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EXHIBIT 2.1
RECAPITALIZATION AGREEMENT
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BY AND AMONG
▇▇▇▇▇▇▇▇▇▇ HEALTHCARE CORPORATION,
PHC/CHC HOLDINGS, INC.
AS PARENTS,
AND
PHC/PSYCHIATRIC HEALTHCARE CORPORATION.,
PHC-SALT LAKE CITY, INC.,
▇▇▇▇▇▇▇▇▇▇ PIONEER VALLEY HOSPITAL, INC.,
PIONEER VALLEY HEALTH PLAN, INC.,
PHC-JORDAN VALLEY, INC.,
▇▇▇▇▇▇▇▇▇▇ PHC REGIONAL MEDICAL CENTER, INC.,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ HOSPITAL, INC.,
PHC UTAH, INC., AND
CLINICARE OF UTAH, INC.
AS SELLERS,
AND
JLL HOSPITAL, LLC, AS BUYER
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DATED AS OF AUGUST 16, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS.........................................................1
1.1. Definition of Certain Terms...........................................1
ARTICLE II. PRE-CLOSING TRANSACTIONS; RECAPITALIZATION........................12
2.1. Pre-Closing Transactions.............................................12
2.2. Assets...............................................................12
2.3. Excluded Assets......................................................14
2.4. Assumption of Liabilities............................................15
2.5. Excluded Liabilities.................................................15
2.6. Consent of Third Parties.............................................17
ARTICLE III. THE CLOSING......................................................18
3.1. Closing..............................................................18
3.2. Buyer's Delivery of the Transaction Consideration....................18
3.3. Closing Deliveries...................................................18
3.3.1. Seller Deliveries............................................18
3.3.2. Buyer Deliveries.............................................20
3.4. Post-Closing Adjustments to Cash Purchase Price......................20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES....................................22
4.1. Representations and Warranties of the Seller.........................22
4.1.1. Authorization, etc...........................................22
4.1.2. Corporate Status.............................................23
4.1.3. No Conflicts, etc............................................23
4.1.4. Seller Financial Statements..................................23
4.1.5. Absence of Changes...........................................23
4.1.6. Litigation...................................................24
4.1.7. Compliance with Laws.........................................24
4.1.8. Government Program Participation.............................24
4.1.9. Cost Reports.................................................25
4.1.10. JCAHO Accreditation..........................................25
4.1.11. Governmental Approval........................................25
4.1.12. Fraud and Abuse..............................................25
4.1.13. ▇▇▇▇-▇▇▇▇▇▇ Loans............................................26
4.1.14. Interests....................................................26
4.1.15. Assets.......................................................26
4.1.16. Material Contracts...........................................27
4.1.17. Intellectual Property........................................27
4.1.18. Owned Real Property..........................................28
4.1.19. Leases.......................................................28
4.1.20. Environmental Matters........................................29
4.1.21. Employment Relations.........................................29
4.1.22. Employee Benefit Plans.......................................30
4.1.23. Accounts Receivable..........................................31
4.1.24. Insurance....................................................32
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4.1.25. Taxes........................................................32
4.1.26. Affiliate Transactions.......................................34
4.1.27. Brokers, Finders, etc........................................34
4.1.28. Disclosure...................................................35
4.1.29. Solvency.....................................................35
4.1.30. Disclaimer of Warranties.....................................35
4.1.31. Absence of Undisclosed Liabilities...........................35
4.1.32. Inventory....................................................35
4.1.33. Year 2000 Compliance.........................................35
4.1.34. Holdco Capitalization........................................36
4.1.35. Holdco Information...........................................36
4.2. Representations and Warranties of the Buyer.
Buyer represents and warrants to Seller as follows:..................37
4.2.1. Corporate Status; Authorization, etc.........................37
4.2.2. No Conflicts, etc............................................37
4.2.3. Litigation...................................................38
4.2.4. Financial Capability.........................................38
4.2.5. No Current Operations........................................38
4.2.6. No Brokers...................................................38
4.2.7. Disclosure...................................................38
4.2.8. Solvency.....................................................38
4.3. Representations and Warranties of Parent.
4.3.1. Authorization, etc...........................................38
4.3.2. Corporate Status.............................................39
4.3.3. No Conflicts, etc............................................39
4.3.4. Fraud and Abuse..............................................39
4.3.5. Solvency.....................................................39
ARTICLE V. COVENANTS..........................................................40
5.1. Covenants of Seller..................................................40
5.1.1. Conduct of Business..........................................40
5.1.2. Access and Information.......................................41
5.1.3. Further Assurances...........................................42
5.1.4. Schedules....................................................42
5.1.5. Purchasing Contract..........................................42
5.1.6. Use of Names.................................................42
5.1.7. Title and Survey Matters.....................................42
5.1.8. Expansion Project............................................44
5.1.9. Year 2000 Project Plan.......................................44
5.1.10. Bonuses......................................................44
5.2. Covenants of Buyer...................................................45
5.2.1. Further Assurances...........................................45
5.2.2. Post-Closing Access to Information...........................45
5.2.3. Preservation and Access to Patient Records After the
Closing......................................................45
5.2.4. Confidentiality..............................................45
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5.2.5. Release of Letter of Credit..................................46
5.2.6. Financing Commitment. .......................................46
5.2.7. Return of Privileged Documents...............................46
5.2.8. Amendment to Holdco Certificate of Incorporation.............47
5.3. Additional Covenants.................................................47
5.3.1. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇............................................47
5.3.2. Other Government Consents....................................47
5.3.3. Best Efforts; No Inconsistent Action.........................48
5.3.4. Press Releases...............................................48
5.3.5. Stockholders Agreement.......................................48
5.3.6. Termination of Affiliate Transactions........................48
5.4. Tax Matters Covenants................................................48
5.4.1. Code Section 338(h)(10) Election; Allocation of Transaction
Consideration................................................48
5.4.2. Transferors' Taxes and Returns...............................49
5.4.3. PHC's Returns for Tax Periods Including the Closing Date.....49
5.4.4. Tax Periods Ending on or Before the Closing Date.............50
5.4.5. Tax Periods Beginning Before and Ending After the Closing
Date.........................................................50
5.4.6. Cooperation on Tax Matters...................................52
5.4.7. Tax Sharing Agreements.......................................52
5.4.8. Audits.......................................................52
5.4.9. Carrybacks...................................................53
5.4.10. LLC Entity Tax Years Beginning Before and Ending After
Closing......................................................53
5.4.11. Tax Indemnification..........................................53
5.4.12. Procedures Relating to Indemnification of Tax Claims.........54
ARTICLE VI. CONDITIONS PRECEDENT..............................................55
6.1. Conditions to Obligations of Each Party..............................55
6.1.1. HSR Action Notification......................................55
6.1.2. No Injunction, etc...........................................55
6.1.3. Government Approvals.........................................55
6.2. Conditions to Obligations of the Buyer...............................55
6.2.1. Representations, Performance.................................55
6.2.2. Collateral Agreements........................................56
6.2.3. Reorganization...............................................56
6.2.4. No Material Adverse Effect...................................56
6.2.5. Title Commitment.............................................56
6.2.6. Consents.....................................................56
6.2.7. FIRPTA Affidavit.............................................56
6.2.8. Financing....................................................56
6.3. Conditions to Obligations of the Seller..............................56
6.3.1. Representations, Performance, etc............................56
6.3.2. Collateral Agreements........................................57
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6.3.3. Letter of Credit.............................................57
6.3.4. Buyer's Certificate..........................................57
ARTICLE VII. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.............................57
7.1. Employment of Seller's Employees.....................................57
7.2. Welfare and Fringe Benefit Plans.....................................58
7.3. Workers Compensation.................................................59
7.4. Employment Taxes.....................................................59
7.5. No Continuing Obligation.............................................59
ARTICLE VIII. TERMINATION.....................................................60
8.1. Termination..........................................................60
8.2. Break-Up Fee.........................................................60
8.3. Effect of Termination................................................60
ARTICLE IX. ADDITIONAL AGREEMENTS.............................................60
9.1. Seller's Cost Reports................................................60
9.2. Misdirected Payments.................................................61
9.3. WARN Act.............................................................61
9.4. Power of Attorney for D.E.A. Registration Number(s) and Utah
Pharmacy License(s)..................................................61
9.5. Covenant Not to Compete..............................................61
ARTICLE X. INDEMNIFICATION....................................................62
10.1. Indemnification......................................................62
10.2. Survival of Representations and Warranties, etc......................64
10.3. Limitations on Indemnification Provisions; Exclusive Remedy..........65
10.3.1. Limitation on Indemnification................................65
10.3.2. Waiver of Non-Compensatory Damages...........................65
10.3.3. Exclusive Remedy; Waiver and Release.........................65
ARTICLE XI. MISCELLANEOUS.....................................................65
11.1. Expenses.............................................................65
11.2. Severability.........................................................66
11.3. Notices..............................................................66
11.4. Miscellaneous........................................................67
11.4.1. Headings.....................................................67
11.4.2. Entire Agreement.............................................67
11.4.3. Counterparts.................................................67
11.4.4. Governing Law, etc...........................................67
11.4.5. Binding Effect...............................................67
11.4.6. Assignment...................................................67
11.4.7. No Third Party Beneficiaries.................................67
11.4.8. Amendment; Waivers, etc......................................68
11.4.9. Specific Performance.........................................68
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SCHEDULES
Schedule 2.3 Assets
Schedule 2.3(n) Excluded Interests
Schedule 2.5(b) Certain Excluded Liabilities
Schedule 3.1 Recapitalization Transactions
Schedule 4.1.3 Conflicts
Schedule 4.1.5 Changes Post-Seller Financial Statements Date
Schedule 4.1.6 Litigation (Seller)
Schedule 4.1.7 Compliance with Laws (Seller)
Schedule 4.1.8 Medicare/Medicaid Contingencies
Schedule 4.1.9 Amounts Owed to the Programs
Schedule 4.1.10 JCAHO Contingencies
Schedule 4.1.11 Governmental Approvals
Schedule 4.1.12 Applicable Executives
Schedule 4.1.14 Interests
Schedule 4.1.15 Encumbrances
Schedule 4.1.16(a) Material Contracts
Schedule 4.1.16(b) Defaults on Material Contracts
Schedule 4.1.17 Intellectual Property
Schedule 4.1.18 Owned Real Property
Schedule 4.1.19 Leases
Schedule 4.1.20 Environmental Matters
Schedule 4.1.20(a) Certain Leased Real Property
Schedule 4.1.21 Employment Relations
Schedule 4.1.22(a) Employee Benefit Plans
Schedule 4.1.22(e) Exceptions to ERISA and the Code
Schedule 4.1.22(f) Exceptions to "qualifications" under the Code
Schedule 4.1.22(k) Exceptions to the WARN Act
Schedule 4.1.23 Accounts Receivable
Schedule 4.1.24 Insurance Policies
Schedule 4.1.25 Tax Matters
Schedule 4.1.33 Year 2000 Compliance
Schedule 4.1.35 Holdco Assets
Schedule 4.2.2 Governmental Approvals or Consents to be obtained by Buyer
Schedule 4.2.3 Litigation (Buyer)
Schedule 5.3.6 Affiliate Transactions
Schedule 5.4.1 Allocation of Transaction Consideration
Schedule 7.1 Additional Offerees
Schedule 7.2 COBRA Employees
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LIST OF EXHIBITS
Exhibit A Facilities
Exhibit B Interests
Exhibit C Net Working Capital
Exhibit D Terms of License Agreement
Exhibit E Terms of Stockholders Agreement
Exhibit F Terms of Transition Services Agreements
Exhibit G Matters to be covered by Seller Legal Opinion
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT ("Agreement") is made and entered into as
of August 16, 1999, by and among ▇▇▇▇▇▇▇▇▇▇ HEALTHCARE CORPORATION, a California
corporation ("PHC"), PHC/CHC HOLDINGS, INC., a Delaware corporation ("PHC
Holdings" and, together with PHC, collectively, "Parent"), PHC/PSYCHIATRIC
HEALTHCARE CORPORATION, a Delaware corporation ("Holdco"), PHC-SALT LAKE CITY,
INC., a Utah corporation ("PHC-Salt Lake"), ▇▇▇▇▇▇▇▇▇▇ PIONEER VALLEY HOSPITAL,
INC., a Utah corporation ("▇▇▇▇▇▇▇▇▇▇ Pioneer"), PIONEER VALLEY HEALTH PLAN,
INC., a Utah Corporation ("PVHP"), PHC-JORDAN VALLEY, INC., a Utah corporation
("PHC-Jordan"), ▇▇▇▇▇▇▇▇▇▇ PHC REGIONAL MEDICAL CENTER, INC., a Utah corporation
("▇▇▇▇▇▇▇▇▇▇-PHC"), ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ HOSPITAL, INC., a Utah corporation
("▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇"), PHC UTAH, INC., a Delaware corporation ("PHC Utah"),
CLINICARE OF UTAH, INC., a Utah Corporation, ("Clinicare"), (Holdco, PHC-Salt
Lake, ▇▇▇▇▇▇▇▇▇▇ Pioneer, PVHP, PHC-Jordan, ▇▇▇▇▇▇▇▇▇▇-PHC, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
PHC Utah and Clinicare, are referred to hereinafter individually, jointly and
severally as the "Seller"), and JLL HOSPITAL, LLC, a Delaware limited liability
company ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns or leases the acute care hospitals and other health
care facilities set forth in Exhibit A hereto (collectively, the "Facilities");
WHEREAS, Seller owns the capital stock or other equity interests set
forth on Exhibit B hereto in the various corporations, partnerships, limited
liability companies and other entities listed therein in connection with
Seller's health care-related operations in the Salt Lake City, Utah area
(collectively, "the Interests");
WHEREAS, Buyer wishes to acquire, and Seller wishes to sell, assign and
transfer substantially all of the assets and properties, including the
Facilities and the Interests, owned, leased or used by Seller in the operations
of the Business in the manner and upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, an election will be made to treat Buyer as a corporation for
U.S. federal income Tax purposes;
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definition of Certain Terms. The terms defined in this Article I,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for
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all purposes of this Agreement. All references herein to a Section, Article or
Schedule are to a Section, Article or Schedule of or to this Agreement, unless
otherwise indicated.
Accounts Receivable: as defined in Section 2.2(d).
Adjusted Cash Purchase Price: as defined in Section 3.4(a).
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person.
Affiliate Transactions: all accounts payable, notes payable,
accounts receivable and Contracts, whether or not entered into in the
ordinary course of the Business, to or by which Seller or the Business,
on the one hand, and Seller's Affiliates, on the other hand, are a party
or are otherwise bound, or by which any of the Assets is bound or
pursuant to which Seller or the Business has made or is obligated to make
payments or incur expenses to or for the benefit of Seller's Affiliates.
Agreement: this Recapitalization Agreement, including the
Schedules hereto.
Applicable Executives: the individuals set forth on SCHEDULE
4.1.12 hereto.
Applicable Law: all applicable statutes, laws, rules, regulations,
ordinances, codes, judgments, decrees or orders of any Governmental
Authority having jurisdiction over Seller, the Assets or the Business.
Applicable Rate: as defined in Section 3.4(b)
Assets: as defined in Section 2.2.
Assumed Liabilities: as defined in Section 2.4
Assumption Agreement: as defined in Section 2.4.
Benefit Liabilities: liabilities, obligations, commitments,
damages and costs payable under any Employee Benefit Plan.
Best Efforts: best efforts reasonable under the circumstances,
excluding, except to the extent specifically provided herein, the payment
of any money or other consideration to any third party or the
commencement of any litigation.
Books and Records: as defined in Section 2.2(g).
Business: the business conducted by Seller relating to Seller's
ownership and operation of the Facilities, Clinicare, PVHP and the
Interests.
Business Day: shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in Utah are authorized or required to
close.
Buyer: as defined in the first paragraph of this Agreement.
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Buyer Indemnitees: as defined in Section 10.1(a).
Buyer's Certificate: the certificate to be executed by Buyer (i)
describing the agreements and instruments executed by Seller in
connection with the Pre-Closing Transactions and the transaction
contemplated by Paragraph 1 of SCHEDULE 3.1 that have been furnished to
Buyer and (ii) certifying that the Pre-Closing Transactions and the
transactions contemplated by Paragraph 1 of SCHEDULE 3.1 have been
completed in a manner satisfactory to Buyer.
Buyer's 401(k) Plan: as defined in Section 7.1(d)
Buyer's Pre-Closing Expansion Costs: as defined in Section 3.4(c)
Cash Purchase Price: the cash to be delivered to Seller at Closing
as set forth on SCHEDULE 3.1.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq.
Clean Up: all action required to: (1) cleanup, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment, (2)
prevent the Release of Hazardous Materials so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (4) respond to
any government requests for information or documents in any way relating
to cleanup, removal, treatment or remediation or potential cleanup,
removal, treatment or remediation of Hazardous Materials in the indoor or
outdoor environment.
Closing: as defined in Section 3.1.
Closing Date: as defined in Section 3.1.
Closing Net Working Capital: as defined in Section 3.4(a)
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the Stockholders Agreement, the Transition
Services Agreement, the License Agreement, the Buyer's Certificate and
each of the agreements and other documents and instruments described in
Section 3.3.
Commitment Letter: as defined in Section 4.2.4
Confidential Information: as defined in 5.2.4
Consent: any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of
registration, certificate, declaration or filing with, or report or
notice to, any Person, including but not limited to any Governmental
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Authority but expressly excluding the procurement by Buyer of provider
contracts with the Programs.
Construction Agreement: the agreement dated as of December 1,
1998, by and between PHC-Jordan and ▇▇▇▇▇▇▇▇ Street Bovis relating to
additions and renovations at Jordan Valley Hospital.
Contracts: those Assets described in Section 2.2(h).
Contractor: collectively, the General Contractor, the
Sub-Contractors and the Other Contractors.
Contractors' Interim Invoices: as defined in Section 5.1.8.
Control (including the terms "controlled by" and "under common
control with"): the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.
Corporation: as defined in Section 4.1.14.
Cost Reports: as defined in Section 4.1.9
Current Program Receivables: Program Receivables which have been
billed since the close of the most recent cost reporting fiscal year.
Cut-Off Invoices: as defined in Section 5.1.8.
D.E.A.: the United States Department of Justice Drug Enforcement
Agency.
Deliverables: the deliverables summarized in the Year 2000 Project
Plan with respect to the operation of the Business and the Facilities.
Department of Health: The Utah Department of Health.
$ or dollars: lawful money of the United States.
DOJ: the United States Department of Justice.
Draw Request: the monthly invoice of the General Contractor
representing the monthly draw, in arrears, of the General Contractor and
the Sub-Contractors, with respect to the Expansion Project.
Effective Time: as defined in Section 3.1.
Election: as defined in Section 5.4.1
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Employees: collectively, any employee or former employee employed
or formerly employed in the operation of the Business or the
beneficiaries or dependents of any such employee or former employee.
Employee Benefit Plan: as defined in Section 4.1.22.
Environmental Authorities: the United States Environmental
Protection Agency, and all other federal, state, regional, county or
local government authorities authorized or having jurisdiction to enforce
Environmental Laws.
Environmental Laws: any applicable federal, state or local
statute, law, rule, regulation, ordinance, code or rule of common law in
effect as of the Closing Date (including any amendments in effect as of
the Closing Date) relating to the pollution or protection of the
environment, or to exposure to or Releases into the indoor or outdoor
environment of Hazardous Substances, including without limitation,
CERCLA; The Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Sections 6901, et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Sections 1201, et seq.; the Toxic Substances Control Act, 15
U.S.C. Sections 2601, et seq.; the Clean Air Act, 42 U.S.C. Sections
7401, et seq.; and the Medical Waste Tracking Act of 1988, 42 U.S.C.,
Section 6992, et seq.
Environmental Permits: all permits, licenses, registrations and
other authorizations required under Environmental Laws to operate a
Facility or to Release, use or dispose of Hazardous Substances used,
stored, generated, treated, transported or Released by or on behalf of
the Facilities.
Environmental Proceedings: any proceeding initiated by an
Environmental Authority or by any other third party, under any
Environmental Law related to or regarding the Facilities, the Assets or
the Real Property or the use, release or disposal of Hazardous Substances
by Seller or otherwise on or from the Facilities.
Environmental Reports: as defined in Section 4.1.20.
Equipment: as defined in Section 2.2(b).
Equity Investment: as defined in Section 5.2.6.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliates: as defined in Section 4.1.22(a).
Excluded Assets: as defined in Section 2.3.
Excluded Liabilities: as defined in Section 2.5.
Expansion Costs: as defined in Section 5.1.8.
Expansion Costs Invoices: as defined in Section 3.4(c).
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Expansion Project: as defined in Section 5.1.8.
Facilities: as defined in the Recitals.
Financing Ceiling: as defined in Section 5.2.6
FIRPTA Affidavit: as defined in Section 6.2.7.
FTC: the Federal Trade Commission.
GAAP: generally accepted accounting principles as in effect in the
United States.
General Contractor: ▇▇▇▇▇▇▇▇ Street Bovis.
Governmental Approval: any consent, permit, license, certificate,
franchise approval or authorization of any Governmental Authority, but
expressly excluding any Environmental Permit and the procurement by Buyer
of provider contracts with the Programs.
Governmental Authority: any federal, state or local governmental
authority, agency, court, department, bureau, board or commission,
domestic or foreign.
Hazardous Substances: all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5,
or defined as such by, or regulated as such under, any Environmental Law,
including, without limitation, friable asbestos, asbestos-containing
material and poly-chlorinated biphenyls, radioactive wastes and
radioactive substances.
Holdco: PHC/Psychiatric Healthcare Corporation.
