyer;
Prohibited Transaction: defined in section 406 of ERISA
and section 4975 of the Code;
Projections: the financial assumptions and projections
prepared by Vanguard with respect to Vanguard's business,
dated September 27, 2002, delivered to Seller prior to the
Effective Date;
Purchase Offer: defined in Section 13.11;
Purchase Price: defined in Section 2.5(a);
Real Property: all real property legally owned or
leased by Seller and its Subsidiaries and used in the
conduct of the Hospital Businesses, as more particularly
described on Schedule 2.1(a), together with all buildings,
improvements and fixtures thereon and all appurtenances and
rights thereto;
Reportable Event: defined in section 4043 of ERISA;
Responding Party: defined in Section 16.2;
Schedules: the schedules attached to this Agreement and
incorporated herein by reference;
SEC: the Securities and Exchange Commission;
Securities Act: the Securities Act of 1933, as amended
from time to time;
Sections: sections of the Agreement;
Seller: Baptist Health System, a Texas non-profit
corporation;
Seller's Indemnified Persons: Seller and its
Affiliates, successors and assigns, and their respective
Affiliates, directors, trustees, officers, employees, agents
and representatives;
Shareholders' Agreement: defined in Section 11.3(b)(i);
Signing Schedules: defined in Section 17.1;
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Special Audited Financial Statements: the audited
consolidated balance sheet of Seller as of August 31, 2000,
and the audited consolidated statement of revenues and
expenses, and audited consolidated statement of cash flows
for the fiscal year then ended, together with the notes
thereto and the report therein of BDO ▇▇▇▇▇▇▇, LLP,
independent certified public accountants;
Special Capital Expenditures: defined in Section
2.5(a);
Special Synthetic Lease: the lease instrument in
respect of the Real Property described on Schedule 6.10;
Submission Date: defined in Section 16.3;
Subordinated Note: the Vanguard 8.18% Convertible
Subordinated Note Due 2012 to be issued to Seller at Closing
in the original principal amount of $17,641,800 and in
substantially the form attached as Exhibit B;
Subsidiary: with respect to any Person, (a) any
corporation of which more than 50% of the total voting power
of all classes of the equity interests (however designated)
entitled without regard to the occurrence of any contingency
to vote in the election of directors is owned by such Person
directly or through one or more Subsidiaries of such Person
and (b) any entity other than a corporation of which at
least a majority of the equity interest (however designated)
entitled without regard to the occurrence of any contingency
to vote in the election of the governing body, partners,
managers or others that will control the management of such
entity is owned by such Person directly or through one or
more other Subsidiaries of such Person. The Subsidiaries of
Seller are the Baptist Health System Foundation, Baptist
Venture Corp., BHS Medical Services Corporation, BMHS
Healthcare Corporation, and, subject to consummation prior
to Closing of the transaction described in clause (i) of
Section 6.10, Memorial Professional Services, Inc.;
Tax: any income, unrelated business income, gross
receipts, license, payroll, employment, excise, severance,
occupation, privilege, premium, net worth, windfall profits,
environmental (including taxes under section 59A of the
Code), customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real
property, personal property, recording, stamp, sales, use,
service, service use, transfer, registration, escheat,
unclaimed property, value added, alternative or add-on
minimum, estimated or other tax, assessment, charge, levy or
fee of any kind whatsoever, including payments or services
in lieu of Tax, interest or penalties on and additions to
all of the foregoing, which are due or alleged to be due to
any Governmental Authority, whether disputed or not;
Tax Return: any return, declaration, report, claim for
refund, information return or statement, including schedules
and attachments thereto and amendments, relating to Taxes;
11
Texas Airlife: Texas Airlife, Inc., a non-profit
corporation of which the Seller and the Bexar County
Hospital District located in San Antonio, Texas and doing
business as University Health System are the sole sponsors
through their equal rights to appoint its Board of
Directors;
Unaudited Financial Statements: the unaudited
consolidated balance sheets of Seller as of August 31, 2000,
2001 and 2002, and the unaudited consolidated statements of
revenue and expenses and unaudited consolidated statements
of cash flows for the fiscal years then ended, included in
Schedule 3.6;
Unbooked Employee Benefits: (i) all unused sick leave,
personal day and vacation accumulations of the Hired
Employees (whether in such form or in the form of paid time
off or extended illness bank plans) and the estimated
employer share of FICA Tax thereon, all to the extent not
otherwise included in Net Working Capital, (ii) unaccrued
contingent liabilities for recruitment bonuses for nurses
payable 25% upon commencement of employment with Seller, 25%
upon completion of one year's employment and 50% upon
completion of two years' employment and (iii) unaccrued
commitments for tuition reimbursement described in Section
7.3(f);
Vanguard: Vanguard Health Systems, Inc., a Delaware
corporation;
Vanguard Financial Statements: the audited consolidated
balance sheet of Vanguard as of June 30, 2002, and the
audited consolidated statement of revenue and expenses, and
audited consolidated statement of cash flows for the fiscal
years then ended, together with the notes thereto and the
report thereon of Vanguard's independent certified public
accountants;
Vanguard SEC Documents: defined in Section 5.8;
WARN Act: the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. 2101-2109.
1.2. Certain References. As used in this Agreement, and unless
the context requires otherwise:
(a) References to "include" or "including" mean including
without limitation;
(b) References to "partners" include general and limited
partners of partnerships and members of limited liability
companies;
(c) References to "partnerships" include general and limited
partnerships, joint ventures and limited liability companies;
(d) References to any document are references to that document
as amended, consolidated, supplemented, novated or replaced by
the parties thereto from time to time;
12
(e) References to any Legal Requirements or law are references
to those Legal Requirements or that law as amended, consolidated,
supplemented or replaced from time to time and all rules and
regulations promulgated thereunder; provided that with respect to
any representation and warranty hereunder, references to Legal
Requirements or law shall be to those Legal Requirements or that
law that is in effect on the date such representation and
warranty is made, re-made or affirmed;
(f) References to time are references to San Antonio, Texas
time;
(g) References to knowledge, including the qualification of any
representation, warranty or other statement in this Agreement by
the words "known" or "knowingly" or by the phrase "to the best
knowledge" or by any variant thereof means as of the date hereof
(i) in the case of Seller, actual knowledge of each of the
Persons whose names are set forth on Schedule 1.2(g)(i), after
due inquiry by Seller of such Persons, but no further inquiry by
such Persons, and (ii) in the case of Buyer or Vanguard, actual
knowledge of each of the Persons whose names are set forth on
Schedule 1.2(g)(ii), after due inquiry by Buyer or Vanguard of
such Persons, but no further inquiry by such Persons;
(h) The gender of all words includes the masculine, feminine and
neuter, and the number of all words includes the singular and
plural; and
(i) The Table of Contents, the division of this Agreement into
Articles and Sections, and the use of captions and headings in
connection therewith are solely for convenience and shall have no
legal effect in construing the provisions of this Agreement.
2.0. Purchase and Sale of Assets and Related Matters
2.1. Sale of Assets. Subject to the terms and conditions of this
Agreement, at Closing Seller shall sell, assign, convey, transfer
and deliver to Buyer, or cause to be sold, assigned, conveyed,
transferred and delivered to Buyer, free and clear of all
Encumbrances other than the Permitted Encumbrances, the Assets,
including the following:
(a) The Real Property described in Schedule 2.1(a);
(b) All equipment (including medical and computer equipment at
the Hospital Businesses), vehicles, furniture and furnishings and
other tangible personal properties owned by Seller and used in
the conduct of the Hospital Businesses, including the tangible
personal property listed in Schedule 2.1(b);
(c) The current assets identified on Schedule 2.1(c) as being
included in Net Working Capital;
(d) Except as described in Section 2.2(a), all financial,
patient, medical staff, personnel and other records of the
Hospital Businesses (including equipment records,
medical/administrative libraries, medical records, documents,
catalogs, books, records, files and operating manuals);
13
(e) All right, title and interest of Seller, or to the extent
applicable its Subsidiaries, in the Assumed Contracts, including
those listed on Schedule 2.1(e);
(f) All licenses, permits and other approvals (including pending
approvals) of Governmental Authorities, to the extent legally
assignable, relating to the ownership, development and operation
of the Hospital Businesses, including those described on
Schedule 2.1(f);
(g) Except as described in Section 2.2(m), all goodwill, general
intangibles and Intellectual Properties owned by Seller and used
in connection with the ownership and operation of the Hospital
Businesses, and the Information Systems owned or licensed by
Seller and used in connection with the ownership and operation of
the Hospital Business; the Information Systems used by Seller on
a systemwide basis or otherwise material to the operation of the
Hospital Businesses are as described in Schedule 2.1(g);
(h) All property, real, personal or mixed, tangible or
intangible, of Seller and its Subsidiaries arising or acquired
between the Effective Date and the Closing Date;
(i) The ownership or investment interests, including all
transferable rights relating thereto, of Seller and its
Subsidiaries in the Joint Ventures;
(j) All insurance proceeds received by Seller or payable to
Seller and all deductibles, copayments and self-insurance
requirements payable by Seller arising in connection with damage
to the Assets occurring prior to the Closing Date, to the extent
not expended for the repair or restoration of the Assets;
(k) The Real Property located in Boerne, Texas owned by Memorial
Professional Services, Inc., and, subject to concurrent payoff at
Closing by Seller of the Special Synthetic Lease, the Real
Property leased by Seller under the Special Synthetic Lease;
(l) The 50% interest in the PHO owned by Memorial Health
Foundation;
(m) Claims of Seller against third parties relating to the
Assets, ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
otherwise, but excluding such claims relating to the Excluded
Assets and claims and legal rights of Seller relating to Excluded
Liabilities; and
(n) All proceeds, if any, from the sale of property, plant or
equipment of Seller or of Seller's interest in any of the Joint
Ventures from and after August 31, 2002, except where any such
proceeds are used by Seller to purchase replacement property,
plant or equipment for that sold.
2.2. Excluded Assets. Notwithstanding the generality of
Section 2.1, the following assets (the "Excluded Assets") are not
a part of the sale and purchase contemplated by this Agreement
and are excluded from the Assets:
14
(a) Any records of Seller or any Affiliates which by law Seller
or such Affiliate is required to retain in its possession, which
records are described on Schedule 2.2(a);
(b) All cash (including cash received as a result of the
collection of the Accounts Receivable in the ordinary course of
business), cash equivalents, short term investments, and "assets
limited as to use: -under debt agreements; -Board appropriated;
and -funds restricted by donor", as such terms are used on the
Interim Balance Sheet;
(c) Inventory disposed of or exhausted after the Effective Date
and prior to the Closing Date in the ordinary course of the
Hospital Businesses, and Assets transferred or disposed of in
accordance with Section 6.2(e);
(d) All appeals and appeal rights relating to Cost Report
settlements, as such term is used on the Interim Balance Sheet;
(e) All funds held by trustees pursuant to bond indentures of
Seller;
(f) All physician loans and receivables for amounts owed to
Seller by physicians;
(g) The name "Baptist", and any derivatives including the word
"Baptist" that are currently in use by Seller, Buyer's use of
which will be governed by the terms of the License Agreement;
(h) The Assets and properties to be contributed to the New
Foundation or retained by Seller listed on Schedule 2.2(h);
(i) All claims, rights, interests and proceeds with respect to
refunds of Taxes (including property taxes) for periods ending on
or prior to the Closing Date and all rights to pursue appeals of
the same, unless the claims, rights, interests and proceeds
relate to refunds of Taxes included in the computation of Net
Working Capital or paid by Seller to Buyer after any prorations
for Taxes under Section 2.6;
(j) Any asset that would revert to Seller or an Affiliate of
Seller as employer upon the termination of any Employee Benefit
Plan, including assets representing a surplus or overfunding of
any Employee Benefit Plan;
(k) Any board-designated, restricted or escrowed funds or
assets, or funds or assets held in trust for any Employee Benefit
Plan maintained by Seller or to which Seller contributed;
(l) All proceeds from insurance policies payable or paid to
Seller to the extent such amounts reimburse Seller for amounts
expended to repair or replace any Asset;
(m) Items of Intellectual Property and Information Systems set
forth on Schedule 2.2(m);
15
(n) Seller's investment interest in the Laundry Cooperative;
(o) The claims against third Persons described on Schedule
2.2(o); and
(p) Any other assets listed or described on Schedule 2.2(p) as
Excluded Assets or excluded by mutual written agreement of the
Parties.
2.3. Assumed Liabilities. As of the Closing Date, Buyer shall
assume the Assumed Debt as set forth on Schedule 2.3(a) and the
Assumed Liabilities as set forth on Schedule 2.3(b).
2.4. Excluded Liabilities. Notwithstanding anything to the
contrary set forth herein, under no circumstance shall Buyer
assume or be obligated to pay, and none of the Assets shall be or
become liable for or subject to any of the Excluded Liabilities,
including the following, which shall be and remain liabilities of
Seller:
(a) Liabilities or obligations of Seller for Taxes in respect of
periods ending on or prior to the Closing Date or resulting from
the consummation of the transactions contemplated herein, other
than (i) those included in the computation of Net Working Capital
and (ii) amounts paid by Seller to Buyer after any prorations for
Taxes under Section 2.6;
(b) Liabilities or obligations arising from any Excluded Assets;
(c) Liabilities or obligations arising from any and all
indebtedness of Seller for borrowed money other than the Assumed
Debt;
(d) Liabilities or obligations arising under any Assumed
Contract before the Closing Date or resulting from any breach or
default occurring prior to the Closing Date under any Assumed
Contract (in each case solely to the extent of any such liability
accruing or related to the period on or before the Closing Date),
liabilities arising out of, and directly attributable to, the
assignment to Buyer at Closing of any Assumed Contract, and
liabilities arising under any Contracts that are not Assumed
Contracts;
(e) Liabilities or obligations arising out of or in connection
with claims, litigation or proceedings described in
Schedule 3.22, and claims, litigation and proceedings (whether
instituted prior to or after Closing) for acts or omissions which
allegedly occurred prior to the Closing Date, including
litigation and other actions arising from medical staff
credentialing decisions at the Hospital Businesses prior to the
Closing Date (in each case solely to the extent of any such
liability accruing or related to the period on or before the
Closing Date);
(f) Liabilities or obligations under the ▇▇▇▇-▇▇▇▇▇▇ Act or
other restricted grant or loan programs with respect to
restricted grants or loans occurring prior to the Closing Date
and to the extent such liabilities or obligations are
attributable to events occurring on or before the Closing Date;
(g) Liabilities or obligations to employees of Seller, Employee
Benefit Plans, the Internal Revenue Service, PBGC or any other
Governmental Authority, arising from or
16
relating to periods priorto Closing (whether or not triggered by
the transactions contemplated by this Agreement and whether or not imposed
by Legal Requirements directly on Buyer as the transferee of the
Assets), including liabilities or obligations arising under any
Employee Benefit Plan or severance pay program or arrangement
maintained by Seller prior to Closing, EEOC claim, unfair labor
practice, unemployment compensation, and wage and hour practice,
as a result of acts of Seller prior to Closing, except (i) to the
extent included in Net Working Capital, and (ii) Unbooked
Employee Benefits;
(h) Cost Report settlement payables relating to all Cost Report
periods ending on or before the Closing Date;
(i) Liabilities or obligations of Seller in respect of periods
ending on or prior to the Closing Date arising under the terms of
any third-party payor programs or Government Payment Programs,
including any recoupment rights of the Health Care Financing
Administration or the Texas Department of Health, and any
liability arising pursuant to any third-party payor program or
Government Payment Programs as a result of the consummation of
the transactions contemplated herein, including recapture of
previously reimbursed expenses;
(j) Liabilities or obligations relating to or arising out of the
conduct of the Warm Springs + Baptist Rehabilitation Network and
Seller's ownership and economic interests therein;
(k) Liabilities or obligations of Seller arising under any
Contract of the Joint Ventures before the Closing Date or
resulting from any breach or default occurring prior to the
Closing Date under any Contract of the Joint Ventures, and
liabilities or obligations of Seller arising out of or in
connection with claims, litigation or proceedings (whether
instituted prior to or after Closing) for acts or omissions of
any of the Joint Ventures which occurred prior to the Closing
Date (in each case solely to the extent of any such liability
accruing or related to the period on or before the Closing Date);
provided that for purposes of Section 15.1(c) Seller shall
indemnify only for actual liability, if any, for which Buyer is
held responsible under any such Contract of the Joint Ventures
but not for any diminution in value of the interest in such Joint
Venture assigned to Buyer or other consequential damages; and
(l) Penalties, fines, settlements, interest, costs and expenses
arising out of or incurred as a result of any actual or alleged
violation by Seller of any Legal Requirement that occurred prior
to the Closing Date, including any claims, litigation or other
actions relating to Environmental Laws (in each case solely to
the extent of any such liability accruing related to the period
on or before the Closing Date).
2.5. Purchase Price; Post-Closing Adjustments.
(a) At Closing, Buyer shall assume the Assumed Liabilities and
the Assumed Debt and pay Seller a purchase price (the "Purchase
Price") determined as follows, subject to the Post-Closing
adjustments as described in Section 2.5(c):
17
(i) $295,000,000;
plus (ii) the amount, if any, by which Net Working
Capital on the Closing Balance Sheet exceeds
$23,000,000; or
minus (iii) the amount, if any, by which Net
Working Capital on the Closing Balance
Sheet is less than $23,000,000; and
plus (iv) the amount of capital expenditures
incurred by Seller from and after the
Effective Date and prior to the Closing Date
in connection with Permitted Life Safety
Repairs, in an amount not to exceed
$3,500,000; and
plus (v) such other capital expenditures incurred
by Seller from and after the Effective Date
and prior to the Closing Date that are
approved in writing by both Seller and by
▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice Chairman of Buyer, such
approval not to be unreasonably withheld (the
"Special Capital Expenditures").
(b) No more than three days prior to the Closing Date, Seller,
at its sole cost and expense, shall conduct (and Buyer shall be
entitled to monitor at its sole cost and expense) a physical
count as of such date of the Inventory that is useable in the
ordinary course of the Hospital Businesses (having due regard for
the services offered by the Hospital Businesses as of the
Effective Date), and shall prepare a schedule indicating the
value of such Inventory (determined at cost on a first-in first-
out basis for each item). Seller shall give Buyer at least five
business days' prior written notice of the date that the
Inventory is to be counted and shall permit Buyer to monitor the
count. The Parties acknowledge that the physical count to be
taken pursuant to this Section 2.5(b) will not be conducted until
just prior to the Closing Date and, therefore, the results of
such physical count will not be available until some time after
the Closing Date. Accordingly, for purposes of the Closing
Balance Sheet, the Net Working Capital shall reflect the value of
the Inventory determined pursuant to the physical count described
in this Section.
(c) No more than three business days prior to Closing, Buyer and
Seller shall agree on the value as of the Closing Date of the
Prepaids to be purchased by Buyer and estimates of fees, expenses
and other items as of the Closing Date. Buyer shall pay to
Seller at Closing by wire transfer of immediately available funds
to the account or accounts designated by Seller in writing an
amount (the "Cash Portion of the Purchase Price") equal to the
Purchase Price minus (i) the Assumed Debt, (ii) $3,500,000, as
the agreed value of the Unbooked Employee Benefits, (iii) the
value of the other Assumed Liabilities described in clause (vi)
of the definition of "Assumed Liabilities" as scheduled on
Schedule 2.3(b), (iv) $30,000,000, payable by delivery of the
Preferred Shares, and (v) $17,641,800, payable by delivery of the
Subordinated Note, and (vi) $358,200, payable by delivery of the
General Partner Shares. Within 60 days after the Closing Date,
Seller will deliver to Buyer the Closing Balance Sheet, prepared
in accordance with generally accepted accounting principles
18
consistently applied, and the Cash Portion of the Purchase Price
and deductions described above in this Section 2.5(c) shall be
recalculated, after taking into account any prorations under
Section 2.6, to reflect the difference between $23,000,000 (as
adjusted in the manner described in the first sentence of this
Section) and the Net Working Capital on the Closing Balance Sheet
(the "Post-Closing Adjustments"), provided that such
recalculation shall be dollar-for-dollar in the differences
between such booked amounts and no consideration in the
recalculations shall be given to the fact that under generally
accepted accounting principles consistently applied a materiality
standard applies to Financial Statements. If Buyer disputes any
entry in the Closing Balance Sheet relevant to the calculation of
the Post-Closing Adjustments, and/or disputes the value of the
Inventory, and such dispute is not resolved to the mutual
satisfaction of Seller and Buyer within 90 days after the Closing
Date, Seller and Buyer each shall have the right to require that
such dispute be submitted to a certified independent public
accounting firm as Seller and Buyer may then mutually agree upon
in writing (the "Independent Accountant"), acting as experts and
not as arbitrators, to review Seller's books and resolve the
computation or verification of the disputed Closing Balance Sheet
entries in accordance with the provisions of this Agreement and
otherwise where applicable in accordance with generally accepted
accounting principles applied on a consistent basis. The
Independent Accountant shall make its determination of the Post-
Closing Adjustments, if any, within 30 days of its engagement by
the Parties. The determination of the Independent Accountant
shall be final and binding on the Parties. Seller and Buyer
shall equally split the fees and expenses of any such submission
to the Independent Accountant.
