EXHIBIT 10.2
BENEFITS AND EMPLOYMENT MATTERS
AGREEMENT
by and among
COLUMBIA/HCA HEALTHCARE CORPORATION,
and
TRIAD HOSPITALS, INC.
and
LIFEPOINT HOSPITALS, INC.
dated as of May 11, 1999
TABLE OF CONTENTS
Page No.
BENEFITS AND EMPLOYMENT MATTERS AGREEMENT............................ 1
RECITALS............................................................. 1
Article I. DEFINITIONS............................................... 1
Section 1.1 Definitions........................................... 1
Section 1.2 Other Terms........................................... 5
Section 1.3 Certain Constructions................................. 5
Section 1.4 Sections.............................................. 5
Section 1.5 Survival.............................................. 5
Article II. EMPLOYEE BENEFITS........................................ 6
Section 2.1 General............................................... 6
Section 2.2 Tax-Qualified Plans................................... 7
Section 2.3 Stock Option Plans.................................... 10
Section 2.4 Welfare Benefit Plans................................. 14
Section 2.5 Services to be Provided by Columbia/HCA and Mutuality. 16
Section 2.6 Preservation of Right To Amend or Terminate Plans..... 18
Section 2.7 Reimbursement......................................... 18
Section 2.8 Payroll Reporting and Withholding..................... 19
Article III. LABOR AND EMPLOYMENT MATTERS............................ 20
Section 3.1 Independent Employers................................. 20
Section 3.2 Employment Policies and Practices..................... 20
Section 3.3 Notice of Claims...................................... 20
Section 3.4 Assumption of Unemployment Tax Rates.................. 20
Section 3.5 No Third-Party Beneficiary Rights..................... 21
Article IV. DEFAULT.................................................. 21
Section 4.1 Default............................................... 21
Section 4.2 Force Majeure......................................... 21
Article V. MISCELLANEOUS............................................. 22
Section 5.1 Access Information; Cooperation...................... 22
Section 5.2 Assignment............................................ 22
Section 5.3 Headings.............................................. 22
Section 5.4 Attorney-Client Privilege............................. 22
Section 5.5 Severability.......................................... 22
Section 5.6 Parties Bound......................................... 22
Section 5.7 Notices............................................... 22
Section 5.8 Further Action........................................ 23
Section 5.9 Waiver................................................ 23
Section 5.10 Governing Law......................................... 24
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Section 5.11 Consent to Jurisdiction............................... 24
Section 5.12 Waiver of Jury Trial.................................. 24
Section 5.13 Entire Agreement...................................... 24
Section 5.14 Counterparts.......................................... 25
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BENEFITS AND EMPLOYMENT MATTERS AGREEMENT
THIS BENEFITS AND EMPLOYMENT MATTERS AGREEMENT (this "Agreement") is made
this 11th day of May 1999 by and among Columbia/HCA Healthcare Corporation, a
Delaware corporation ("Columbia/HCA"), Triad Hospitals, Inc., a Delaware
corporation and wholly owned subsidiary of Columbia/HCA ("Triad"), and LifePoint
Hospitals, Inc., a Delaware corporation and wholly owned subsidiary of
Columbia/HCA ("LifePoint") (each, singly, a "Party" and, collectively, the
"Parties"). Capitalized terms used in this Agreement are defined in Article I
and Section 2.3.
RECITALS
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WHEREAS, Columbia/HCA, directly and through its subsidiaries, owns and
operates health care facilities and related assets;
WHEREAS, the Board of Directors of Columbia/HCA has determined that it is
in the best interests of Columbia/HCA and its shareholders to distribute all of
the shares of Triad Stock and LifePoint Stock to the holders of Columbia/HCA
Stock (the "Distributions");
WHEREAS, in connection with the Distributions, Columbia/HCA, Triad and
LifePoint have set forth in a certain distribution agreement (the "Distribution
Agreement") the corporate transactions required to effect the Distributions and
the agreements that will govern certain matters following the Distributions; and
WHEREAS, as contemplated by the Distribution Agreement, Columbia/HCA, Triad
and LifePoint have agreed to enter into this agreement allocating
responsibilities with respect to employee compensation, benefits, labor, plan
administration and certain other employment matters pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
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shall have the meanings indicated below:
Affiliate: any entity required to be aggregated with Columbia/HCA,
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Triad or LifePoint, as appropriate, pursuant to Code sections 414(b), 414(c),
414(m) or 414(o).
COBRA: Code section 4980B and ERISA Sections 601 through 608,
-----
establishing employer requirements for continuation of health care benefits for
certain current and former employees or dependents thereof.