Holdco Common Stock: as defined in Section 4.1.34.
Hospitals: the hospitals set forth on Exhibit A hereto.
HSR Act: the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-trust Improvements Act of
1976, as amended.
Indemnified Party: as defined in Section 10.1(c).
Independent Accounting Firm: as defined in Section 3.4(a)(ii).
Initial Allocation: as defined in Section 5.4.1.
Indemnifying Party: as defined in Section 10.1(c).
Intellectual Property: all (a) trademarks (registered or
unregistered), service marks, trade names, assumed names and logos (other
than the Excluded Assets) (b) copyrights and computer software and
registrations thereof and applications therefor (other than the
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Excluded Assets); and (c) if any, patents and patent applications (as
applicable) and (d) all agreements and licenses relating to any of the
foregoing owned, filed or licensed by Seller and used in the Business.
Interests: as defined in the Recitals.
Inventory: as defined in Section 2.2(c).
IRS: the Internal Revenue Service.
Jordan Valley Hospital: The Hospital owned and operated by
PHC-Jordan and listed on Exhibit A.
Leased Real Property: the Real Property subject to the Leases.
Leases: means the real property leases and subleases pursuant to
which the Seller is the lessee, lessor, sublessee or sublessor and that
pertain to the Business as listed and described in SCHEDULE 4.1.19.
Letter of Credit: the letter of credit in the amount of $7,550,750
issued by Paribas in favor of AHP of Utah, Inc. or any successor thereof,
securing obligations under the Pioneer Valley Lease.
License Agreement: the agreement to be executed by Seller and
Buyer providing for the license of certain Intellectual Property
substantially in the form of Exhibit D hereto.
Lien: any mortgage, pledge, security interest, encumbrance,
recorded easement, encroachment, option or lien on any real or personal
property.
Litigation: as defined in Section 4.1.6.
LLC Interests: as set forth on Exhibit B.
Losses: as defined in Section 10.1.
Material Adverse Effect: a material adverse effect (i) with
respect to Seller, on the Assets, business, operations, environmental
liability, financial condition or results of operations of the Business
taken as a whole, and (ii) with respect to Buyer, on the assets,
business, operations, environmental liability, financial condition or
results of operations of Buyer taken as a whole.
Material Contract: as defined in Section 4.1.16(a).
Material Intellectual Property: as defined in Section 4.1.17.
Medical Benefit Plan: as defined in Section 7.2(a).
Minimum Claim Amount: as defined in Section 10.3.1.
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Net Working Capital: as defined in Exhibit C hereto.
Offerees: as defined in Section 7.1(a).
Other Contractors: any architect, construction manager,
contractor, engineer, laborer, supplier, independent contractor or
construction consultant used in connection with the Expansion Project,
other than the General Contractor and the Sub-Contractors.
Other LLC Entities: as defined in Section 4.1.25
Owned Real Property: the real property owned by Seller and used in
the operation of the Business, as listed on SCHEDULE 4.1.18.
Parent: collectively, PHC and PHC Holdings.
Party or Parties: either the Buyer or any of the Sellers, or all
of them, as the context requires.
Permitted Liens: (i) Except for Liens securing the Seller
Indebtedness, Liens securing liabilities which are reflected or reserved
against in the Seller Financial Statements to the extent so reflected or
reserved, (ii) Liens for Taxes not yet due and payable or which are being
contested in good faith and by appropriate proceedings (iii) Liens
arising or imposed by law in the ordinary course of business (including
easements, permits, zoning requirements and other restrictions of record
or limitations on the use of real property or irregularities in title
thereto and Liens for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like) that do not materially detract from
the value of the Assets or materially interfere with Seller's use thereof
in the operation of the Business and which do not involve an amount in
excess of $50,000 individually, (iv) Liens, including those arising by
operation of law, otherwise relating to the liabilities to be assumed by
Buyer pursuant to Section 2.4 hereof and (v) Liens set forth on SCHEDULES
4.1.14, 4.1.15 and 4.1.18.
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
PHC: ▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation.
Pioneer Valley Hospital: the Hospital leased and operated by
▇▇▇▇▇▇▇▇▇▇ Pioneer and listed on Exhibit A.
Pioneer Valley Lease: the lease dated as of May 15, 1996 by and
between ▇▇▇▇▇▇▇▇▇▇ Pioneer and American Health Properties, Inc., as
amended from time to time, governing the lease of the real property and
the improvements thereon used by ▇▇▇▇▇▇▇▇▇▇ Pioneer to operate Pioneer
Valley Hospital.
Pioneer Valley Real Property: the real property governed by the
Pioneer Valley Lease.
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Pre-Closing Net Working Capital: an amount equal to $19,451,000.
Pre-Closing Period: as defined in Section 3.4(c).
Pre-Closing Tax Period: as defined in Section 5.4.11.
Pre-Closing Transactions: as defined in Section 2.1.
Privileged Documents: shall mean any documents of Seller subject
to the attorney-client privilege or the work product privilege except for
those documents the disclosure or transfer of which would not, in the
good faith opinion of Seller after consulting with legal counsel, result
in a loss of any such privilege with respect to the subject matter of any
pending, threatened or possible cause of action or judicial or
administrative action, suit, proceeding or investigation.
Program Receivables: accounts receivable owing to Seller pursuant
to its provider contracts with the Programs.
Programs: the Medicare, Medicaid and TRICARE programs.
Progress Reports: as defined in Section 4.1.33.
Purchasing Contracts: (i) the Purchasing Agreement dated August 2,
1999 entered into by and between ▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation and
▇▇▇▇▇ HealthSystem Medical, Inc., having a term of two (2) years
commencing on August 1, 1999 and ending on July 31, 2001 and (ii) the
Agreement dated November 20, 1996 entered into by and between Health
Services Corporation of America and ▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation,
having a term of three (3) years commencing on November 20, 1996 and
ending on November 19, 1999.
Pro-Rated Draw Requests: as defined in Section 5.1.8.
Real Property: as defined in Section 2.2(a).
Recapitalization Transactions: the transactions to be completed as
set forth on SCHEDULE 3.1 hereto.
Release: any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration
into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater and surface or subsurface strata)
or into or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water, groundwater or
property.
Securitization Program: the accounts receivable securitization
program governed by the documents, instruments, and agreements executed
and delivered by PHC Funding Corp. II, PHC and certain Subsidiaries of
PHC, initially entered into as of April 16, 1993 with Sheffield
Receivables Corporation, together with any documents, instruments and
agreements from time to time executed and delivered in connection
therewith.
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Seller: as defined in the Recitals.
Seller Cost Reports: as defined in Section 9.1.
Seller Financial Statements: as defined in Section 4.1.4.
Seller Financial Statements Date: as defined in Section 4.1.4.
Seller Indebtedness: the Senior Bank Credit Facility and the
Securitization Program.
Seller Indemnitees: as defined in Section 10.1(a).
Seller's 401(k) Plan: as defined in Section 7.1(d).
Senior Bank Credit Facility: the ▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation
Amended and Restated Credit Agreement, providing for a $140,000,000
Reducing Revolving Credit Facility and a $115,000,000 Term Loan Facility,
dated as of March 30, 1998, as amended.
Severance Plan: as defined in Section 7.1(b).
Shares: as defined in Section 4.1.34.
SLRMC: Salt Lake Regional Medical Center, the Hospital owned and
operated by PHC - Salt Lake and listed on Exhibit A.
Statement: as defined in Section 3.4(a).
8023 Statement: as defined in Section 5.4.1.
Stockholders Agreement: as defined in Section 5.3.5.
Straddle Period: as defined in Section 5.4.5(a).
Sub-Contractors: those sub-contractors and suppliers whose
services in connection with the Construction Agreement are invoiced by
the General Contractor in the Draw Requests.
Subsidiaries: each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interests.
Survey: as defined in Section 5.1.7(b).
Tax: includes all foreign, federal, state, or local government
income, franchise, withholding, estimated, excise, sales, use, gross
receipt, employment, payroll, transfer, property, profit, value added,
service, capital stock, license, social security, workers compensation,
unemployment, utility, gains, severance, stamp, occupation, premium,
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windfall, environmental, disability, registration, alternative or add-on
minimum, gift, ad valorem, export, import, customs duties or other taxes,
charges, fees, duties, levies, penalties, or other assessments of any
kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority, whether
disputed or not; provided, however, Tax does not include any charge, fee
or penalty imposed exclusively under the Programs on Seller or its
Affiliates as a result of services provided by Seller or its Affiliates.
Tax Claim: as defined in Section 5.4.12(a).
Taxing Authority: includes any federal, state, local, or foreign
governmental authority responsible for the imposition of any Tax.
Tax Returns: any return, report, declaration, form, claim for
refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
Termination Notice: as defined in Section 8.1(b)
Title Commitment: as defined in Section 5.1.7(a).
Title Company: as defined in Section 5.1.7(a).
Title Policy: as defined in Section 5.1.7(a).
Transaction Consideration: the consideration to be delivered to
SELLER as set forth on SCHEDULE 3.1 hereto.
Transaction Expenses: as defined in Section 11.1.
Transferor: as defined in Section 4.1.25.
Transferred Corporation: as defined in Section 4.1.25
Transferred Employees: as defined in Section 7.1(a).
Transferred Entities: those entities listed on Exhibit B hereto.
Transition Services Agreement: the agreement to be executed by
Seller and Buyer providing for certain transition services substantially
in the form of Exhibit F hereto.
Underlying Documents: as defined in Section 5.1.7(a).
WARN Act: Worker Adjustment and Retraining Notification Act of
1988.
Work: as defined in Section 5.1.8.
Year 2000 Compliance: as defined in Section 4.1.33.
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Year 2000 Project Plan: as defined in Section 4.1.33.
ARTICLE II.
PRE-CLOSING TRANSACTIONS; RECAPITALIZATION
2.1. Pre-Closing Transactions. Upon the terms and subject to the
conditions set forth in this Agreement, the parties agree that prior to the
consummation of the Closing, Parent and Seller shall take such actions and
undertake such transactions as they deem necessary or appropriate to cause
Holdco or a Subsidiary of Holdco to acquire all of the Assets as of the Closing,
free and clear of all liabilities and obligations other than the Assumed
Liabilities and Permitted Liens, in a manner mutually acceptable to Buyer and
Seller. Such actions and transactions shall be referred to herein as the
"Pre-Closing Transactions."
2.2. Assets. The term "Assets" shall mean all right, title and interest
of the Seller in and to all assets, real, personal and mixed, tangible and
intangible, other than the Excluded Assets, owned or leased and used by Seller
in the operation of the Business, whether carried on the books of Seller or not
carried on the books of Seller, due to expense, full depreciation or otherwise,
as the same may exist on the Closing Date, including, without limitation except
to the extent included in the Excluded Assets, those in the following categories
(collectively, the "Assets"):
(a) fee or leasehold title to all real property including,
without limitation, the real property described in SCHEDULES 4.1.18 and
4.1.19 hereto, together with all improvements, buildings and fixtures
located thereon or therein other than those improvements, buildings and
fixtures owned by third parties that have leased real property from
Seller pursuant to ground leases, and all rights and appurtenances
pertaining thereto and all construction in progress (collectively, the
"Real Property");
(b) all leased and owned tangible personal property, including
all equipment, furniture, furnishings, parts, machinery, fixtures,
computer equipment, tools, spare parts, motor vehicles and leasehold
improvements owned or leased by Seller and used in the Business
("Equipment"), as well as manufacturers' warranties associated with such
items;
(c) all inventories owned or leased by Seller and used in the
Business, including all inventories of supplies, drugs, food, janitorial
and office supplies and other disposables and consumables located at the
Facilities or purchased by Seller for use in the Business ("Inventory"),
as well as all manufacturer's and vendor's warranties associated with
such items;
(d) all accounts receivable and notes receivable arising out of
the operation of the Business ("Accounts Receivable");
(e) all claims and causes of action of Seller against third
parties and Seller's rights to offset amounts against claims and causes
of action made by third parties with respect to the Assets, Assumed
Liabilities or the operation of the Business, including, but not limited
to, all rights against suppliers under warranties covering any of the
Inventory
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or Equipment, and all rights against insurers arising out of the
insurance policies maintained by Seller or otherwise relating to the
Assets, Assumed Liabilities or operation of the Business;
(f) all rights to causes of action, lawsuits, judgments, claims
and demands of any nature available to or being pursued by the Seller
with respect to the Business or the ownership, use, function or value of
any Asset, whether arising by way of counterclaim or otherwise;
(g) all books and records and other documents (whether on
paper, computer diskette, tape or other storage media) associated with
the Assets or the Assumed Liabilities and used in the operation of the
Business, including, without limitation, all financial, patient, medical
staff and personnel records, property records, production records,
engineering records, environmental compliance records, purchase and sales
records, credit data, marketing, advertising and promotional materials,
payroll records, accounting records, fixed asset lists, supplier lists,
manuals, technical and repair data, correspondence, files and any similar
items ("Books and Records");
(h) All commitments, contracts, leases, and agreements in
respect of the Business, including, without limitation, Seller's provider
contracts with the Programs (collectively, the "Contracts");
(i) to the extent assignable, all licenses and permits relating
to the ownership, development and operations of the Assets and the
Business (including, without limitation, any pending or approved
Governmental Approvals regarding the Business) necessary, or required by
Applicable Laws, to own or lease and operate the Assets and to conduct
the Business as it is presently conducted by Seller;
(j) all Intellectual Property;
(k) all Hospital-based computer software, programs and similar
systems owned or licensed by Seller and used in the Business;
(l) the Interests;
(m) to the extent assignable, all prepaid expenses, deposits
and other similar items of Seller associated with the operation of the
Business;
(n) except those relating to Excluded Assets, all claims,
refunds and rebates and similar items with respect to the Assets;
(o) all stationery, forms, labels, shipping materials,
brochures, art work, photographs, advertising materials and any similar
items owned by Seller and used in the operation of the Business;
(p) all goodwill of the businesses evidenced by the Assets;
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(q) all insurance proceeds arising in connection with property
damage to the Assets occurring after the date hereof and on or prior the
Closing Date, to the extent not expended on the repair or restoration of
the Assets or required to be applied to amounts outstanding under the
Senior Bank Credit Facility pursuant to the terms thereof;
(r) the names, symbols and telephone numbers used with respect
to the operation of any of the Business, including, without limitation,
the names of any of the Facilities set forth on Exhibit A and the Related
Entities set forth on Exhibit C; and
(s) all of Seller's right, title and interest in and to all
other assets, property and rights owned or leased by Seller and used in
the Business, tangible and intangible, real, personal or mixed, wherever
located, whether or not carried at value or listed on the books and
records of Seller, and whether in the possession of Seller or others.
Subject to the terms and conditions hereof, prior to the Closing, the
Assets shall be transferred or otherwise conveyed to Holdco or a Subsidiary
thereof free and clear of any and all Liens other than the Permitted Liens.
2.3. Excluded Assets. The Seller will retain and not transfer, and
Holdco or a Subsidiary thereof will not purchase or acquire, the following
properties, assets and rights (collectively, the "Excluded Assets"):
(a) cash and cash equivalents;
(b) rights to settlements and retroactive adjustments, if any,
for cost reporting periods ending on or prior to the Closing Date arising
from or against the United States government under the terms of the
Programs;
(c) all Privileged Documents;
(d) all claims of Seller against third parties, and Seller's
rights to offset amounts against claims made by third parties, with
respect to any Excluded Liabilities;
(e) all proceeds, benefits, income or revenues accruing (and
any security or other deposits made) with respect to any of the Excluded
Assets;
(f) Seller's corporate minute books, minutes, tax records and
other records of Seller required to be maintained by Seller as a matter
of law (it being understood that patient medical records are not intended
to be excluded);
(g) the name "▇▇▇▇▇▇▇▇▇▇" and all variations thereof, all
trademarks and logos related thereto and all stationery, forms, labels,
brochures, advertising materials and similar items bearing any of the
foregoing;
(h) all intercompany accounts of Seller and its Affiliates;
(i) all commitments, contracts, leases, capital leases, notes,
and agreements between Seller and its Affiliates; and
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(j) all policies, procedures, internal controls and reporting
systems that have been developed and maintained by PHC at its principal
offices located in Houston, Texas;
(k) all computer hardware and software owned and licensed by
PHC and maintained and located at PHC's Houston data center;
(l) any interest in and to the "▇▇▇▇▇▇▇▇▇▇ Pride" and "Service
Advantage" programs;
(m) all other assets located outside of the State of Utah other
than assets used primarily in the Business or located outside the State
of Utah on a temporary basis;
(n) the equity interest held by Seller in the entities set
forth on SCHEDULE 2.3(n); and
(o) the other assets set forth on SCHEDULE 2.3.
2.4. Assumption of Liabilities. Subject to the terms and conditions set
forth herein and except for the Excluded Liabilities, at the time of the
Pre-Closing Transactions, Seller shall cause Holdco or a Subsidiary thereof to
assume and agree to be responsible for and agree to discharge or otherwise
satisfy all liabilities, obligations and commitments of Seller of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, relating to or arising out of the operation of the
Business. Prior to the Closing, Holdco or a Subsidiary thereof shall assume the
liabilities described in this Section 2.4 (the "Assumed Liabilities") by
executing and delivering to Seller an assumption agreement in form and substance
satisfactory to Buyer and Seller (the "Assumption Agreement").
2.5. Excluded Liabilities. None of Holdco, any Subsidiary thereof or
Buyer have agreed to pay, shall be required to assume and shall have any
liability or obligation with respect to, any of the following liabilities or
obligations, direct or indirect, absolute or contingent, of Seller or the
Business (the "Excluded Liabilities"):
(a) liabilities or obligations of Seller in respect of periods
prior to Closing arising under the terms of the Programs, Blue Cross or
other third party payor programs, including, without limitation, any
retroactive denial of claims, civil monetary penalties or any gain on
sale that may be recognized under the Medicare or Medicaid program as a
result of the consummation of the transactions described herein;
(b) any cause of action or judicial or administrative action,
suit, proceeding or investigation, pending or threatened on or prior to
the Closing Date or relating to periods prior to the Closing Date
including, without limitation, those items listed on SCHEDULES 2.5(b) AND
4.1.6;
(c) any failure to comply with, or any violation of, any law,
rule, regulation, statute, ordinance, permit, judgment, injunction,
order, decree, license or other Governmental Approval applicable to the
Assets (other than Environmental Laws, which are addressed in subsections
(l) and (m) below), which failure or violation occurred on or prior to
the Closing Date;
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(d) any obligations of Seller under this Agreement and the
Collateral Agreements;
(e) any obligations or liabilities of Seller for expenses or
fees incident to or arising out of the negotiation, preparation, approval
or authorization of this Agreement and the other agreements contemplated
hereby or the consummation (or preparation for the consummation) of the
transactions contemplated hereby and thereby, including brokers',
attorneys' and accountants' fees;
(f) any obligation of Seller under provider contracts with the
Programs in respect of periods prior to and including the Closing Date;
(g) any obligation or liability of Seller or any of its
Affiliates with respect to any Tax (including any obligation or liability
pursuant to Treas. Reg. Section 1.1502-6 or any similar provision of
state, local, or foreign law or as a result of the election under Section
338(h)(10) of the Code, as contemplated by Section 5.4.1 of this
Agreement) relating to (i) any taxable period (or portion thereof) ending
on or prior to the Closing Date, other than Buyer's share of any Taxes
specifically required to be prorated pursuant to the terms of this
Agreement or any Collateral Agreement, (ii) the portion of a Straddle
Period (as defined in Section 5.4.5(a)), ending on the Closing Date (with
due regard being given to Sections 5.4.5(b) and (c)), but with respect to
liabilities imposed pursuant to Treas. Reg. Section 1.1502-6 or any
similar provision of state, local or foreign law, for the entire Straddle
Period, or (iii) the Seller's or its Affiliates' share of Taxes as set
forth in Section 5.4.2;
(h) all Benefit Liabilities except as specifically assumed in
Article VII hereof;
(i) liabilities or obligations arising at any time under any
Contract not assumed by Buyer except to the extent provided pursuant to
Section 2.6(c);
(j) liabilities or obligations attributable to any breach of or
default under any Contract by Seller prior to the Closing Date (whether
or not Buyer has assumed such Contract), which breach or default has not
been cured on or prior to the Closing Date;
(k) any obligation or liability asserted under any federal
▇▇▇▇-▇▇▇▇▇▇ program or other restricted grant and loan programs with
respect to the ownership or operation of the Facilities;
(l) liabilities or obligations arising out of or relating to
(i) violations of Environmental Laws on or prior to the Closing Date by
Seller or any of its Affiliates relating to the Facilities or Real
Properties, (ii) Environmental Proceedings pending or threatened on or
prior to the Closing Date against Seller or any of its Affiliates
relating to the Facilities or Real Properties or (iii) the Cleanup of
Hazardous Substances Released, disposed of or discharged by Seller or any
of its Affiliates; (A) on, beneath or adjacent to any of the Real
Properties prior to or on the Closing Date; or (B) at any other location
if such substances were generated, used, stored, treated, transported or
Released by or on behalf of a Facility prior to or on the Closing Date;
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(m) liabilities or obligations arising out of or relating to
(i) violations of Environmental Laws on or prior to the Closing Date by
Persons other than Seller or any of its Affiliates relating to the
Facilities or Real Properties, (ii) Environmental Proceedings pending or
threatened on or prior to the Closing Date against Persons other than
Seller or any of its Affiliates relating to the Facilities or Real
Properties or (iii) the Cleanup of Hazardous Substances Released,
disposed of or discharged by Persons other than Seller or any of its
Affiliates; (A) on, beneath or adjacent to any of the Real Properties
prior to or on the Closing Date; or (B) at any other location if such
substances were generated, used, stored, treated, transported or Released
by or on behalf of a Facility prior to or on the Closing Date;
(n) liabilities or obligations arising out of or relating to
the entities set forth on SCHEDULE 2.3(n); or
(o) liabilities or obligations of Parent, Seller or any of
their Affiliates that do not arise out of or relate to the Business.