(d) If the amount of the Purchase Price owed by Buyer to Seller
increases or is reduced as a result of the Post-Closing
Adjustments, each Party shall make appropriate payment to the
other within five business days after determination of the amount
or amounts owed by or to such Party. Any payment required by
this Section shall be made by wire transfer of immediately
available funds to an account or accounts designated by the
payee, and the Parties shall execute such receipts or other
acknowledgments as are reasonably necessary to evidence such
payments.
(e) At Closing, the General Partner shall issue and deliver to
Seller a stock certificate evidencing Seller's ownership of the
General Partner Shares and Vanguard shall issue and deliver to
Seller (i) a certificate evidencing Seller's ownership of the
Preferred Shares and (ii) the Subordinated Note.
2.6. Prorations. At Closing, and to the extent not included in
Net Working Capital, Buyer and Seller shall prorate real estate
and personal property lease payments, real estate and personal
property Taxes and other assessments, and all other income and
expenses (including utilities) with respect to the Assets which
are normally prorated upon a sale of assets of a going concern.
There will be no proration of real estate or other Taxes in
respect of which Seller is exempt immediately prior to Closing
from the payment of such Taxes.
2.7. Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets as proposed by Buyer and approved by
Seller, in accordance with their fair market values consistent
19
with section 1060 of the Code and as set forth on Schedule 2.7.
Such allocation shall be binding upon the Parties for all
applicable federal, state, local and foreign Tax purposes. Seller
and Buyer shall report gain or loss or cost basis, as the case
may be, in a manner consistent with such allocation on all Tax
Returns filed by any of them after Closing and not voluntarily
take any inconsistent position therewith in any administrative or
judicial proceeding relating to such returns. Seller and Buyer
shall exchange mutually acceptable and completed Internal Revenue
Service Forms 8594 (including supplemental forms, if required),
which they shall use to report the transaction contemplated
hereunder to the Internal Revenue Service in accordance with such
allocation.
3.0. Representations and Warranties of Seller
Except as disclosed in the Schedules, Seller makes the
following representations and warranties to Buyer on and as of
the Effective Date and shall be deemed to make them again at and
as of the Closing:
3.1. Organization. Seller is a non-profit corporation duly
organized and validly existing in good standing under the laws of
the State of Texas. Seller is not licensed, qualified or
admitted to do business in any jurisdiction other than in the
State of Texas and there is no other jurisdiction in which the
ownership, use or leasing of any of Seller's assets or
properties, or the conduct or nature of its business, makes such
licensing, qualification or admission necessary.
3.2. Powers; Consents; Absence of Conflicts, Etc. Seller has the
requisite power and authority to conduct the Hospital Businesses
as now being conducted, to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance by Seller of this Agreement and the Closing Documents
to which Seller is or becomes a party and the consummation by
Seller of the transactions contemplated herein and therein:
(a) are within Seller's corporate powers, are not in
contravention of the terms of its articles of incorporation,
bylaws and other governing documents, if any, as amended to date,
and, subject to approval of this Agreement and the transactions
contemplated hereby by the BGCT prior to Closing, have been duly
authorized by all appropriate corporate and member action;
(b) do not conflict with, result in any breach or contravention
of, or permit the acceleration of the maturity of, any
liabilities of Seller (other than Excluded Liabilities satisfied
as of the Closing Date), and do not create or permit the creation
of any Encumbrance on or affecting any of the Assets;
(c) do not violate any Texas law to which Seller or the Assets
may be subject (including any bulk transfer or similar law),
other than such violations which would not have a Material
Adverse Effect; and
(d) except as set forth on Schedule 3.2, do not conflict with or
result in a breach or violation of any material Contract to which
Seller is a party or by which it is bound (other
20
than Excluded
Liabilities satisfied as of the Closing Date), other than such
violations which would not have a Material Adverse Effect.
3.3. Binding Agreement. This Agreement and each of the Closing
Documents to which Seller is or becomes a party are (or upon
execution will be) valid and legally binding obligations of
Seller, enforceable against Seller in accordance with the
respective terms hereof or thereof, except as enforceability may
be restricted, limited or delayed by applicable bankruptcy or
other laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
3.4. Subsidiaries and Third Party Rights. Except as set forth on
Schedule 3.4, there are no Contracts with or rights of any Person
to acquire, directly or indirectly, any material Assets, or any
interest therein, other than Contracts entered into in the
ordinary course of the Hospital Businesses. Seller holds no
interest in any Person that conducts a healthcare business other
than the Joint Ventures and the Subsidiaries of Seller identified
on Schedule 3.4. The Joint Ventures and Laundry Cooperative are
accounted for by Seller as investments and not consolidated with
the financial results of the Hospitals. The Subsidiaries of
Seller are the Baptist Health System Foundation, Baptist Venture
Corp., BHS Medical Services Corporation, BMHS Healthcare
Corporation and, subject to consummation prior to Closing of the
transaction described in clause (i) of Section 6.10, Memorial
Professional Services, Inc.
3.5. Legal and Regulatory Compliance. To Seller's knowledge,
Seller has timely filed all reports, data and other information
required to be filed with Governmental Authorities, where a
failure to file timely would have a Material Adverse Effect.
Except as set forth on Schedule 3.5, Seller has not received
written notice from any Governmental Authority of any proceeding
or investigation by Governmental Authorities alleging or based
upon a violation of any Legal Requirements that has not expired
and that would otherwise have a Material Adverse Effect on the
Hospital Businesses. To Seller's knowledge, Seller has not been
threatened by any Person with any proceeding or investigation by
Governmental Authorities alleging a violation of any Legal
Requirements. Seller has delivered to Buyer a complete and
genuine copy of (i) any corporate integrity agreement with the
Office of Inspector General of the United States Department of
Health and Human Services or written agreement with such
Governmental Authority to establish or maintain a corporate
integrity policy or program applicable to any of the Hospital
Businesses and (ii) any settlement or other agreement with any
other Governmental Authority, other than participation agreements
with Medicare and Medicaid, that imposes any continuing
obligations on any of the Hospital Businesses or contains
obligations which have not been fully discharged. To Seller's
knowledge, Seller has fully and timely complied with all of the
terms and conditions thereof, and all certifications, audits and
reports required to be delivered and all documents required to be
retained under agreements with the Office of the Inspector
General described in the foregoing sentence that affect the
Hospital Businesses have been timely delivered and retained.
3.6. Financial Statements. Attached as Schedule 3.6 are copies
of the Unaudited Financial Statements. The Financial Statements
fairly present the financial condition and results of operations
of the Hospital Businesses as of the respective dates thereof and
for the periods therein referred to, all in accordance with
generally accepted accounting principles, subject, in the case of
unaudited Financial Statements, to normal recurring year-end
adjustments (the effects of which will
21
not have a Material
Adverse Effect) and the absence of notes (which, if presented,
would not differ materially from those included in the Audited
Financial Statements); and the Financial Statements reflect the
consistent application of such accounting principles throughout
the periods involved.
3.7. Operation of the Hospital Businesses. The Assets constitute
all assets, properties, goodwill and businesses necessary to
operate the Hospital Businesses substantially in the manner in
which they have been conducted by Seller since August 31, 2001,
except (i) as set forth on Schedule 3.7, and (ii) for property,
plant and equipment otherwise sold or disposed of since such date
resulting in gross proceeds not exceeding $750,000 in the
aggregate. Schedule 3.7 sets forth a list of the ten largest non-
governmental payors of the Hospital Businesses, determined based
on revenues from services provided for the fiscal year ended
August 31, 2001. To Seller's knowledge, no payor listed on
Schedule 3.7 intends to terminate or materially curtail its
business relationship with or materially reduce reimbursement
rates to the Hospitals.
3.8. Recent Activities. Since August 31, 2002 and except as set
forth on Schedule 3.8:
(a) No material damage, destruction or loss (whether or not
covered by insurance) has occurred affecting the Assets;
(b) Except in the ordinary course of the Hospital Businesses in
accordance with existing Hospital personnel policies, Seller has
not increased or agreed to increase the compensation payable to
any of the employees or (to Seller's knowledge, to) agents of the
Hospital Businesses or agreed to make any bonus that has not been
paid or severance payment to any of the employees or (to Seller's
knowledge, to) agents of the Hospital Businesses, and has not
employed any additional management personnel in respect of the
Hospital Businesses;
(c) No labor dispute has occurred that has had or would have a
Material Adverse Effect;
(d) Seller has not sold, assigned, transferred, distributed or
otherwise disposed of any of the Assets, except in the ordinary
course of the Hospital Businesses, and it has not sold or
factored, or agreed to sell or factor, any Accounts Receivable;
(e) No Encumbrance has been imposed on any of the Assets, other
than the Permitted Encumbrances;
(f) Seller has not canceled or waived any rights in respect of
the Assets, except in the ordinary course of the Hospital
Businesses and except for settlements of disputes which have not
had and will not have a Material Adverse Effect;
(g) There has been no change in any accounting method, policy or
practice of Seller with respect to the Hospital Businesses;
22
(h) Other than compensation paid in the ordinary course of
employment, Seller has not paid any amount to, sold any Assets
to, or entered into any Contract with, any officer or director,
trustee or governor of Seller;
(i) Seller has not paid or agreed to pay to any Person damages,
fines, penalties or other amounts in respect of actual or alleged
violation of any Legal Requirement;
(j) Seller has not instituted any new, terminated, amended or
otherwise modified any Employee Benefit Plan or Other Plan,
except for amendments required to comply with applicable Legal
Requirements;
(k) Seller has not entered into or agreed to enter into any
transaction outside the ordinary course of the Hospital
Businesses that would result in a liability or obligation of
Seller in excess of $75,000; and
(l) to Seller's knowledge, no event or circumstance has occurred
which has had or reasonably could be expected to have a Material
Adverse Effect.
3.9. Accounts Receivable; Inventory.
(a) The Accounts Receivable, to the extent uncollected, are
valid and existing and represent monies due for goods sold and
delivered and services performed in bona fide commercial
transactions, have been billed or are billable and, except as set
forth on Schedule 3.9, are not subject to any Encumbrances; to
Seller's knowledge, except for the application of deposits held
by the Hospital Businesses, there are no refunds, discounts or
setoffs payable or assessable with respect to the Accounts
Receivable not reflected in the Financial Statements. Since
August 31, 2000, no Accounts Receivable that have been written
off have been sold by Seller.
(b) All Inventory is carried at cost on a first-in first-out
basis. All items of Inventory on hand consist of items of a
quality usable or saleable in the ordinary course of business,
except for those items which are obsolete, below standard quality
or in the process of repair. The quantities of Inventory are at a
level consistent with the quantities of Inventory maintained in
the ordinary course of the Hospital Businesses.
3.10. Equipment. Schedule 2.1(b) includes a depreciation
schedule as of the date set forth therein that, to Seller's
knowledge, takes into consideration major items of equipment
associated with, or constituting any part of, the Assets. To
Seller's knowledge and except as described on Schedule 3.10, all
equipment used in the operations of the Hospital Businesses,
whether reflected in the Financial Statements or otherwise, is
maintained and is in operating condition, except for such non-
operative equipment which, individually or in the aggregate, does
not have a Material Adverse Effect. Except as set forth on
Schedule 3.10 to Seller's knowledge, all major medical equipment
has been maintained substantially in accordance with manufacturer
requirements, and, if required by applicable Contract or law,
maintenance logs or journals with respect to such major medical
23
equipment have been maintained and Seller has made such
maintenance logs or journals available to Buyer.
3.11. Title to Personal Property. Seller owns good and valid
title or leasehold interests in all Assets other than the Real
Property, free and clear of any Encumbrances other than the
Encumbrances described in Schedule 3.11. At Closing Seller will
convey to Buyer good and valid title to or leasehold interests
in, as the case may be, all Assets other than the Real Property
owned by Seller, free and clear of any Encumbrances other than
the Permitted Personal Property Encumbrances.
3.12. Real Property.
(a) Seller owns fee simple, beneficial or leasehold interests
(as the case may be) in the Real Property described in
Schedule 2.1(a), together with those buildings, improvements and
fixtures attached to Real Property owned by Seller described in
Schedule 2.1(a) and all appurtenances and rights thereto, free
and clear of any Encumbrances other than the Encumbrances
described on Schedule 3.12.
(b) The Real Property described in Schedule 2.1(a) comprises all
of the real property owned or leased by Seller or its
Subsidiaries that is associated with or employed in the current
operation of the Hospital Businesses.
(c) At Closing Seller will convey to Buyer (and/or cause its
Subsidiaries to convey to Buyer) fee simple or leasehold
interests (as the case may be) in all Real Property, free and
clear of any Encumbrances other than the Permitted Real Property
Encumbrances.
(d) Seller has not received notice of condemnation or similar
proceedings relating to the Real Property or any part thereof.
(e) No part of the Real Property contains or is located within
any flood plain, navigable water or other body of water,
tideland, wetland, marshland or any other area which is subject
to special State, federal or municipal regulation, control or
protection (other than zoning or other land use regulations
customarily applicable to all real estate within the applicable
jurisdiction).
(f) Except as set forth on Schedule 3.12, there are no Persons
in possession of, or, to Seller's knowledge, claiming any
possession, adverse or not, to or other interest in, any portion
of Seller's interest in the Real Property, other than Seller,
whether as lessees, tenants at sufferance, trespassers or
otherwise.
(g) Except as set forth in Schedule 3.12, no commitments have
been made to any tenant for repairs or improvements other than
for normal repairs and maintenance in the future or improvements
or finish-out work required by the tenant Contract, and no rents
due under any of the Contracts with tenants have been assigned or
hypothecated to, or encumbered by, any Person.
24
3.13. Environmental Matters. Notwithstanding any other
provision of this Agreement, this Section 3.13 contains the only
representations or warranties of Seller with respect to
Environmental Laws affecting the Hospital Businesses, and no
other statement or representation or warranty of Seller in any
other document delivered to or received by or on behalf of Buyer
in connection with the transactions contemplated by this
Agreement shall be deemed to be a representation or warranty
relating to Environmental Laws.
(a) To Seller's knowledge, the Hospital Businesses are in
compliance with all Environmental Laws except where the failure
to be in compliance would not have a Material Adverse Effect. To
Seller's knowledge, the Hospital Businesses have all material
permits, licenses and approvals which are necessary under
Environmental Laws for their operation as currently conducted,
except for such incidental licenses, permits, and other
authorizations which would be readily obtainable by any qualified
applicant without undue burden in the event of a lapse. All
Governmental Permits required under Environmental Laws that are
currently owned, held, or possessed by the Hospital Businesses
are listed in Schedule 3.13.
(b) The Hospital Businesses are not currently subject to any
pending or, to Seller's knowledge, threatened judicial or
administrative investigation, proceeding, order, judgment, decree
or settlement alleging or relating to a violation of or liability
under any Environmental Law which occurred prior to the Closing
Date.
(c) None of the Hospital Businesses is subject to any pending
or, to Seller's knowledge, threatened order from or claim by any
Governmental Authorities or third party claimant relating to the
release of any Materials of Environmental Concern which occurred
prior to the Closing Date in violation of any Environmental Law.
Except as set forth in Schedule 3.13, none of the Hospital
Businesses has reported an unpermitted release pursuant to any
Environmental Laws and, to Seller's knowledge, no unpermitted
release of any Materials of Environmental Concern in violation of
any Environmental Laws has occurred at or affecting the Real
Property or the Hospital Businesses.
(d) None of the Hospital Businesses has received written notice
from Government Authorities or a third party claimant to the
effect that it is or may be liable under Environmental Law as a
result of the storage, disposal, or arrangement for disposal of
Materials of Environmental Concern which occurred prior to the
Closing Date in violation of Environmental Laws.
(e) Except as set forth on Schedule 3.13, there are no
underground storage tanks located on the Real Property.
(f) Seller has provided to Buyer a copy of Seller's asbestos
operation and maintenance program for the Hospital Businesses.
(g) To Seller's knowledge, no polychlorinated biphenyls are used
or stored at the Real Property, except as set forth on Schedule
3.13.
25
3.14. Intellectual Properties and Information Systems. To
Seller's knowledge:
(a) Seller has the right to use the Intellectual Properties used
by Seller in the conduct of the Hospital Businesses, and no
proceedings have been instituted or threatened which challenge
Seller's right to use the Intellectual Property.
(b) Seller has the right to use the Information Systems, and no
proceedings have been instituted or threatened which challenge
Seller's use of such software, hardware application programs and
similar systems.
3.15. Insurance. Schedule 3.15 describes all insurance
arrangements, including self-insurance, in place for the benefit
of the Assets and the conduct of the Hospital Businesses. With
respect to third party insurance, Schedule 3.15 sets forth the
name of each insurer, whether such insurer is an Affiliate of
Seller, and the number, coverage, limits, term and premium for
each policy of insurance purchased or held by Seller covering the
ownership and operation of the Assets and the Hospital
Businesses. All of such policies are now and until Closing will
remain valid, outstanding, in full force and effect, and
enforceable with no premium arrearages. Except as set forth on
Schedule 3.15, since August 31, 1999, Seller has not been denied,
or reduced or requested a reduction in the scope or amount of,
any insurance or indemnity bond coverage with respect to the
ownership or operation of the Assets or the Hospital Businesses.
Except as set forth on Schedule 3.15, no insurance carrier has
canceled or reduced, or given notice of its intention to cancel
or reduce, any insurance coverage with respect to the Hospital
Businesses, and, to Seller's knowledge, there exist no grounds to
cancel or avoid any such policies or the coverage provided
thereby. True and correct copies of all such policies and any
endorsements thereto have been delivered to Buyer.
3.16. Permits and Licenses. Schedule 3.16 contains an
accurate list and summary description of all material licenses,
permits, franchises and certificates of need (including
applications therefor), except for those otherwise identified in
Schedule 3.13, in effect as of the date hereof, owned or held by
Seller relating to the ownership, development or operations of
the Hospital Businesses and the Assets (collectively, the
"Permits"), all of which, to Seller's knowledge, are in full
force and effect. Each of the Hospitals is duly licensed as an
acute care hospital by the appropriate state agencies, and all
Hospital departments or other Hospital Businesses that are
required to be separately licensed are duly licensed by the
appropriate state agencies and are in compliance in all material
respects with such licensing requirements. Seller has provided
to Buyer complete and genuine copies of the latest Joint
Commission on Accreditation of Health Care Organizations,
HCFA/CMS, Texas Department of Health licensure/survey and/or fire
marshal reports of the Hospital Businesses and plans of
correction or responses thereto. The Hospitals have taken or are
taking all reasonable steps to correct all material deficiencies
noted therein.
3.17. Government Payment Programs; Accreditation. Each of
the Hospitals has current and valid provider Contracts with the
Government Payment Programs and/or their fiscal intermediaries or
paying agents and, to Seller's knowledge, complies with the
conditions of participation therein except to the extent that a
failure to so comply would not have a Material Adverse Effect.
To Seller's knowledge, each of the Hospitals is entitled to
receive and is receiving payment under the Government Payment
Programs for services rendered to qualified beneficiaries and is
not subject to
26
any withholds or offsets in respect thereof, other
than withholds or offsets which individually or in the aggregate
do not have a Material Adverse Effect. The Cost Reports were
filed when due for all Cost Report periods through August 31,
1999. The Cost Reports have been audited and Notices of Program
Reimbursement issued for all Cost Report periods through August
31, 1997. All amounts shown as due from Seller in the Cost
Reports were remitted with such reports and all amounts shown in
the Notices of Program Reimbursement as due have been paid.
Except to the extent liabilities and contractual adjustments of
Seller under the Government Payment Programs have been properly
reflected and adequately reserved in the Financial Statements, to
Seller's knowledge, Seller has not received or submitted any
claim for payment in excess of the amount provided by law or
applicable Contract and Seller has not received notice of any
dispute or claim by any Governmental Authority, fiscal
intermediary or other Person regarding the Government Payment
Programs, or the Hospitals' participation therein. Each of the
Hospitals is duly accredited by the Joint Commission on
Accreditation of Healthcare Organizations and/or other
accrediting organizations as described on Schedule 3.17. Seller
has provided to Buyer complete and genuine copies of the most
recent accreditation survey reports, deficiency lists, statements
of deficiency, plans of correction and similar materials. The
Hospitals have taken or are taking all reasonable steps to
correct all material deficiencies noted therein.