2.6. Consent of Third Parties.
(a) Notwithstanding anything to the contrary in this Agreement,
this Agreement shall not constitute an agreement to assign or transfer
any Governmental Approval, Environmental Permit, instrument, contract,
lease, permit or other agreement or arrangement or any claim, right or
benefit arising thereunder or resulting therefrom if an assignment or
transfer or an attempt to make such an assignment or transfer without the
Consent of a third party would constitute a breach or violation thereof;
and any transfer or assignment to the Buyer by the Seller of any interest
under any such instrument, contract, lease, license, permit or other
agreement or arrangement that requires the Consent of a third party shall
be made subject to such Consent or approval being obtained. The Seller
shall use its Best Efforts to obtain any such Consent or approval prior
to the Closing Date. In the event any such Consent or approval is not
obtained on or prior to the Closing Date, the Seller shall continue to
use its Best Efforts to obtain any such approval or consent after the
Closing Date until such Consent or approval has been obtained.
Notwithstanding anything contained herein to the contrary, the failure to
obtain such a Consent or approval despite otherwise complying with the
terms of this Section 2.6 shall not constitute a breach hereof or a
default hereunder.
(b) If any such Consent is not obtained by Seller prior to the
Closing, until such Consent is obtained, Seller shall use its Best
Efforts, at Seller's sole cost and expense, to (i) provide Holdco or its
Subsidiaries the benefits of any Governmental Approval, Environmental
Permit or Contract to which such Consent relates, (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Holdco or its Subsidiaries, without incurring any financial obligation to
Holdco or its Subsidiaries, and (iii) enforce for the account and benefit
of Holdco or its Subsidiaries any and all rights of Seller arising from
such Governmental Approval, Environmental Permit or Contract against such
issuer thereof and all other parties thereto (including the right to
elect to terminate in accordance with the terms thereof on the advice of
Holdco). Notwithstanding the foregoing, no action taken pursuant to this
Section 2.6 shall be deemed to satisfy the conditions set forth in
Sections 6.1.3 or 6.2.6 hereof.
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(c) To the extent that Holdco or its Subsidiaries are provided
the benefits pursuant to Section 2.6(b) of any Governmental Approval,
Environmental Permit or Contract, Holdco or such Subsidiaries shall
perform, on behalf of Seller, for the benefit of the issuer thereof and
all other parties thereto, the obligations of Seller thereunder or in
connection therewith, but only to the extent that (i) such action by
Holdco or such Subsidiaries would not result in any material default
thereunder or in connection therewith and (ii) such obligation would have
been an Assumed Liability but for the non-assignability or
non-transferability thereof.
ARTICLE III.
THE CLOSING
3.1. Closing. Upon the terms and subject to the conditions set forth in
this Agreement, the parties agree to complete the transactions set forth on
SCHEDULE 3.1 hereto (the "Recapitalization Transactions"), and the closing of
the Recapitalization Transactions and the other transactions contemplated hereby
(the "Closing") that have not been consummated prior to such time shall take
place at 10:00 A.M. local time on the 15th day of October, 1999 AT THE OFFICES
OF SKADDEN, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, or at such other time and place upon which the parties may agree (the
"Closing Date"); provided, however, that the parties shall pre-close the
transactions contemplated hereby within two business days of the Closing at THE
OFFICES OF MAYOR, DAY, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Closing shall be effective as of 11:59 P.M. local time
on the Closing Date (the "Effective Time"). If the conditions set forth in
Article VI have not been satisfied prior to October 15, 1999, the Closing Date
shall be on the third business day after the last of such conditions have been
satisfied; provided that the Closing Date shall not be later than November 30,
1999.
3.2. Buyer's Delivery of the Transaction Consideration.
Buyer agrees to deliver or cause to be delivered the Transaction
Consideration in accordance with SCHEDULE 3.1.
3.3. Closing Deliveries.
3.3.1. Seller Deliveries. Seller and Parent shall deliver the
following documents, as applicable, duly executed and delivered to the
Buyer at the Closing, each in form and substance reasonably satisfactory
to Buyer's counsel:
(a) bills of sale, assignment and general conveyance, with
respect to the transfer of Assets to Holdco or a Subsidiary
thereof (other than any Asset to be transferred pursuant to any of
the instruments referred to in any other clause of this Section
3.3.1);
(b) assignments of all Contracts, Permits and any other
agreements and instruments constituting Assets, assigning to
Holdco or a Subsidiary thereof, all of Seller's right, title and
interest therein and thereto, with any required Consent endorsed
thereon;
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(c) a special warranty deed, with covenants against
grantor's acts, or its equivalent, with respect to each parcel of
Owned Real Property in form and substance reasonably satisfactory
to Buyer and Seller, conveying fee simple title to the Owned Real
Property to Holdco or a Subsidiary thereof, together with any
necessary transfer declarations, or other filings;
(d) assignments and assumptions of the Leases conveying
leasehold title to Holdco or a Subsidiary thereof, subject to the
Permitted Liens, together with any necessary transfer declarations
or other filings;
(e) an assignment of names and Intellectual Property, in
recordable form;
(f) certificates representing the Interests, duly endorsed
or accompanied by stock powers duly executed in blank, with
appropriate stock transfer tax stamps, if any, affixed, or any
other documents that are necessary to transfer good and valid
title to the Interests to Holdco;
(g) the compliance certificate referred to in Section 6.2.1
hereof;
(h) each of the Collateral Agreements to which Seller or
Parent is a party;
(i) the Books and Records;
(j) certified copies of resolutions duly adopted by each
Seller's and Parent's board of directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby as applicable;
(k) certified copies of each Seller's and Parent's
certificate of incorporation and bylaws;
(l) a certificate of the Secretary or an Assistant
Secretary of each Seller and Parent as to the incumbency of the
officer(s) of such Seller and Parent executing this Agreement and
the Collateral Agreements;
(m) resignations of the directors and officers of the
Transferred Entities that are designated by Seller effective as of
the Closing;
(n) a short-form certificate of good standing of each
Seller and Parent;
(o) a legal opinion from counsel to Seller and Parent
reflecting the matters specified in Exhibit G hereto;
(p) evidence of the release of the liens attributable to
the Seller Indebtedness;
(q) the FIRPTA Affidavit as provided for in Section 6.2.7;
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(r) estoppel certificates from the landlords under the
material Leases;
(s) copies of the material Consents referred to in Section
6.2.6 hereof; and
(t) such other documents, certificates and instruments (i)
to be delivered to Buyer as contemplated by this Agreement or the
Collateral Agreements or (ii) as Buyer reasonably deems necessary
to effect the transfer of the Assets to Holdco or a Subsidiary
thereof as contemplated hereby.
3.3.2. Buyer Deliveries. Buyer shall deliver or cause to be
delivered the following to Seller at Closing, each in form and substance
reasonably satisfactory to Seller:
(a) an aggregate amount equal to the Cash Purchase Price by
wire transfer in immediately available funds to the bank account
or accounts designated by Parent in writing at least two business
days prior to the Closing Date;
(b) certified copies of resolutions duly adopted by Buyer's
board of managers authorizing the execution, delivery and
performance of this Agreement and the other agreements
contemplated hereby;
(c) certified copies of Buyer's certificate of formation
and limited liability company agreement;
(d) a certificate of the Secretary or an Assistant
Secretary of Buyer as to the incumbency of the officer(s) of Buyer
executing this Agreement and the Collateral Agreements;
(e) a short-form certificate of good standing of Buyer;
(f) the Assumption Agreement;
(g) each of the Collateral Agreements to which Buyer is a
party; and
(h) such other payments, documents, certificates and
instruments to be delivered to Seller as contemplated by this
Agreement and the Collateral Agreements.
3.4. Post-Closing Adjustments to Cash Purchase Price.
(a) The Cash Purchase Price shall be adjusted following the
Closing as follows (as so adjusted, the "Adjusted Cash Purchase Price"):
(i) As soon as practicable, but in no event later than 60
days after the Closing Date, Seller shall deliver to Buyer a
statement (the "Statement") setting forth Seller's determination
of Seller's Net Working Capital as of the Closing
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Date (the "Closing Net Working Capital"), and setting forth in
reasonable detail Seller's calculation thereof. The Statement
shall be prepared in accordance with GAAP, consistently applied in
accordance with Seller's historical financial statements.
(ii) Buyer and its accountants shall have 60 days following
receipt by Buyer of the Statement during which to review the
Statement and any related work papers prepared in connection with
the calculation of Closing Net Working Capital and to dispute any
item contained in the Statement. If Buyer fails to notify Seller
of any such dispute within such 60-day period, the Statement shall
be the "Final Settlement." If Buyer timely notifies Seller of any
such dispute, and Seller and Buyer cannot resolve any such dispute
within 20 days of receipt by Seller of such notice, such dispute
shall be resolved by Ernst & Young, LLP, or if such accounting
firm is unable to so act, by a nationally recognized accounting
firm selected by Ernst & Young (the accounting firm so engaged
shall hereinafter be referred to as the "Independent Accounting
Firm"); the determination of the Independent Accounting Firm shall
be made as promptly as practicable (but no later than 165 days
after the Closing Date) and shall be final and binding on both
Buyer and Seller. Any expenses relating to engagement of the
Independent Accounting Firm shall be shared equally by Buyer and
Seller. In the event of a dispute, the Statement, as modified by
resolution by Buyer and Seller, or by the Independent Accounting
Firm, shall be the "Final Settlement."
(iii) The Adjusted Cash Purchase Price shall be equal to
the Cash Purchase Price, increased or decreased, as the case may
be, as follows: The Cash Purchase Price shall be (i) reduced by
the amount, if any, by which the Closing Net Working Capital is
less than the Pre-Closing Net Working Capital or (ii) increased by
the amount, if any, by which the Closing Net Working Capital is
greater than the Pre-Closing Net Working Capital.
(b) Notwithstanding the foregoing, the Cash Purchase Price
shall not be reduced or increased if the aggregate difference between (i)
the Closing Net Working Capital and the Pre-Closing Net Working Capital
is less than $250,000, whether positive or negative. To the extent that
the Cash Purchase Price is reduced as contemplated hereby, PHC shall pay
such amount to Holdco or, to the extent that the Cash Purchase Price is
increased as contemplated hereby, Holdco shall pay such amount to PHC, in
either case, within five (5) days of the final determination of such
amount together with interest thereon at the prime rate as then in effect
at Citibank (the "Applicable Rate") calculated on the basis of the number
of days elapsed from the Closing Date to the date of the payment, by wire
transfer of immediately available funds to an account designated by
Holdco or PHC, as applicable.
(c) The Parties agree that Seller shall be responsible for
Expansion Costs incurred prior to the date hereof (regardless of whether
or not such Expansion Costs have been paid on or prior to the date
hereof) and (assuming the Closing occurs) Buyer shall be responsible for
Expansion Costs incurred during the period of time from the date hereof
through the Closing Date (the "Pre-Closing Period") and thereafter.
Accordingly,
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the Cash Purchase Price shall be increased by an amount equal to the
Expansion Costs incurred and paid by Seller during the Pre-Closing Period
("Buyer's Pre-Closing Expansion Costs") in accordance with the provisions
of this Section 3.4(c). At least three (3) business days prior to the
Closing Date, Seller shall deliver to Buyer the Pro-Rated Draw Request,
any subsequent Draw Requests and all Contractors' Interim Invoices which
have been paid by Seller (collectively, the "Expansion Costs Invoices"),
copies of which may have previously been provided to Buyer pursuant to
the provisions of Section 5.1.8 hereof. Upon receipt of the Expansion
Costs Invoices, Buyer shall have the right to review any item contained
therein, and Buyer and Seller shall use Best Efforts to resolve any
dispute with respect thereto at or prior to the Closing. At the Closing,
Holdco shall pay to Seller by wire transfer of immediately available
funds to an account designated by Parent, an amount equal to Buyer's
Pre-Closing Expansion Costs as set forth in the Expansion Costs Invoices,
or as otherwise agreed to by Buyer and Seller, plus interest on any
amounts reflected in the Expansion Costs Invoices as Buyer's Pre-Closing
Expansion Costs which Seller has actually paid during the Pre-Closing
Period to third parties, at the Applicable Rate on the basis of the
number of days elapsed from the date of such payment by Seller of Buyer's
Pre-Closing Expansion Costs to the Closing Date. All Draw Requests and
Contractors Interim Invoices, in each case for the Pre-Closing Period,
which have not been paid by Seller as of the Closing Date shall be
assumed by Holdco as part of the Assumed Liabilities.
(d) The Cash Purchase Price shall be decreased by an amount
equal to any insurance proceeds arising in connection with damage to the
Assets and received by Seller during the Pre-Closing Period that are
applied by Seller to amounts outstanding under the Senior Bank Credit
Facility pursuant to the terms thereof.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Seller. Each Seller jointly
and severally represents and warrants to Buyer as follows:
4.1.1. Authorization, etc. Each Seller has the corporate power and
authority to execute and deliver this Agreement and each of the
Collateral Agreements to which it will be a party, to perform fully its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each
Seller of this Agreement, and the consummation of the transactions
contemplated hereby, have been, and on the Closing Date the execution and
delivery by each Seller of each of the Collateral Agreements and the
consummation of the transactions contemplated thereby will have been,
duly authorized by all requisite corporate action of each Seller. Each
Seller has duly executed and delivered this Agreement and on the Closing
Date each Seller will have duly executed and delivered each of its
respective Collateral Agreements. This Agreement is, and on the Closing
Date each of the Collateral Agreements to which each Seller is a party
will be, legal, valid and binding obligations of each Seller, enforceable
against such Seller in accordance with their respective terms except that
(a) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
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hereafter in effect, relating to or limiting creditors' rights generally
and (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
4.1.2. Corporate Status. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions in which
the ownership of its Assets or the operation of the Business makes such
qualification or licensing necessary, except to the extent that any
failure to be so licensed or qualified would not result in a Material
Adverse Effect. Each Seller has all requisite corporate power and
authority to own, lease and operate the Assets and to conduct the
Business as it is now being conducted.
4.1.3. No Conflicts, etc. The execution, delivery and performance
by each Seller of this Agreement and each of the Collateral Agreements,
and the consummation of the transactions contemplated hereby and thereby,
do not and will not (a) conflict with or result in a violation of or a
default under (i) any Applicable Law applicable to such Seller, the
Business or the Assets, or (ii) the certificate of incorporation or
bylaws or other organizational documents of such Seller, or (b) except as
set forth in SCHEDULE 4.1.3, conflict with, or result in any material
violation of or constitute a material default (or an event or condition
which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or result in the creation or
imposition of any Lien (as hereinafter defined) under, any Material
Contract. Except as set forth in SCHEDULE 4.1.11, no material Consent of
any Governmental Authority is required to be obtained or made by or with
respect to Seller in connection with the execution and delivery of this
Agreement or the Collateral Agreements, or the consummation by Seller of
the transactions contemplated hereby or thereby, or the conduct of the
Business by Buyer after the Closing, other than compliance with the
filings under the HSR Act.
4.1.4. Seller Financial Statements. Seller has delivered to Buyer
(i) the unaudited balance sheet of each Seller dated at December 31,
1998, 1997 and 1996 and the related unaudited statements of income of
such Seller for each such year then ended used in preparing the audited
consolidated financial statements of Parent and its consolidated
subsidiaries for the years ended December 31, 1998, 1997 and 1996 and
(ii) the unaudited balance sheet of each Seller at June 30, 1999 (the
"Seller Financial Statements Date") and the related unaudited statements
of income for the six months then ended (together, the "Seller Financial
Statements"). The Seller Financial Statements were prepared in accordance
with GAAP consistently applied and fairly present in all material
respects the financial position and results of operations of the
respective Sellers at their respective dates, subject in the case of
unaudited interim financial statements to normal year end adjustments and
the absence of explanatory footnote disclosure required by GAAP.
4.1.5. Absence of Changes. Except as set forth in SCHEDULE 4.1.5,
since the Seller Financial Statements Date through the date hereof,
Seller has conducted the Business only
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in the ordinary course consistent with prior practice and has not, on
behalf of, in connection with or relating to the Business or the Assets:
(a) suffered any event or change which individually or in
the aggregate, has had or would reasonably be expected to result
in a Material Adverse Effect;
(b) taken any action which, if taken after the execution
and delivery of this Agreement, would constitute a breach or
violation of Section 5.1.1 hereof; or
(c) entered into any contract, agreement or arrangement
with respect to any of the foregoing.
4.1.6. Litigation. Except as set forth on SCHEDULE 4.1.6, there is
no action, claim, suit, investigation or proceeding material to the
Business ("Litigation") pending, or to Seller's knowledge threatened,
against or relating to Seller in connection with the Assets, the Assumed
Liabilities, or the Business or against or relating to the transactions
contemplated by this Agreement at law or in equity or before any
Governmental Authority or arbitration tribunal by any private party or
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign. Seller is not in default with respect to any judgment, order,
writ, injunction or decree material to the Business and served upon it of
any court or of any Governmental Authority. The Privileged Documents do
not contain any information with respect to any pending, threatened or
possible cause of action or judicial or administrative action, suit,
proceeding or investigation or any other facts or circumstances that are
reasonably likely to have a Material Adverse Effect.
4.1.7. Compliance with Laws. Except as disclosed in SCHEDULE
4.1.7, to Seller's knowledge, since August 16, 1996, Seller has complied
in all material respects, and is presently complying in all material
respects, with all Applicable Laws material to the operation of the
Business or the Assets, and Seller has not received any notice alleging
any violation of an Applicable Law material to the operation of the
Business or the Assets. Seller has not been indicted, convicted or, to
Seller's knowledge, subject to an investigation of the Office of
Inspector General of the Department of Health and Human Services (the
"OIG") or other applicable Governmental Authority, or received a notice
from the OIG or other applicable Governmental Authority, with respect to
a violation or an alleged violation of the Medicare and Medicaid fraud
and abuse provisions of the federal Social Security Act, and to Seller's
knowledge has not committed a violation of any of such provisions.
4.1.8. Government Program Participation. Each of the Facilities is
eligible to receive payment from the Programs and is a "provider" under
existing provider agreements with the Programs. Each of the Facilities is
in substantial compliance with the conditions of participation in the
Programs and has received all approvals or qualifications necessary for
reimbursement on the Assets. Except as set forth on SCHEDULE 4.1.8, there
is not pending, nor to Seller's knowledge threatened, any proceeding or
investigation under the Programs involving the Facilities or any of the
Assets.
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4.1.9. Cost Reports. All cost reports ("Cost Reports") required to
be filed by the Hospitals under the Programs, or any other Applicable
Laws, have been prepared and filed in accordance with such Applicable
Laws. Seller has made available to Buyer true and complete copies of the
Cost Reports relating to the Business which the Seller has filed with the
Programs for the last three (3) years, as well as all correspondence and
other documents relating to any disputes and/or settlements with the
Programs by the Seller within the last three (3) years; except as set
forth on SCHEDULE 4.1.9, Seller has paid all amounts which, to Seller's
knowledge, are owed to the Programs for periods ended prior to March 31,
1997. SCHEDULE 4.1.9 sets forth, for each of the Facilities, the years
for which Cost Reports remain to be settled. Except for disputes between
Seller and the intermediary which concern the payment of individual
claims (as opposed to a dispute concerning the right of Seller to receive
reimbursement generally or to participate in the Programs), and except as
set forth on SCHEDULE 4.1.9, to Seller's knowledge, there is no dispute
between Seller and any Governmental Authorities regarding such Cost
Reports other than with respect to adjustments thereto made in the
ordinary course of business.
4.1.10. JCAHO Accreditation. Each Hospital is duly accredited with
no contingencies (except as set forth in SCHEDULE 4.1.10), by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") for the
period specified in SCHEDULE 4.1.10. Seller has made available to Buyer
copies of each Hospital's most recent JCAHO accreditation survey report
and deficiency list, if any and each Hospital's most recent Statement of
Deficiencies and Plan of Correction, if any.
4.1.11. Governmental Approval. SCHEDULE 4.1.11 sets forth all
Governmental Approvals that are material to the conduct of the Business.
SCHEDULE 4.1.11 includes a complete description of all licenses, permits,
franchises and certificates of need, if any, and their respective dates
of termination or renewal, owned or held by Seller that are material to
the ownership or operation of the Assets or the Business, together with
any formal and specific notices or directives received by Seller from the
agency responsible for such SCHEDULE 4.1.11 item, for which noncompliance
with such notice or directive would likely cause the revocation or
suspension for such item or a material fine or penalty. Except as set
forth in SCHEDULE 4.1.11, all such Governmental Approvals have been duly
obtained and are in full force and effect, and the Seller is in
compliance with each of such Governmental Approvals held by it with
respect to the Assets and the Business, except where non-compliance would
not result in damages in excess of $100,000. There is no claim, action,
suit, investigation or proceeding pending or, to the knowledge of Seller,
threatened regarding suspension or cancellation of any such Governmental
Approval. Except as set forth in SCHEDULE 4.1.11, none of such
Governmental Approvals will lapse, terminate or expire as a result of the
performance of this Agreement by Seller or the consummation of the
transactions contemplated hereby or by the Collateral Agreements.
4.1.12. Fraud and Abuse. To the knowledge of the Applicable
Executives, Seller has not engaged in any activities which are prohibited
under 42 U.S.C. Sections 1320a-7, 1320a-7a, 1320a-7b, 1395nn and 1396b,
the federal Civil False Claims Act (31 U.S.C. Section 3729 et seq.), the
federal TRICARE statute, or the regulations promulgated pursuant to such
statutes or related state or local statutes or regulations.
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4.1.13. ▇▇▇▇-▇▇▇▇▇▇ Loans. The Seller does not have any
outstanding obligation to repay any loans, grants, or loan guarantees, or
to provide uncompensated care in consideration thereof, pursuant to the
▇▇▇▇-▇▇▇▇▇▇ Act (42 U.S.C. Section 291a et seq.)
4.1.14. Interests. Except as set forth on SCHEDULE 4.1.14, the
membership interests (the "LLC Interests") in each limited liability
company (an "LLC") set forth opposite the name of a Seller or Parent on
Exhibit B hereto are owned by such Seller and constitute, except as set
forth in SCHEDULE 4.1.14, all of its equity interests in such LLC. Such
Seller has good and valid title to the LLC Interests owned directly by
it, free and clear of all Liens other than Permitted Liens, and upon
delivery to Holdco or a Subsidiary thereof of an assignment of the LLC
Interests executed by Seller, good and valid title to the LLC Interests
will pass to Holdco or a Subsidiary thereof, free and clear of any Liens
other than Permitted Liens. Except as set forth on SCHEDULE 4.1.14,
neither such Seller or any other Person has any right to acquire any
additional membership or other equity interest in such LLC or any
securities convertible into membership or other equity interests in such
LLC. Except as set forth on SCHEDULE 4.1.14, there are no outstanding
options, rights, calls, commitments of any kind relating to, or any
presently effective voting trusts, agreements or understandings, with
respect to any of the LLC Interests which would prevent the assignment
and transfer of the LLC Interests as provided herein or restricting or
otherwise relating to the voting, dividend rights or disposition of the
LLC Interests. All of the LLC Interests are validly issued and
outstanding, fully paid and nonassessable. The LLC Interests have not
been issued in violation of, and are not subject to, any preemptive,
subscription or similar rights. No LLC owns, directly or indirectly, any
capital stock or other equity interest in or of any corporation,
partnership, joint venture or other entity. Except as set forth on
SCHEDULE 4.1.14, each such Seller is, and at all times from the date
hereof to the transfer to Holdco or a Subsidiary thereof will be, the
sole record and beneficial owner of the LLC Interests set forth opposite
its name on Exhibit B, free and clear of any lien, charge, security
interest, encumbrance or claim other than Permitted Liens.
4.1.15. Assets. Except as disclosed in SCHEDULE 4.1.15, Seller
has, and on the Closing Date, Holdco or Subsidiaries thereof will have,
good and valid title to the Assets owned by it, other than the Real
Property (which is addressed in Section 4.1.18) and valid leasehold
interests in, or other rights to use, all of the Assets not owned by
Seller, whether or not such Assets are reflected on the December 31, 1998
balance sheet, included in the Seller's Financial Statements or
thereafter acquired, in each case, free and clear of any and all Liens
other than Permitted Liens. Except as set forth on SCHEDULE 4.1.15, as of
the date hereof and as of the Closing Date, all Equipment material to the
conduct of the Business will be in substantially the same operating
condition, reasonable wear and tear excepted, as existed on the Seller
Financial Statements Date. The Assets comprise all assets, properties,
licenses, rights and agreements (i) in each case, being used in the
conduct of the Business on the date hereof and (ii) required for the
conduct of the Business by Seller as now being conducted, except for the
Excluded Assets.
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4.1.16. Material Contracts.
(a) SCHEDULE 4.1.16 contains a complete and correct list of
all Material Contracts. "Material Contracts" shall mean those
Contracts relating to the Business to which a Seller is a party or
by which a Seller or the Assets are bound, other than any Leases
or any contract, agreement or commitment that (i) by its terms,
terminates, or may be terminated by the Seller unconditionally and
without penalty within one year of the Closing Date and is in an
amount less than $100,000; (ii) relates to the Seller
Indebtedness; or (iii) is set forth on SCHEDULES 4.1.18 and 4.1.19
hereto. Notwithstanding the foregoing, each of the following
Contracts is a "Material Contract" and is set forth on SCHEDULE
4.1.16: (i) collective bargaining agreements and other contracts
with any labor union; (ii) agreements including covenants which
restrict the Business' rights to compete; (iii) consent decrees of
Governmental Authorities to which the Assets or the Facilities are
bound; (iv) employment agreements and severance agreements,
including severance arrangements included in Seller's policies
applicable to employees generally; (v) other than the Contracts
relating to the Seller Indebtedness, any Contract under which
Seller has borrowed or loaned money in excess of $100,000, or any
mortgage, note, bond, indenture or other evidence of indebtedness
(excluding advances, deposits or similar obligations) or any
guarantee of indebtedness; or (vi) joint ventures or similar
agreements.
(b) There does not exist under any Material Contract any
material event of default or event or condition that, after notice
or lapse of time or both, would constitute a material violation,
breach or event of default thereunder on the part of Seller or, to
Seller's knowledge, any other party thereto except as set forth in
SCHEDULE 4.1.16. Except as set forth in SCHEDULE 4.1.16, no
consent of any third party is required under any Material Contract
as a result of or in connection with the execution, delivery and
performance of this Agreement or the consummation of the
transactions contemplated hereby. Each Material Contract is in
full force and effect and is the valid and binding obligation of
Seller and, to the knowledge of Seller, of each other party
thereto. Seller has made available to Buyer copies of all Material
Contracts. Except as set forth in SCHEDULE 4.1.16 the consummation
of the transactions contemplated by this Agreement will not result
in any Material Contract failing to remain in full force and
effect (without imposition of any material restriction, adverse
condition, limitation, cost or penalty to Seller, Buyer or the
Business). Except as set forth on SCHEDULE 4.1.16, Seller has
satisfied all of its material obligations under the Material
Contracts to the extent that such obligations can be determined as
of the date of this Agreement and Seller will continue to satisfy
all such obligations pursuant to such Material Contracts through
the Closing Date.
4.1.17. Intellectual Property. SCHEDULE 4.1.17 contains a complete
and correct list of Intellectual Property material to the operation of
the Business (the "Material Intellectual Property"). Seller owns or has
the right to use pursuant to license, sublicense, agreement or permission
all Material Intellectual Property. Except as set forth in SCHEDULE
4.1.17, Seller is the sole and exclusive owner of the Material
Intellectual
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Property for which it is identified as the owner thereof on SCHEDULE
4.1.17, and is listed in the records of the appropriate agency as the
sole and exclusive owner of record for each such registration, grant and
application listed thereon. Except as set forth in SCHEDULE 4.1.17,
Seller has the full right to use (without payment) the Material
Intellectual Property in the conduct of the Business, as currently
conducted. Except as set forth in SCHEDULE 4.1.17, no claims have been
asserted or, to the knowledge of Seller, threatened, nor has Seller
received notice of any such claim that (i) the operations of the Business
infringe upon or conflict with the rights of any other Person in respect
of any Material Intellectual Property or (ii) any Material Intellectual
Property or the use by the Business of any Material Intellectual Property
is invalid or unenforceable. To the knowledge of Seller, no Person is
presently infringing or, since January 1, 1997, has infringed upon
Seller's rights in respect of the Material Intellectual Property.
4.1.18. Owned Real Property. SCHEDULE 4.1.18 contains a complete
and correct list of the Owned Real Property setting forth the address of
each parcel of Owned Real Property including, without limitation, the
properties reflected as being so owned on the Seller Financial Statements
and not disposed of after the Seller Financial Statements Date in the
ordinary course of business and in accordance with the terms of this
Agreement. Seller has, and on the Closing Date, Holdco or a Subsidiary
thereof will have, good and valid fee title to the Owned Real Property
free and clear of all Liens other than Permitted Liens. All of the
buildings, structures and material appurtenances owned by Seller and
situated on the Owned Real Property are in substantially good operating
condition, and substantially in a state of good maintenance and repair,
subject to ordinary wear and tear. The Owned Real Property has adequate
rights of ingress and egress for operation of the Business in the
ordinary course. Except as disclosed on SCHEDULE 4.1.18, no condemnation
or similar proceeding is pending or, to the best knowledge of Seller,
threatened, with respect to the Owned Real Property. Except for Owned
Real Property subject to any of the Leases, Seller is not obligated under
any option, right of first refusal or other contractual right to sell,
lease or otherwise dispose of any Owned Real Property.
4.1.19. Leases. SCHEDULE 4.1.19 contains a complete and correct
list of all Leases to which a Seller is a party setting forth the
address, landlord and tenant for each Lease. Seller has made available to
the Buyer true, correct and complete copies of the Leases. Except as
disclosed on SCHEDULE 4.1.19, no event has occurred and is continuing
that constitutes or, with notice or the passage of time or both, would
constitute a material default, violation or breach by Seller in any
respect under any Lease. Except as disclosed on SCHEDULE 4.1.19, to the
best knowledge of Seller, all of the buildings, structures and material
appurtenances situated on the Leased Real Property are in reasonably good
operating condition, and in a state of good maintenance and repair,
subject to ordinary wear and tear. The Leased Real Property has adequate
rights of ingress and egress for operation of the Business in the
ordinary course. Except as disclosed on SCHEDULE 4.1.19, to the best
knowledge of Seller, no condemnation or similar proceeding is pending or
threatened with respect to the Leased Real Property. Except as set forth
in SCHEDULE 4.1.19, no Consent of any third party is required under any
Lease as a result of or in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Each Lease is in full force and effect and is the
valid and binding obligation of Seller and, to the knowledge of Seller,
of
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each other party thereto. Except as set forth on SCHEDULE 4.1.19, Seller
has not assigned its interest under any such Lease, sublet any interest
in any Leased Real Property or pledged its interest therein. Except as
set forth in SCHEDULE 4.1.19 the consummation of the transactions
contemplated by this Agreement will not result in any Lease failing to
remain in full force and effect (without imposition of any material
restriction, adverse condition, limitation, cost or penalty to Seller,
Buyer or the Business). Except as set forth in SCHEDULE 4.1.19, Seller
has satisfied all of its material obligations under the Leases to the
extent that such obligations can be determined as of the date of this
Agreement and Seller will continue to satisfy all such obligations
pursuant to such Leases through the Closing Date.
4.1.20. Environmental Matters. Except as set forth in SCHEDULE
4.1.20 (i) to Seller's knowledge, the Facilities are in compliance in all
material respects with Environmental Laws; (ii) Seller has obtained all
material Environmental Permits necessary for the operation of the
Facilities, and all such Environmental Permits are in full force and
effect; (iii) Seller is in compliance with all such Environmental
Permits, except for noncompliance, individually or in the aggregate, that
does not have a Material Adverse Effect; (iv) there are no pending or, to
the best knowledge of Seller, threatened Environmental Proceedings; (v)
Seller has not generated, handled, stored, disposed of or released any
Hazardous Substances on any of the Owned Real Property or Leased Real
Property other than in compliance, in all material respects, with
applicable Environmental Laws; (vi) there have been no Releases of
Hazardous Substances by Seller on or underneath any of the Owned Real
Property or Leased Real Property, except pursuant to and in material
compliance with an Environmental Permit; (vii) there are not now and to
Seller's knowledge there never have been any underground storage tanks,
PCBs or asbestos located on the Owned Real Property or on the Pioneer
Valley Real Property or the Leased Real Property set forth on SCHEDULE
4.1.20(a) hereto except as allowed by and in material compliance with all
applicable Environmental Permits and Environmental Laws; and (viii)
Seller has not received any written communication, whether from a
Governmental Authority, citizens group, employee or otherwise, that
alleges that Seller is not in full compliance with Environmental Laws.
There is no Environmental Proceeding pending or to the knowledge of
Seller, threatened against Seller or with respect to the Assets. Seller
has made available to Buyer all environmental reports and studies
relating to the Assets, the Facilities or the Real Property of which
Seller is aware and of which Seller has possession (the "Environmental
Reports"). Notwithstanding anything in this Agreement to the contrary,
this Section 4.1.20 sets forth the exclusive representations and
warranties of Seller to Buyer with respect to environmental matters of
any kind or nature whatsoever. The inclusion of any item disclosed in
SCHEDULE 4.1.20 does not constitute an admission by any Party that any
matters disclosed in such Schedule constitute a violation of any
Environmental Law.
4.1.21. Employment Relations. Except as set forth on SCHEDULE
4.1.21, (a) no Seller is now engaging or has since August 16, 1996
engaged in any unfair labor practice involving the Business that could
reasonably be expected to result in a material liability to the Business,
(b) no Seller has been notified of any material grievance involving an
employee of the Business, (c) no Seller is a party to any collective
bargaining agreement involving the Business and no such collective
bargaining agreement is currently being
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negotiated by any Seller, (d) there is no labor strike, slowdown or work
stoppage pending or, to the knowledge of Seller, threatened against
Seller relating to the Business, and (e) to the knowledge of Seller,
there have been no union-organizing efforts relating to the Business.
Seller has not received written notice of the intent of any federal,
state or local agency responsible for the enforcement of labor or
employment laws to conduct an investigation of or relating to Seller or
the Business, and no such investigation is in progress except, in each
case, for investigations in the ordinary course of business.
4.1.22. Employee Benefit Plans.
(a) SCHEDULE 4.1.22(a) contains a true and complete list of
each deferred compensation and each bonus or other incentive
compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization,
life insurance and other "welfare" plan, fund or program (within
the meaning of section 3(1) of "ERISA"); each profit-sharing,
stock bonus or other "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be
contributed to by any Seller or by any trade or business, whether
or not incorporated (an "ERISA Affiliate"), that together with any
Seller would be deemed a "single employer" within the meaning of
section 4001(b) of ERISA, or to which any Seller or an ERISA
Affiliate is party, whether written or oral, for the benefit of
any employee or former employee of the Business (the "Employee
Benefit Plans").
(b) With respect to each Employee Benefit Plan, Seller has
heretofore delivered or made available to Buyer true and complete
copies of each of the plan and all related documents, including
annual reports, Summary Plan Descriptions, trust agreements and
the most recent determination letter received from the Internal
Revenue Service with respect to each Employee Benefit Plan
intended to qualify under section 401 of the Code.
(c) No Employee Benefit Plan is subject to Title IV of
ERISA, and no liability under Title IV or section 302 of ERISA has
been incurred by the Seller or any ERISA Affiliate that has not
been satisfied in full. Insofar as the representation made in this
Section (c) applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to
which the Company or any ERISA Affiliate made, or was required to
make, contributions during the five (5)-year period ending on the
last day of the most recent plan year ended prior to the Closing
Date.
(d) All contributions required to be made with respect to
any Employee Benefit Plan on or prior to the Closing Date have
been timely made or are reflected on the Seller Financial
Statements.
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(e) Except as set forth in SCHEDULE 4.1.22(e), each
Employee Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law,
including, but not limited to, ERISA and the Code.
(f) Except as set forth in SCHEDULE 4.1.22(f), each
Employee Benefit Plan intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified and the
trusts maintained thereunder are exempt from taxation under
section 501(a) of the Code.
(g) No Employee Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of the Business for
periods extending beyond their retirement or other termination of
service, other than coverage mandated by applicable law.
(h) No amounts payable under the Employee Benefit Plans
will fail to be deductible for federal income tax purposes by
virtue of section 162(a)(1), 162(m) or 280G of the Code.
(i) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or
officer of Seller or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due
any such employee or officer.
(j) There are no pending, threatened or anticipated claims
by or on behalf of any Employee Benefit Plan, by any employee or
beneficiary covered under any such Employee Benefit Plan, or
otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits).
(k) Except as set forth in SCHEDULE 4.1.22(k), (i) since
the enactment of the WARN Act, Seller has not effectuated a "plant
closing" or a "mass layoff" (as such terms are defined in the WARN
Act); (ii) Seller has not effected any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or
regulation; and (iii) none of Seller's employees has suffered an
"employment loss" (as defined in the WARN Act) during the 90-day
period prior to the date of this Agreement.
4.1.23. Accounts Receivable. Except as set forth on SCHEDULE
4.1.23, the Accounts Receivable on the Seller Financial Statements and
all Accounts Receivable that exist as of the Closing Date constitute
valid claims arising from bona fide transactions in the ordinary course
of business, and are collectible, net of any reserves for bad debt and
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contractual allowances (which reserves and allowances are determined in
accordance with GAAP as applied by Seller, consistent with past
practice).
4.1.24. Insurance. Seller has made available to Buyer or its
representatives copies of, and SCHEDULE 4.1.24 lists, all insurance
policies that Seller maintains with respect to the Business and the
Assets or on the employees of the Business. In Seller's judgment, such
policies, with respect to their amounts and types of coverage, are
adequate to insure against risks to which Seller and its property and the
Assets are normally exposed in the operation of the Business, subject to
customary deductibles and policy limits. All such policies are in full
force and effect. Except as set forth in SCHEDULE 4.1.24, there are no
pending, nor to the knowledge of Seller, threatened disputes relating to
coverage or other disputed claims under any of the foregoing insurance
policies and there are no pending defaults and Seller has received no
notices of cancellation of such policies.
4.1.25. Taxes. For purposes of this Section 4.1.25 and Section
5.4, (i) "Transferors" shall mean PHC Holdings, PHC - Salt Lake, PHC -
Jordan, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇-PHC, ▇▇▇▇▇▇▇▇▇▇ Pioneer, PHC Utah,
Clinicare and PVHP (each a "Transferor"); (ii) "Transferred Corporation"
shall mean Holdco; (iii) "Other LLC Entities" shall mean SouthRidge
Professional Plaza, LLC, and ▇▇▇▇▇ Surgical Center, LLC, (each an "Other
LLC Entity"). (▇▇▇▇▇ City ASC, LLC, and Other LLC Entities are sometimes
collectively referred to in this 4.1.25 and Section 5.1.4 as the "LLC
Entities." Except as set forth on SCHEDULE 4.1.25:
(a) All Tax Returns required to be filed by or on behalf of
the Transferors, the Transferred Corporation or ▇▇▇▇▇ City ASC,
LLC on or before the Closing Date have been (or will be as of the
Closing Date) timely filed. All such Tax Returns are (or will be
as of the Closing Date) true, correct and complete in all
respects. None of the Transferors, the Transferred Corporation or
▇▇▇▇▇ City ASC, LLC is at present the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever
been made by a Taxing Authority in a jurisdiction where the
Transferors, the Transferred Corporation or ▇▇▇▇▇ City ASC, LLC do
not file Tax Returns to the effect that any Transferor, the
Transferred Corporation or ▇▇▇▇▇ City ASC, LLC is or may be
subject to Taxes imposed by that jurisdiction. None of the
Transferors, the Transferred Corporation or ▇▇▇▇▇ City ASC, LLC is
required to file any state Tax Returns other than in those states
set forth in SCHEDULE 4.1.25.
(b) Each Transferor, the Transferred Corporation and ▇▇▇▇▇
City, ASC, LLC have timely paid or will pay prior to the Closing
Date all Taxes due from it. Each Transferor, the Transferred
Corporation and ▇▇▇▇▇ City, ASC, LLC have established (and until
the Closing will establish) on their books and records reserves
that are adequate for the payment of all Taxes not yet due or
payable.
(c) There are no Liens for Taxes upon the assets,
properties or business of any Transferor, the Transferred
Corporation or ▇▇▇▇▇ City ASC, LLC. No facts exist which would
reasonably be expected to result in the assessment of
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any liability for Taxes by any Taxing Authority against any
Transferor, the Transferred Corporation or ▇▇▇▇▇ City ASC, LLC.
(d) Prior to the date of this Agreement, Parent has
provided Buyer with written schedules of (i) the taxable years of
the Transferors, the Transferred Corporation, ▇▇▇▇▇ City ASC, LLC
and, to Parent's knowledge, Other LLC Entities for which any
statute of limitations with respect to any Tax has not expired and
(ii) with respect to U.S. federal income Taxes, for all taxable
years of the Transferors, the Transferred Corporation, ▇▇▇▇▇ City
ASC, LLC, and, to Parent's knowledge, Other LLC Entities for which
the statutes of limitations have not yet expired, those years for
which examinations have been completed, those years for which
examinations are presently being conducted and those years for
which examinations have not yet been initiated. No deficiency or
material adjustment to taxable income or deductions for any Taxes
has been proposed, asserted, or assessed against the Transferors,
the Transferred Corporation, ▇▇▇▇▇ City ASC, LLC or, to Parent's
knowledge, Other LLC Entities which has not been resolved and paid
in full and no issue has been raised by a Taxing Authority in any
such examination which reasonably would be expected to result in a
proposed deficiency, penalty or interest for any other period.
There are no outstanding waivers or comparable consents regarding
the application of any statute of limitations with respect to any
Taxes or Tax Returns of the Transferors, the Transferred
Corporation, ▇▇▇▇▇ City ASC, LLC or, to Parent's knowledge, any
Other LLC Entities, and no power of attorney with respect to the
Transferors, any Transferred Corporation, ▇▇▇▇▇ City ASC, LLC or,
to Parent's knowledge, any Other LLC Entity has been granted which
currently remains in force.
(e) Parent has delivered to Buyer correct and complete
copies of all Tax Returns, examination reports, and statement of
deficiencies assessed against or agreed to with respect to the
Transferred Corporation, ▇▇▇▇▇ City ASC, LLC and, to Parent's
knowledge, Other LLC Entities.
(f) Neither the Transferors, the Transferred Corporation,
▇▇▇▇▇ City ASC, LLC, or to Parent's knowledge, the Other LLC
Entities, nor any of their respective representatives has received
notice or is otherwise aware of any pending audit or other
proceeding by any federal, state, local or foreign court,
governmental, regulatory, administrative or similar authority with
respect to any Taxes or Tax Returns.