3.18. Agreements and Commitments. Schedule 3.18 identifies
Contracts related to the Hospital Businesses in each of the
categories below (and Seller has delivered to Buyer complete and
genuine copies of written Contracts described below in Seller's
possession):
(a) Contracts affecting the ownership or use of, title to or
interest in any Real Property;
(b) Contracts with any physicians or physician groups;
(c) Contracts relating to information and data processing
systems, hardware and software utilized in connection with the
Hospital Businesses, provided that if any of the foregoing
Contracts would otherwise be an Immaterial Contract but for its
description in this paragraph, Seller shall be required to use
only Commercially Reasonable Efforts to identify such Contract;
(d) Collective bargaining agreements or other Contracts with
labor unions or other employee representatives or groups;
(e) Contracts with directors, trustees, partners, officers or
other individual employees of Seller relating to the Hospital
Businesses;
(f) Contracts for the administration, operation or funding of
any Employee Benefit Plan;
(g) Contracts with any health plan, health provider, independent
practice association or similar Person providing for capitation
or risk-sharing arrangements; and
(h) All other Contracts that are not Immaterial Contracts.
27
3.19. The Assumed Contracts. Except as described on Schedule
3.19, with respect to the Assumed Contracts:
(a) Such Assumed Contracts constitute lawful and legally binding
obligations upon the parties thereto and are enforceable in
accordance with their terms, except as enforceability may be
restricted, limited or delayed by applicable bankruptcy or other
laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity;
(b) Each such Assumed Contract is in full force and effect and
constitutes the entire agreement by and between the parties
thereto with respect to the subject matter therein described
except where such failure would not constitute a Material Adverse
Effect;
(c) Seller has not received written notice of any default or
breach of any such Assumed Contract by any party;
(d) No such Assumed Contract contains a non-competition
provision binding against Seller; and
(e) The assignment of any such Assumed Contract to and
assumption of such Assumed Contract by Buyer will not give a
third party the right to terminate such Assumed Contract, or
result in any penalty or premium to, or adverse change in the
rights, remedies, benefits or obligations of, any party
thereunder, other than a penalty or premium arising under an
Immaterial Contract if, after consideration thereof, such
Immaterial Contract is still an Immaterial Contract.
3.20. Employees and Employee Relations.
(a) Schedule 3.20 sets forth (i) a complete list (as of the date
set forth therein) of names, positions, current annual salaries
or wage rates, and bonus and other compensation arrangements of
all full-time and part-time non-physician employees of Seller and
its Subsidiaries working at the Hospital Businesses; and (ii) a
separate complete list (as of the date set forth therein) of
names, positions, current annual salaries or wage rates, and
bonus and other compensation arrangements of all full-time and
part-time physician employees of Seller or its Subsidiaries
(indicating in both lists whether each employee is part-time or
full-time, whether such employee is employed under written
Contract, and, if such employee is not actively at work, the
reason therefor). Schedule 3.20 also sets forth the name of each
employee whose employment was terminated during the 90-day period
ending on the Effective Date and the reason for such termination.
(b) There is no pending, or to Seller's knowledge, threatened
employee strike, work stoppage or slowdown, labor dispute or
unfair labor practices at the Hospital Businesses and no
employees of Seller are represented by, or have, within the
preceding three full fiscal years of Seller, made demand for
recognition of, a labor union or employee
28
organization, and no other union organizing or collective bargaining
activities by or with respect to any employees of Seller are taking place.
(c) Except to the extent included in Net Working Capital, the
Unbooked Employee Benefits or the Assumed PTO, to Seller's
knowledge, no present or former employee of Seller or the
Hospital Businesses has or will have as a result of the
consummation of the transactions contemplated by this Agreement
any claim against Buyer relating to periods before the Closing
Date for (i) overtime pay; (ii) wages, salary, bonuses or amounts
due under any Employee Benefit Plan or Other Plan, or (iii) sick
pay, severance pay, claim for unlawful discharge, personal day or
vacation pay or paid or personal time off.
3.21. Seller's Employee Benefit Plans.
(a) Schedule 3.21 lists each Employee Benefit Plan and Other
Plan that Seller maintains or has maintained within the last five
years or to which it contributes (including employee elective
deferrals), has contributed or has been required to contribute
within the last five years.
(b) With respect to each Employee Benefit Plan (and related
trust, insurance contract or fund) maintained by Seller, to
Seller's knowledge, and except as described on Schedule 3.21,
there is no material noncompliance liability relating to periods
before the Closing Date that will become the liability of Buyer
as a result of the consummation of the transactions contemplated
by this Agreement.
3.22. Litigation and Proceedings. Schedule 3.22 contains an
accurate list and summary description of all written claims,
actions, suits, litigation, arbitration, mediations,
investigations and other proceedings pending against or otherwise
affecting Seller with respect to the Hospital Businesses or the
Assets. Except as described on Schedule 3.22, all such
litigation, arbitration, mediations and other proceedings are
fully insured (except for applicable deductibles and self-
insurance) and no insurer has issued a "reservation of rights"
letter or otherwise qualified its obligation to insure and defend
Seller against losses arising therefrom. Except as set forth on
Schedule 3.22, to Seller's knowledge, there are no claims,
actions, suits, litigation, arbitration, mediations,
investigations or other proceedings (including qui tam actions)
pending, affecting or to Seller's knowledge threatened against
Seller which would have a Material Adverse Effect on the Hospital
Businesses or the Assets.
3.23. Taxes.
(a) Except as set forth in Schedule 3.23, Seller has filed all
Tax Returns required to be filed by or on behalf of it, all such
Tax Returns are correct and complete in all material respects,
and Seller has duly paid or made provision in the Financial
Statements for the payment of all Taxes payable by Seller since
August 31, 1998; no claim has been made by a Governmental
Authority in a jurisdiction where Seller does not file Tax
Returns that it is or may be subject to Tax by that jurisdiction;
and there are no Encumbrances on any Assets that arose in
connection with any failure (or alleged failure) to pay any Tax.
29
(b) Except as set forth in Schedule 3.23, Seller has withheld
proper and accurate amounts from its employees' compensation in
full and complete compliance with all withholding and similar
provisions of the Code and any and all other applicable Legal
Requirements, and has withheld and paid, or caused to be withheld
and paid, all Taxes on monies paid by Seller to other Persons for
which withholding or payment is required by law.
(c) Except as set forth in Schedule 3.23, to Seller's knowledge,
no Governmental Authority intends to assess any additional Taxes
for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax liability of Seller either
claimed or raised by any Governmental Authority in writing, or as
to which Seller has notice or knowledge based upon personal
contact with any agent of such authority; Schedule 3.23 lists all
federal, state, local and foreign income Tax Returns filed with
respect to Seller for the last three complete fiscal years of
Seller and for the current year-to-date, and indicates those Tax
Returns that have been audited and those that currently are the
subject of audit or that have not been audited.
(d) Except as set forth in Schedule 3.23, there is not currently
in effect any waiver of a statute of limitations in respect of
Taxes by Seller or any Contract to extend the time with respect
to a Tax assessment or deficiency.
(e) Seller is not a party to any Tax allocation or sharing
Contract and Seller is not and has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return.
(f) Seller is a corporation exempt from federal and state income
taxation, and has received a favorable letter of determination
from the Internal Revenue Service and the State of Texas
regarding such Tax status.
(g) Seller has not had any liability for the Taxes of any Person
(other than Seller under Internal Revenue Service regulation
1.1502-6 or any similar provision of state, local or foreign
law), as a transferee or successor, by Contract or otherwise.
3.24. Medical Staff; Physician Relations. Seller has
provided to Buyer complete and genuine copies of the bylaws,
policies, rules and regulations of the medical staff and medical
executive committees of the Hospitals and the other Hospital
Businesses. Schedule 3.24 sets forth (a) the name and age of
each member of the medical staff of the Hospital Businesses
(active, associate, consulting, courtesy or other); (b) the
degree (M.D., D.O., etc), title, specialty and board
certification, if any, of each Hospital medical staff member, and
(c) the number of current medical staff members in respect of
whom any committee of the medical staff has recommended adverse
action which is not yet final. Except as described on Schedule
3.24, Seller has no pending or to Seller's knowledge threatened
disputes with medical staff members or applicants or allied
health professionals and all appeal periods in respect of any
medical staff member or applicant against whom an adverse action
has been taken have expired. Based upon and in reliance upon
Seller's review of (i) the "List of Excluded
Individuals/Entities" on the website of the United States Health
and Human Services Office of Inspector General
(▇▇▇▇://▇▇▇.▇▇▇.▇▇▇/▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇.▇▇▇▇), and (ii)
30
the "List of Parties Excluded From Federal Procurement and Nonprocurement
Programs" on the website of the United States General Services
Administration (▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇/), no member of the
medical staff has been excluded from participation in any
Government Payment Program either (i) as of the date of the last
(or initial) credentialing of such member by Seller to be on the
medical staff of one of the Hospitals, such recredentialing
occurring in Seller's Hospitals every two years for each such
member, or (ii) to Seller's knowledge, thereafter.
3.25. Restricted Assets. Except as set forth on Schedule
3.25, to Seller's knowledge, none of the Assets is subject to any
liability in respect of funds received by any Person for the
purchase, improvement or use of any of the Assets or the conduct
of the Hospital Businesses under restricted or conditioned grants
or donations, including monies received under the ▇▇▇▇-▇▇▇▇▇▇
Act.
3.26. Brokers and Finders. Except as set forth on Schedule
3.26, neither Seller nor any Affiliate of Seller, nor any
officer, trustee, director, employee or agent thereof, has
engaged any finder or broker in connection with the transactions
contemplated hereunder.
3.27. Payments. To Seller's knowledge, none of the Hospitals
has made any request for a payment from a Government Payment
Program in respect of healthcare services furnished by a Person
who at such time was excluded from participation in such
Government Payment Program.
3.28. Bankruptcy. Seller, after Closing as a result of the
transactions contemplated hereby, will not be rendered insolvent
or otherwise unable to pay its debts as they become due; Seller
has no intention of filing in any court pursuant to any statute
either of the United States or of any state a petition in
bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or any portion of its
property; and to Seller's knowledge, no other Person has filed or
threatened to file such a petition against Seller.
3.29. Private Placement. The Preferred Shares and
Subordinated Note to be acquired by Seller at Closing are being
acquired for its own account and without a view to the public
distribution of such securities or any interest therein. Seller
is and at Closing will be an "Accredited Investor", as such term
is defined in Regulation D under the Securities Act. Seller has
sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of
its investment in the Preferred Shares and Subordinated Note and
is capable of bearing the economic risks of such investments,
including a complete loss thereof. Seller has been furnished
with and carefully read a copy of this Agreement, including the
Exhibits, and has been given the opportunity to ask questions of
and receive answers from Vanguard concerning the terms and
conditions of the Preferred Shares, the Subordinated Note and
other related matters. Seller acknowledges that Vanguard has
made available to Seller or its agents all documents and
information relating to an investment in the Preferred Shares and
the Subordinated Note requested by or on behalf of Seller, Seller
further acknowledges that the Preferred Shares and Subordinated
Note will be subject to the restrictions on transfer set forth in
the following legends and that the certificates evidencing the
Preferred Shares and the Subordinated Note shall contain legends
to substantially the following effect: The securities evidenced
by this certificate have not been registered under the Securities
Act and may not be offered or sold except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and prior to
transfer the
31
transferor shall provide to Buyer an opinion of
counsel satisfactory to Buyer that such registration is not
required. The office of Seller in which the investment decision
was made is located in San Antonio, Texas.
3.30. Full Disclosure. The representations and warranties of
Seller in this Agreement and the Schedules relating thereto do
not and will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the
statements made therein not misleading.
4.0. Provisions Relating to the New Foundation
4.1. Organization of New Foundation. Prior to Closing, Seller
will decide to either (i) form the New Foundation and contribute
to it some or all the net proceeds from the sale of Seller's
Assets pursuant to this Agreement, and/or (ii) merge or
consolidate with BCFS or another BGCT-affiliated entity, with the
surviving entity succeeding by operation of law to the assets and
liabilities of Seller. If Seller decides to form the New
Foundation and contribute to it some or all of the net proceeds
from the sale of Seller's Assets pursuant to this Agreement, then
Seller shall (1) cause the New Foundation to be organized prior
to Closing, and (2) cause the New Foundation to join this
Agreement and become a Party by executing and entering into a
joinder agreement substantially in the form attached as Exhibit C
(with such changes as are acceptable to, or as amended by, the
New Foundation and Buyer, the "Joinder Agreement"). If Seller
decides not to form the New Foundation but to merge or
consolidate with BCFS or another BGCT-affiliated entity, the
covenants and agreements of, and rights and benefits accruing to,
the New Foundation under this Agreement shall be of no force or
effect.
4.2. Dissolution of Seller. Seller represents and warrants to
Buyer that, if Seller decides to form the New Foundation and
contribute to it all of the net proceeds from the sale of
Seller's Assets pursuant to this Agreement, Seller may dissolve
after Closing. Such dissolution is acceptable to Buyer if, after
payment has been made (or provided for) in respect of Seller's
liabilities, Seller's assets after Closing (and the net proceeds
from the sale thereof under this Agreement) are contributed to
the New Foundation.
5.0. Representations and Warranties of Buyer and Vanguard
Except as disclosed in the Schedules, each of Buyer and
Vanguard make the following representations and warranties to
Seller on and as of the Effective Date and shall be deemed to
make them again at and as of the Closing Date:
5.1. Organization. Vanguard is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. Buyer is a limited partnership duly organized and
validly existing under the laws of the State of Delaware and by
Closing will be qualified to do business in the State of Texas.
The General Partner is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware
and by Closing will be qualified to do business in the State of
Texas.
32
5.2. Corporate Powers; Consents; Absence of Conflicts, Etc. Each
of Vanguard and Buyer has the requisite power and authority to
conduct its business as now being conducted, to enter into this
Agreement, and to perform its obligations hereunder. The
execution, delivery and performance by Vanguard and Buyer of this
Agreement and the Closing Documents to which they are or become a
party and the consummation by Vanguard and Buyer of the
transactions contemplated herein and therein:
(a) are within their respective corporate or partnership powers
and are not in contravention of the terms of their respective
certificates of incorporation and bylaws or partnership
agreements, as amended to date, and have been approved by all
requisite corporate or partnership action;
(b) do not conflict with or result in any breach or
contravention of, any material agreement to which Vanguard or
Buyer is a party or by which either is bound; and
(c) do not violate any Delaware or Texas law to which Vanguard
or Buyer may be subject.
5.3. Binding Agreement. This Agreement and each of the Closing
Documents to which Vanguard and Buyer are or become parties are
(or upon execution will be) valid and legally binding obligations
of Vanguard and Buyer, as the case may be, enforceable against
each of them in accordance with the respective terms hereof and
thereof, except as enforceability against them may be restricted,
limited or delayed by applicable bankruptcy or other laws
affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
5.4. Brokers and Finders. Neither Buyer nor any Affiliate of
Buyer, nor any officer, director, employee or agent thereof, has
engaged any finder or broker in connection with the transactions
contemplated hereunder.
5.5. Buyer's Employee Benefit Plans.
(a) Schedule 5.5 lists each Employee Benefit Plan and Other Plan
that Buyer will offer to the Hired Employees (the "Buyer Employee
Benefit Plans"). The Buyer Employee Benefit Plans are the same
in all material respects to the employee benefit plans generally
provided to employees at other hospitals operated by Buyer's
Affiliates.
(b) With respect to each Buyer Employee Benefit Plan (and
related trust, insurance contract or fund) maintained by Vanguard
or Buyer, to Vanguard's and Buyer's respective knowledge, there
is no material noncompliance liability relating to periods before
the Closing Date.
5.6. Financing. Certain funds controlled by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Capital Partners have entered into a subscription agreement with
Vanguard to purchase an additional $322.3 million of Vanguard's
common stock to provide the equity portion of the financing to
fund, among other things, acquisitions such as the transactions
contemplated by this Agreement, provided that the consummation of
such purchases of Vanguard's common stock is subject to several
conditions
33
outside of Vanguard's control. In addition, as of the
Effective Date, Vanguard has approximately $115 million available
for draw under its line of credit, the ability under Vanguard's
current credit agreement to issue up to $250 million of
additional term loan indebtedness (subject to the lenders
choosing in their discretion to make the term loans available),
and approximately $50 million of cash on hand.
5.7. Compliance with Government Programs. Neither Buyer nor
Vanguard nor any of their Affiliates nor any Person who owns a 5%
or greater equity interest in Vanguard or Buyer has been barred,
excluded or otherwise prohibited from participation in any
Governmental Payment Program or has been convicted of a criminal
offense relating to any such program and no action or proceeding
relating to any such Governmental Payment Program is pending
against Buyer, Vanguard, or any of their Affiliates or any Person
who owns a 5% or greater equity interest in Vanguard or Buyer.
5.8. Vanguard's Securities Filings and Financial Statements.
Vanguard has furnished or made available to Seller true and
complete copies of all reports or registration statements it has
filed with the SEC under the Securities Act and the Exchange Act,
for all periods subsequent to January 1, 2002, all in the form so
filed (collectively the "Vanguard SEC Documents"). As of their
respective filing dates, the Vanguard SEC Documents filed under
the Exchange Act complied in all material respects with the
requirements of the Exchange Act and none of the Vanguard SEC
Documents filed under the Exchange Act contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were
made, not misleading. The Vanguard SEC Documents filed under the
Securities Act complied in all material respects with the
requirements of the Securities Act at the time such Vanguard SEC
Documents became effective under the Securities Act, and none of
the Vanguard SEC Documents filed under the Securities Act
contained an untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading at the time such
Vanguard SEC Documents became effective under the Securities Act.
The Vanguard Financial Statements filed under the Securities Act
(at and after the time the Vanguard SEC Documents became
effective under the Securities Act) and filed under the Exchange
Act comply as to form in all material respects with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes
thereto) and present fairly Vanguard's consolidated financial
position at the dates thereof and of its operations and cash
flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end adjustments
(the effect of which will not have a Material Adverse Effect) and
the inclusion of condensed notes in accordance with applicable
SEC regulations. Since the date of the balance sheet included in
the Vanguard Financial Statements, Vanguard has not effected any
change in any method of accounting or accounting practice, except
for any such change required because of a concurrent change in
generally accepted accounting principles.
5.9. Full Disclosure; Projections.
34
(a) The representations and warranties of Buyer and Vanguard in
this Agreement and the Schedules relating thereto do not and will
not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made
therein not misleading.
(b) The Projections delivered to Seller by Buyer prior to the
Effective Date were prepared in good faith and based on
assumptions believed by Buyer to be reasonable when the
Projections were prepared, and there are no statements or
conclusions in the Projections which are based upon or include
information known to Buyer to be misleading in any material
respect or which fail to take into account material information
known to Buyer regarding the matters reported therein. On the
Effective Date, Buyer believes that the Projections are
reasonable and attainable, it being understood that the
Projections include assumptions as to future events that are not
to be viewed as facts and there can be no assurance that such
assumptions, statements, estimates and Projections will be
realized and that actual results may differ from the projected
results and such differences may be material and adverse.
5.10. Due Diligence. Buyer and its Affiliates are engaged in
the business of owning and operating hospitals and related
healthcare facilities, have substantial experience conducting due
diligence associated with the acquisition of such facilities,
have had a reasonable opportunity to conduct their due diligence
and ask questions of and receive answers from Seller concerning
the Hospital Businesses, and all such questions have been
answered to the reasonable satisfaction of Buyer and Vanguard.
5.11. Legal and Regulatory Compliance. To Vanguard's and
Buyer's knowledge, Vanguard and Buyer have timely filed all
reports, data and other information required to be filed with
Governmental Authorities, where a failure to file timely would
have a Material Adverse Effect with respect to Vanguard or Buyer,
as the case may be. Except as set forth on Schedule 5.11,
neither Vanguard nor Buyer has received written notice from any
Governmental Authority of any proceeding or investigation by
Governmental Authorities alleging or based upon a violation of
any Legal Requirements that has not expired and that would
otherwise have a Material Adverse Effect with respect to Vanguard
or Buyer, as the case may be. To Vanguard's and Buyer's
knowledge, neither Vanguard nor Buyer has been threatened by any
Person with any proceeding or investigation by Governmental
Authorities alleging a violation of any Legal Requirements.
5.12. Government Payment Programs; Accreditation. Except as
described on Schedule 5.12, each of Vanguard's hospitals has
current and valid provider Contracts with the Government Payment
Programs and/or their fiscal intermediaries or paying agents and,
to Vanguard's knowledge, complies with the conditions of
participation therein except to the extent that a failure to so
comply would not have a Material Adverse Effect. To Vanguard's
knowledge, each of its hospitals is entitled to receive and is
receiving payment under the Government Payment Programs for
services rendered to qualified beneficiaries and is not subject
to any withholds or offsets in respect thereof, other than
withholds or offsets which individually or in the aggregate do
not have a Material Adverse Effect. Each of Vanguard's hospitals
is duly accredited by the Joint Commission on Accreditation of
Healthcare Organizations.
35
5.13. Litigation and Proceedings. Except as set forth on
Schedule 5.14, to Vanguard's and Buyer's knowledge, there are no
claims, actions, suits, litigation, arbitration, mediations,
investigations or other proceedings pending, affecting or to
Vanguard's or Buyer's knowledge threatened against Vanguard or
Buyer which would have a Material Adverse Effect with respect to
Vanguard or Buyer, as the case may be.
5.14. Taxes. Vanguard has filed all Tax Returns required to
be filed by or on behalf of it, all such Tax Returns are correct
and complete in all material respects, and Vanguard has duly paid
or made provision in Vanguard's Financial Statements for the
payment of all Taxes payable by Vanguard since August 31, 1998;
no claim has been made by a Governmental Authority in a
jurisdiction where Vanguard does not file Tax Returns that it is
or may be subject to Tax by that jurisdiction.
5.15. Bankruptcy. Neither Vanguard nor Buyer, after Closing
as a result of the transactions contemplated hereby, will be
rendered insolvent or otherwise unable to pay their respective
debts as they become due; neither Vanguard nor Buyer has any
intention of filing in any court pursuant to any statute either
of the United States or of any state a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a
receiver or trustee of all or any portion of their respective
property; and to Vanguard's and Buyer's knowledge, no other
Person has filed or threatened to file such a petition against
Vanguard or Buyer.
6.0. Covenants and Agreements of Seller
6.1. Operations. From the Effective Date until the Closing Date
and except as set forth on Schedule 6.1 or otherwise expressly
provided in this Agreement, or agreed to in writing by Buyer,
Seller will:
(a) Carry on the Hospital Businesses in substantially the same
manner as it currently conducts the Hospital Businesses;
(b) Maintain the Assets in substantially their current
condition, ordinary wear and tear excepted and make the capital
expenditures related to the Assets and/or the Hospital Businesses
set forth on Schedule 6.1;
(c) Take commercially reasonable actions necessary to deliver to
Buyer title to the Assets or an assignment of Seller's interest
therein, as the case may be, free and clear of all Encumbrances
(except for the Permitted Encumbrances) and to obtain appropriate
releases, consents, estoppels, certificates, opinions and other
instruments as Buyer may reasonably request; provided that Seller
shall not be required to make any material payments to third
parties or any other significant expenditure of funds in
connection therewith;
(d) Keep in full force and effect present insurance policies or
other comparable insurance benefiting the Assets and the conduct
of the Hospital Businesses;
(e) Maintain and preserve its business organizations intact
(subject to the right of Seller to discharge any employee in the
ordinary course of business and, in the case of the
36
proposed discharge of any Hospital administrator or senior executive
officer after reasonable notice to Buyer); and
(f) Permit and allow reasonable access by Buyer during normal
business hours to discuss with and make offers of post-Closing
employment to personnel working at the Hospital Businesses, to
advertise for post-Closing employment at the Hospital Businesses,
and to establish relationships with physicians, payors and other
Persons having business relations with Seller.
6.2. Negative Covenants. From the Effective Date until the
Closing Date and except as set forth on Schedule 6.2 or otherwise
expressly provided in this Agreement or agreed to by Buyer in
writing, Seller will not:
(a) Amend or terminate any Assumed Contract, or enter into any
Contract; provided that Seller may enter into, terminate or amend
Immaterial Contracts in the ordinary course of the Hospital
Businesses consistent with past practices or may amend any such
Assumed Contract to the extent that the principal effect of such
amendment is to effectuate the assignment and assumption thereof
pursuant to this Agreement and such amendment does not increase
the obligations of Buyer following the Closing to any material
extent or reduce the obligations of the other party or parties
thereto to any material extent;
(b) Make an offer for employment after Closing to any employee
of the Hospital Businesses who has received an offer of
employment from Buyer;
(c) Increase compensation payable or to become payable to, make
a bonus or severance payment to, or otherwise enter into one or
more bonus or severance Contracts with, any employee or agent of
any of the Hospital Businesses, except (i) that bonus payments
may be made as required by Contracts entered into prior to the
Effective Date and (ii) in the ordinary course of the Hospital
Businesses consistent with past practices in accordance with
existing personnel policies;
(d) Create or assume any new Encumbrance upon any of the Assets
other than (i) the interests of lessors or lessees under
operating leases entered into in the ordinary course of the
Hospital Businesses consistent with past practices and (ii) the
Permitted Encumbrances;
(e) Sell, assign, transfer, distribute or otherwise transfer or
dispose of any item of property, plant or equipment of Seller
having an original cost in excess of $5,000, other than any
Excluded Assets, except in the ordinary course of the Hospital
Businesses consistent with past practices with comparable
replacement thereof;
(f) Create, incur, assume, guarantee or otherwise become liable
for any indebtedness, or agree to do any of the foregoing, except
(i) indebtedness owed to Seller and (ii) other liabilities in the
ordinary course of the Hospital Businesses consistent with past
practices;
37
(g) Cancel, forgive, release, discharge or waive any Accounts
Receivable or any similar Asset or right with respect to the
Hospital Businesses, or agree to do any of the foregoing, except
in the ordinary course of the Hospital Businesses consistent with
past practices;
(h) Sell or factor any Accounts Receivables;
(i) Change any accounting method, policy or practice or, other
than in the ordinary course of business in accordance with
current accounting methods, policies and practices, reduce any
reserves in the Financial Statements;
(j) Terminate, amend or otherwise modify any Employee Benefit
Plan or Other Plan, except Seller may make amendments required to
comply with this Agreement or applicable Legal Requirements;
(k) Increase in any material respect the liabilities or
obligations included within the definition of Unbooked Employee
Benefits; or
(l) Amend or agree to amend the articles or certificate of
incorporation or bylaws of Seller.
6.3. Buyer Access to and Provision of Additional Information.
(a) From the Effective Date until the Closing Date, Seller, to
the extent legally permissible without waiving any privilege or
violating any duties of confidentiality to third Persons imposed
by Contracts or Legal Requirements: (i) will make available to
Buyer full and complete access to and the right to inspect the
Assets, books and records of Seller relating to the Hospital
Businesses during normal business hours; (ii) will use its best
efforts to provide to Buyer full and complete access to any of
the employees and medical staff members providing services at or
for the Hospital Businesses during normal business hours; (iii)
will furnish to Buyer such additional financial, operating and
other data and information regarding the Hospital Businesses as
Buyer may from time to time reasonably request, without regard to
where such information may be located to the extent in Seller's
possession, and with respect to such data not in Seller's
possession, will use Commercially Reasonable Efforts to make such
data (including auditors' work papers) available to Buyer; and
(iv) where any such access or information is denied due to duties
of confidentiality to third Persons imposed by a Contract, Seller
will give Buyer written notice of the subject matter of each non-
disclosure, and, at Buyer's reasonable request, make Commercially
Reasonable Efforts to obtain the waiver of such duty of
confidentiality by such third Person to allow disclosure of such
matter to Buyer.
(b) Seller will deliver to Buyer complete and genuine copies of:
(i) within 20 days following the end of each calendar month
prior to the Closing Date, the unaudited balance sheet of Seller
and the related unaudited statements of income and cash flows of
the Hospital Businesses for each such month
38
then ended and for the year-to-date then ended, in consolidating
and consolidated format,
(ii) promptly after prepared, any other financial statements or
reports prepared prior to Closing by or for management relating
to the Hospital Businesses, together with any notes thereto, and
(iii) promptly after they become available, the Audited
Financial Statements.
(c) From the Effective Date until the Closing Date, Seller shall
cause the officers and employees of the Hospital Businesses to
confer on a regular and frequent basis with one or more
representatives of Buyer at Buyer's request and to answer Buyer's
questions regarding matters relating to the conduct of the
Hospital Businesses and the status of transactions contemplated
by this Agreement. Seller shall notify Buyer in writing of any
material changes in the operations or financial condition of the
Hospital Businesses and of any complaints, investigations,
hearings or adjudicatory proceedings (or communications
indicating that the same may be contemplated) of any Person and
shall keep Buyer reasonably informed of such matters.
6.4. Alternative Proposals.
(a) From the Effective Date until the Closing of the
transactions contemplated by, or termination of, this Agreement
and subject to Section 6.4(b), Seller
(i) will not, and will direct and use its best efforts to cause
its officers, directors, employees, agents and representatives
(including any investment banker, attorney or accountant retained
by either of them) not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including any proposal
or offer to its board of directors) with respect to a merger,
acquisition, consolidation, business combination or similar
transaction involving the purchase of or transfer of control over
all or any significant portion of the Assets or equity or
membership interests in Seller (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal"), or engage
in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person
relating to an Alternative Proposal, or otherwise facilitate any
effort or attempt to make or implement an Alternative Proposal;
(ii) will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing, and it
will take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this
Section; and
39
(iii) will notify Buyer immediately if any such inquiries
or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be
initiated or continued with, it.
(b) Nothing contained in Section 6.4(a) shall prohibit the board
of trustees, officers or agents of Seller from furnishing
information to or entering into discussions or negotiations with
any Person that makes an unsolicited bona fide Alternative
Proposal; provided that (A) the board of trustees of Seller
determines in good faith that such action is required for the
board to comply with its fiduciary duties imposed by non-profit
corporation law and other law, (B) prior to furnishing such
information to, or entering into discussions or negotiations
with, such Person, Seller provides written notice to Buyer to the
effect that it is furnishing information to, or entering into
discussions or negotiations with, such Person, and (C) subject to
any confidentiality agreement with such Person (which Seller
determined in good faith was required to be executed in order for
its board to comply with fiduciary duties imposed by law), Seller
keeps Buyer informed of the status (not the terms) of any
discussions or negotiations.
(c) Nothing in this Section shall:
(i) permit Seller to terminate this Agreement except as
specifically provided in Article 11;
(ii) permit Seller to enter into any Contract with respect to an
Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement Seller shall not
enter into any Contract with any Person that provides for or in
any way facilitates an Alternative Proposal (other than a
confidentiality agreement in customary form)); or
(iii) affect any other obligation of Seller under this
Agreement.
6.5. Insurance Ratings. From the Effective Date until the
Closing Date, Seller will take all actions reasonably requested
by Buyer to enable Buyer, at Buyer's expense, to succeed to the
Workers' Compensation and Unemployment Insurance ratings of
Seller and the Hospital Businesses for insurance purposes;
provided that Seller makes no representation or warranty that
Buyer will be successful in such succession. Buyer shall not be
obligated to succeed to any such rating, except as it may elect
to do so.
6.6. Tail Insurance. On or prior to the Closing Date or except
as otherwise agreed by Buyer at Closing, Seller will purchase and
obtain an extended claims reporting provision without expiration
for primary and excess professional and general liability
insurance policies in force as of the Effective Date, for the
full value of their existing limits of liability for activities
occurring prior to the Closing Date, which shall reasonably
protect the Hospitals and each physician for whom any of the
Hospitals otherwise has an obligation to provide such insurance
consistent with past practice and which are written on a claims
made insuring agreement against insured losses. To the extent
commercially available, Seller shall obtain quotes for extended
claim endorsements which shall
40
name Buyer as an insured
thereunder, give Buyer notice of the cost (if any) of such
endorsements and obtain such endorsements for the benefit of
Buyer at the request of Buyer, provided that Buyer shall
reimburse Seller for the cost of such endorsements. Buyer shall
cooperate with Seller to evaluate alternative arrangements that
provide substantially the same liability protections to the
Parties as tail insurance, but that are less costly than the
purchase by Seller of tail insurance directly. If any insurance
described in this Section is provided under a program of self-
insurance, Seller may satisfy the above obligations by
maintaining self-insurance in amounts that provide substantially
the same liability protections to the Parties as would arise
under occurrence-based insurance policies purchased by Seller to
cover acts and omissions prior to Closing of the Hospitals and
each physician who is an employee of the Hospitals or for whom
any of the Hospitals otherwise has an obligation to provide such
insurance consistent with past practice, provided that Seller may
engage, at its option, in a loss portfolio transfer for some or
all of such risks with one or more insurers qualified to sell
insurance to Seller in the State of Texas, in which event Seller
shall obtain quotes for such insurers expressly naming Buyer as a
beneficiary thereof to the extent commercially available, give
Buyer notice of the incremental cost (if any) of having Buyer
named as a beneficiary, and name Buyer as a beneficiary in such
loss portfolio transfer at the request of Buyer, provided that
Buyer shall reimburse Seller for the incremental cost thereof.
6.7. Consent of Others. Subject to the obligations of Buyer
under Section 7.1, as soon as reasonably practicable after the
date hereof, and in any event prior to Closing, Seller shall use
Commercially Reasonable Efforts to obtain the consents required
to be obtained by Seller of all necessary Persons and
Governmental Authorities having jurisdiction over this
transaction to the consummation of the transactions contemplated
hereunder, including the Permits listed in Schedule 3.16 that are
assignable by Seller, the contractual rights, licenses,
investments, interests and assets referenced in Section 2.1(g),
(i), (k) and (l) and the assignment and continuation of the
Assumed Contracts. The foregoing notwithstanding, Buyer shall
use Commercially Reasonable Efforts to obtain any Permits listed
in Schedule 3.16 that are not assignable by Seller, provided that
Seller shall cooperate with Buyer in obtaining such consents so
long as such cooperation is at no material cost to Seller.
6.8. Seller's Efforts to Close. Seller shall use Commercially
Reasonable Efforts to satisfy all the conditions precedent set
forth in Articles 9 and 10 to its or to Buyer's obligations under
this Agreement to the extent that Seller's action or inaction can
control or influence the satisfaction of such conditions.
6.9. Employee Terminations. At Closing, Seller shall deliver to
Buyer a list as of the Closing Date setting forth the name of
each employee of the Hospital Businesses whose employment was
terminated during the 90 day period ending on the Closing Date
and the reason for such termination and Seller shall not
terminate prior to Closing (except for cause) any employee to
whom Buyer has agreed to offer employment.
6.10. Acquisition of the PHO and the Boerne Property;
Synthetic Lease Arrangement. At or prior to Closing, Seller
shall either (i) acquire Memorial Health Foundation by merger
into BHS and as a result indirectly acquire the 50% interest in
the PHO and the Real Property located in Boerne, Texas owned by
Memorial Professional Services, Inc., or (ii) cause such Persons
to transfer
41
and convey such Assets to Buyer at Closing, in
consideration for the forgiveness of indebtedness owed by such
Persons to Seller. In addition, Seller shall pay off the
indebtedness related to, and obtain the termination of, the
Special Synthetic Lease relating to the Real Property described
on Schedule 6.10 and cause such Real Property to be transferred
and conveyed to Seller.
6.11. Texas Airlife. Prior to Closing, Seller shall use
Commercially Reasonable Efforts to obtain the approval of
University Health System to replace Seller as one of the two
sponsors of Texas Airlife with the right to appoint 50% of Texas
Airlife's Board of Directors (the other sponsor being University
Health System) with Buyer or its Affiliate, as designated by
Buyer; and if such approval is not obtained, Seller will take
Commercially Reasonable Efforts after Closing to cause Texas
Airlife to provide to Buyer substantially the same operating and
economic benefits enjoyed by Seller prior to Closing.
7.0. Covenants and Obligations of Buyer.
From the Effective Date until the Closing Date and except as
otherwise expressly provided in this Agreement, or agreed to in
writing by Seller, Buyer will:
7.1. Consent of Others. As soon as reasonably practicable after
the Effective Date, and in any event prior to Closing, Buyer
shall use Commercially Reasonable Efforts to obtain the Permits,
accreditations, consents and approvals required to be obtained by
Buyer of all necessary Persons and Governmental Authorities
having jurisdiction over this transaction to the consummation of
the transactions contemplated hereunder, including the Permits
listed in Schedule 3.16 that are not assignable by Seller. In
that regard, Buyer may, in its reasonable determination, conclude
that in order to obtain such Permits, accreditations, approvals
or assignments, Buyer must enter into a separate agreement or
understanding with the Governmental Authority, or payor, or the
other party to an Assumed Contract, responsible for issuing or
granting a Permit, accreditation, consent or approval. Such
agreement may require Buyer to assume certain obligations and
liabilities of Seller that are Excluded Liabilities or against
which Seller is to indemnify, or for which Seller is to otherwise
reimburse, Buyer. Alternatively, Buyer may be required by Legal
Requirement to assume, or be deemed by Legal Requirement to have
assumed, such obligations and liabilities of Seller. If Buyer
enters into any such agreement or understanding with any such
Person or assumes by Legal Requirement such obligations or
liabilities of Seller, such agreement, understanding or
assumption shall not in any manner whatsoever impair the rights
of Buyer's Indemnified Persons to indemnification against Seller
or the New Foundation, or diminish Seller's indemnity obligations
to Buyer's Indemnified Persons, under this Agreement and shall
under no circumstances be claimed by Seller or the New Foundation
as a defense (whether of waiver, estoppel, consent, operation of
law or otherwise) against Buyer's assertion of any claim under
this Agreement against Seller, and the rights and obligations of
the Parties to each other under this Agreement shall be
determined as if such agreement or understanding with such
Governmental Authority or payor, or the other party to an Assumed
Contract, did not exist or such assumption was not required by
Legal Requirement. Buyer shall give Seller prior notice of its
intent to enter into, and Seller may participate in negotiating
the terms of, any such agreement or understanding with the
Governmental Authority, or payor, or the other party to an
Assumed Contract, responsible for issuing or granting a Permit,
accreditation, consent or approval.
42
7.2. Buyer's Efforts to Close. Buyer shall use Commercially
Reasonable Efforts to satisfy all the conditions precedent set
forth in Articles 9 and 10 to its or Seller's obligations under
this Agreement to the extent that Buyer's action or inaction can
control or influence the satisfaction of such conditions.
7.3. Employee Matters.
(a) Subject to the exclusions set forth in this Section and in
reliance upon the representations and warranties of Seller in
Sections 3.20 and 3.21, Buyer will provide written offers, or one
or more of Buyer's Affiliates will provide written offers, to
employ as of the Closing Date substantially all active employees
of Seller immediately prior to Closing on substantially the same
terms and conditions (i.e., salaries, wages, job duties, titles,
and responsibilities) applicable to such employees on the
Effective Date. Buyer will also offer to employ at the Hospitals
substantially all employees of Seller working at the Hospitals
who are on family or medical leave, short-term disability or
other short-term leave immediately prior to Closing, effective
upon their return to work, on substantially the same terms and
conditions (i.e., salaries, wages, job duties, titles and
responsibilities) applicable to such employees prior to going on
short-term leave. In addition, Buyer will offer the Hired
Employees the opportunity to participate in the Buyer Employee
Benefit Plans described in Section 5.5. Seller acknowledges that
all employment offers will be made subject to the satisfactory
completion by Buyer of its customary employee background checks.
Employees employed under written Contracts will not be offered
employment pursuant to this Section, but shall be employed
pursuant to the terms of the Assumed Contracts, if any, relating
to such employees. Any workforce reduction shall be conducted by
Buyer in compliance with all applicable Legal Requirements.
(b) Nothing contained in this Section or elsewhere in this
Agreement shall be deemed to limit or otherwise affect in any
manner the right of Buyer or any Affiliate of Buyer to terminate
at will the employment of any Hired Employee (except as otherwise
provided in Assumed Contracts with such employees), or limit the
right of Buyer or any Affiliate to apply its existing personnel
policies and procedures to the Hired Employees. Nothing
contained in this Section or elsewhere in this Agreement shall be
deemed to limit or otherwise affect in any manner the right of
Buyer or any Affiliate of Buyer to make changes after Closing to
the terms and conditions of Employee Benefit Plans offered to the
Hired Employees so long as such changes apply to all employees
covered by the affected Employee Benefit Plans.
(c) With respect to the Hired Employees and their eligible
dependents, Buyer will waive any eligibility waiting periods and
the "pre-existing condition" exclusions under Buyer's applicable
Employee Welfare Benefit Plan offered to the Hired Employees,
subject to any eligibility and pre-existing condition limitations
provided by Seller's Employee Welfare Benefit Plan, as the case
may be, as of the Closing Date. Buyer shall give all Hired
Employees credit for their accumulated and unused vacation, sick
and personal days, to the extent the same constitute Accrued PTO,
and for their Unbooked Employee Benefits; such amounts shall not
be subject to reduction, offset or any other limitation under
Buyer's vacation, holiday, sick pay or paid time-off policies and
procedures. Buyer shall give all
43
Hired Employees credit after
Closing for their years of service with Seller for the purpose of
determining how much vacation, holiday and sick pay and severance
pay the Hired Employees are entitled to under the applicable
Employee Welfare Benefit Plan of Buyer and for purposes of
determining eligibility to participate, vesting percentages and
rates of accrual in the Employee Pension Benefit Plans offered to
the Hired Employees, subject to any limitations relating to such
matters provided by Seller's Employee Welfare Benefit Plan, as
the case may be, as of the Closing Date. Buyer will not make any
contributions to Seller's pension plans and will not assume or
otherwise become liable for (i) Seller's Employee Welfare Plans,
(ii) obligations under Seller's severance program or severance
Contracts, (iii) with respect to Hired Employees and their
beneficiaries who are in a "continuum of care" on the Closing
Date, payment of any inpatient hospital or sub-acute care
facility charges for such admission, unless they are enrolled in
an HMO plan both prior to and after Closing, (iv) long-term
disability payments to any former employee of Seller who does not
actively work for Buyer after Closing, or (v) other obligations
to former or currently retired employees of Seller, including
unemployment compensation. A person is in the "continuum of
care" on the Closing Date if that person (y) is an inpatient of
any hospital on the Closing Date or (z) is an inpatient at a sub-
acute care facility (e.g., skilled nursing facility, long term
care facility or mental health facility) on the Closing Date.