(g) Neither ▇▇▇▇▇ City ASC, LLC nor, to Parent's knowledge,
any of the Other LLC Entities is a party to, is bound by, or has
any obligation under, any Tax allocation, sharing agreement or
similar contract or arrangement. The Transferred Corporation will
have no liability under any Tax allocation, sharing agreement or
similar contract or arrangement. None of the Transferors, the
Transferred Corporation, ▇▇▇▇▇ City ASC, LLC or, to Parent's
knowledge, the Other LLC Entities have any liability for the Taxes
of any Person (other than the Parent and its Subsidiaries) as a
transferee or successor or otherwise (including
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under Treas. Reg. Section 1.1502-6 or any similar provision of
state, local or foreign law).
(h) None of the Transferors, the Transferred Corporation,
or, to Parent's knowledge, the LLC Entities have failed to
withhold and pay over to the appropriate Taxing Authority all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(i) The Transferred Corporation has not filed a consent
under Section 341(f) of the Code concerning collapsible
corporations.
(j) No Transferor or Transferred Corporation has been a
member of an affiliated group, within the meaning of Section
1504(a) of the Code, filing a consolidated federal income Tax
Return (other than a group the common parent of which is Parent).
(k) Neither Parent nor its Affiliates have ever been the
Tax Matters Partner as defined in Section 6231(a)(7) of the Code
with respect to the Other LLC Entities.
(l) Parent or its Affiliates have paid all Taxes due with
respect to any ownership interest of Parent or its Affiliate in
the in the LLC Entities.
(m) Seller believes that neither the Pre-Closing
Transactions nor any transactions contemplated in this Agreement
will terminate one or more of the LLC Entities under Section 708
of the Code. Prior to Seller or any of its Affiliates transferring
interests in an LLC Entity, Seller shall confirm that such
transfer will not terminate the LLC Entity under Section 708. If a
transfer contemplated by this Agreement would terminate an LLC
Entity, either (i) Seller shall obtain the consent of (A) Buyer
and (B) any Members of the affected LLC Entity whose consent is
required under the LLC's operating agreement to the termination of
the LLC under Section 708 or (ii) the portion of the LLC Entity
Interest which may be transferred without causing a termination
shall be transferred immediately and Seller or its Affiliates
shall enter into an agreement to sell the balance of the interest
to Holdco no more than 13 months from the date of the initial
transfer. In the event (ii) applies, the Transaction Consideration
shall be reduced by the amount to be paid by Holdco for the
balance of the LLC Entity Interest.
4.1.26. Affiliate Transactions. SCHEDULE 4.1.26 sets forth a true,
correct and complete description of all material Affiliate Transactions.
Except as set forth in SCHEDULE 4.1.26, each of the Affiliate
Transactions will terminate at or prior to the Closing without any
payment by or liability to the Business or relating to any Asset.
4.1.27. Brokers, Finders, etc. Other than Chase Securities Inc. no
agent, broker, Person or firm acting on behalf of Seller or any of its
Affiliates is, or will be, entitled to
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any fee, commission or broker's or finder's fees in connection with this
Agreement or any of the transactions contemplated hereby.
4.1.28. Disclosure. No representation or warranty by Seller
contained in this Agreement or any Collateral Agreement, and no
information contained in any certificate delivered by Seller pursuant to
this Agreement or any Collateral Agreement, contains any untrue statement
of a material fact or omits to state any material fact necessary in order
to make the statements contained herein or therein not misleading.
4.1.29. Solvency. Except as set forth on SCHEDULE 4.1.29, no
Seller is, nor after Closing as result of the transactions contemplated
hereby will be, rendered insolvent or otherwise unable to pay its debts
as they become due. No Seller 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 under
bankruptcy laws or for the appointment of a receiver or trustee of all or
any portion of such Seller's property; and, to Seller's knowledge, no
other Person has filed or threatened to file such a petition against any
Seller.
4.1.30. Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES AND
REPRESENTATIONS EXPRESSLY SET FORTH HEREIN, THE ASSETS WILL BE
TRANSFERRED BY SELLER TO HOLDCO OR A SUBSIDIARY THEREOF IN THEIR
CONDITION AT CLOSING, "AS IS", WITH NO WARRANTY OF HABITABILITY OR
FITNESS FOR HABITATION, WITH RESPECT TO THE REAL PROPERTY, AND WITH NO
OTHER WARRANTIES, INCLUDING THE WARRANTIES OF SUITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
OTHER ASSETS, ANY AND ALL OF WHICH WARRANTIES (WHETHER EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE) SELLER HEREBY DISCLAIMS.
4.1.31. Absence of Undisclosed Liabilities. Except for liabilities
and obligations (i) set forth in SCHEDULE 4.1.31, (ii) reflected in the
Seller Financial Statements or (iii) incurred in the ordinary course of
business consistent with past practice, Seller does not have any material
liabilities or obligations of any nature, direct or indirect, whether
accrued, fixed, contingent or otherwise, relating to the Business. This
Section 4.1.31 shall not be deemed to apply to any obligations or
liabilities of the types that (i) are covered by any other
representations and warranties under this Section 4.1 and (ii) are either
(a) disclosed in the Schedules or (b) are specifically excluded or
excepted from the terms of such representations and warranties under the
express language of such representations and warranties or by reason of
qualifications of such representations and warranties relating to
materiality, Seller's knowledge or other specific qualifications set
forth therein.
4.1.32. Inventory. The inventory with respect to each Facility is,
and at Closing will be, maintained in all material respects in such
quality and quantities as is consistent with such Facility's historical
practices.
4.1.33. Year 2000 Compliance. Seller has provided Buyer with
copies of Parent's Year 2000 Project Plan and the weekly progress reports
the "Progress Reports" under the
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Year 2000 Project Plan prepared as of the date hereof, and has provided
Buyer with access to all supplementary material and documentation with
respect at the steps taken to cause the Business and the Facilities to be
in Year 2000 Compliance. The Year 2000 Project Plan and the Progress
Reports accurately set forth (i) the steps to implement the Deliverables
(ii) the actions completed by Seller as of the date of this Agreement to
implement the Deliverables, which actions are set forth on SCHEDULE
4.1.33 and (iii) those remaining actions identified in the Year 2000
Project Plan to implement the Deliverables which have not been completed
as of the date of this Agreement. Seller believes that upon completion of
such remaining patient critical and operations critical actions as set
forth in and in accordance with the Year 2000 Project Plan, that the
systems described in the Year 2000 Project Plan will function in Year
2000 Compliance in all material respects. For purposes of this Agreement,
"Year 2000 Compliance" means that such systems will operate without
resulting in material disruption to the operation of the Facilities or
material liability to the Business as a result of errors relating to the
processing of date data in connection with the year change from December
31, 1999 to January 1, 2000, provided that such systems are used with
accurate date and other data.
4.1.34. Holdco Capitalization. The authorized capital stock of
Holdco consists of 1000 shares of no par value common stock ("Holdco
Common Stock"), all of which are issued and outstanding as of the date
hereof (the "Shares") and are owned by PHC Holdings, and all of which
will be issued and outstanding and owned by PHC Holdings immediately
prior to consummation of the transactions contemplated by SCHEDULE 3.1.
There are no outstanding options, rights, calls or commitments of any
kind relating to, or any presently effective agreements or
understandings, with respect to, the Shares which would affect or prevent
the transfer of the Shares contemplated by SCHEDULE 3.1 or restricting or
otherwise relating to the voting, dividend rights or disposition of the
Shares. All of the Shares are validly issued and outstanding, fully paid
and nonassessable. None of the Shares have been issued in violation of,
and are not subject to, any preemptive, subscription or similar rights.
Neither Parent, nor Seller nor any other Person (other than Buyer) has
any right to acquire any additional shares of Holdco Common Stock or any
securities convertible or exchangeable into Holdco Common Stock. Except
as set forth on SCHEDULE 4.1.34, Holdco does not own any capital stock or
other equity interest in or of any corporation, partnership, joint
venture or other entity. PHC Holdings is, and at all times from the date
hereof until immediately prior to the consummation of the transactions
contemplated by SCHEDULE 3.1 will be, the sole record and beneficial
owner of the Shares, free and clear of all Liens, other than Permitted
Liens. Upon delivery by Buyer of the Transaction Consideration in
accordance with such SCHEDULE 3.1, and upon delivery to Buyer of a
certificate or certificates representing the shares of Holdco Common
Stock to be issued to Buyer at the Closing in accordance with SCHEDULE
3.1, such shares of Holdco Common Stock will be duly authorized and
validly issued, fully paid and non-assessable.
4.1.35. Holdco Information. Seller has made available to Buyer or
its representatives all material agreements and instruments that relate
to Holdco, its assets, business or operations as well as any documents
executed in connection with the transactions set forth on SCHEDULE 3.1
hereto. Except for the Assets being acquired in connection with the
consummation of the transactions set forth on SCHEDULE 3.1, and except as
set forth on SCHEDULE 4.1.35, Holdco does not own any assets and has not
since
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January 1, 1997 entered into any agreements or been bound by or a party
to any agreements under which it has any obligations in excess of
$10,000.
4.2. Representations and Warranties of the Buyer. Buyer represents and
warrants to Seller as follows:
4.2.1. Corporate Status; Authorization, etc. Buyer is a limited
liability company duly formed, validly existing and in good standing
under the laws of the jurisdiction of its organization with full power
and authority to execute and deliver this Agreement and the Collateral
Agreements to which it is a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Buyer of this Agreement, and the
consummation of the transactions contemplated hereby, have been, and on
the Closing Date the execution and delivery by Buyer of the Collateral
Agreements to which it is a party will have been, duly authorized by all
requisite corporate action of Buyer. Buyer has duly executed and
delivered this Agreement and on the Closing Date Buyer will have duly
executed and delivered the Collateral Agreements to which it is a party.
This Agreement is, and on the Closing Date each of the Collateral
Agreements to which Buyer is a party will be, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms except that (a) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.2.2. No Conflicts, etc. The execution, delivery and performance
by Buyer of this Agreement and each of the Collateral Agreements to which
it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (a) conflict with or result in a
violation of or a default under (i) the organizational documents of
Buyer, or (ii) any Applicable Law applicable to Buyer or any of its
properties or assets, or (b) except as set forth in SCHEDULE 4.2.2,
conflict with, or result in any violation of or constitute a default (or
an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration of the
maturity of any liability or obligation pursuant to, or result in the
creation or imposition of any Lien under, any contract, agreement or
other instrument applicable to Buyer or any of its properties or assets,
except, in the case of clause (ii), for violations and defaults that,
individually and in the aggregate, have not and will not materially
impair the ability of Buyer to perform its obligations under this
Agreement or under any of the Collateral Agreements to which it is a
party. Except as specified in SCHEDULE 4.2.2, no Governmental Approval or
other Consent is required to be obtained or made by Buyer in connection
with the execution and delivery of this Agreement or the Collateral
Agreements or the consummation of the transactions contemplated hereby
and thereby. Except as set forth in SCHEDULE 4.2.2, no material Consent
of any Governmental Authority is required to be obtained or made by or
with respect to Buyer in connection with the execution and delivery of
this Agreement or the Collateral Agreements, the consummation by Buyer of
the transactions contemplated hereby or thereby, other than compliance
with and filings under the HSR Act.
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4.2.3. Litigation. Except as set forth on SCHEDULE 4.2.3, there is
no action, claim, suit, investigation or proceeding material to Buyer
pending, or to Buyer's knowledge threatened, against or relating to Buyer
or against or relating to the transactions contemplated by this Agreement
at law or in equity or before any Governmental Authority that is
reasonably likely to have a Material Adverse Effect.
4.2.4. Financial Capability. Prior to the execution of this
Agreement, Buyer executed a commitment letter dated August 11, 1999 with
The Bank of Nova Scotia (the "Commitment Letter"), complete and current
copies of which have been furnished to Seller.
4.2.5. No Current Operations. Buyer does not currently own or
operate an acute care hospital in the geographic area encompassing the
Salt Lake City - ▇▇▇▇▇ Metropolitan Statistical Area (encompassing the
three contiguous counties in Northern Utah of ▇▇▇▇▇ County, ▇▇▇▇▇ County
and Salt Lake County).
4.2.6. No Brokers. No agent, broker, Person or firm acting on
behalf of Buyer is, or will be, entitled to any fee, commission or
broker's or finder's fees in connection with this Agreement or any of the
transactions contemplated hereby.
4.2.7. Disclosure. No representation or warranty by Buyer
contained in this Agreement or any Collateral Agreement, and no
information contained in any certificate delivered by Buyer pursuant to
this Agreement or any Collateral Agreement, and no information contained
in any certificate delivered by Buyer pursuant to this Agreement or any
Collateral Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading.
4.2.8. Solvency. Buyer is not, nor after Closing as result of the
transactions contemplated hereby will be, rendered insolvent or otherwise
unable to pay its debts as they become due. Buyer 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 under bankruptcy laws or for the appointment of a receiver
or trustee of all or any portion of Buyer's property; and, to Buyer's
knowledge, no other Person has filed or threatened to file such a
petition against Buyer.
4.3. Representations and Warranties of Parent. Each Parent jointly and
severally represents and warrants to Buyer as follows:
4.3.1. Authorization, etc. Each Parent has the corporate power and
authority to execute and deliver this Agreement and each of the
Collateral Agreements to which it will be a party, to perform fully its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each
Parent of this Agreement, and the consummation of the transactions
contemplated hereby, have been, and on the Closing Date the execution and
delivery by each Parent of each of the Collateral Agreements and the
consummation of the transactions contemplated thereby will have been,
duly authorized by all requisite
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corporate action of each Parent. Each Parent has duly executed and
delivered this Agreement and on the Closing Date each Parent will have
duly executed and delivered each of the Collateral Agreements to which it
is a party. This Agreement is, and on the Closing Date each of the
Collateral Agreements to which each Parent is a party will be, legal,
valid and binding obligations of each Parent, enforceable against such
Parent in accordance with their respective terms except that (a) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in
effect, relating to or limiting creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
4.3.2. Corporate Status. Each Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified or licensed to do
business and is in good standing in each of the jurisdictions in which
the ownership of its assets or the operation its business makes such
qualification or licensing necessary, except to the extent that any
failure to be so licensed or qualified would not result in a material
adverse effect on the operations of such Parent's business taken as a
whole.
4.3.3. No Conflicts, etc. The execution, delivery and performance
by each Parent of this Agreement and each of the Collateral Agreements,
and the consummation of the transactions contemplated hereby and thereby,
do not and will not (a) conflict with or result in a violation of or a
default under (i) any Applicable Law applicable to such Parent, or (ii)
the certificate of incorporation or bylaws or other organizational
documents of such Parent or (b) conflict with, or result in any material
violation of or constitute a material default (or an event or condition
which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation pursuant to, or result in the creation or
imposition of any Lien under, any material Contract to which such Parent
is a party or by which such Parent or its assets are bound or affected.
Except as set forth in SCHEDULE 4.1.11, no material Consent of any
Governmental Authority, or any third party is required to be obtained or
made by or with respect to Parent in connection with the execution and
delivery of this Agreement or the Collateral Agreements, or the
consummation by Parent of the transactions contemplated hereby or
thereby, or the conduct of the Business by Buyer after the Closing, other
than compliance with the filings under the HSR Act.
4.3.4. Fraud and Abuse. To the knowledge of the Applicable
Executives, Parent has not engaged in any activities with respect to the
Business which are prohibited under 42 U.S.C. Sections 1320a-7, 1320a-7a,
1320a-7b, 1395nn and 1396b, the federal Civil False Claims Act (31 U.S.C.
Section 3729 et seq.), the federal TRICARE statute, or the regulations
promulgated pursuant to such statutes or related state or local statutes
or regulations.
4.3.5. Solvency. Parent is not, nor after Closing as result of the
transactions contemplated hereby will be, rendered insolvent or otherwise
unable to pay its debts as they become due. Parent has no intention of
filing in any court pursuant to any statute
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either of the United States or of any state, a petition in bankruptcy or
insolvency or for reorganization under bankruptcy laws or for the
appointment of a receiver or trustee of all or any portion of Parent's
property; and, to Parent's knowledge, no other Person has filed or
threatened to file such a petition against Parent.
ARTICLE V.
COVENANTS
5.1. Covenants of Seller.
5.1.1. Conduct of Business. From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by the Buyer, or as required to effect the
transactions set forth on SCHEDULE 3.1 hereto, Seller will use its Best
Efforts to carry on the Business in the ordinary course, in substantially
the same manner as heretofore conducted, and to preserve intact its
present business organization, its current relationships with customers,
suppliers and others having business dealings with it with respect to the
Business or the Assets. Without limiting the generality of the foregoing,
and, except as contemplated by this Agreement or as set forth on SCHEDULE
5.1.1, during the period from the date of this Agreement to the Closing
Date, without the prior written consent of Buyer, Seller will not, with
respect to the Business or the Assets:
(a) increase the rate of compensation of, or pay or agree
to pay any benefit to, its directors, officers or employees,
except in the ordinary course of business or as may be required by
any existing plan, agreement or arrangement;
(b) enter into, adopt or amend any Plan, or employment or
severance agreement, except in the ordinary course of business;
(c) (i) sell, lease, transfer, or otherwise dispose of any
of the Assets, other than in the ordinary course of business, or
(ii) mortgage or encumber any of the Assets which have an
aggregate book value in excess of $100,000;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing the stock or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization, or division thereof or otherwise acquire or agree to
acquire any assets which are material individually, or in the
aggregate, to Seller, except to the extent any of the foregoing do
not relate to the Business;
(e) amend the certificate of incorporation, by-laws or
similar organizational documents of any of the Corporations, LLCs
or partnerships;
(f) modify, amend or terminate any Material Contract to be
assumed by Holdco or a Subsidiary thereof, pursuant to this
Agreement (except modifications or amendments associated with
renewals in the ordinary course of business consistent with past
practice);
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(g) enter into any Contract other than in the ordinary
course of business (i) obligating Seller or the Business to expend
more than $100,000 or (ii) relating to the Assets and extending
beyond the Closing Date;
(h) permit any change to any of the Assets (other than
normal wear and tear, depreciation or casualty or changes that
would not materially and adversely affect the conduct of the
Business) or enter into any agreement or commitment to sell to any
third party any of the Assets, other than transactions in the
ordinary course of business or that would not materially and
adversely affect the conduct of the Business, including, without
limitation, sales of obsolete Assets not currently used in the
conduct of the Business; or solicit any offers or proposals in
connection with the foregoing;
(i) (i) incur, assume or prepay any material indebtedness
or any other liabilities other than borrowings in connection with
the Seller Indebtedness or otherwise in the ordinary course of
business, consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any material obligations
of any other person other than in the ordinary course of business,
consistent with past practice; or (iii) make any material loans,
advances or capital contributions to, or investments in, any other
person; or
(j) agree, whether in writing or otherwise, to do any of
the foregoing.
5.1.2. Access and Information.
(a) From the date hereof to the Closing Date, Seller shall
afford to the officers and authorized representatives and agents of
Buyer, full access, during normal business hours, upon reasonable notice
and at such time(s) and in such manner as will not disrupt or adversely
affect the delivery of care to patients, to all documents, records, work
papers and information relating to the Assets and the Business (except
for Privileged Documents) and all facilities, offices and warehouses of
the Business as Buyer shall from time to time reasonably request. In
addition, Seller will permit Buyer's officers and authorized
representatives and agents reasonable access to such personnel of Seller
during normal business hours, upon reasonable notice and at such times
and in such manner as will not disrupt or adversely affect the delivery
of care to patients, as reasonably required by Buyer in its review of the
properties, assets and business affairs of the Business. Seller will keep
Buyer generally informed as to the affairs of the Business.
(b) Seller acknowledges that prior to the Closing, Buyer
intends to cause its accountants to conduct an audit of the Business.
Seller agrees to cooperate with such accountants to the extent reasonably
required by Buyer's accountants to effect such audit in a timely fashion,
including by providing management representation letters as may be
reasonably requested. Accordingly, Seller shall afford such accountants
full access, during normal business hours, upon reasonable notice and at
such time(s) and in such manner as will not disrupt or adversely affect
the delivery of care to patients, to all documents, records, work papers
and information relating to the Assets and the Business
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(except for Privileged Documents) and all Facilities, offices and
warehouses of the Business, as such accountants shall from time to time
reasonably request.
(c) Seller will cooperate with and provide such information and
assistance to Buyer as is reasonably requested in connection with
obtaining the financing contemplated by the Commitment Letter.
5.1.3. Further Assurances. Following the Closing, Seller shall
from time to time, at no additional expense to Seller, execute and
deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise
reasonably requested by Buyer, to confirm and assure the rights and
obligations provided for in this Agreement and in the Collateral
Agreements and render effective the consummation of the transactions
contemplated hereby and thereby.
5.1.4. Schedules. Seller may revise or supplement the Schedules at
any time on or prior to the Closing Date to reflect information that
either (i) existed on the date hereof and should have been included on
one or more Schedules but was not, or (ii) came into existence after the
date hereof and would have been required to be disclosed on one or more
Schedules if such information was in existence on the date hereof. Such
revisions and supplements, if any, shall not be deemed disclosed as of
the date hereof and shall not prohibit Buyer from relying on the
condition set forth in Section 6.2.1 hereof.
5.1.5. Purchasing Contract. For a period of one (1) year from and
after the Closing, Parent shall use its Best Efforts, and shall cause its
Affiliates to use their respective Best Efforts to, provide Holdco and
its Affiliates, for their use in connection with the Business, with
benefits under the Purchasing Contracts, as the same may be in effect
from time to time, in substantially the same manner as presently
provided, provided, however, that neither Parent nor its Affiliates shall
be required to take any action that could reasonably be expected to (i)
adversely affect their rights under any Purchasing Contract or their
relationship with the other parties to such contract, (ii) subject Parent
or its Affiliates to any liability or require them to make any payments
or (iii) otherwise significantly and adversely affect Parent or its
Affiliates.