Buyer will make available group health plan continuation coverage
required under COBRA to employees of Seller who are eligible for
COBRA, provided that Seller will reimburse Buyer, with respect to
COBRA beneficiaries receiving self insured PPO coverage whose
qualifying events occurred prior to the Closing Date, for any
excess of PPO claims of such COBRA Beneficiaries paid from
Buyer's assets and not reimbursed from stop loss insurance over
the COBRA premiums collected from such COBRA Beneficiaries,
determined in the aggregate with respect to all such individuals
at the end of the COBRA period for all such employees. If Hired
Employees who are enrolled in an HMO plan prior to the Closing
Date are in a "continuum of care" on the Closing Date and are not
enrolled in an HMO plan after the Closing Date, Seller will
reimburse Buyer for inpatient hospital charges paid in respect of
such employee until they are no longer in the continuum of care.
(d) Buyer will credit each Hired Employee and their eligible
dependents under the Employee Welfare Benefit Plans offered to
the Hired Employees with any deductibles, copayments or other
cost-sharing amounts incurred by the Hired Employee or eligible
dependent under Seller's Employee Welfare Benefit Plans, as the
case may be, during the period beginning on the first day of the
most recent plan year of the applicable Employee Welfare Benefit
Plan offered by Buyer to the Hired Employees and ending on the
Closing Date.
(e) Between the Effective Date and Closing, Buyer may run
newspaper advertisements in the name of any of the Hospital
Businesses to recruit employees for and in the name of any of the
Hospital Businesses, such employment to commence as of the
Closing or any time thereafter; provided that should this
Agreement terminate prior to Closing for any reason, Seller shall
not be liable for any obligation made by Buyer to such
prospective employee.
44
(f) Buyer will provide tuition reimbursement to the Hired
Employees enrolled in a qualified educational program at Closing,
for the year in which the Closing occurs, in accordance with and
subject to the terms and conditions of Seller's tuition
reimbursement plan.
8.0. Additional Covenants and Obligations
8.1. Necessary Antitrust Filings. From the Effective Date until
the Closing Date, each of the Parties shall file, if and to the
extent required by law, all reports or other documents required
or requested by Governmental Authorities under the HSR Act or
under the antitrust laws of the State of Texas concerning the
transactions contemplated hereby, and comply promptly with any
requests by the Governmental Authorities for additional
information concerning such transactions, so that (1) the waiting
period specified in the HSR Act will expire as soon as reasonably
possible after the Effective Date and (2) Governmental
Authorities in Texas have been provided all information they have
reasonably requested concerning the transactions contemplated
hereby. Each of the Parties shall furnish to the other Parties
such information as the other Parties reasonably require to
perform their obligations under the HSR Act or under such Texas
laws and shall exchange drafts of the relevant portions of each
other's report forms or other filings prior to filing.
8.2. Costs and Expenses.
(a) Except as otherwise expressly set forth in this Agreement,
all expenses of the preparation of this Agreement and of the
purchase of the Assets set forth herein, including counsel,
accounting, brokerage and investment advisor fees and
disbursements, shall be borne by the respective Party incurring
such expenses, whether or not such transactions are consummated.
(b) Seller shall pay the cost of preparation of the Audited
Financial Statements other than the Special Audited Financial
Statements, all sales and use Taxes arising out of the transfer
of the Assets, State and County real estate transfer Taxes, the
costs of complying with the Attorney General's process referred
to in Section 8.5, the cost of Buyer's standard form owner's or
leasehold title insurance policies described in Section 10.6, and
the cost of removing Encumbrances that are not Permitted
Encumbrances. Buyer shall pay the cost of the preparation of the
Special Audited Financial Statements, the HSR Act filing fee,
certificate of exemption filing fees, city real estate transfer
Taxes, the cost of any title insurance policy endorsements
requested by Buyer, including extended coverage endorsement, and
the costs of land title surveys of the Real Property and
environmental, engineering and other professional studies
undertaken by Buyer, and any fees related to obtaining any new
Permits or the assignment or transfer of any existing Permits.
8.3. Fulfillment of Conditions. Each Party will execute and
deliver at Closing each Closing Document that such Party is
required by this Agreement to execute and deliver as a condition
to Closing, and will take all commercially reasonable steps
necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of the Parties
45
contained in this Agreement, to the extent that satisfaction of
such condition is within the control of such Party.
8.4. Release of Encumbrances. Seller shall cause all
Encumbrances other than the Permitted Encumbrances to be released
and discharged at or prior to Closing.
8.5. Texas Attorney General Process for Sales of Non-Profit
Assets to For-Profit Corporations. Prior to Closing, Seller
shall notify the Attorney General of the State of Texas of the
sale of the Assets proposed herein and comply with the
requirements imposed by said Attorney General in the sale of
assets owned by non-profit corporations to for-profit
corporations (including bearing the cost of any third party
appraisals or valuations requested by the Attorney General).
9.0. Conditions Precedent to Obligations of Seller
The obligations of Seller hereunder are subject to the
satisfaction on or prior to the Closing Date of the following
conditions, unless waived in writing by Seller:
9.1. Accuracy of Representations and Warranties; Covenants.
(a) Each of the representations and warranties of Vanguard and
Buyer contained in this Agreement shall be true and correct on
and as of the Effective Date; each of the representations and
warranties of Vanguard and Buyer contained in this Agreement that
are qualified as to materiality shall be true and correct on and
as of the Closing Date; and each of the other representations and
warranties of Vanguard and Buyer contained in this Agreement
shall be true and correct in all material respects on and as of
the Closing Date.
(b) Each and all of the terms, covenants and agreements to be
complied with or performed by Vanguard and Buyer on or before the
Closing Date shall have been complied with and performed in all
material respects.
9.2. Adverse Action or Proceeding. No bona fide action or
proceeding before any Governmental Authority shall have been
instituted or threatened to restrain or prohibit the transactions
herein contemplated, and no Governmental Authority shall have
taken any other action or made any request of Seller as a result
of which Seller reasonably and in good ▇▇▇▇▇ ▇▇▇▇▇ it inadvisable
to proceed with the transactions hereunder; the Attorney General
of the State of Texas shall not have imposed any post-Closing
condition on Seller, compliance with which would breach any
material covenant of Seller or the New Foundation in this
Agreement, including Section 12.2; and there shall not be in
effect any order restraining, enjoining or otherwise preventing
consummation of the sale of the Assets and other transactions
contemplated hereunder.
9.3. Contract and Other Consents and Approvals. Seller shall
have obtained the consents and approvals required for the
assignment of the contractual rights, licenses, investments,
interests and assets referenced in Sections 2.1(g), (i), (k) and
(l) and all other consents and approvals that the Parties agree
are required for the assignment of any Contracts (other than
Immaterial Contracts) listed or described on Schedule 3.18, as it
may be supplemented pursuant to Section 17.1.
46
9.4. BGCT Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the BGCT.
9.5. Pre-Closing Confirmations. Seller shall have obtained
documentation or other evidence reasonably satisfactory to Seller
that Seller and Buyer have received or will receive all consents,
approvals, authorizations and clearances of Governmental
Authorities required to consummate the transactions contemplated
hereby, and that all applicable waiting periods under the HSR Act
have expired.
9.6. Extraordinary Events. Neither Vanguard nor Buyer shall
(a) be in receivership or dissolution; (b) have made any
assignment for the benefit of creditors; (c) have been
adjudicated a bankrupt; (d) have filed a petition in voluntary
bankruptcy, a petition or answer seeking reorganization, or an
arrangement with creditors under the federal bankruptcy law or
any other similar law or statute of the United States or any
state, nor shall any such petition have been filed against
Vanguard or Buyer; or (e) have entered into any Contract to do or
permit the doing of any of the foregoing on or after the Closing
Date.
9.7. Opinion of Vanguard's and Buyer's Counsel. Seller shall
have received an opinion from counsel to Vanguard and Buyer (who
may be in-house counsel) dated as of the Closing Date and
addressed to Seller, in form and substance satisfactory to
Seller, to substantially the following effect:
(a) Vanguard is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware
with full corporate power to carry on its business as it is now
being conducted. Vanguard has full power and authority to
execute and deliver this Agreement and each of the Closing
Documents to which it is a party and to perform its obligations
herein and therein. All corporate proceedings required to be
taken by Vanguard to authorize the execution and delivery of this
Agreement and each of the Closing Documents to which it is a
party and to authorize the performance of its obligations herein
and therein, have all been duly and properly taken.
(b) Buyer is a validly existing limited partnership under the
laws of the State of Delaware with full partnership power to
carry on its business as it is now being conducted and is
qualified to do business in Texas. Buyer has full power and
authority to execute and deliver this Agreement and each of the
Closing Documents to which it is a party and to perform its
obligations herein and therein. All partnership proceedings
required to be taken by Buyer to authorize the execution and
delivery of this Agreement and each of the Closing Documents to
which it is a party and to authorize the performance of its
obligations herein and therein, have all been duly and properly
taken.
(c) The execution, delivery and performance by Vanguard and
Buyer of this Agreement and each of the Closing Documents to
which each of them is a party does not violate any provision of
their respective articles of incorporation or bylaws or, to the
knowledge of such counsel, of any indenture or other material
Contract to which it is a party.
47
(d) This Agreement and each of the respective Closing Documents
to which it is a party constitutes a valid and binding obligation
of each of Vanguard and Buyer, enforceable against each of them
in accordance with the Closing Documents' respective terms,
subject, as to enforcement of remedies, to (a) applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or other laws affecting creditors' rights generally
from time to time in effect; (b) limitations on the enforcement
of equitable remedies, and (c) such other qualifications as
counsel to the Parties may mutually agree upon.
(e) To such counsel's knowledge, the consummation of the
transactions described in this Agreement will not result in a
violation, breach or default by Vanguard or Buyer under any
material Delaware and Texas law.
In rendering such opinion(s), such counsel may rely upon
certificates of governmental officials and may place reasonable
reliance as to factual matters (subject to any contrary actual
knowledge of counsel) upon certificates of officers of Vanguard
and Buyer.
9.8. Delivery of Closing Documents. Vanguard and Buyer shall
have delivered at Closing (to the Person or Persons designated
therein) the Closing Documents required by, and otherwise have
fully complied with, the provisions of Section 11.4, and the
General Partner shall have performed or complied with all of its
obligations under the Shareholders' Agreement required to be
performed or complied with prior to Closing.
10.0. Conditions Precedent to Obligations of Buyer
The obligations of Buyer hereunder are subject to the
satisfaction on or prior to the Closing Date of the following
conditions, unless waived in writing by Buyer:
10.1. Representations and Warranties; Covenants.
(a) Each of the representations and warranties of Seller
contained in this Agreement and of the New Foundation in the
Joinder Agreement shall be true and correct on and as of the
Effective Date; each of the representations and warranties of
Seller contained in this Agreement and of the New Foundation in
the Joinder Agreement that are qualified as to materiality, as
supplemented pursuant to Section 17.1, shall be true and correct
on and as of the Closing Date; each of the other representations
and warranties of Seller contained in this Agreement and of the
New Foundation in the Joinder Agreement, as supplemented pursuant
to Section 17.1, shall be true and correct in all material
respects on and as of the Closing Date.
(b) Each and all of the terms, covenants and agreements to be
complied with or performed by Seller or the New Foundation on or
before the Closing Date shall have been complied with and
performed in all material respects.
(c) The circumstances or events disclosed on the supplements to
the Schedules delivered by Seller or the New Foundation pursuant
to Section 17.1 shall not, individually or
48
in the aggregate, have
a Material Adverse Effect which has not been cured on or prior to
the Closing Date.
10.2. Adverse Action or Proceeding. No action or proceeding
before any Governmental Authority shall have been instituted or
threatened to restrain or prohibit the transactions herein
contemplated, and no Governmental Authority shall have taken any
other action or made any request of Seller as a result of which
Buyer reasonably and in good ▇▇▇▇▇ ▇▇▇▇▇ it inadvisable to
proceed with the transactions hereunder; and there shall not be
in effect any order restraining, enjoining or otherwise
preventing consummation of the sale of the Assets and other
transactions contemplated hereunder.
10.3. Pre-Closing Confirmations and Contractual Consents.
Buyer shall have obtained documentation or other evidence
reasonably satisfactory to Buyer that:
(a) Seller and Buyer have received all consents, Permits,
approvals, authorizations and clearances of Governmental
Authorities required to consummate the transactions herein
contemplated;
(b) Buyer has received confirmation from the Texas Department of
Health and other applicable licensure agencies that upon Closing
all licenses required by law to operate the Hospital Businesses
will be transferred to or issued in the name of Buyer;
(c) The Hospitals will be qualified as of Closing to participate
in the Government Payment Programs and will be entitled to
receive payment under the Government Payment Programs for
services rendered to qualified beneficiaries on and after the
Closing Date;
(d) Seller shall have obtained the consents and approvals
required for the assignment of the contractual rights, licenses,
investments, interests and assets referenced in Sections 2.1(g),
(i), (k) and (l) and all other consents and approvals that the
Parties agree are required for the assignment of any Contracts
(other than Immaterial Contracts) listed or described on Schedule
3.18, as it may be supplemented pursuant to Section 17.1;
(e) Buyer has obtained such other consents, approvals and
Permits as are legally or contractually required for the
consummation of the transactions described herein; and
(f) all applicable waiting periods under the HSR Act have
expired.
10.4. Extraordinary Events. Seller shall not (a) be in
receivership or dissolution; (b) have made any assignment for the
benefit of creditors; (c) have been adjudicated a bankrupt;
(d) have filed a petition in voluntary bankruptcy, a petition or
answer seeking reorganization, or an arrangement with creditors
under the federal bankruptcy law or any other similar law or
statute of the United States or any state, nor shall any such
petition have been filed against any of them, or (e) have entered
into any Contract to do or permit the doing of any of the
foregoing on or immediately after the Closing Date.
49
10.5. No Material Adverse Change; Audited Financial
Statements. Since August 31, 2002, no event or circumstance
shall have occurred which had or reasonably could be expected to
have a Material Adverse Effect, except for events occurring on or
prior to the Effective Date disclosed herein, or events occurring
after the Effective Date as to which Buyer consents in writing.
Seller shall have delivered to Buyer the Audited Financial
Statements and Buyer shall have had them for not less than 30
days, the Audited Financial Statements for the years ended August
31, 2000 and 2001 shall not have shown any adverse change from
the Unaudited Financial Statements, and the Audited Financial
Statements for the year ended August 31, 2002 shall have shown
EBITDA during such year of not less than $10,000,000.
10.6. Title Insurance Policies and Surveys. Buyer shall have
received:
(a) Commitments from First American Title Insurance Company to
issue to Buyer as of the Closing Date one or more 1992 ALTA
Extended Coverage, Owner's or Leasehold Title Insurance Policies
for the Real Property, in amounts to be reasonably determined by
Buyer, and with endorsements as Buyer may request;
(b) Commitments from First American Title Insurance Company to
issue to Buyer's mortgagee as of the Closing Date one or more
ALTA extended coverage lender's title insurance policies for the
Real Property, in amounts acceptable to the mortgagee, in form
satisfactory to the mortgagee and with such endorsements as the
mortgagee reasonably requires; and
(c) ALTA Surveys of the Real Property and improvements thereon,
from an engineering firm agreed to by the Parties and certified
to Buyer, Seller, the title insurance company, the mortgagee and
such other Persons as Buyer may designate.
10.7. Opinion of Seller's and the New Foundation's Counsel.
Buyer shall have received an opinion from counsel to Seller and
the New Foundation (who may be in-house counsel) dated as of the
Closing Date and addressed to Buyer, in form and substance
satisfactory to Buyer, to substantially the following effect:
(a) Seller is a non-profit corporation duly incorporated and
validly existing in good standing under the laws of the State of
Texas with full corporate power to carry on its business as it is
now being conducted. Seller has full corporate power and
authority to execute and deliver this Agreement and each of the
Closing Documents to which it is a party and to perform its
obligations herein and therein. All corporate proceedings
required to be taken by Seller to authorize the execution and
delivery of this Agreement and each of the Closing Documents to
which it is a party and to authorize the performance of its
obligations herein and therein, have all been duly and properly
taken.
(b) The New Foundation is a non-profit corporation duly
incorporated and validly existing in good standing under the laws
of the State of Texas with full corporate power to carry on its
business as it is now being conducted. The New Foundation has
full corporate power and authority to execute and deliver this
Agreement and each of the Closing
50
Documents to which it is a
party and to perform its obligations herein and therein. All
corporate proceedings required to be taken by the New Foundation
to authorize the execution and delivery of this Agreement and
each of the Closing Documents to which it is a party and to
authorize the performance of its obligations herein and therein,
have all been duly and properly taken.
(c) The execution, delivery and performance of this Agreement
and each of the Closing Documents to which it is a party does not
violate any provision of its articles of incorporation or bylaws,
or to such counsel's knowledge, of any indenture or other
Contract to which Seller or the New Foundation is a party.
(d) This Agreement and each of the Closing Documents to which it
is a party constitutes a valid and binding obligation of Seller
and the New Foundation, enforceable against each of them in
accordance with its terms, subject, as to enforcement of
remedies, to (a) applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance or other laws
affecting creditors' rights generally from time to time in
effect; (b) limitations on the enforcement of equitable remedies
and (c) such other qualifications as counsel to the Parties may
mutually agree upon.
(e) To such counsel's knowledge, the consummation of the
transactions described in the Agreement will not result in a
violation, breach or default by Seller or the New Foundation
under any material Texas law.
In rendering such opinion, such counsel may rely upon
certificates of governmental officials and may place reasonable
reliance as to factual matters (subject to any contrary actual
knowledge of counsel) upon certificates of officers of Seller and
the New Foundation.
10.8. Lien Searches and Termination Statements. Seller shall
have delivered to Buyer UCC lien, litigation and tax searches
showing all Encumbrances on the Assets, accompanied by fully
executed UCC termination statements or other releases or
reconveyances for all Encumbrances that are not Permitted
Encumbrances.
10.9. ▇▇▇▇-▇▇▇▇▇▇ Facilities. There shall be no Encumbrance
on or affecting any of the Assets or Hospital Businesses relating
to or arising out of the ▇▇▇▇-▇▇▇▇▇▇ Act except Encumbrances, if
any, arising from ▇▇▇▇-▇▇▇▇▇▇ Act obligations that Buyer elects
to assume.
10.10. Delivery of Closing Documents. Seller and the New
Foundation shall have delivered at Closing (to the Person or
Persons designated therein) the Closing Documents required by,
and otherwise have fully complied with, the provisions of
Section 11.3 and Seller shall have performed or complied with all
of its obligations under the Shareholders' Agreement required to
be performed or complied with prior to Closing.
11.0. Closing; Termination of Agreement
11.1. Closing. Consummation of the sale and purchase of the
Hospital Businesses and the other transactions contemplated by
and described in this Agreement (the "Closing") shall take place
51
at the offices of Seller at 10:00 a.m. on the tenth business day
following satisfaction or waiver of the conditions set forth in
Articles 9 and 10, or at such time or place as the Parties may
mutually agree. Unless otherwise agreed in writing by the
Parties at Closing, the Closing shall be effective for accounting
purposes as of 12:01 a.m. on the Closing Date.
11.2. Pre-Closing. A pre-closing of the transactions
contemplated hereunder may, if the Parties so agree, be held at a
time and place mutually agreeable to the Parties on one or more
business days preceding the Closing Date.
11.3. Deliverables of Seller and the New Foundation at
Closing. At the Closing and unless otherwise waived in writing
by Buyer, Seller and the New Foundation shall deliver or cause to
be delivered:
(a) To Buyer:
(i) Special warranty deeds, fully executed by Seller (and the
appropriate Subsidiaries of Seller, if any), and in recordable
form, conveying to Buyer fee title to the owned Real Property,
free and clear of all Encumbrances other than the Permitted Real
Property Encumbrances;
(ii) bills of sale and assignment, fully executed by Seller (and
the appropriate Subsidiaries of Seller), in form and substance
reasonably acceptable to Buyer, conveying to Buyer good and valid
title to all Assets other than the Real Property, free and clear
of all Encumbrances other than the Permitted Personal Property
Encumbrances;
(iii) assignments, fully executed by Seller (and the
appropriate Subsidiaries of Seller), in form and substance
reasonably acceptable to Buyer, conveying to Buyer Seller's
interests in the Assumed Contracts; and
(iv) the Joinder Agreement fully executed by Seller and the New
Foundation.