5.1.6. Use of Names. At or prior to the Closing, Seller shall
cause an amendment to the certificate of incorporation or other
organizational documents of Seller to be filed with the Secretary of
State of the State of jurisdiction of its incorporation or formation, or
other appropriate official, changing its name or a name bearing no
resemblance to those set forth on SCHEDULE 5.1.6. At the Closing, Seller
will deliver to Holdco duplicate originals of such amendments, each duly
executed and suitable for filing, or file-stamped copies of such
amendments, if previously filed. After the Closing, neither Seller nor
any Affiliate of Seller shall use or permit any of its affiliates to use
the names set forth on SCHEDULE 5.1.6 or any variant or derivative
thereof.
5.1.7. Title and Survey Matters.
(a) Title Commitment. Prior to Closing, Seller shall cause to
be furnished to Buyer current title commitments (collectively, the "Title
Commitment") issued by
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Chicago Title (the "Title Company") to issue to Holdco, at or as soon as
possible after Closing, its ALTA Form B owner's title insurance policies
(for each of the Owned Real Property) and, at Buyer's election, its
leasehold title insurance policy for the Pioneer Valley Real Property,
without standard exceptions and, at Buyer's election, with normal
endorsements (including, without limitation, endorsements relating to
zoning, access, tax parcel, contiguity (if applicable and available),
survey and the owner's comprehensive endorsement), subject to all
Permitted Liens in an amount equal to the fair market value of each such
Owned Real Property or the leasehold value of the Pioneer Valley Real
Property as determined by Buyer. The Title Commitment will commit the
insurer to insure that, with respect to the Owned Real Property, the fee
simple title to such Owned Real Property is marketable and valid and
vested in Holdco, and, with respect to the Pioneer Valley Real Property,
that the leasehold estate is good and marketable subject to the terms and
conditions of the lease, and the lessor named in the lease was the owner
of such Pioneer Valley Real Property on the date of the signing of the
lease, subject, in each case, only to Permitted Liens. The Title
Commitments will be accompanied by readable copies of all documents cited
as exceptions to title therein (the "Underlying Documents"), which will
be certified by the Title Company as true, correct and complete copies of
the Underlying Documents. The cost of such title insurance (including
premiums) will be borne by Buyer. To the extent that reference is made in
the Title Commitment to any material exceptions ("additional exceptions")
other than the Permitted Liens, Buyer will have ten (10) days from the
later of (x) the date Seller delivers the Title Commitment to Buyer and
(y) the date Seller delivers the Survey to Buyer, to notify Seller in
writing of any material objections to such additional exceptions. If
notice of such objection is not given to Seller within such period, then
any objection to the additional exceptions shall be deemed to have been
waived by Buyer, and all those additional exceptions shall be Permitted
Liens. Seller shall have the right (including without limitation the
right to use all or any part of the Purchase Price for this purpose), but
not the obligation, up to and including the Closing to cure or remove any
objectionable exceptions, so that the Title Policies can be issued to
Buyer at the Closing at Buyer's expense without making exception to the
objectionable exceptions. If, at or prior to the Closing, Seller notifies
Buyer that Seller is unable or unwilling to cure or remove any such
objectionable exceptions, and if any such objectionable exception would
materially and adversely affect the conduct of the Business after the
Closing, then Buyer shall have the option of giving notice to Seller
within ten (10) days after receipt of Seller's notice or on the date of
the Closing, whichever date first occurs, either to terminate this
Agreement or to waive any such objections, in which case the
objectionable exceptions shall be Permitted Liens; and if no such notice
is given by Buyer, then Buyer will be deemed to have elected to waive any
such objections.
(b) Survey. As soon as reasonably practical after the date
hereof, but in no event less than twenty (20) days prior to Closing,
Seller shall deliver to Buyer surveys (collectively, the "Survey") of the
Owned Real Property and the Pioneer Valley Real Property acceptable to
the Title Company for purposes of deleting standard survey exceptions as
provided above and reflecting all improvements visible on the ground and
all easements, rights of way, means of ingress or egress encroachments
and drainage ditches, whether abutting or interior, of record or on the
grounds. The legal description of the Real Property set forth in the
title policies issued pursuant to the Title
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Commitments will conform to the legal descriptions set forth in any
surveys required under this Section. The expense of preparing any surveys
hereunder will be borne by Seller.
5.1.8. Expansion Project. Seller has construction work in progress
at Jordan Valley Hospital with a budgeted completion cost of $15,512,401
(the "Expansion Project"). Both Seller and Buyer wish for the work on the
Expansion Project to continue during the Pre-Closing Period. To this end,
Seller agrees, in all material respects and consistent with Seller's
practice prior to the date hereof with respect thereto, to (i) continue
to plan, design, construct, equip, obtain government approvals and
implement the Expansion Project consistent with its approved plans,
specifications, schedule and budget; (ii) discharge its obligations and
enforce its rights against the Contractors; (iii) pay all invoices and
other amounts owed to any Contractor or other party in order to fund the
costs and expenses of the Expansion Project, including, without
limitation, the cost of labor, materials, equipment, tools and services
(the "Work") provided by any Contractor (but excluding retainage under
each individual contract), in accordance with the terms and conditions of
such invoice or any contract relating to the Expansion Project, including
the Construction Agreement (the "Expansion Costs"); (iv) obtain from (a)
the Other Contractors, an invoice (a "Cut-Off Invoice") for all Expansion
Costs incurred for Work performed in connection with the Expansion
Project for the period between the date of the most recent invoice prior
to the date hereof and the date hereof and monthly invoices for work
performed in connection with the Expansion Project thereafter in the
ordinary course of business and (b) the General Contractor, all Draw
Requests in the ordinary course of business; (v) provide to Buyer as soon
as practicable after Sellers receipt thereof, copies of the Cut-Off
Invoices and a copy of the Draw Request for the calendar month during
which the date hereof occurs (the "Pro-Rated Draw Request") together with
a calculation of the pro-rated amount of the Pro-Rated Draw Request, if
applicable, representing the Expansion Costs for Work performed in
connection with the Expansion Project from and after the date hereof;
(vi) provide to Buyer monthly reports of the Expansion Costs throughout
the Pre-Closing Period (which reports shall be provided within three (3)
business days of the end of each calendar month and shall include, for
such month, (a) the Draw Request and (b) the Other Contractor's invoices
(collectively, the "Contractors' Interim Invoices"); and (vii) obtain
from Buyer the approval of any material changes in the scope or schedule
of the Expansion Project, or any material increase in the budgeted costs.
5.1.9. Year 2000 Project Plan. During the Pre-Closing Period
Seller will continue to take the steps set forth in the Year 2000 Project
Plan to implement the Deliverables in accordance with such Plan and
Seller's past practices with respect thereto, including the preparation
of Progress Reports. Seller will provide Buyer with copies of all
Progress Reports prepared during the Pre-Closing Period as they are
completed. On the Closing Date or as soon thereafter as practicable,
Seller will provide Buyer with an update of SCHEDULE 4.1.33 setting forth
the actions completed by Seller to implement the Deliverables as of the
Closing Date.
5.1.10. Bonuses. At or prior to the time of the final
determination of the Adjusted Cash Purchase Price pursuant to Section
3.4, Seller shall pay all amounts owing pursuant
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to bonus letters addressed to the individuals set forth on SCHEDULE
5.1.10 hereto in accordance with the terms of such letters.
5.2. Covenants of Buyer.
5.2.1. Further Assurances. Following the Closing, Buyer shall, and
shall cause its Affiliates to, from time to time, at no additional
expense to Buyer or such Affiliates, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by
Seller, to confirm and assure the rights and obligations provided for in
this Agreement and in the Collateral Agreements and render effective the
consummation of the transactions contemplated hereby and thereby.
5.2.2. Post-Closing Access to Information. Buyer acknowledges that
subsequent to Closing, Seller may need access to information or documents
in the control or possession of Buyer (or its Affiliates) for the
purposes of concluding the transactions set forth herein, audits,
compliance with Applicable Laws and requirements of Governmental
Authorities, and the prosecution or defense of third party claims.
Accordingly, Buyer agrees that, after Closing, Buyer (and its Affiliates)
will, at the expense of the Seller and upon written request, make
available to agents, independent auditors and/or governmental agencies,
such documents and information as may be available relating to the Assets
for periods prior and subsequent to Closing to the extent necessary to
facilitate concluding the transactions set forth herein, audits,
compliance with Applicable Laws and requirements of Governmental
Authorities and the prosecution or defense of claims.
5.2.3. Preservation and Access to Patient Records After the
Closing. After the Closing, Buyer shall, in the ordinary course of
business and as required by law, keep and preserve all medical records
and other records of the Facilities existing as of the Closing Date.
Buyer acknowledges that as a result of entering into this Agreement and
its ownership of the Assets, it will gain access to patient and other
information which is subject to rules and regulations concerning
confidentiality. Buyer agrees to abide by any such rules and regulations
relating to the confidential information it acquires. Buyer agrees to
maintain the patient records delivered to Buyer at Closing at the
Facilities after Closing in accordance with applicable law (including, if
applicable, Section 1861(v)(i)(1) of the Social Security Act (42 U.S.C.
Section 1395(v)(1)(1)), and requirements of relevant insurance carriers.
Upon reasonable notice, during business hours, and upon receipt of
appropriate consents and authorizations, Buyer shall afford to the
representatives of Seller, including its counsel and accountants, full
and complete access to, and copies of, the records transferred to Buyer
at the Closing (including, without limitation, access to patient records
in respect of patients treated by Seller at the Facilities). In addition,
Seller shall be entitled to remove from the Facilities any such patient
records for purposes of pending litigation involving a patient to whom
such records refer, upon receipt of appropriate consents and
authorizations.
5.2.4. Confidentiality. With respect to Confidential Information
provided by either Seller or Buyer or their respective Affiliates in
connection with and relative to the transactions contemplated by this
Agreement, each Party hereto agrees to use Best Efforts
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to cause its officers, employees, representatives and agents to hold all
such Confidential Information in strict confidence and only to disclose
such Confidential Information to such duly authorized persons as are
necessary to effect the transactions contemplated hereby, and, if
requested, to return all originals and copies of any such written
Confidential Information to the other Party hereto or its Affiliates (as
applicable) in the event, for any reason, the transactions contemplated
hereby are not consummated. Nothing in this Section shall prohibit the
use of such Confidential Information for such governmental filings as are
required by law or governmental regulations or the disclosure of such
Confidential Information if such disclosure is compelled by judicial or
administrative process or, in the opinion of such disclosing Party's
counsel, other requirements of law. Each Party agrees that it will not
use, and will not knowingly permit others to use, any Confidential
Information in a manner detrimental to the Business, the other Party
hereto or to their competitive disadvantage. Each Party and its officers,
employees and agents recognize that any breach of this Section by a Party
would result in irreparable harm to the other Party and its Affiliates
and that therefore such other Party hereto shall be entitled to an
injunction to prohibit any such breach in addition to all of their other
legal and equitable remedies. For the purposes hereof, "Confidential
Information" shall mean all information of any kind concerning either
Seller or Buyer or their respective Affiliates obtained, directly or
indirectly, from the other Party hereto in connection with the
transactions contemplated by this Agreement except information (i)
ascertainable or obtained from public or published information, (ii)
received from a third party not under an obligation to keep such
information confidential, (iii) which is or becomes known to the public
(other than through a breach of this Agreement), or (iv) which was in
such Party's possession prior to disclosure thereof to such Party in
connection herewith.
5.2.5. Release of Letter of Credit. On or prior to Closing, Buyer
shall replace or otherwise cause the Letter of Credit to be terminated
and released and shall cause Seller to be fully released from all
liabilities and obligations with respect thereto.
5.2.6. Financing Commitment. Buyer will immediately provide Seller
with written notice of any amendments to or modifications of the terms
and conditions of the Commitment Letter and will promptly notify Seller
in writing of any fact or occurrence that might cause any conditions to
the financing provided for by the Commitment Letter not to be satisfied.
Buyer agrees that it will not agree to any amendments or modifications to
the Commitment Letter providing for an increase in the aggregate amount
of financing contemplated thereby to an amount exceeding $200,000,000
(the "Financing Ceiling") or to eliminate or reduce the equity investment
to be made in Buyer to an amount below $125,000,000 (the "Equity
Investment"). In the event that Buyer determines to pursue financing in
lieu of the financing contemplated by the Commitment Letter, Buyer agrees
that it will not seek financing with respect to the transactions
contemplated hereby that would exceed the Financing Ceiling or that would
permit Buyer to consummate the transactions contemplated hereby without
the Equity Investment having been made.
5.2.7. Return of Privileged Documents. In the event that Seller
inadvertently furnishes to Buyer any Privileged Documents, Buyer agrees
to use its Best Efforts to
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protect and preserve the privilege applicable to such Privileged
Documents at Seller's expense and to promptly return the same to Seller
immediately upon Seller's request.
5.2.8. Amendment to Holdco Certificate of Incorporation. At
Closing or within five (5) business days thereof, Buyer shall cause an
amendment to the Certificate of Incorporation of Holdco to be filed with
the Secretary of State of Utah changing the name of Holdco to a name that
bears no resemblance to "PHC" or "▇▇▇▇▇▇▇▇▇▇."
5.3. Additional Covenants.
5.3.1. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇. Each of Buyer and Seller will, within
five business days after executing this Agreement, prepare and file with
the FTC and the DOJ the premerger notification form required under the
HSR Act and a request for early termination of the waiting period. The
Parties will further (i) discuss with each other any comments the
reviewing Party may have; (ii) cooperate with each other in connection
with such filings, which cooperation will include, but not be limited to,
furnishing the other with such information or documents as may be
reasonably required in connection with such filings; (iii) promptly file
after any request by the FTC or the DOJ any appropriate information or
documents so requested by FTC or the DOJ; and (iv) notify each other of
any other communications with the FTC or the DOJ that relate to the
transactions contemplated by this Agreement and, to the extent
appropriate, permit the other to participate in any conferences with the
FTC or the DOJ. The Parties will use Best Efforts to accelerate and
obtain HSR Act clearance. Buyer and Seller will each pay one-half of the
filing fee required by the HSR Act. Each of Buyer and Seller will pay its
own expenses in connection with the preparation of the premerger
notification form. The Parties will each pay one-half of the fees of any
experts or advisers mutually retained to assist the parties to obtain HSR
Act clearance.
5.3.2. Other Government Consents. Promptly following the execution
of this Agreement, the Parties will proceed to prepare and file with the
appropriate Governmental Authority any requests for approval or waiver
(in addition to those specifically described above), if any, that are
required from any Governmental Authority which may be necessary or
appropriate or are reasonably deemed necessary or appropriate by a
Party's counsel in connection with the transactions contemplated by this
Agreement, including, without limitation, the consent of the FTC to the
transfer of SLRMC, and the Parties will diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for
approval or waiver and all proceedings necessary to secure such approvals
and waivers. Each Party shall, in good faith, take all reasonable steps
that are within its power to cause to be satisfied the conditions
precedent to its obligations or other Parties' obligations to close that
are dependent upon its actions. Each Party shall cooperate fully with the
other Parties to provide such support, assistance and information to the
other Parties as may be reasonably requested by them in connection with
its applications for all necessary Consents by Governmental Authorities
and by private parties in connection with the transactions contemplated
hereunder and to consult regularly with the other Parties in the
preparation of any such applications or requests for consent. The Parties
shall pay any and all customary fees and charges in connection with the
foregoing. The Parties will use Best Efforts to obtain any Consents
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or Governmental Authorities required to be obtained in connection with
the transactions contemplated hereby.
5.3.3. Best Efforts; No Inconsistent Action. Subject to the terms
and conditions hereof, each Party will use its Best Efforts to effect the
transactions contemplated by this Agreement and to fulfill the conditions
to the obligations of the Parties hereto set forth in Article VI of this
Agreement. No Party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the
consummation of the transactions contemplated by this Agreement, except
that nothing in this Section 5.3.3 will limit the rights of the Parties
under Article VIII of this Agreement.
5.3.4. Press Releases. No press releases or other public
announcements concerning the transactions contemplated by this Agreement
may be made by any Party without the prior written consent of the other
Party, which consent will not be unreasonably withheld; provided,
however, that (i) Seller's consent shall not be required for Buyer to
include the Facilities (by Facility name) in payer provider directories
(both new and existing) and (ii) nothing in this provision will prevent a
Party from making such releases or announcements as are necessary for a
Party to satisfy its legal obligations or the requirements of the New
York Stock Exchange, but in any such case the affected Party will
promptly notify the other Party.
5.3.5. Stockholders Agreement. At Closing, Parent, Holdco, Buyer
and certain other investors in Holdco shall enter into a Stockholders
Agreement substantially on the terms specified in Exhibit F hereto.
5.3.6. Termination of Affiliate Transactions. Seller shall cause
all Affiliate Transactions, including, without limitation, those listed
in SCHEDULE 5.3.6 to be cancelled, terminated, waived and released at or
prior to the Closing without any consideration being paid or payable by
the Business in respect thereof, pursuant to appropriate agreements or
other instruments, in form and substance satisfactory to Buyer.
5.4. Tax Matters Covenants.
5.4.1. Code Section 338(h)(10) Election; Allocation of Transaction
Consideration. PHC and Buyer shall jointly make an election under Section
338(h)(10) of the Code (and any comparable provision of applicable state
or local income tax law) with respect to the purchase of the stock of
Holdco by Buyer (and, at Buyer's Option, with respect to those lower-tier
Subsidiaries of Holdco for which such an election may be made) and, as
soon as practicable after the Closing shall mutually prepare a Form 8023,
with all attachments (the "8023 Statement") and shall cooperate with each
other to take all actions necessary and appropriate (including filing
such additional forms, returns, elections, schedules and other documents
as may be required) to effect and preserve a timely election, in
accordance with the provisions of Treas. Reg. Section 1.338(h)(10)-1 (or
any comparable provisions of state or local tax law) or any successor
provisions (the "Election"). The Buyer shall make an allocation of that
portion of what it estimates will be the Modified ADSP (as defined in
Treas. Reg. Section 1.338(h)(10)) allocable to assets of Class I, II, and
III (as defined in Treas. Reg. Section 1.338(b)-2T) among the Assets and
among
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the properties of each subsidiary corporation for which an Election is
made that are Class I, II, or III assets (the "Initial Allocation"). The
Initial Allocation shall be submitted to PHC within 90 days of Closing.
If PHC agrees with the Initial Allocation (or fails to notify Buyer of
any disagreement within 30 days of receipt of the Initial Allocation)
such allocation shall be the basis for allocating the Modified ADSP once
the Adjusted Cash Purchase Price has been determined. If PHC disagrees
with the Initial Allocation, Buyer and PHC shall attempt to resolve their
differences during the 30 day period following PHC's giving notice of the
disagreement to Buyer. If the Parties are unable to resolve their
differences during such 30 day period, the differences shall be resolved
by a mutually agreed upon mediator within 180 days of Closing. If the
Parties are unable to agree on a mediator, it shall be a national
accounting firm mutually agreed upon by the independent accounting firms
which audit PHC and Buyer and the differences shall be resolved within
180 days of Closing. Nothing in this Section 5.4.1 shall prevent the
parties from agreeing to vary the timing requirements herein to make an
Election under any Applicable Law.
After the later of the determination of the Adjusted Cash Purchase
Price and the determination of Initial Allocation, but in no event later
than 70 days prior to the due date of the Form 8023, the Buyer shall
prepare, and submit to PHC, a draft of Form 8023 based upon the Initial
Allocation and the Adjusted Cash Purchase Price. If PHC accepts the draft
Form 8023 (or fails to notify Buyer of any disagreement within 15 days of
receipt of the draft Form 8023) such draft shall be the basis for the
Form 8023 filed with the IRS. If PHC disagrees with the draft Form 8023,
Buyer and PHC shall attempt to resolve their differences during the 15
day period following PHC's giving notice of the disagreement to Buyer. If
the Parties are unable to resolve their differences during such 15 day
period, the differences shall be resolved by a mutually agreed upon
mediator not later than 10 days prior to the due date of the Form 8023.
If the Parties are unable to agree on a mediator, it shall be a national
accounting firm mutually agreed upon by the independent accounting firms
which audit PHC and Buyer and the differences shall be resolved not later
than 10 days prior to the due date of the Form 8023.
5.4.2. Transferors' Taxes and Returns. Tax Returns and Taxes of
the Transferors will be the responsibility of Parent and the Transferors,
except that (i) Buyer shall pay any sales or use Taxes related to the
transfers of assets or property in connection with the Pre-Closing
Transactions and (ii) any other transfer or recordation taxes shall be
allocated between the Buyer and the Transferor in the manner customary in
the taxing jurisdiction.
5.4.3. PHC's Returns for Tax Periods Including the Closing Date.
PHC will include the income of the Transferred Corporation (including any
deferred income triggered into income by Treas. Reg. Section 1.1502-13
and Treas. Reg. Section 1.1502-14, any excess loss accounts taken into
income under Treas. Reg. Section 1.1502-19 and any income from the deemed
sale of assets pursuant to the Election) for the Transferred
Corporation's tax periods ending on and including the Closing Date on
PHC's consolidated federal and applicable state and local income Tax
Returns that include the Closing Date and pay any income Taxes
attributable to such income. Holdco and its Affiliates will furnish Tax
information to PHC for inclusion in such Tax Returns for the period which
includes the
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Closing Date in general accordance with the past custom and practice of
PHC and its Subsidiaries. PHC will allow the Buyer an opportunity to
review and comment upon such Tax Returns (including any amended returns)
to the extent that they relate to the Transferred Corporation. Except to
the extent consistent with past practice, or required by applicable law,
PHC and its Affiliates will take no position on such Tax Returns that
relates to the Transferred Corporation that would adversely affect the
Transferred Corporation after the Closing Date. The income of the
Transferred Corporation will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by
closing the books of the Transferred Corporation as of the end of the
Closing Date.
5.4.4. Tax Periods Ending on or Before the Closing Date. Parent
shall prepare or cause to be prepared and file or cause to be filed all
income Tax Returns for the Transferred Corporation for all periods ending
on or prior to the Closing Date which are due after the Closing Date.
Buyer shall provide (or shall cause its Subsidiaries to provide) (i)
cooperation in the preparation and filing of such Tax Returns, which
shall include reasonable access to the books and records of its
Subsidiaries, and (ii) such powers of attorney or other instruments as
are necessary to file such Tax Returns (including, if necessary, causing
an appropriate authorized officer of the Transferred Corporation to sign
the return). Parent shall reimburse Buyer for Taxes of the Transferred
Corporation with respect to such periods within fifteen (15) days after
payment by Buyer or its Affiliates to the extent such Taxes are not
reflected in Taxes payable (rather than in any general Tax reserve or any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the balance sheet as of
the Closing Date.
5.4.5. Tax Periods Beginning Before and Ending After the Closing
Date.
(a) Any Tax period of a Transferor or of a Transferred
Corporation that both begins before and ends after the Closing Date is
referred to in this Section 5.4 as a "Straddle Period."
(i) Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns due after the Closing Date with
respect to Straddle Periods of the Transferred Corporation and
shall provide Parent with adequate opportunity to review and
comment on such Tax Returns prior to their due date. Upon notice
from Buyer, the Parent shall pay to Buyer, prior to the due date
of any such Tax Returns, the portion of the Taxes due on such Tax
Returns that are attributable to the portion of the Straddle
Period ending on the Closing Date.
(ii) Parent shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due on or before the Closing
Date with respect to Straddle Periods of the Transferred
Corporation and shall provide Buyer with adequate opportunity to
review and comment on such Tax Returns prior to their due date
(unless filed prior to the date of this Agreement). Upon notice
from Parent, the Buyer shall pay to Parent prior to the due date
of any such Tax Returns (or, if
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later, on the Closing Date), the portion of the Taxes due on such
Tax Returns that are attributable to the portion of the Straddle
Period following the Closing Date.
(iii) Buyer shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due after the Closing Date
with respect to Straddle Periods of Transferors, other than PHC
Holdings, for Taxes not measured by income imposed with respect to
its Business or Assets and shall provide Parent with adequate
opportunity to review and comment on such Tax Returns prior to
their due date. Upon notice from Buyer, Parent shall pay to Buyer,
prior to the due date of any such Tax Returns, the portion of the
Taxes due on such Tax Returns that are attributable to the portion
of the Straddle Period ending on the Closing Date.
(iv) Parent shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns due on or before the Closing
Date with respect to Straddle Periods of the Transferors imposed
with respect to its Business or Assets and shall provide Buyer
with adequate opportunity to review and comment on such Tax
Returns prior to their due date (unless filed prior to the date of
this Agreement). Upon notice from Parent, the Buyer shall pay to
Parent prior to the due date of any such Tax Returns (of, if
later, on the Closing Date), the portion of the Taxes due on such
Tax Returns that are attributable to the portion of the Straddle
Period following the Closing Date.
(v) Parent shall prepare or cause to be prepared and file
or cause to be filed all income Tax Returns for the Transferors
with respect to Straddle Periods.
(b) Except as provided in the final sentence of this (b) of
Section 5.4, for purposes of Section 5.4.5(a) in the case of any sales
and use, income, gross receipts, franchise or similar taxes that are
imposed on a periodic basis and payable for a Straddle Period, the
portion of such Taxes attributable to the portion of the Straddle Period
ending on the Closing Date shall be deemed equal to the amount which
would be payable if the relevant Straddle Period ended on the Closing
Date. Any deductions, credits, or other items relating to a Straddle
Period shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with the
prior practice of Parent and its Affiliates. Notwithstanding the
preceding sentences of this (b), Taxes which are described in Section
5.4.2 and are reportable on a Tax Return described in (a) of this Section
5.4.5 shall (i) be treated as attributable to the portion of the Straddle
Period ending on the Closing Date to the extent they are the
responsibility of the Parent under Section 5.4.2 and (ii) not be treated
as attributable to the portion of the Straddle Period ending on the
Closing Date to the extent they are the responsibility of the Buyer under
Section 5.4.2.
(c) For purposes of Section 5.4.5(a), in the case of any Taxes
payable for a Straddle Period (other than those described in Section
5.4.5(b)) that are imposed on a periodic basis and with respect to the
business or assets of the Transferors or the Transferred Corporation, the
portion of such Taxes attributable to the portion of the
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Straddle Period ending on the Closing Date shall be deemed equal to the
amount of such Taxes for the entire Straddle Period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding Tax period) multiplied by a fraction the
numerator of which is the number of calendar days in the portion of the
Straddle Period ending on and including the Closing Date and the
denominator of which is the number of calendar days in the entire
Straddle Period.
5.4.6. Cooperation on Tax Matters.
(i) Buyer, Parent, and their respective Subsidiaries shall
cooperate fully, as and to the extent reasonably requested by any
Party, in connection with the filing of Tax Returns pursuant to
this Section 5.4 and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision of
records and information which are reasonably relevant and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder.
(ii) Buyer, Parent, and their respective Subsidiaries
further agree, upon request, to use their best efforts without
incurring unreasonable cost or expense to obtain any certificate
or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed with respect to the transactions
contemplated hereby.
(iii) Buyer, Parent and their respective Subsidiaries
further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant
to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(iv) Buyer, Parent and their respective Subsidiaries shall
take all actions necessary to cause Buyer to replace PHC Utah as
the Tax Matters Partner for ▇▇▇▇▇ City ASC, LLC effective as of
the Closing Date.
5.4.7. Tax Sharing Agreements. All Tax allocation, sharing
agreements or similar agreements with respect to or relating to the
Transferred Corporation or (to the extent Parent or any of Parent's
Subsidiaries is a party to such Agreement) LLC Entity shall be terminated
as of the Closing Date and, after the Closing Date, the Transferred
Corporation or LLC Entity shall not be bound thereby or have any
liability thereunder.
5.4.8. Audits. Parent will promptly inform Buyer of any audit
commenced by a Taxing Authority with respect to a Tax Return filed
pursuant to Section 5.4.3, Section 5.4.4 or Section 5.4.5 above. Buyer
will promptly inform Parent of (a) any audit commenced by a Taxing
Authority with respect to a Tax Return filed pursuant to Section 5.4.5
above and (b) any issue raised with respect to an audit of a return filed
pursuant to Section 5.4.5 above which relates (i) to a transaction
occurring on or before the Closing Date or (ii) to an item or items which
cannot be specifically allocated to either the period ending on the
Closing Date or the period beginning on the day after the Closing Date or
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(iii) which would otherwise affect the amount of Tax allocated to the
period ending on the Closing Date. Parent shall have the right (but not
the obligation) to control that portion of the defense of any such audit
or resulting litigation (using counsel of its choice, paid for by
Parent), and to settle any such issue raised on any terms in its sole
discretion. Each Party shall cooperate with the other in the defense of
any such audit as such Party may reasonably request. Such cooperation
shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder.
5.4.9. Carrybacks. Except to the extent required by law, Parent
will not cause any Tax item or attribute of the Transferred Corporation
to be carried back from a tax period beginning after Closing to a tax
period ending on or before the Closing without the express written
permission of Buyer. Parent shall not file or cause to be filed any Tax
Return that includes any such carryback following receipt of permission
granted pursuant to the preceding sentence without the prior written
consent of Buyer. Parent, Buyer and their respective Subsidiaries shall
not file or cause to be filed any Tax Return with respect to any taxable
year or other taxable period beginning after the Closing Date which
reflects positions which are (i) inconsistent with the tax reporting
contemplated by sections 5.4.1 through 5.4.5 for the transactions
pursuant to this Agreement and (ii) could reasonably be expected
adversely to affect the liability of the other Party or any of its
Affiliates with respect to Taxes.
5.4.10. LLC Entity Tax Years Beginning Before and Ending After
Closing. The Taxable income or loss for an LLC Entity's Taxable year
which includes (but does not end on) the Closing Date shall be
apportioned between the Transferor (which owned the interest in the LLC
Entity prior to its transfer to Holdco) and Holdco in a manner mutually
acceptable to Buyer and Seller. If Buyer and Seller are unable to agree
on a method of allocation, (i) any income or loss associated with a
transaction outside the ordinary course of business and involving gross
proceeds in excess of $100,000 shall be allocated to the person who owned
the interest on the date the extraordinary transaction occurred and (ii)
the balance of the taxable income or loss shall be pro rated between the
Transferor and Holdco based on the number of days they owned the interest
in the LLC Entity; provided, however, that if the bases of an LLC
Entity's assets are changed as a result of the transfer of the interest
to Holdco or the Section 338(h)(10) election (i.e., there is an election
under Section 754 of the Code), depreciation deductions shall be
apportioned between the Transferor and Holdco based on a closing of the
books methodology.
5.4.11. Tax Indemnification.
(a) Notwithstanding anything in this Agreement to the contrary,
Parent and Seller, jointly and severally, shall indemnify the Buyer
Indemnitees and hold them harmless from and against and pay or reimburse
the Buyer Indemnitees for, any and all Losses resulting from or arising
out of: (i) all liability for Taxes with respect to Seller and any of its
Affiliates for all taxable periods ending on or prior to the Closing Date
and the portion of any Straddle Period ending on (and including) the
Closing Date ("Pre-
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Closing Tax Period"), including, without limitation, any liability for
Taxes imposed with respect to Holdco and its Subsidiaries pursuant to
Treas. Reg. Section 1.1502-6 (or a comparable provision under state or
local tax law), (ii) all liability for Taxes with respect to Seller and
any of its Affiliates imposed with respect to Holdco and its Subsidiaries
pursuant to Treas. Reg. Section 1.1502-6 (or a comparable provision under
state or local tax law) for a taxable year that includes, but does not
end on, the Closing Date, (iii) all liability for Taxes accruing on or
before the Closing Date which result from (A) the deemed sale of assets
pursuant to the election to be made by the Buyer and the Seller pursuant
to Section 338(h)(10) of the Code, as contemplated by Section 5.4.1 of
this Agreement and (B) the deemed sale of assets pursuant to any
comparable elections under state or local tax laws, and (iv) Seller's
share of all Taxes under Section 5.4.2 hereof.
(b) For purposes of this Section 5.4.11, the portion of any
Taxes for any Straddle Period which is attributable to the portion of the
Straddle Period ending on (and including) the Closing Date shall be
computed as set forth in Section 5.4.5.
5.4.12. Procedures Relating to Indemnification of Tax Claims.
(a) If a claim for Taxes shall be made by any Taxing Authority
in writing, which, if successful, might result in an indemnity payment
pursuant to Section 5.4.11, the Buyer ("Indemnified Party") shall, within
90 days of such written claim, notify the Seller ("Indemnifying Party")
in writing of such claim (a "Tax Claim").
(b) With respect to any Tax Claim which might result in an
indemnity payment to the Buyer Indemnitees thereof pursuant to Section
5.4.11, except as provided in the final sentence of this (b), Seller
shall control all proceedings taken in connection with such Tax Claim
and, without limiting the foregoing, may in its sole discretion and at
its sole expense pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with
respect thereto, and may, in its sole discretion, either pay the Tax
claimed and ▇▇▇ for a refund where applicable law permits such refund
suits or contest such Tax Claim. In connection with such proceedings, (i)
Seller shall keep the Buyer informed of all significant developments and
events relating to such Tax Claim and (ii) the Buyer shall have the right
to participate in (but not control) any such proceedings. The Buyer shall
cooperate with Seller and Holdco in contesting such Tax claim. The
contest of any Tax Claim that relates to (A) Taxes which are being shared
by the Seller and Buyer pursuant to Section 5.4.2, (B) Taxes for a
Straddle Period of the Transferred Corporation, or (C) Taxes for a
Straddle Period of a Transferor (other than Taxes with respect to a Tax
Return described in (a)(v) of Section 5.4.5) shall be jointly controlled
by the Buyer and Seller.
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ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions to Obligations of Each Party. The obligations of the
Parties to consummate the transactions contemplated hereby shall be subject to
the fulfillment or (to the extent permitted by Applicable Law) waiver on or
prior to the Closing Date of the following conditions:
6.1.1. HSR Action Notification. In respect of the notifications of
Buyer and Seller pursuant to the HSR Act, the applicable waiting period
and any extensions thereof shall have expired or been terminated.
6.1.2. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree
or judgment of any court or other Governmental Authority that shall have
become final and non-appealable. No court or other Governmental Authority
shall have determined any Applicable Law to make illegal the consummation
of the transactions contemplated hereby or by the Collateral Agreements,
and no Litigation or proceeding with respect to the application of any
such Applicable Law to such effect or seeking to restrain, enjoin or
otherwise prohibit the transactions contemplated hereby, shall be
pending.
6.1.3. Government Approvals. The Parties shall have obtained all
Governmental Approvals required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement, in usual
and customary form or in such other form as may be satisfactory to each
of the Parties in its reasonable discretion.
6.2. Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by the Buyer) on or prior to the Closing Date of the
following additional conditions, which the Seller agrees to use reasonable good
faith efforts to cause to be fulfilled:
6.2.1. Representations, Performance. The representations and
warranties of the Seller contained in this Agreement, without giving
effect to any revisions or supplements to the Schedules authorized by
Section 5.1.4., (i) shall be true and correct in all respects (in the
case of any representation or warranty containing any materiality or
Material Adverse Effect qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) at and as of the date hereof, and (ii) shall be repeated
and shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality or Material Adverse
Effect qualification) or in all material respects (in the case of any
representation or warranty without any materiality or Material Adverse
Effect qualification) on and as of the Closing Date with the same effect
as though made on and as of the Closing Date provided, however, that this
condition shall be deemed satisfied unless the failure or failures of
such representations and warranties to be so true and correct
(disregarding for this purpose all qualifications in such representations
and warranties relating to materiality, Material Adverse Effect and
knowledge), in the aggregate, would have a Material Adverse Effect.
Seller shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by
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this Agreement to be performed or complied with by it prior to or on the
Closing Date. Seller shall have delivered to the Buyer a certificate,
dated the Closing Date and signed by its duly authorized officers, to the
foregoing effect.
6.2.2. Collateral Agreements. Seller shall have delivered to Buyer
each of the Collateral Agreements to which Seller is a party.
6.2.3. Reorganization. Seller shall have consummated the
Pre-Closing Transactions as contemplated by Section 2.1 above.
6.2.4. No Material Adverse Effect. There shall not have been,
since the date of this Agreement, any event or occurrence which has had
or would reasonably be expected to result in a Material Adverse Effect on
Seller.
6.2.5. Title Commitment. Buyer shall have received the Title
Commitment and the Survey required pursuant to Section 5.1.7 hereof, each
in form and substance reasonably satisfactory to Buyer, and the Title
Company will have extended the effective date thereof to the Closing Date
and will be committed to issue its title insurance policy pursuant to
such Title Commitment.
6.2.6. Consents. Seller shall have provided to Buyer evidence, in
form and substance reasonably satisfactory to Buyer, that all material
Consents of third Persons, including, without limitation, any Consents
required to assign the Material Contracts, have been obtained or given in
accordance with this Agreement.
6.2.7. FIRPTA Affidavit. Seller shall have delivered to Buyer an
affidavit, in a form reasonably satisfactory to Buyer, stating under
penalties of perjury each of the Sellers' taxpayer identification numbers
and that none of the Sellers is a foreign person within the meaning of
Section 1445(b)(2) of the Code (the "FIRPTA Affidavit"); provided,
however, that if the Seller fails to provide the FIRPTA Affidavit, the
transaction shall nonetheless close and Buyer shall withhold and pay over
to the appropriate Taxing Authority the amount required to be withheld
under Section 1445 of the Code as determined by Buyer.
6.2.8. Financing. Provided Buyer has complied with Section 5.2.6
hereof, Buyer shall have received the proceeds under the Commitment
Letter or other financing agreements satisfactory to Buyer.
6.3. Conditions to Obligations of the Seller. The obligation of Seller
to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller), on or prior to the Closing Date, of the
following additional conditions, which Buyer agrees to use reasonable good faith
efforts to cause to be fulfilled.
6.3.1. Representations, Performance, etc. The representation and
warranties of Buyer contained in this Agreement and the Collateral
Agreements (i) shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality or Material
Adverse Effect qualification) or in all material respects (in the case of
any representation or warranty without any materiality or Material
Adverse Effect
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qualification) at and as of the date hereof and (ii) shall be repeated
and shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality or Material Adverse
Effect qualification) or in all material respects (in the case of any
representation or warranty without any materiality or Material Adverse
Effect qualification) on and as of the Closing Date with the same effect
as though made at and as of such time provided, however, that this
condition shall be deemed satisfied unless the failure or failures of
such representations and warranties to be so true and correct
(disregarding for this purpose all qualifications in such representations
and warranties relating to materiality, Material Adverse Effect and
knowledge), in the aggregate, would have a Material Adverse Effect. Buyer
shall have duly performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement and the
Collateral Agreements to be performed or complied with by it prior to or
on the Closing Date. Buyer shall have delivered to Seller a certificate,
dated the Closing Date and signed by its duly authorized officer, to the
foregoing effect.
6.3.2. Collateral Agreements. Buyer shall have delivered to Seller
each of the Collateral Agreements to which Buyer is a party.
6.3.3. Letter of Credit. Buyer shall have replaced the Letter of
Credit and shall have caused Seller to be released from all liabilities
and obligations with respect thereto.
6.3.4. Buyer's Certificate. Buyer shall have delivered to Seller
the Buyer's Certificate.
ARTICLE VII.
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
7.1. Employment of Seller's Employees.
(a) Effective as of the Closing Date, Buyer shall offer
employment to all employees of each Seller engaged in the Business
or who are otherwise listed on SCHEDULE 7.1 hereto (the
"Offerees"), at wage or salary levels, as applicable, and with
employee benefits no less than those currently in effect for the
Offerees. Those employees who accept such offers of employment
effective as of the Closing Date shall be referred to herein as
the "Transferred Employees." Buyer acknowledges and agrees that
solely for purposes of the WARN Act, any person who is an employee
of Seller and who is engaged in the Business (other than part-time
employees as defined under the WARN Act) as of the Closing Date
shall be deemed an employee of Buyer for purposes of the WARN Act
on the Closing Date. With respect to such "deemed" employees,
Buyer further agrees and acknowledges that Buyer will be
responsible for all applicable notices and liabilities under the
WARN Act resulting from the termination of any such employees on
and after the Closing Date.
(b) As of the Closing Date, Buyer shall adopt and maintain
(without substantial changes except as may be required by
applicable law) for a period of at least one year from the Closing
Date the terms and conditions of Seller's policies
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providing for severance benefits described on SCHEDULE 4.1.22(a)
(hereinafter called the "Severance Plan") for the Transferred
Employees. For purposes of determining benefits under the
Severance Plan, the Transferred Employees will be credited with
all service with Seller or its Affiliates. On and after the
Closing Date, Buyer shall be solely responsible and liable for
benefits that are payable under the Severance Plan (but only if
severance occurs after the Closing Date), as modified as necessary
to reflect Buyer's adoption of the Severance Plan.
(c) As of the Closing Date, Buyer shall assume all of the
Seller's obligations with respect to accrued but unpaid vacation
for Transferred Employees as accrued on the books of Seller and
any accrued sick pay for Transferred Employees.
(d) Buyer will adopt an employee pension benefit plan (as
such term is defined in section 3(2) of ERISA ("Buyer's 401(k)
Plan") that is no less favorable to the Transferred Employees than
Seller's 401(k) Plan described on SCHEDULE 4.1.22(a) ("Seller's
401(k) Plan"). All Transferred Employees who were participants in
Seller's 401(k) Plan prior to Closing shall become participants in
Buyer's 401(k) Plan as of Closing. Subject to Buyer's completion
of due diligence with respect to Seller's 401(k) Plan, which shall
occur as soon as reasonably possible following the date hereof,
Buyer shall submit an application for a favorable determination
letter to the IRS on Buyer's 401(k) Plan and, contingent upon the
receipt of such favorable determination letter, Seller shall, upon
completion of the voluntary compliance audit with respect to the
Seller's plan under the IRS walk-in closing agreement program,
transfer all the assets attributable to the accounts (both vested
and unvested) of the Transferred Employees to Buyer's 401(k) Plan
in a manner that is in compliance with Section 414(l) of the Code.
Buyer's 401(k) Plan shall at all times be maintained in compliance
with the Code and ERISA. Seller will provide copies of all plan
documents, summary plan descriptions and other records pertaining
to Seller's 401(k) Plan which will be necessary for the
administration of Buyer's 401(k) Plan for the Transferred
Employees.