(b) To the General Partner:
(i) the agreement between the shareholders of the General
Partner in the form attached as Exhibit D (with such changes
thereto as are acceptable to the parties thereto, the
"Shareholders' Agreement");
(ii) the License Agreement between Buyer and Seller, in the form
attached as Exhibit E (with such changes thereto as are
acceptable to the parties thereto, the "License Agreement"),
pursuant to which Seller will grant to Buyer the right to use the
name "Baptist" and any derivatives including the word "Baptist"
that are currently in use by Seller in the conduct of the
Hospital Businesses upon the terms and conditions described
therein;
52
(iii) original or certified copies or a binder of the tail
insurance policies required by Section 6.6, and receipts
evidencing payment of the premiums therefor;
(iv) copies of resolutions duly adopted by the board of trustees
of Seller authorizing and approving the execution and delivery of
this Agreement and the Closing Documents and the consummation of
the transactions contemplated hereby and thereby, certified as
true and in full force and effect as of the Closing Date by the
appropriate officers of Seller;
(v) certificates of the duly authorized officer of Seller
certifying that each of the representations and warranties of
Seller contained in this Agreement, as supplemented in accordance
with Section 17.1, that is qualified as to materiality is true
and correct on and as of the Closing Date, that each of the other
representations and warranties of Seller contained in this
Agreement is true and correct in all material respects on and as
of the Closing Date, and that each and all of the terms,
covenants and agreements to be complied with or performed by
Seller on or before the Closing Date have been complied with and
performed;
(vi) certificates of incumbency for the officers of Seller
executing the Agreement and the Closing Documents, dated as of
the Closing Date;
(vii) certificates of existence and good standing from the
state in which Seller is incorporated or organized, each dated
the most recent practical date prior to Closing; and
(viii) copies of resolutions duly adopted by the board of
trustees of the New Foundation authorizing and approving the
execution and delivery of this Agreement and the Closing
Documents and the consummation of the transactions contemplated
hereby, certified as true and in full force and effect as of the
Closing Date by the appropriate officers of the New Foundation;
(ix) certificates of the duly authorized officer of the New
Foundation certifying that each of the representations and
warranties of the New Foundation contained in this Agreement that
is qualified as to materiality is true and correct on and as of
the Closing Date, that each of the other representations and
warranties of the New Foundation contained in this Agreement is
true and correct in all material respects on and as of the
Closing Date, and that each and all of the terms, covenants and
agreements to be complied with or performed by the New Foundation
on or before the Closing Date have been complied with and
performed;
(x) certificates of incumbency for the officers of the New
Foundation executing the Agreement and the Closing Documents,
dated as of the Closing Date;
53
(xi) certificates of existence and good standing from the state
in which the New Foundation is incorporated or organized, each
dated the most recent practical date prior to Closing; and
(xii) such other Closing Documents as Buyer or Vanguard
reasonably deems necessary to effect the transactions
contemplated hereby.
11.4. Vanguard's and Buyer's Deliverables at Closing. At the
Closing and unless otherwise waived in writing by Seller,
Vanguard and Buyer shall deliver or cause to be delivered to
Seller:
(a) the Cash Portion of the Purchase Price and certificates
evidencing the General Partner Shares, the Preferred Shares and
the Subordinated Note,
(b) an assumption agreement, fully executed by Buyer, in form
and substance acceptable to Seller, pursuant to which Buyer shall
assume the future payment and performance of the Assumed
Liabilities and the Assumed Debt;
(c) the Shareholders' Agreement, fully executed by the General
Partner;
(d) the Joinder Agreement, fully executed by Buyer;
(e) copies of resolutions duly adopted by the boards of
directors of Vanguard and the General Partner authorizing and
approving the execution and delivery of this Agreement and the
Closing Documents and the consummation of the transactions
contemplated hereby and thereby, certified as true and in full
force and effect as of the Closing Date by appropriate officers
of Vanguard or the General Partner, as the case may be;
(f) certificates of the duly authorized President or a Vice
President of Vanguard and the General Partner certifying that
each of the representations and warranties of Vanguard and Buyer
contained in this Agreement that is qualified as to materiality
is true and correct on and as of the Closing Date, that each of
the other representations and warranties of Vanguard and Buyer
contained in this Agreement is true and correct in all material
respects on and as of the Closing Date, and that each and all of
the terms, covenants and agreements to be complied with or
performed by Vanguard and Buyer on or before the Closing Date
have been complied with and performed;
(g) certificates of incumbency for the officers of Vanguard, and
the General Partner executing this Agreement and the Closing
Documents, dated as of the Closing Date;
(h) certificates of existence and good standing of Vanguard, and
the General Partner, and a certificate of existence of Buyer,
from the states in which they are incorporated or organized, as
the case may be, dated the most recent practical date prior to
Closing; and
(i) such other Closing Documents as Seller or the New Foundation
reasonably deems necessary to effect the transactions
contemplated hereby.
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11.5. Termination Prior to Closing.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated, and the transactions contemplated by
this Agreement abandoned, upon notice by the terminating Party to
the other Parties:
(i) at any time before the Closing, by mutual consent of Buyer
and Seller;
(ii) by Buyer in accordance with Section 11.6;
(iii) at any time before the Closing, by Buyer on the one
hand, or by Seller on the other hand, in the event of material
breach of this Agreement by the non-terminating Party;
(iv) if the satisfaction of any condition to such Party's
obligations under this Agreement becomes impossible or
impracticable with the use of Commercially Reasonable Efforts and
the failure of such condition to be satisfied is not caused by a
breach by the terminating Party;
(v) at any time after January 3, 2003, by Seller if the
transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to consummate
is not caused by a breach of this Agreement by Seller or the New
Foundation;
(vi) at any time after January 3, 2003, by Buyer if the
transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to consummate
is not caused by a breach of this Agreement by Buyer;
(vii) by Buyer if, since August 31, 2002, any event,
occurrence or development of a state of circumstances or facts
has occurred which has had or reasonably could be expected to
have a Material Adverse Effect;
(viii) by Seller if, as a result of an Alternative Proposal
received by Seller from a Person other than Vanguard or Buyer,
the board of directors or trustees of Seller determines in good
faith that its fiduciary obligations under applicable non-profit
corporation law and other law require that such Alternative
Proposal be accepted; provided that (i) the board of trustees of
Seller shall have determined in good faith on the basis of oral
or written advice of outside counsel that such action is required
by its fiduciary obligations under applicable law after
considering applicable provisions of state non-profit corporation
law and other law and after giving effect to all concessions, if
any, which have been offered by Buyer pursuant to clause (ii) of
this paragraph, and (ii) prior to any such termination as a
result of such an Alternative Proposal, Seller shall, and shall
cause its financial and legal advisors to, negotiate with Buyer
to make such adjustments in the terms and conditions of this
Agreement as would enable Buyer to proceed with the transactions
contemplated hereby; and
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provided further that, in connection
with the negotiations covered by clause (ii) of this paragraph,
the purchase price in the Alternative Proposal shall not be
deemed to be in excess of Buyer's Purchase Price under this
Agreement until the purchase price in the Alternative Proposal is
in excess of the greater of (x) the sum of (A) the Purchase Price
under this Agreement and (B) the $10,000,000 termination fee set
forth in Section 11.7(a) and (y) the sum of (A) that amount
higher than the Purchase Price proposed by Buyer as Buyer's new
purchase price for the Assets and (B) the $10,000,000 termination
fee set forth in Section 11.7(a);
(ix) by Buyer if (A) trading generally shall have been suspended
or is materially limited on or by the New York Stock Exchange or
the Nasdaq National Market, or (B) any moratorium on commercial
banking activities shall have been declared by either Federal or
New York State authorities and is continuing, or (C) the United
States shall have declared war in accordance with its
constitutional processes, or (D) there shall have occurred and be
continuing any material outbreak or escalation of hostilities or
other national or international calamity or crisis (other than
any such hostilities or crises as may exist as of the Effective
Date) which has materially adversely impaired the procurement by
Buyer of the proposed senior secured B Term Loans which Buyer
plans to utilize to fund most of the Cash Portion of the Purchase
Price, or (E) there shall have occurred and be continuing any
material disruption of or material adverse change in financial,
banking or capital market conditions or in the syndication market
for senior secured B Term Loans in the United States which has
materially adversely impaired the procurement by Buyer of the
proposed senior secured B Term Loans which Buyer plans to utilize
to fund most of the Cash Portion of the Purchase Price; or
(x) at any time by Buyer upon written notice to Seller along
with paying to Seller the termination fee described in Section
11.7(a).
(b) No termination shall be effective pursuant to
Section 11.5(a)(viii) or Section 11.5(a)(x) unless concurrently
with such termination, Seller or Buyer, as the case may be, pays
the applicable termination fee in full in accordance with the
provisions of Section 11.7.
11.6. Termination for Casualty. If prior to the Closing Date
any part of one or more of the Hospitals is destroyed or damaged
by fire, theft, vandalism or other cause or casualty and, as a
result thereof, either (i) more than $2,000,000 of Assets is
rendered prior to the Closing Date unsuitable for its primary
intended use or (ii) the Hospitals are unable to provide all Core
Services, Buyer may terminate this Agreement in its entirety
without penalty. Otherwise, the Parties shall consummate the
transactions notwithstanding such destruction or damage, in which
event Seller shall pay, transfer and assign to Buyer at Closing
the proceeds (or the right to receive the proceeds) of, plus any
deductibles or copayments required under, the applicable
insurance policy.
11.7. Effect of Termination.
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(a) If this Agreement is terminated pursuant to Section 11.5(a),
other than pursuant to Sections 11.5(a)(iii), (viii) or (x),
neither Party shall have any claim against the other. If Seller
terminates this Agreement pursuant to Section 11.5(a)(viii),
Seller shall pay to Vanguard in cash a termination fee of
$10,000,000. If Buyer terminates this Agreement pursuant to
Section 11.5(a)(x), Buyer shall pay to Seller in cash a
termination fee of $50,000,000. If Seller terminates this
Agreement pursuant to Section 11.5(a)(iii), Buyer's liability to
Seller for Losses suffered by Seller shall not exceed
$50,000,000. The Parties acknowledge and agree that the
agreements contained in this Section are an integral part of the
transaction contemplated by the Agreement and constitute
liquidated damages and not a penalty. If one Party fails to
promptly pay to the other any fee due under this Section 11.7,
the defaulting Party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including
the filing of any lawsuit or other legal action, taken to collect
payment, together with interest as provided in Section 17.16 from
the date such fee was required to be paid.
(b) Upon termination of this Agreement, Buyer's right of access
shall terminate, each Party shall promptly return every document
furnished it by the other Party (or any Affiliate of such other
Party) in connection with the transactions contemplated hereby,
whether obtained before or after execution of this Agreement, and
all copies thereof, and will destroy all copies of any analyses,
studies, compilations or other documents prepared by it or its
representatives to the extent they contain any information with
respect to the business of the other Parties or their Affiliates,
and will cause its representatives to whom such documents were
furnished to comply with the foregoing.
(c) This Section 11.7 shall survive any termination of this
Agreement.
12.0. Post Closing Covenants of Seller
12.1. Termination of Hired Employees. As of the Closing
Date, all Hired Employees shall cease to be employed by Seller
and cease to accumulate additional benefit accruals in any
Employee Pension Benefit Plan of Seller. As soon as practicable
after Closing (but in any event prior to December 31 of the year
in which the Closing occurs), Seller shall provide Buyer with all
necessary payroll records for the calendar year in which the
Closing occurs so that Buyer may furnish a Form W-2 to all Hired
Employees disclosing all wages and other compensation paid to
them (and amounts withheld therefrom) by Seller and Buyer in the
calendar year.
12.2. Noncompetition.
(a) For a period of five years from and after the Closing Date,
neither Seller nor the Foundation nor the New Foundation shall,
directly or indirectly, and Seller and the New Foundation shall
use their respective best efforts to cause their respective
Affiliates (including the New Foundation) not to, in any
capacity:
(i) own, lease, manage, operate, control, participate in the
management or control of, be employed by, or maintain or continue
any interest whatsoever in any
57
hospital, or in any other facility
that provides outpatient surgery, diagnostic imaging, renal
dialysis, radiation therapy, primary care, urgent care, cardiac
catherization or endoscopy services within a 25-mile radius of
each of the Hospitals, which are in direct competition with the
Hospital Businesses; or
(ii) employ or solicit the employment of any Hired Employee
unless (X) such employee resigns voluntarily (without any
solicitation from Seller, the Foundation or the New Foundation or
any of their Affiliates), (Y) Buyer consents in writing to such
employment or solicitation, or (Z) such employee is terminated by
Buyer after the Closing Date; or
(iii) Take any affirmative act with the sole intent of
causing any Person (including any physician employee or medical
staff member) to terminate any Contract for the provision or
arrangement of health care services from any of the Hospitals.
(b) Notwithstanding the foregoing:
(i) Seller, the Foundation and the New Foundation, or any
successor to any of the foregoing, shall be permitted at any time
and from time to time to engage in the health care businesses or
to make grants to fund the health care businesses described on
Schedule 12.2;
(ii) Seller may continue to hold its equity interest in Buyer,
which the parties acknowledge is not an Affiliate of Seller
subject to the limitations of this Section; and
(iii) Seller, the Foundation and the New Foundation may
advertise generally for employment opportunities and issue other
notices of employment opportunities to the public at large and
employ Hired Employees who accept offers of employment pursuant
to such general advertisements and public notices.
(c) Seller acknowledges that any remedy at law for any breach of
this Section would be inadequate and consent to the granting by
any court of an injunction or other equitable relief, without the
necessity of actual monetary loss being proved, in order that a
breach or threatened breach of this Section may be effectively
enjoined.
12.3. Change of Corporate Names. Promptly after Closing,
Seller shall change and cause its Affiliates (other than the
Foundation and the New Foundation) to change their corporate
names to names not including "Baptist Hospital", "Baptist Health
System," "Baptist Medical Center" or any variation of the
foregoing related to or suggesting activities falling within the
sphere of activities restricted under Section 12.2, provided that
if Seller merges or consolidates with BCFS or any other BGCT-
affiliated entity, such entity may change its name to "Baptist
Health and Family Services" or another name substantially similar
thereto containing the words "Baptist" and "Health".
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12.4. Seller's Cost Reports. Seller will prepare and timely
file or cause to be prepared and timely filed all Cost Reports
required to be filed after Closing for periods ending on or prior
to the Closing Date, including the terminating Cost Report
required as a result of the consummation of the transactions
described herein. The Purchase Price shall be allocated in the
terminating Cost Report in a manner consistent with the
allocation for Tax purposes described in Section 2.7. Buyer will
forward to Seller any and all correspondence, remittances and
demands relating to Seller's Cost Reports within five business
days after receipt by Buyer. Seller shall retain all rights to
Seller's Cost Reports, including any payables resulting from or
reserves relating to the Cost Reports and the right to appeal any
Medicare determinations relating to the Cost Reports.
12.5. Further Assurances. At any time and from time to time
at and after the Closing, upon request of Buyer, Seller shall do,
execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such further acts, deeds,
assignments, transfers, conveyances, powers of attorney,
confirmations and assurances as Buyer may reasonably request to
more effectively convey, assign and transfer to and vest in Buyer
full legal right, title and interest in and actual possession of
the Assets and the Hospital Businesses, and to generally carry
out the purposes and intent of this Agreement. Seller also shall
furnish Buyer with such information and documents in its
possession or under its control, or which Seller can execute or
cause to be executed, as will enable Buyer to prosecute any and
all petitions, applications, claims and demands relating to or
constituting a part of the Assets and Hospital Businesses.
12.6. Scholarships. Seller or the New Foundation shall for a
period of at least ten years following the Closing continue to
provide, and will cause its Affiliates to provide, scholarships
and financial support at the Institute of Health Education to
enhance career opportunities in the health care field in San
Antonio, Texas at levels at or above those currently provided by
Seller and such Affiliates; provided that the foregoing
obligation is conditioned upon Buyer's compliance with Section
13.7.
12.7. Lease of Seller's Employee Benefit Plans. At the
request of Buyer, Seller will cover the Hired Employees under any
or all of Seller's Employee Benefit Plans from the Closing Date
until December 31, 2002, provided that (i) Buyer shall reimburse
Seller for all of Seller's direct out-of-pocket costs of such
leased Employee Benefit Plans and (ii) Buyer's request for such
lease must be made to Seller a reasonable time prior to Closing.
13.0. Post-Closing Covenants of Buyer.
13.1. General Partner Board of Directors; Hospital Advisory
Board.
(a) The Board of Directors of the General Partner shall be
comprised of seven members, four of whom shall be nominated by a
subsidiary of Vanguard and three of whom shall be nominated by
Seller or the New Foundation, and each of the shareholders of the
General Partner shall execute a consent, or vote its shares in
the General Partner at any annual or special meeting of
shareholders where action with respect to the election of
directors is to be taken, so as to give effect to the provisions
of this Section 13.1. Either such shareholder may revoke at any
time the nomination of a particular individual nominated by it.
59
If, as a result of death, disability, retirement, resignation,
removal or otherwise, there shall exist any vacancy on the Board
of Directors of General Partner, the shareholder entitled under
this Section 13.1 to nominate such individual whose death,
disability, retirement, resignation or removal resulted in such
vacancy may nominate another individual to fill such capacity and
serve as a director. If, at any time, a shareholder of the
General Partner is then entitled to vote for the removal of
directors of the General Partner, it will not vote any of its
shares in favor of the removal of any director who shall have
been nominated pursuant to this Section 13.1 unless the
shareholder entitled to nominate such director shall have
consented to such removal in writing. The provisions of this
paragraph shall be merged into the Shareholders' Agreement upon
Closing.
(b) As soon as practicable following the Closing, Buyer will
appoint and maintain one or more advisory boards for the
Hospitals composed of the Hospital's Chief Executive Officer and
equal numbers of physicians on the Hospital's medical staff and
community representatives (the "Advisory Board"), in accordance
with Buyer's model bylaws. Subject to applicable Legal
Requirements, the Advisory Board will advise the Hospital on
medical staff credentialing, quality assurance and accreditation,
in accordance with Buyer's model bylaws. In its advisory
capacity, the Advisory Board shall also review and advise Buyer
on management's recommended capital budgets for the Hospital.
The Advisory Board will be composed of between five and 15
members appointed for terms of three years on a staggered basis
to provide continuity. The composition of the initial Advisory
Board shall be agreed upon by Buyer and Seller on or prior to the
Closing Date and Seller or the New Foundation may nominate
candidates for 50% of the seats of each Advisory Board up for
selection in each year thereafter. The provisions of this paragraph
shall be merged into the Shareholders' Agreement upon Closing.
13.2. Indigent and Low Income Care. Buyer acknowledges that
the Hospitals have historically provided significant levels of
care for indigent and low-income patients and have also provided
care through a variety of community-based health programs.
Subject to changes in Legal Requirements or governmental
guidelines or policies (such as implementation of universal
healthcare coverage), Buyer will maintain and adhere to the
Hospitals' current policy on charity care, a copy of which is
attached as Exhibit F, and for the first seven years after
Closing will continue to provide not less than $12,300,000 of
charity care annually to indigent and low-income patients,
provided that on each of the first six anniversaries of the
Closing Date, the annual dollar amount of charity care to be
provided by Buyer pursuant to this Section shall be subject to
adjustment as provided in Schedule 13.2. Within 120 days after
each of the first seven anniversaries of the Closing Date, Buyer
will provide Seller or the New Foundation with an annual report
of its compliance with the charity care commitment described in
this Section in a form reasonably acceptable to Seller or the New
Foundation, as the case may be. Seller acknowledges that the
dollar amount of charity care may vary as a result of a number of
factors, including changes in payor mix, local unemployment
figures and eligibility requirements for State or Federal health
benefit programs. If Buyer fails to provide at least the dollar
amount of charity care required by this Section in any period
covered by the annual report, Buyer shall set forth in the annual
report the reasons for such noncompliance and the Parties shall
consult with each other in good faith to determine what, if any,
actions Buyer may take to reasonably satisfy the Seller or the
New Foundation, as the case may be, that Buyer is providing
sufficient levels
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of charity care to indigent and low-income patients. Upon request of
Seller or the New Foundation at any time after the sixth anniversary of
the Closing Date, Buyer and Seller or the New Foundation, as the case
may be, shall negotiate in good faith to determine whether Buyer should
extend its commitment to provide specified dollar amounts of charity care
and, if so, the amount and period of the extended commitment.
13.3. Commitments to Maintain the Hospitals and Provide Core
Services.
(a) For seven years from the Closing Date and unless otherwise
agreed by Seller or the New Foundation, Buyer shall maintain each
of the Hospitals as a general acute care hospital licensed in the
State of Texas and accredited by the Joint Commission on
Accreditation of Healthcare Organizations.
(b) For seven years from the Closing Date and unless otherwise
agreed by Seller or the New Foundation, Buyer shall provide at
the Hospitals, at a minimum those services described on Schedule
13.3 (the "Core Services").
13.4. Capital Expenditures. Seller and Buyer have jointly
developed preliminary short and long-term capital plans and
strategic initiatives designed to meet projected service and
facility needs and reaffirm their commitments to the stated goals
and objectives of such plans and initiatives. Seller and Buyer
shall use Commercially Reasonable Efforts to update the
preliminary capital plan prior to the Closing with a more
definitive capital plan providing for agreed future capital
expenditures for the Hospital Businesses. To such end, Buyer
will expend or commit in a binding Contract to expend (or cause
or permit its Affiliates or third parties to expend or commit in
a binding Contract to expend) not less than $200,000,000 for
capital expenditures in and around the San Antonio metropolitan
area during the first six years after Closing, $75,000,000 of
which Buyer will expend or commit in a binding Contract to expend
(or cause or permit its Affiliates or third parties to expend or
commit in a binding Contract to expend) during the first two
years after Closing; provided that the performance of any such
binding commitment to expend capital shall occur not later than
12 months following the end of such two-year period or six-year
period, as the case may be. If Buyer, its Affiliates and such
third parties do not spend or commit to spend the full
$75,000,000 within the two-year period or the full $200,000,000
within the six-year period, Buyer shall pay to Seller, the New
Foundation or its assignee upon demand the balance in cash,
provided that if Seller terminates the License Agreement pursuant
to its right to do so under Section 8(c) of the License
Agreement, Buyer shall not be obligated to pay the balance in
cash, but, in addition to any other rights or remedies available
to Seller under law, Seller may seek specific performance of
Buyer's capital expenditure commitment hereunder. Permitted Life
Safety Repairs and Special Capital Expenditures which are added
to the calculation of the Purchase Price in Section 2.5(a) shall
count towards Buyer meeting the capital expenditure covenants set
forth in this Section 13.4.
13.5. Retention of Medical Staff. Buyer shall permit all
members of the Hospitals' medical staff, whether active,
honorary, temporary or otherwise, to retain their current medical
staff appointments until the expiration of their current terms
or, if earlier, two years after Closing. The foregoing will not
limit the ability of Buyer's board of directors, the Hospital's
Advisory Board or
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the Hospital's medical executive committee to suspend medical staff
appointment or clinical privileges in accordance with the terms and
provisions of the medical staff bylaws.
13.6. ▇▇▇▇▇▇-Centered Delivery System. In its conduct of the
Hospital Businesses, Buyer will establish and support the
recommendations of a "Ministry and Mission Committee", comprised
of members nominated by Seller or the BGCT, to preserve and
maintain the Baptist mission and ▇▇▇▇▇▇-centered approach that
Seller has used historically in the conduct of the Hospital
Businesses and to oversee pastoral care at the Hospitals. Buyer
will employ a Vice President of Ministries, at fair market
compensation, to oversee mission, vision and values integration
and will maintain indefinitely chapels in all of the Hospitals
and enhance the pastoral care and clinical pastoral education
programs of the Hospitals in conjunction with the Committee. The
Ministry and Mission Committee will recommend to management the
candidate for appointment to the Vice President of Ministries.
Buyer will maintain Seller's policy on therapeutic abortion and
sterilization. Buyer will work with Seller and the BGCT to
define the scope and mission of pastoral care programs at the
Hospital Businesses after the Closing.
13.7. Institute of Health Education. For not less than ten
years after Closing, Buyer will continue to operate the Institute
of Health Education's Schools of Professional Nursing, Surgical
Technology, Medical Imaging and Vocational Nursing in
substantially the same manner and with substantially the same
financing commitments as Seller operated and financed the
Institute of Health Education as of the Effective Date (or with
such expanded or improved facilities, faculty and staff,
curriculum or financing commitments as Buyer may determine).
13.8. Post Closing Assistance to Seller. Notwithstanding any
of the other provisions of this Agreement, at all times after
Closing upon reasonable notice and during normal business hours,
Buyer will make its records available to Seller in a timely
manner and cooperate with and assist Seller in a timely manner
with the following:
(a) The preparation and filing by Seller of Seller's Cost
Reports as required by Section 12.4;
(b) The preparation and filing by Seller of W-2s not filed by
Buyer pursuant to Section 12.1 and other Tax Returns of Seller;
(c) Defending any audits or prosecuting any appeals with regard
to Seller's Cost Reports; and
(d) Paying Excluded Liabilities and utilizing Excluded Assets.
For 12 months after the Closing Date, Buyer will comply with the
provisions of this Section 13.8 at no cost to Seller other than
out-of-pocket expenses. From and after the first anniversary of
the Closing Date, Seller shall reimburse Buyer for its actual
reasonable costs of complying with this Section 13.8. Buyer
shall provide such information, cooperation and assistance
without warranty of any kind to Seller, including a warranty
about the reliability of the contents of such information.
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13.9. No Sale of Hospitals. For seven years after the
Closing Date and without the consent of Seller or the New
Foundation, Buyer shall not sell or otherwise transfer all or
substantially all of the Assets constituting one or more of the
Hospitals to any Person, other than a transfer to a Permitted Transferee.
Nothing in this Section shall limit or impair the ability of Buyer to
operate and conduct the business of the Hospitals as Buyer sees fit in
its sole discretion, subject to its obligations in this Agreement.
13.10. Termination of Post-Closing Covenants. If Seller
terminates the License Agreement pursuant to its right to do so
under Section 8(c) of the License Agreement during the first two
years of the term of the License Agreement, Buyer's covenants and
agreements in this Article 13 shall terminate and be of no
further force or effect, except that Buyer's covenants and
agreements in Sections 13.4 and 13.8 shall survive such
termination. If Seller terminates the License Agreement pursuant
to its right to do so under Section 8(c) of the License Agreement
after the first two years of the term of the License Agreement,
Buyer's covenants and agreements in this Article 13 shall
terminate and be of no further force or effect, except that
Buyer's covenants and agreements in Sections 13.3(a), 13.4 and
13.8 shall survive such termination. If Seller terminates the
License Agreement for any other reason, Buyer's covenants and
agreements in this Article 13 shall survive such termination.
13.11. Future Local Operations. Buyer and Vanguard will develop
any additional hospitals or healthcare facilities which they may from time
to time determine to develop within Bexar County, Texas through the Buyer
and in accordance with the provisions of the Shareholders' Agreement and
the License Agreement, to the extent such agreements are then in effect.
14.0. Other Post-Closing Agreements
14.1. Post-Closing Maintenance of and Access to Information.
(a) The Parties acknowledge that after Closing each Party may
need access to information and documents (regardless of medium)
in the control or possession of another Party for the purposes of
concluding the transactions contemplated by this Agreement,
preparing Tax Returns or conducting Tax audits, obtaining
insurance, complying with the Government Payment Programs and
other Legal Requirements, and prosecuting or defending third
party claims. Accordingly, each Party shall keep, preserve and
maintain in the ordinary course of business, and as required by
Legal Requirements and relevant insurance carriers, all books,
records (including patient medical records), documents, databases
and other information (regardless of medium) in the possession or
control of such Party and relevant to the foregoing purposes at
least until the expiration of any applicable statute of
limitations or extensions thereof. Thereafter, each Party shall
notify the other Parties, and offer to the other Parties
reasonable access to such documents, prior to the destruction
thereof.
(b) Each Party shall cooperate fully with, and make available
for inspection and copying by, the other Party, its employees,
agents, counsel and accountants and/or Governmental Authorities,
upon written request and at the expense of the requesting Party,
such books, records, documents and other information to the
extent reasonably necessary to
63
facilitate the foregoing purposes. In addition, each Party shall
cooperate with, and shall permit and use its best efforts to cause
its former and present directors, officers and employees to cooperate
with, the other Party on and after Closing in furnishing information,
evidence, testimony and other assistance in connection with any action,
proceeding, arrangement or dispute of any nature with respect to
the subject matters of this Agreement.
(c) Buyer shall promptly forward to Seller all bills, notices,
correspondence, claims or actions relating to any Excluded Asset
or Excluded Liability and will not pay Excluded Liabilities and
then request reimbursement from Seller therefor.
(d) Upon Buyer's receipt of appropriate consents and
authorizations, Seller or its assignee shall be entitled to
remove from the Hospital Businesses, at their sole risk and
expense, any patient or other records that relate to events or
periods prior to Closing for purposes of pending claims or
litigation involving matters to which such records refer, as
certified in writing prior to removal by counsel retained by
Seller in connection with such litigation. Any records so
removed from the Hospitals shall be promptly returned to Buyer
following their use by Seller.
(e) The exercise by any Party of any right of access granted
herein shall not materially interfere with the business
operations of the other Party.
14.2. Transition Services and Patients. If Buyer receives
any Cost Report settlement amounts from the Government Payment
Programs for discharges occurring prior to the Closing Date,
Buyer shall promptly tender such amounts to Seller. If Seller
receives any Cost Report settlement amounts from the Government
Payment Programs for discharges occurring on or after the Closing
Date, Seller shall promptly tender such amounts to Buyer. Each
Party shall be entitled to receive from the Government Payment
Programs and Blue Cross and Blue Shield of Texas Cost Report
settlements (including capital costs, indirect medical education
and disproportionate share) for those patients discharged by a
Party at the time such Party owned the Hospitals based upon the
Cost Report filed by such Party.
15.0. Indemnification
15.1. Indemnification by Seller. Subject to and to the
extent provided in this Article, from and after the Closing,
Seller shall indemnify, defend and hold harmless Buyer's
Indemnified Persons, and each of them, from and against any
Losses incurred or suffered by Buyer's Indemnified Persons,
directly or indirectly, as a result of or arising from:
(a) Any false or incorrect representation or warranty made by
Seller in this Agreement or by the New Foundation in the Joinder
Agreement, provided that in determining whether there has been
any such false or incorrect representation or warranty, any
qualification as to materiality included in any representation or
warranty shall not be taken into account;
64
(b) The nonfulfillment of any covenant, agreement or other
obligation of Seller or the New Foundation set forth in this
Agreement or in any other agreement or instrument delivered by
Seller or the New Foundation pursuant to this Agreement, except
as may be waived by Buyer; and
(c) The Excluded Liabilities.
15.2. Seller's Limitations.
(a) In no event shall Seller's indemnification obligations under
Section 15.1(a) exceed $100,000,000.
(b) Seller shall not be required to make any indemnification
payment pursuant to Section 15.1(a) unless the aggregate of all
amounts for which indemnity payable by Seller exceeds $750,000
(the "Basket Amount"), and in such event, Seller shall be
responsible for only the amount in excess of the Basket Amount;
provided that there shall be no minimum Loss requirement, and
liability of Seller shall arise from and after $1.00 of Losses,
in respect of Losses resulting from Seller's intentional
misrepresentation or fraud.
(c) The liability of Seller with respect to any claim for
indemnification by any Indemnified Party pursuant to Section 15.2
shall be offset dollar-for-dollar by (i) any insurance proceeds
received by Buyer after the Closing Date in respect of the Losses
involved, and (ii) any other recovery made by Buyer from any
third-party on account of the Losses involved.
(d) Seller shall have no liability under Section 15.1(a) if, at
or before the Closing Date, Vanguard or Buyer had actual
knowledge of a false or incorrect representation or warranty of
Seller or the New Foundation (other than as a result of
disclosure by Seller or the New Foundation) and did not inform
one of the Persons listed on Schedule 1.2(g)(i) of such
knowledge.
15.3. Indemnification by Vanguard and Buyer. Subject to and
to the extent provided in this Article, from and after the
Closing Date, Vanguard and Buyer shall each indemnify, defend and
hold harmless Seller's Indemnified Persons, and each of them,
from and against any Losses incurred or suffered by Seller's
Indemnified Persons, directly or indirectly, as a result of or
arising from:
(a) Any false or incorrect representation or warranty made by
Vanguard or Buyer, provided that in determining whether there has
been any such false or incorrect representation or warranty, any
qualification as to materiality included in any representation or
warranty shall not be taken into account;
(b) The nonfulfillment of any covenant, agreement or other
obligation of Vanguard or Buyer set forth in this Agreement or in
any other agreement or instrument delivered by Vanguard or Buyer
pursuant to this Agreement, except as may be waived by Seller;
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(c) The Assumed Liabilities; and
(d) Any liability or claim of Seller arising under the WARN Act
as a result of Buyer's termination after Closing of any employee
hired by Buyer in accordance with Section 7.3 or as a result of
the termination by Seller of any corporate employees of Seller to
whom Buyer does not make employment offers as of Closing pursuant
to Section 7.3.
15.4. Vanguard's and Buyer's Limitations.
(a) In no event shall Vanguard's or Buyer's indemnification
obligations under Section 15.3(a) exceed $100,000,000.
(b) Buyer shall not be required to make any indemnification
payment pursuant to Section 15.3(a) unless the aggregate of all
amounts for which indemnity payable by Buyer exceeds the Basket
Amount and in such event, Buyer shall be responsible for only the
amount in excess of the Basket Amount; provided that there shall
be no minimum Loss requirement, and liability of Buyer shall
arise from and after $1.00 of Losses, in respect of Losses
resulting from Buyer's intentional misrepresentation or fraud.
(c) The liability of Buyer with respect to any claim for
indemnification by any Indemnified Party pursuant to Section 15.4
shall be offset dollar-for-dollar by (i) any insurance proceeds
received by Seller or the New Foundation after the Closing Date
in respect of the Losses involved, and (ii) any other recovery
made by Seller or the New Foundation from any third-party on
account of the Losses involved.
(d) Vanguard and Buyer shall have no liability under Section
15.3(a) if, at or before the Closing Date, Seller or the New
Foundation had actual knowledge of a false or incorrect
representation or warranty of Vanguard or Buyer (other than as a
result of disclosure by Vanguard or Buyer) and did not inform one
of the Persons listed on Schedule 1.2(g)(ii) of such knowledge.
15.5. Notice and Procedure. All claims for indemnification
by any Indemnified Party against an Indemnifying Party under this
Article shall be asserted and resolved as provided in the
following provisions of this Article 15
15.6. Notice and Control of Litigation. If any claim or
liability for which an Indemnifying Party would be liable for
Losses to an Indemnified Party is asserted in writing by a Person
other than any Buyer's Indemnified Persons or Seller's
Indemnified Persons, the Indemnified Party shall notify the
Indemnifying Party in writing of the same within 30 days after
receipt of such written assertion of a claim or liability.
Should the Indemnified Party fail to notify the Indemnifying
Party in the time required above, the Indemnifying Party shall be
relieved of its obligations pursuant to this Article to the
extent such failure to notify in the time required above
materially adversely affects the Indemnifying Party's ability to
defend such matter. If the Indemnifying Party notifies the
Indemnified Party within 30 days after notice of such claim that
the Indemnifying Party will defend the Indemnified Party against
the claim, the Indemnifying Party shall, at its sole cost and
risk, defend
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the claim and control the defense, settlement and
prosecution of any litigation. If within 30 days after notice of
such claim the Indemnifying Party either notifies the Indemnified
Party that the Indemnifying Party disputes its obligations of
indemnity with respect to the claim or fails to notify the
Indemnified Party that the Indemnifying Party will defend the
claim, or if the Indemnifying Party notifies the Indemnified
Party within such 30 days that the Indemnifying Party will defend
the Indemnified Party against the claim but fails thereafter to
diligently prosecute or settle the claim, the Indemnified Party
will have the right (but not the obligation) to undertake the
defense, compromise or settlement of such claim at the cost and
risk of the Indemnifying Party. Anything in this
Section notwithstanding, (i) if there is a reasonable probability
that a claim may materially and adversely affect the Indemnified
Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right, at its own
cost and expense, to defend, compromise and settle such claim,
(ii) the Indemnifying Party shall not, without the written
consent of the Indemnified Party, settle or compromise any claim
or consent to the entry of any judgment which does not include as
an unconditional term thereof the giving by the claimant to the
Indemnified Party a release from all liability in respect to such
claim, and (iii) the Indemnifying Party may not assume the
defense of the claim on behalf of the Indemnified Party if (1)
the Persons against whom the claim is made, or any impleaded
Persons, include both the Indemnifying Party and any Indemnified
Party, and (2) representation of both such Persons by the same
counsel would be inappropriate due to actual or potential
differing interests between them, in which case any Indemnified
Party shall have the right to defend the claim on its own behalf
and to employ counsel at the expense of the Indemnifying Party.
All Parties agree to cooperate fully as necessary in the defense
of such matters (including making any counterclaim or cross-claim
against any Person other than another Party).
15.7. Notice of Claim. If an Indemnified Party has a claim
against any Indemnifying Party that is not described in Section
15.6, the Indemnified Party shall deliver a notice with
reasonable promptness to the Indemnifying Party describing the
claim. Should the Indemnified Party fail to notify the
Indemnifying Party within the time frame required above, the
indemnity with respect to the subject matter of the required
notice shall be limited to the damages that would have
nonetheless resulted absent the Indemnified Party's failure to
notify the Indemnifying Party in the time required above after
taking into account such actions as could have been taken by the
Indemnifying Party had it received timely notice from the
Indemnified Party.
15.8. Mixed Claims. Notice of any claim composed in part of
third party claims and claims that are not third party claims may
be given pursuant to either Section 15.6 or 15.7, and the giving
of a notice under Section 15.6 when a notice is properly due
under Section 15.7, or the giving of a notice under Section 15.7
when a notice is properly due under Section 15.6, shall not
impair the Indemnified Party's rights hereunder except to the
extent that an Indemnifying Party has been irreparably prejudiced
thereby.
15.9. Presumption of Liability. If the Indemnifying Party
either fails to notify the Indemnified Party within 30 days
following its receipt of notice of the claim that the
Indemnifying Party disputes its obligations of indemnity with
respect to a claim or assumes the defense of a claim, the claim
will be conclusively deemed a liability of the Indemnifying
Party.
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15.10. Disputed Claims. If the Indemnifying Party timely
notifies the Indemnified Party that the Indemnifying Party
disputes its obligations of indemnity with respect to the claim,
the Indemnifying Party and the Indemnified Party shall proceed
promptly and in good faith to negotiate a resolution of such
dispute within 60 days following receipt of the notice and, if
such dispute is not resolved through negotiations during such 60-
day period, it shall be resolved pursuant to the provisions of
Article 16.
15.11. Payment of Losses. The Indemnifying Party shall pay
the amount of any Losses to the Indemnified Party within 30 days
after notice of the claim is given or on such later date (i) in
the case of a claim described in Section 15.6 that the
Indemnified Party suffers Losses, or (ii) in the case of a claim
described in Section 15.7, promptly after the Indemnified Party
suffers Losses in respect of the claim. In the event the
Indemnified Party is not paid in full for its claim in a timely
manner after the Indemnifying Party's obligation to indemnify and
the amount thereof has been determined, the amount due shall bear
interest from the date that the Indemnifying Party suffered
Losses in respect of the claim until paid at the interest rate
provided in Section 17.16.
15.12. Limitation Period. No claim pursuant to this Article
15 may be asserted under this Agreement unless the Party making
the claim gives the Party against whom the claim is to be made
notice of such claim before the end of the applicable survival
period (as hereinafter defined), provided that such claim shall
survive the expiration of the survival period if notice thereof,
as required hereby, was previously given.
15.13. Survival of Representations; Indemnity Periods.
Notwithstanding any right of Buyer (whether or not exercised) to
investigate the Hospital Businesses or any right of any Party
(whether or not exercised) to investigate the accuracy of the
representations and warranties of the other Party contained in
this Agreement, each of Seller and the New Foundation has, on the
one hand, and Buyer and Vanguard have, on the other hand, the
right to rely fully upon the representations, warranties,
covenants and agreements of the other contained in this Agreement
as set forth in this Section. The representations, warranties,
covenants and agreements in this Agreement made by the Parties
will survive the Closing (a) indefinitely with respect to matters
covered by Sections 2.4, 3.1, 4.1, 5.1, 12, 13, 14, 15, 17.13 and
18; (b) until the sooner of 60 days after the expiration of all
applicable periods of statutes of limitations (including all
periods of extension, whether automatic or permissive) or three
years with respect to matters covered by Sections 3.5, 3.13,
3.17, 3.22, 3.23, 3.26, 3.27, 3.28, 4.4, 5.4, 5.7, 5.11, 5.13,
5.14 and 5.15; and (c) until the second anniversary of the
Closing Date in the case of all other representations,
warranties, covenants and agreements, except that:
(i) any representation, warranty, covenant or agreement that
would otherwise terminate in accordance with this clause (b) or
(c) above shall survive, if notice shall have been given pursuant
to Section 15.7 on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise
resolved as provided in this Article,
(ii) in the event of intentional misrepresentation or fraud in
the making of any representation or warranty, all representations
and warranties that are the subject of the intentional
misrepresentation or fraud shall survive until the expiration of
all
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applicable statutes of limitations (including all periods of
extension, whether automatic or permissive) with respect to
matters covered thereby, and
(iii) rights to indemnification under this Article will
survive until any claims brought hereunder shall have been
satisfied or otherwise resolved as provided herein.