7.2. Welfare and Fringe Benefit Plans.
(a) Effective as of the Closing Date, Buyer shall assume,
with respect to the Transferred Employees and their dependents and
beneficiaries Seller's medical benefit plan described on SCHEDULE
4.1.22(a) (the "Medical Benefit Plan"). In addition, Buyer shall
provide the Transferred Employees and their dependents and
beneficiaries coverage commencing on the Closing Date under group
life, short-term disability and long-term disability plans
established by Buyer for such Persons who for all purposes of this
Section will be credited with all service with Seller or its
Affiliates, provided that, from and after the Closing Date, Seller
shall remain responsible for any and all Benefit Liabilities to or
in respect of the Employees or their beneficiaries or dependents
relating to or arising in connection with any claims for life,
disability, accidental death or dismemberment, supplemental
unemployment compensation, medical, dental, hospitalization, other
health or other welfare or fringe benefits or expense
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reimbursements, to the extent such claims relate to or are based
upon medical, dental, hospitalization or health services provided
prior to the Closing Date and are not included in Net Working
Capital or in connection with the requirements of Section 4980B of
the Code to provide continuation of health care coverage under any
Employee Benefit Plan in respect of Employees to the extent such
Benefit Liabilities relate to terminations of employment occurring
on or prior to the Closing Date. With respect to any Employee
Benefit Plan that is subject to Section 125 of the Code, Seller
shall transfer assets equal to the aggregate account balances of
all Transferred Employees, as of the Closing Date, to Buyer or
shall take other action mutually agreed to by Buyer and Seller to
avoid the loss by Transferred Employees of any part of such
balances.
(b) From and after the Closing Date, Buyer shall be
responsible for any and all Benefit Liabilities that relate to the
period from and after the Closing Date (other than any Excluded
Liabilities) relating to or arising in connection with the
requirements of Section 4980B of the Code to provide continuation
of health care coverage under any Employee Benefit Plan in respect
of Transferred Employees, including the former Employees set forth
on SCHEDULE 7.2, any other Employees whose employment with Seller
terminates between the date hereof and the Closing Date (a list of
whom shall be provided to Buyer at or prior to the Closing), and
the beneficiaries and covered dependents of any of the foregoing
persons.
(c) Buyer shall provide the appropriate notices required
under Section 4980B of the Code with respect to continuation of
health care coverage under any Employee Benefit Plan in respect of
Transferred Employees, their beneficiaries and covered dependents.
7.3. Workers' Compensation. From and after the Closing Date, Buyer
shall be responsible for any and all Benefit Liabilities to or in respect of any
Transferred Employee relating to or arising in connection with any and all
claims for workers' compensation benefits (or benefits for work-related injuries
or illnesses that are covered under any occupational benefits plan of Seller)
that relate to the period from and after the Closing Date.
7.4. Employment Taxes. To the extent permitted by law, Seller will and
Buyer will (i) treat Buyer as a "successor employer" and the Seller as a
"predecessor," within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the
Code, with respect to Transferred Employees who are employed by the Buyer for
purposes of Taxes imposed under the United States Federal Unemployment Tax Act
("FUTA") or the United States Federal Insurance Contributions Act ("FICA") and
(ii) and cooperate with each other to avoid, to the extent possible, the filing
of more than one IRS Form W-2 with respect to each such Transferred Employee for
the calendar year within which the Closing Date occurs.
7.5. No Continuing Obligation. Subject to Buyer's obligations pursuant
to Section 9.3 below, this Agreement (a) shall not require Buyer, Holdco or any
of their respective subsidiaries to employ any Employee on or after the Closing
Date or (b) constitute a guarantee of continuing employment to any Transferred
Employee.
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ARTICLE VIII.
TERMINATION
8.1. Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the written agreement of Buyer and the Seller; or
(b) by either Seller or Buyer by written notice to the
other (a "Termination Notice") if the Closing has failed to occur
on or before 5:00 P.M. Houston, Texas time on November 30, 1999,
(or such later date as Seller and Buyer shall agree in writing),
except that neither Buyer nor Seller shall terminate this
Agreement by delivery of a Termination Notice while such Party is
in breach or default of its obligations hereunder.
8.2. Break-Up Fee. In the event that the Closing does not occur for any
reason other than as a result of (a) Seller's inability to satisfy the
conditions set forth in Sections 6.2.1 or 6.2.4 or (b) the inability of the
Parties to satisfy the conditions set forth in Sections 6.1.1, 6.1.2 or 6.1.3
(and provided Seller is ready, willing and able, assuming compliance by Buyer
with its obligations hereunder, to satisfy the conditions set forth in Sections
6.2.2, 6.2.3, 6.2.5 and 6.2.6), including any termination of this Agreement by
Buyer as a result thereof, then Buyer shall pay or cause to be paid to Seller,
in same day funds, upon demand, as liquidated damages and not as a penalty, the
sum of $7,500,000. The Parties acknowledge and agree that the actual damages
resulting from the failure of the Closing to occur for the reasons set forth
above, would be difficult or impracticable to calculate and that, in light of
the circumstances, the foregoing represents a reasonable approximation of such
damages and shall be in lieu of other damages in respect of such occurrence.
Upon payment of such amount, Buyer shall have no further obligation hereunder,
except as provided in Section 8.3 hereof.
8.3. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 8.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any Party hereto, or
any of its directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except for any liability resulting from
such Party's breach of this Agreement, provided, however, that the provisions of
Section 5.2.4, 5.3.4, 8.2 and 11.1 shall survive the termination of this
Agreement.
ARTICLE IX.
ADDITIONAL AGREEMENTS
9.1. Seller's Cost Reports. Seller will prepare and file all
terminating cost reports in connection with Current Program Receivables with the
applicable agencies and shall provide Buyer with a copy thereof (the "Seller
Cost Reports"). Such Seller Cost Reports shall be, in all material respects,
prepared and filed in accordance with all Applicable Laws. Buyer shall forward
to Seller any and all correspondence relating to the Seller Cost Reports within
three (3) Business Days after receipt by Buyer. Buyer shall retain all rights to
the Current Program Receivables and to the Seller Cost Reports including,
without limitation, the right to appeal
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any Medicare determinations relating to the Current Program Receivables and
Seller Cost Reports. Seller shall retain the originals of the Seller Cost
Reports, correspondence, work papers and other documents relating to Seller Cost
Reports and the Current Program Receivables. Seller will furnish copies of such
documents to Buyer prior to Closing.
9.2. Misdirected Payments. Seller and Buyer covenant and agree to
remit, within three (3) days after receipt, to the other any payments received,
which payments are on or in respect of accounts or notes receivable owned by (or
are otherwise payable to) the other.
9.3. WARN Act. Buyer agrees and acknowledges that the purchase of the
Assets constitutes the sale of one or more businesses within the meaning of the
WARN Act and the rules and regulations promulgated thereunder. Anything in this
Agreement to the contrary notwithstanding, Buyer agrees and acknowledges that
for purposes of the WARN Act, any person who is an employee of a Seller (other
than part-time employees as defined under the WARN Act) at a Facility as of the
Closing Date (which shall constitute the effective date of the sale within the
meaning of the WARN Act) shall be considered an employee of Buyer immediately
upon the Closing. With respect to such "deemed" employees, Buyer further agrees
and acknowledges that Buyer will be responsible for all applicable notices and
liabilities under the WARN Act resulting from the termination of any such
employees after the Closing Date.
9.4. Power of Attorney for D.E.A. Registration Number(s) and Utah
Pharmacy License(s). Buyer covenants that it shall promptly apply for all
necessary D.E.A. registration(s) or Utah Pharmacy License(s) with respect to the
Facilities as soon as possible. At or prior to Closing, Seller shall execute in
favor of Buyer one or more Powers of Attorney for Order Forms authorizing Buyer
or a representative of Buyer to execute applications for books of official order
forms and to sign such order forms, under Seller's D.E.A. Registration Number(s)
or Seller's Pharmacy License(s) as required for all necessary controlled
substances on an interim basis until such time as Buyer shall receive approval
of all necessary D.E.A. registration(s) or Utah Pharmacy License(s). Seller
covenants that it shall cooperate with Buyer and provide such information as
Buyer may reasonably request in making all such applications for registration or
licensing.
9.5. Covenant Not to Compete.
(a) Seller acknowledges that Buyer would be irreparably damaged
if the knowledge of Seller of the business and affairs, trade secrets or
confidential information of the Business were disclosed or utilized on
behalf of any person which is in, or contemplates entering into,
competition in any respect, directly or indirectly, with the Business. In
furtherance of this Section 9.5 and to secure the interest of Buyer
hereunder, Seller hereby covenants and agrees that, from and after the
Closing and until the third anniversary of the Closing Date, Seller shall
not, and shall cause each of its Affiliates not to, directly or
indirectly, participate in the ownership, management, operation or
control of, or be connected with or employed by, or act as a consultant
for, or have any financial interest in or aid or knowingly assist anyone
else in the conduct of, any business or entity which (i) is similar to
the Business in the Salt Lake City, Utah region, or (ii) is actively
pursuing the conduct of such business in such region; provided, however,
that this
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Agreement shall not restrict or prohibit Seller or its Affiliates from
(i) conducting any business of Seller or its Affiliates that is unrelated
to the Business, in substantially the same manner as presently conducted
(ii) owning, managing or operating the Excluded Assets, (iii) selling the
business of Parent, whether by merger, sale of stock or assets or (iv)
otherwise being the owner of up to 2% of any class of outstanding
securities of any public company or entity.
(b) From and after the Closing Date, Seller shall not use for
its benefit or disclose to any person, any proprietary information of the
Business or information with respect to customers, suppliers, employees
or financial affairs of the Business, or any other confidential matter,
obtained or developed by any of them prior to the Closing Date with
respect to any aspect of the Business.
(c) From and after the Closing Date until the third anniversary
of the Closing Date, neither Seller shall, nor shall it permit of its
Affiliates to, without the prior written consent of Buyer, solicit any
person who is a Transferred Employee and continues to be an employee of
the Business at the time of such proposed solicitation, or induce such
person to terminate his or her employment with Buyer; provided, however,
that Seller shall not be prohibited from conducting generalized
solicitation for employees (which solicitations are not specifically
targeted at Buyer employees) through the use of media advertisements,
professional search firms or otherwise.
(d) Seller acknowledges and agrees that if it were to breach
any provision of this Section 9.5, any remedy at law would be inadequate
and that Buyer, in addition to seeking monetary damages in connection
with any such breach, shall be entitled to specific performance, and
injunctive and other equitable relief, without the necessity of posting
any bond or other security, to prevent or restrain a breach of this
Section 9.5 or to enforce the provisions hereof.
(e) Seller and Buyer intend that the provisions of this Section
9.5 be enforced to the fullest extent permissible under the laws applied
in each jurisdiction in which enforcement is sought. If any provision of
this Section 9.5, or any part hereof, shall be held by a court of
competent jurisdiction to be invalid or unenforceable, this Section 9.5
shall be amended to revise the scope of such provision to make it
enforceable, if possible, or to delete such provision or such part.
ARTICLE X.
INDEMNIFICATION
10.1. Indemnification. For purposes of this Agreement, the term "Losses"
means, any and all claims, liabilities, obligations, losses, fines, interests,
penalties, costs, royalties, proceedings, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including out-of-pocket expenses and reasonable attorneys'
and accountants' fees incurred in the investigation or defense of any of the
same or in asserting any of their respective rights hereunder. To the extent any
Indemnification or Loss is governed by Section 5.4, this Section 10.1 shall not
apply.
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(a) By Parent and Seller. Parent and Seller jointly and
severally covenant and agree to defend, indemnify and hold harmless
Buyer, its officers, directors, employees, and Affiliates (collectively,
the "Buyer Indemnitees") from and against, and pay or reimburse the Buyer
Indemnitees for, any and all Losses resulting from or arising out of:
(i) any breach of any representation or warranty made by
the Seller herein or under any Collateral Agreement (or any facts
or circumstances constituting such breach);
(ii) any breach by Seller of its covenants or obligations
under this Agreement or under any Collateral Agreement other than
covenants or obligations to be performed by Holdco after the
Closing;
(iii) the Excluded Liabilities, other than those set forth
in Sections 2.5(j) and 2.5(m) or the Excluded Assets; or
(iv) the Excluded Liabilities set forth in Sections 2.5(j)
and 2.5(m).
(b) By Buyer and Holdco. Buyer, from and after the date hereof,
and Holdco, from and after the Closing, jointly and severally covenant
and agree to defend, indemnify and hold harmless Seller and its officers,
directors, employees, and Affiliates (collectively, the "Seller
Indemnitees") from and against, and pay or reimburse the Seller
Indemnitees for, any and all Losses resulting from or arising out of:
(i) any breach of any representation or warranty by the
Buyer made or contained in this Agreement or any Collateral
Agreement (or any facts or circumstances constituting such
breach);
(ii) any breach by Buyer of its covenants or obligations
under this Agreement or any Collateral Agreement;
(iii) the Assumed Liabilities assumed by Holdco pursuant to
Section 2.4 and any breach by Holdco or its Subsidiaries of any
covenants or obligations to be performed by any of them after the
Closing under this Agreement or any Collateral Agreement; or
(iv) the operation of the Business by Buyer or by Holdco or
its Subsidiaries or Buyer's or Holdco's or its Subsidiaries'
ownership, operation or use of the Assets following the Closing
Date, including, without limitation, (A) any Tax liabilities
arising in connection with operations of the Business after the
Closing Date and (B) any liabilities, including liabilities to
customers of the Business or users of its products, or to
employees, agents or contractors of the Business, in connection
with the operation of the Business following the Closing Date;
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it being understood that Holdco shall have no obligations or
liabilities with respect to these indemnification provisions prior
to the Closing or in the event that the Closing fails for any
reason to occur.
(c) Indemnification Procedures. In the case of any claim
asserted by a third party against a party entitled to
indemnification under this Agreement (the "Indemnified Party"),
notice shall be given by the Indemnified Party to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified
Party shall permit the Indemnifying Party (at the expense of such
Indemnifying Party) to assume the defense of any Litigation
resulting therefrom, provided that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such
Litigation shall be reasonably satisfactory to the Indemnified
Party and (ii) the Indemnified Party may participate in such
defense at such Indemnified Party's expense. Except with the prior
written consent of the Indemnified Party which consent shall not
be unreasonably withheld, no Indemnifying Party, in the defense of
any such Litigation, shall consent to entry of any judgment or
enter into any settlement that (i) does not provide for the
unconditional release of the Indemnified Party from all liability
or (ii) provides that the Indemnified Party is subject to any
contractual obligations following such settlement. The
Indemnifying Party and the Indemnified Party shall cooperate in
the defense of any Litigation subject to this Section 10.1 and the
records of each shall be available to the other with respect to
such defense and the Indemnifying Party's defense.
(d) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE
INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH
HEREIN, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION
HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF
WHETHER THE INDEMNIFIABLE LOSS GIVING RISE TO SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER
FAULT OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED PARTY. THE
PARTIES AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS
LEGEND.
10.2. Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement for a period of two years from the
Closing Date, provided, however, that the representations and warranties set
forth in (i) Section 4.1.25 (Taxes), 4.1.8 (Government Program Participation),
4.1.9 (Cost Reports), 4.1.10 (JCAHO Accreditation), 4.1.12 (Fraud and Abuse) and
4.1.13 (▇▇▇▇-▇▇▇▇▇▇ Loan) and 4.3.4 (Fraud and Abuse) hereof shall survive until
one year after the expiration of the statute of limitations applicable to legal
claims and causes of action arising from the matters referenced in such Section,
(ii) Sections 4.1.15 and 4.1.18 hereof (Title to Assets) shall survive
indefinitely and (iii) Section 4.1.22 (Employee Benefit Plans) shall survive for
a period of three years from the Closing Date.
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10.3. Limitations on Indemnification Provisions; Exclusive Remedy.
10.3.1. Limitation on Indemnification. No claim for
indemnification by Buyer or Seller against the other party hereto shall
be made unless: (i) each claim for Losses pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i), as the case may be, resulting from a single
inaccuracy or breach (or, if more than one claim for Losses are
substantially similar in nature and arise from the same facts or
circumstances, then the sum of such claims) is for Losses in an amount
equal to or in excess of $250,000 (the "Minimum Claim Amount"), and (ii)
the aggregate amount of claims pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i) that exceed the Minimum Claim Amount exceed
$2,500,000, at which time all claims pursuant to Section 10.1(a)(i),
10.1(a)(iv) or 10.1(b)(i), in excess of $2,500,000, including those used
to aggregate the floor of $2,500,000, shall be subject to indemnification
and recovery by the Indemnified Party to the extent herein provided.
Notwithstanding the foregoing, for purposes of determining whether any
breach or inaccuracy has occurred, all references to "Material Adverse
Effect" or other materiality qualifiers in Article III or Article IV, as
the case may be, shall be disregarded. No claim for indemnification
pursuant to Section 10.1(a)(i), 10.1(a)(iv) or 10.1(b)(i) shall be
effective unless such claim is made in writing and delivered to the
Indemnifying Party hereunder prior to expiration of the survival period
set forth in Section 10.2 hereof. The maximum amount of liability by
Seller and Buyer, for indemnification pursuant to Sections 10.1(a)(i),
and 10.1(b)(i) shall be an amount equal to 50% of the Transaction
Consideration. This Section 10.3.1 shall not apply to, and shall not
limit, any claim for indemnification under Section 5.4 hereof.
10.3.2. Waiver of Non-Compensatory Damages. No Indemnified Party
shall be entitled to recover from an Indemnifying Party for any losses,
costs, expenses, or damages as to which indemnification is provided under
this Agreement any amount in excess of the actual compensatory damages,
court costs and reasonable attorney's fees, suffered by such party; and
Buyer and Seller waive any right to recover punitive, special, exemplary
and consequential damages arising in connection with or with respect to
the indemnification provisions hereof.
10.3.3. Exclusive Remedy; Waiver and Release. The indemnifications
under this Article X shall be Buyer's and Seller's sole and exclusive
remedies, each against the other, with respect to matters arising under
this Agreement, of any kind or nature, or relating to the Business, the
ownership, operation, management, use or control of the Facilities. Buyer
and Seller hereby waive and release any other rights, remedies, causes of
action or claims that they have or that may arise against the other with
respect to matters arising under this Agreement, of any kind or nature,
or relating to the Business, the ownership, operation, management, use or
control of the Facilities.
ARTICLE XI.
MISCELLANEOUS
11.1. Expenses. Except as provided in Section 5.2.2, Seller, on the one
hand, and Buyer, on the other hand, shall bear their respective expenses, costs
and fees (including attorneys', auditors', investment bankers' or brokers and
financing commitment fees) in connection with the
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transaction contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith (the "Transaction Expenses"),
whether or not the transactions contemplated hereby shall be consummated,
provided, however, that Seller shall bear all transfer, sales or excise Taxes
arising out of the consummation of the transactions contemplated hereby, and
Buyer and Seller shall each bear 50% of (i) the costs in connection with a
dispute pursuant to Section 3.4(a)(ii) hereof, and (ii) costs to apply for and
obtain Consents of Governmental Authorities required in connection with
consummation of the transactions contemplated hereby (including under the HSR
Act).
11.2. Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
11.3. Notices. All notices, requests, demands, waivers and other
communication required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered personally,
(ii) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, (iii) sent by next-day or overnight mail or
delivery, or (iv) sent by telecopy or telegram.
(i) if to the Buyer to,
JLL Hospital, LLC
c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
1 ▇▇▇▇▇▇ Square
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Seller,
▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or, in each case, at such other address as may be specified in writing to the
other Parties hereto.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (w) if by personal delivery on the date of such
delivery, (x) if by certified or registered mail, on the seventh business day
after the mailing thereof, (y) if by next-day or overnight mail or delivery, on
the day delivered, (z) if by telecopy or telegram, on the day on which such
telecopy or telegram was sent, provided that a copy is also sent by certified or
registered mail.
11.4. Miscellaneous.
11.4.1. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
11.4.2. Entire Agreement. This Agreement (including the Schedules hereto)
and the Collateral Agreements (when executed and delivered) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
11.4.3. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
11.4.4. Governing Law, etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the conflict of laws
rules thereof.
11.4.5. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
11.4.6. Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
party hereto provided that (a) Buyer shall be permitted to assign its rights
hereunder to the lenders under its Credit Agreement or other financing source of
Buyer or its Subsidiaries or (b) Seller shall be permitted to assign its rights
hereunder to the lenders under the Senior Indebtedness.
11.4.7. No Third Party Beneficiaries. Except as provided in Section 10.1
with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall
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confer any rights upon any person or entity other than the parties hereto and
their respective heirs, successors and permitted assigns.
11.4.8. Amendment; Waivers, etc. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder.
11.4.9. Specific Performance. Each party hereto acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by such party and that any such breach would cause the other
parties hereto irreparable harm. Accordingly, each party hereto also agrees
that, in the event of any breach or threatened breach of the provisions of this
Agreement by such party, the other parties hereto shall be entitled to equitable
relief without the requirement of posting a bond or other security, including in
the form of injunctions and orders for specific performance.
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first above written.
PARENT: ▇▇▇▇▇▇▇▇▇▇ HEALTHCARE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Interim Chief Executive Officer
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and Chief Financial Officer
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PHC/CHC HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: President
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SELLER: PHC-SALT LAKE CITY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President and Chief
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Financial Officer
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▇▇▇▇▇▇▇▇▇▇ PIONEER VALLEY HOSPITAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President and Chief
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Financial Officer
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69
77
PHC-JORDAN VALLEY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President and Chief
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Financial Officer
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PIONEER VALLEY HEALTH PLAN, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President
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▇▇▇▇▇▇▇▇▇▇ PHC REGIONAL MEDICAL CENTER, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: President
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PHC UTAH, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President and Chief
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Financial Officer
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▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ HOSPITAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President and Chief
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Financial Officer
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70
78
PHC/PSYCHIATRIC HEALTHCARE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: President
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CLINICARE OF UTAH, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Title: President
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BUYER: JLL HOSPITAL, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Authorized Person
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71