16.0. Alternate Dispute Resolution
16.1. Agreement to Use the Procedure. In the event of a
dispute between the Parties arising out of or related to this
Agreement, the Parties shall utilize the procedures specified in
this Article except (i) when otherwise modified by written
agreement of the Parties at the time or after such time the
dispute arises; (ii) in connection with disputes relating to the
Post-Closing Adjustments, in which event the provisions of
Section 2.5 shall be utilized; (iii) any dispute relating to the
exercise of a right to terminate the Agreement, (iv) any dispute
arising out of a third party lawsuit, (e.g., a potential cross-
claim), notwithstanding that the dispute otherwise arises under
the Agreement, and (v) when otherwise expressly provided
elsewhere in this Agreement.
16.2. Initiation of the Procedure. A Party seeking to
utilize these procedures (the "Initiating Party") shall give
written notice to the other Party or Parties, describing briefly
the nature of the dispute and its claim and identifying an
individual with authority to settle the dispute on its behalf.
The Party receiving such notice (the "Responding Party") shall
have ten days within which to designate, in a written notice
given to the Initiating Party, an individual with authority to
settle the dispute on its behalf. The individuals so designated
shall be known as the "Authorized Individuals."
16.3. Unassisted Settlement. The Authorized Individuals
shall make such investigations as they deem appropriate and
promptly thereafter (but in no event later than 15 days from the
date of designation of the Responding Party's Authorized
Individual) shall commence discussions concerning resolution of
the dispute. If the dispute has not been resolved within 30 days
from the commencement of discussions (such 30th day being the
"Submission Date"), it shall be submitted to alternative dispute
resolution (the "ADR") as provided below.
16.4. Selection of the Neutral. The Parties shall have ten
days from the Submission Date to select a mutually acceptable
Person who is not an Affiliate or employee of any Party to
resolve the dispute (the "Neutral"). If no Neutral has been
selected within such time, any Party to the dispute may request
that the American Arbitration Association, the Center for Public
Resources, or another mutually agreed-upon provider of neutral
dispute resolution services, supply within ten days a list of
potential Neutrals with qualifications specified by the Parties.
Within five days after receipt of the list, the Parties shall
independently rank the proposed candidates, simultaneously
exchange rankings and select as the Neutral the individual
receiving the highest combined ranking who is available to serve.
16.5. Time and Place for the ADR. In consultation with the
Neutral, the Parties shall promptly designate a mutually
convenient time and place for the ADR (and unless circumstances
require otherwise, such time shall be no later than 60 days after
selection of the Neutral).
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16.6. Exchange of Information. In the event any Party has a
substantial need for information in the possession of the other
Party in order to prepare for the ADR, the Parties shall attempt
in good faith to agree on procedures for the expeditious exchange
of such information, with the help of the Neutral if necessary.
16.7. Summary of Views. One week prior to the first
scheduled session of the ADR, each Party shall deliver to the
Neutral and to the other Party a concise written summary of its
views on the matter in dispute, such summary not to exceed ten
pages in length.
16.8. Staffing the ADR. In the ADR, each Party shall be
represented by the Authorized Individual and by up to two counsel
(who may be in house counsel). In addition, each Party may bring
such other Persons (the maximum number of which shall be agreed
upon by the Parties in advance) as may be needed to respond to
questions, contribute information and participate in the
negotiations, with the assistance of the Neutral, if necessary.
16.9. Conduct of the ADR. The Parties, in consultation with
the Neutral, will agree upon a format for the meetings designed
to assure that the Neutral and the Authorized Individuals have an
opportunity to hear an oral presentation of each Party's views on
the matter in dispute, and that the Authorized Individuals
attempt to negotiate a resolution of the matter in dispute, with
or without the assistance of counsel or others, but with the
assistance of the Neutral. To this end, the Neutral is
authorized to conduct both joint meetings and separate private
caucuses with the Parties. The Neutral will keep confidential
all information learned in private caucus with either Party
unless specifically authorized by such Party to make disclosure
of the information to the other Party.
16.10. The Neutral's Views. The Neutral shall (a) unless
requested not to do so by the Parties, provide his opinion to the
Parties on the probable outcome should the matter be litigated,
and (b) if requested to do so by the Parties, make one or more
recommendations as to the terms of a possible settlement, upon
any conditions imposed by the Parties (including a minimum and
maximum amount). The Neutral shall base his opinions and
recommendations on information then available to the Parties,
excluding only such information disclosed by any Party to the
Neutral in confidence but not disclosed to the other Party or
Parties. The opinions and recommendations of the Neutral shall
not be binding on the Parties.
16.11. Termination of the Procedure. The Parties shall
participate in the ADR to its conclusion (as designated by the
Neutral) and not terminate negotiations concerning resolution of
the matters in dispute until at least ten days thereafter. No
Party shall commence a lawsuit or seek other remedies prior to
the conclusion of the ten-day post-ADR negotiation period,
provided that either Party may commence litigation within five
days prior to the date after which the commencement of litigation
could be barred by an applicable statute of limitations or
doctrine of laches, or in order to request a temporary
restraining order or preliminary injunction to prevent
irreparable harm, in which event the Parties shall continue
nevertheless (unless prohibited by court order) to participate in
the ADR to its conclusion.
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16.12. Fees of the Neutral; Disqualification. The Parties
shall share the fees of the Neutral equally. The Neutral shall
be disqualified as a witness, consultant, expert or counsel for
either Party with respect to the matters in dispute and any
litigation or other matters relating thereto.
16.13. Confidentiality. The procedures described above are
intended to constitute a compromise negotiation for purposes of
the Federal Rules of Evidence and state rules of evidence. The
entire Procedure is confidential, and no stenographic, visual or
audio record shall be made. All conduct, statements, promises,
offers, views and opinions, whether oral or written, made in the
course of the Procedure by any Party, its agents, employees,
representatives or other invitees, and by the Neutral (who will
be the Parties' joint agent for purposes of the Procedure) are
confidential and, where appropriate, shall be deemed to be work
product and privileged. Such conduct, statements,
promises, offers, views and opinions shall not be discoverable or
admissible for any purposes, including impeachment, in any
litigation or other proceeding involving the Parties, and shall
not be disclosed to anyone not an agent, employee, expert,
witness or representative of any Party, provided that evidence
otherwise discoverable or admissible is not excluded from
discovery or admission as a result of its use in the Procedure.
17.0. General
17.1. Schedules.
(a) The Schedules shall be construed with and as an integral
part of this Agreement to the same extent as if the same had been
set forth verbatim herein. Any fact disclosed on one Schedule
shall be deemed to be disclosed on each other applicable
Schedule. At or prior to Closing, Seller shall supplement the
Schedules or deliver new Schedules as necessary to make each of
the representations and warranties of Seller contained in Article
3 and of the New Foundation contained in the Joinder Agreement
true and correct in all material respects on and as of the
Closing Date, provided that without Buyer's written consent, (i)
Seller may not supplement any Schedule relating to the
representations and warranties in Section 3.6, and (ii) no such
supplement may exclude any Assets being conveyed to or purchased
by Buyer or add any Permitted Encumbrances or any liabilities or
obligations being assumed by Buyer. Nothing in the Schedules
shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule
identifies the exception with reasonable particularity and,
without limiting the generality of the foregoing, the mere
listing of a document as an exception to any representation or
warranty shall not be deemed to disclose the contents of such
document as an exception to any representation or warranty. Any
Contracts, documents or other materials delivered by Seller or
its advisors to any of Vanguard and Buyer shall be deemed to be
delivered to each of Vanguard and Buyer.
(b) The Parties acknowledge that all of the Schedules
anticipated to have been completed as of the Effective Date (the
"Signing Schedules") have not been completed, and Seller shall
not be in breach of any representation or warranty made in this
Agreement by reason of the fact that all of the Signing Schedules
are not in fact attached to this Agreement on the Effective Date
of this Agreement. Each Schedule on the List of Schedules that
is
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marked with an asterisk is a "Final Schedule" and may not
change without agreement of the Parties and shall not be governed
by the provisions of this Section 17.1(b). With respect to each
missing Signing Schedule:
(i) Seller will prepare or complete a draft of all Signing
Schedules (the "Draft Schedules") and deliver the Draft Schedules
to Buyer as soon as possible after the Effective Date, but in any
event no later than October 25, 2002.
(ii) If any Draft Schedule is acceptable to Buyer, it will
thereupon be a "Final Schedule"; and
(iii) If Buyer determines in its sole but reasonable
discretion that a Draft Schedule is not acceptable, the Parties
will attempt promptly and in good faith to resolve their
differences with respect to the Draft Schedule, and if the
parties reach a written agreement with respect to the Draft
Schedule, the Draft Schedule will be a "Final Schedule".
(c) Each Final Schedule shall be deemed to be the corresponding
Schedule referred to in this Agreement and shall be part of this
Agreement as fully as if it had been appended on, and shall speak
as of, the Effective Date. Notwithstanding any other provision
of this Agreement, if any Draft Schedule is for any reason
whatsoever not delivered by Seller to Buyer on or before October
25, 2002, or for any reason whatsoever does not become a Final
Schedule pursuant to the provisions of this Section on or before
November 11, 2002, then Buyer shall have the absolute right to
terminate this Agreement on any date subsequent to November 11,
2002.
(d) If Buyer determines reasonably and in good faith that any
Omitted Contract should not be an Assumed Contract because it (i)
is unreasonably burdensome on the operations of the Hospital
Businesses, (ii) violates any Legal Requirement, or (iii) has
been knowingly omitted by Seller from Schedule 2.1(e), then Buyer
shall promptly notify Seller of such determination and, subject
to the following sentence, such Omitted Contract will not be an
Assumed Contract. If Seller disagrees reasonably and in good
faith with Buyer's determination that the Omitted Contract should
not be an Assumed Contract, then such matter will be submitted to
Vanguard's Chief Executive Officer and to Seller's Chairman, or
their respective designees, who shall meet promptly after such
submission and finally determine in good faith whether such
Omitted Contract is or should be an Assumed Contract. Such
determination of Vanguard's Chief Executive Officer and Seller's
Chairman, or their respective designees, shall be final and
binding on the Parties. If Vanguard's Chief Executive Officer
and Seller's Chairman, or their respective designees, are unable
to agree, the dispute shall be resolved pursuant to the
provisions of Article 16.
17.2. CON Disclaimer. This Agreement shall not be deemed to
be an acquisition or obligation of a capital expenditure or of
funds within the meaning of the certificate of need laws of any
state, until the appropriate Governmental Authorities shall have
granted a certificate of need or other appropriate approval or
determined that no certificate of need or other approval is
required.
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17.3. Tax and Government Payment Program Effect. None of the
Parties (nor such Parties' counsel or accountants) has made or is
making in this Agreement any representation to any other Party
(or such Party's counsel or accountants) concerning any of the
Tax or Government Payment Program effects or consequences on the
other Party of the transactions provided for in this Agreement.
Each Party represents that it has obtained, or may obtain,
independent Tax and Government Payment Program advice with
respect thereto and upon which it, if so obtained, has solely
relied.
17.4. Reproduction of Documents. This Agreement as
originally executed and all documents relating hereto, including
consents, waivers and modifications which may hereafter be
executed, the Closing Documents, financial statements,
certificates and other information previously or hereafter
furnished to any Party, may be reproduced by any Party by any
photographic, microfilm, electronic or similar process and the
Parties may destroy any original documents so reproduced. The
Parties stipulate that any such reproduction shall be admissible
in evidence as the original itself in any judicial, arbitral or
administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the
ordinary course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be
admissible in evidence; provided that an originally executed copy
of the Agreement or any other such document shall control over
any purported reproduction thereof to the extent of any
differences between the two.
17.5. Consented Assignment. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Assumed Contract, claim or other right if
the assignment or attempted assignment thereof without the
consent of another Person would (i) constitute a breach thereof
or in any material way affect the rights of Seller thereunder;
(ii) be ineffective or render the Contract void or voidable, or
(iii) materially affect Seller's rights thereunder so that Buyer
would not in fact receive all such rights. In any such event,
Seller shall cooperate in any reasonable arrangement designed to
provide for Buyer the benefits under any such Contract, claim or
right, including enforcement of any and all rights of Seller
against the other Person arising out of the breach or
cancellation by such other Person or otherwise. After Closing,
the Parties shall continue to use Commercially Reasonable Efforts
to obtain the consent to the assignment of such Contract, claim
or right.
17.6. Time of Essence. Time is of the essence in the
performance of this Agreement, provided that if the day on or by
which a notice must or may be given or the performance of any
Party's obligation is due is a Saturday, Sunday or holiday for
banks in San Antonio, Texas, then the day on or by which such
notice must or may be given or that such performance is due shall
automatically be extended to the first business day thereafter.
This Section may be waived only in a writing expressly referring
hereto.
17.7. Consents, Approvals and Discretion. Except as herein
expressly provided to the contrary, whenever this Agreement
requires any consent or approval to be given by any Party or any
Party must or may exercise discretion, such consent or approval
shall not be unreasonably withheld or delayed and such discretion
shall be reasonably exercised.
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17.8. Choice of Law; Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas without regard to such State's conflicts of laws rules, and
all remedies for dispute resolution arising under this Agreement,
including mediation, shall be conducted in San Antonio, Texas.
17.9. Benefit; Assignment. This Agreement shall inure to the
benefit of and be binding upon the Parties and their respective
legal representatives, successors and assigns, including BCFS if
Seller merges with BCFS. No Party may assign this Agreement
without the prior written consent of the other Parties.
17.10. Third Party Beneficiary. The terms and provisions of
this Agreement (including provisions regarding employee and
employee benefit matters) are intended solely for the benefit of
the Parties, Buyer's Indemnified Persons with respect to Article
15, Seller's Indemnified Persons with respect to Article 15, and
their respective successors and permitted assigns, and are not
intended to confer third-party beneficiary rights upon any other
Person. Any reference in this Agreement to one or more Employee
Benefit Plans of Buyer includes provisions, if any, in such plans
permitting their termination or amendment and any covenant in
this Agreement to provide any Employee Benefit Plan shall not be
deemed or construed to limit the right of Buyer to terminate or
amend such plan in accordance with its terms.
17.11. Waiver of Breach, Right or Remedy. The waiver by any
Party of any breach or violation by another Party of any
provision of this Agreement or of any right or remedy permitted
the waiving Party in this Agreement (i) shall not waive or be
construed to waive any subsequent breach or violation of the same
provision (ii) shall not waive or be construed to waive a breach
or violation of any other provision, and (iii) shall be in
writing and may not be presumed or inferred from any Party's
conduct. Except as expressly provided otherwise in this
Agreement and except for the obligation of the Parties to first
utilize the ADR procedure in Article 16, no remedy conferred by
this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be in addition to every other
remedy granted in this Agreement or now or hereafter existing at
law or in equity, by statute or otherwise. The election of any
one or more remedies by a Party shall not constitute a waiver of
the right to pursue other available remedies. In addition to any
other rights and remedies any Party may have at law or in equity
for breach of this Agreement, each Party shall be entitled to
seek an injunction to enforce the provisions of this Agreement.
17.12. Notices. Any notice, demand or communication required,
permitted or desired to be given hereunder shall be deemed
effectively given if given in writing (i) on the date tendered by
personal delivery; or (ii) on the date tendered for delivery by
nationally recognized overnight courier, in any event addressed
as follows:
If to Buyer: c/o Vanguard Health Systems, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Seller: ▇▇▇▇ ▇. Box, Esq.
Senior Vice President-Legal Affairs & Chief
Legal Officer
Baptist Health System
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: J. ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or number, and to the attention of such
other Person, as any Party may designate at any time in writing
in conformity with this Section.
17.13. Misdirected Payments. Seller shall remit to Buyer with
reasonable promptness any monies received by Seller after Closing
constituting or in respect of the Assets and Assumed Liabilities.
Buyer shall remit to Seller with reasonable promptness any monies
received by Buyer after Closing constituting or in respect of the
Excluded Assets and Excluded Liabilities. If any Person
determines that funds previously paid or credited to the Hospital
Businesses in respect of services rendered prior to the Closing
Date have resulted in an overpayment or must be repaid, Seller
shall be responsible for the repayment of said monies (and the
defense of such actions). If Buyer suffers any deduction to or
offset or withhold against amounts due either of them of funds
previously paid or credited to the Hospital Businesses in respect
of services rendered prior to the Closing Date, Seller shall
immediately pay to Buyer, as the case may be, the amounts so
billed or offset upon demand. Any amounts due Buyer by Seller or
its Affiliate, or due Seller by Buyer or its Affiliate, may be
offset against monies or other funds held by the Party entitled
to payment; provided that Seller shall first have the opportunity
to review the facts giving rise to the deduction, offset or
withhold and raise any related objection thereto. Any dispute
between the Parties as to any deduction, offset or withholding
proposed under this Section 17.13 shall be resolved pursuant to
Article 16.
17.14. Severability. If any provision of this Agreement is
held or determined to be illegal, invalid or unenforceable under
any present or future law, and if the rights or obligations of
any Party under this Agreement will not be materially and
adversely affected thereby: (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement; (c) the remaining provisions
of this Agreement will remain in full force and effect and will
not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement; and (d) in
lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as a part of this Agreement a legal,
valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
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17.15. Entire Agreement; Amendment. This Agreement supersedes
all previous contracts, agreements and understandings and
constitutes the entire agreement of whatsoever kind or nature
existing between or among the Parties representing the within
subject matter and no Party shall be entitled to benefits other
than those specified herein. As between or among the Parties,
any oral or written representation, agreement or statement not
expressly incorporated herein, whether given prior to or on the
Effective Date, shall be of no force and effect unless and until
made in writing and signed by the Parties on or after the
Effective Date. The representations and warranties set forth in
this Agreement shall survive the Closing and remain in full force
and effect as provided in Article 15, and shall survive the
execution and delivery of all other agreements, instruments or
other documents described, referenced or contemplated herein and
shall not be merged herewith or therewith. This Agreement may be
executed in two or more counterparts, each and all of which shall
be deemed an original and all of which together shall constitute
the same instrument. This Agreement may not be amended except in
a written instrument executed the Parties.
17.16. Interest. Unless otherwise provided herein to the
contrary, any monies required to be paid by any Party to another
Party pursuant to this Agreement shall be due two business days
after demand therefor and if not paid when due shall accrue
interest from and after the due date to and including the date
full payment is made at an annual rate equal to the prime rate in
effect for the relevant period as reported by the Wall Street
Journal under "Money Rates".
17.17. Drafting. No provision of this Agreement shall be
interpreted for or against any Person on the basis that such
Person was the draftsman of such provision, and no presumption or
burden of proof shall arise favoring or disfavoring any Person by
virtue of the authorship of any provision of this Agreement.
17.18. Confidentiality; Public Announcements.
(a) Except for disclosure required by the applicable securities
laws or other Legal Requirements, with respect to information
provided by Seller to Buyer in connection with and relative to
this proposed transaction, the executed Confidentiality Agreement
dated March 14, 2002, in respect of confidentiality between
Vanguard and Seller shall remain in effect until Closing.
(b) At all times before the Closing, Seller, on the one hand,
and Buyer, on the other hand, will consult with the other before
issuing or making any reports, statements or releases to the
public with respect to this Agreement or the transactions
contemplated hereby and will use good faith efforts to obtain the
other Party's approval of the text of any public report,
statement or release to be made on behalf of such Party. If
either Party is unable to obtain the approval of its public
report, statement or release from the other Party and such
report, statement or release is, in the opinion of legal counsel
to such Party, necessary to discharge such Party's disclosure
obligations under law, then such Party may make or issue the
legally required report, statement or release and promptly
furnish the other Party a copy thereof.
18.0. Guarantee of Buyer's Obligations.
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Vanguard, as principal obligor and not merely as a surety,
hereby unconditionally guarantees full, punctual and complete
performance by Buyer of all of their obligations under this
Agreement and each of the Closing Documents subject to the terms
hereof and thereof and so undertakes to Seller and the New
Foundation that, if and whenever Buyer is in default, Vanguard
will on demand from Seller or the New Foundation duly and
promptly perform or procure the performance of Buyer's
obligations. The foregoing guarantee is a continuing guarantee
and will remain in full force and effect until the obligations of
Buyer under this Agreement have been duly performed or discharged
and will continue to be effective or will be reinstated, as the
case may be, if at any time any sum paid to Seller must be
restored by Seller upon the bankruptcy, liquidation or
reorganization of Buyer. Vanguard's obligations under this
Section shall not be affected or discharged in any way by
any proceeding with respect to Buyer under any federal or state
bankruptcy, insolvency or debtor relief laws.
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In Witness Whereof, the Parties have caused this Agreement
to be executed in multiple originals by their duly authorized
officers as of the Effective Date.
Baptist Health System
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, Board of Trustees
VHS San Antonio Partners, L.P.
By: VHS Acquisition Subsidiary Number 5, Inc.,
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
Vanguard Health Systems, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice Chairman
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