Code: the Internal Revenue Code of 1986, as amended, or any successor
----
legislation.
Columbia/HCA Defined Benefit Plan: any Defined Benefit Plan sponsored
---------------------------------
by a Subsidiary of Columbia/HCA prior to the Distribution Date.
Columbia/HCA Employee: any Employee of Columbia/HCA or an Affiliate
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thereof immediately prior to the Distributions, excluding Triad Employees and
LifePoint Employees.
Columbia/HCA Plans: the Columbia/HCA Retirement Plans and the
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Columbia/HCA Welfare Plans, collectively.
Columbia/HCA Retirement Plans: the Columbia/HCA Healthcare
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Corporation Money Purchase Pension, Stock Bonus and Salary Deferral Plans.
Columbia/HCA Stock: the Class A Common Stock, par value $.01 per
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share, of Columbia/HCA.
Columbia/HCA Terminee: any individual who (i) is no longer employed
---------------------
by Columbia/HCA or any Affiliate thereof immediately prior to the Distribution
Date and (ii) is not a LifePoint Terminee or a Triad Terminee.
Columbia/HCA Welfare Plans: the Columbia Medical Plan, the Columbia
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Dental Plan, the Columbia Flexible Benefits Plan, the Columbia Life, Accidental
Death & Dismemberment Plan, the Columbia Long-Term Disability Plan and the
Columbia Flexible Spending Account Plan.
Defined Benefit Plan: a tax-qualified retirement Plan (under Code
--------------------
section 401(a)) that is not a Defined Contribution Plan.
Defined Contribution Plan: a tax-qualified retirement Plan (under
-------------------------
Code section 401(a)) defined in Code section 414(i).
Distribution Date: the date on which the Distributions occur.
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Distribution Year: the calendar year which includes the Distribution
-----------------
Date.
Employee: with respect to any entity, an individual who is
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considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, layoff with rights of recall, and any other leave of absence or
similar interruption of active employment that is not considered, according to
the policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment).
EPIC Plan: the EPIC Healthcare Group, Inc. Profit Sharing Plan.
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ERISA: the Employee Retirement Income Security Act of 1974, as
-----
amended, or any successor legislation.
ESOP: an employee stock ownership plan, as defined in Code section
----
4975.
HMO: any health maintenance organization organized under 42 U.S.C.
---
(S) 300e-9, or a state health maintenance organization statute that provides
medical services for Columbia/HCA Employees, Triad Employees or LifePoint
Employees under any Plan.
HealthTrust Plan: the HealthTrust, Inc.--The Hospital Company 401(k)
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Retirement Program.
IRS: the Internal Revenue Service.
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LifePoint Business: any business conducted by LifePoint, or a
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LifePoint Subsidiary, on the Distribution Date.
LifePoint Employee: an Employee of LifePoint, or any direct or
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indirect Subsidiary of LifePoint that is an Affiliate thereof, on the
Distribution Date.
LifePoint Retirement Plan: a Defined Contribution Plan to be
-------------------------
established by LifePoint pursuant to Plan Spin-offs from the Columbia/HCA
Retirement Plans in accordance with Section 2.2(a).
LifePoint Stock: the Common Stock, par value $.01 per share, of
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LifePoint.
LifePoint Terminee: any individual who is no longer employed by
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Columbia/HCA or any Affiliate thereof immediately prior to the Distribution
Date, but who was employed by a LifePoint Business immediately prior to his
termination of employment from Columbia/HCA and its Affiliates.
LifePoint Welfare Plans: the Welfare Benefit Plans to be established
-----------------------
by LifePoint pursuant to Plan Spin-offs in accordance with Section 2.4(a).
Plan: any plan, policy, arrangement, contract or agreement providing
----
compensation or benefits for any group of Employees or former Employees or
individual Employee or former Employee, or the dependents or beneficiaries of
any such Employee or former Employee, whether formal or informal or written or
unwritten, and including, without limitation, any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
Employee or former Employee or the beneficiaries of any such Employee or former
Employee, adopted or entered into by a Party prior to, upon or after the
Distribution, regardless of whether such plan, policy, arrangement, contract or
agreement is governed by ERISA. The term "Plan" as used in this Agreement does
not include any contract, agreement or understanding entered into by
Columbia/HCA prior to the Distributions, or any contract, agreement or
understanding entered into by Columbia/HCA, Triad or LifePoint after the
Distributions, relating to settlement of actual or potential employee-related
litigation claims.
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Plan Spin-off: a procedure whereby accrued benefits and/or rights and
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elections of a particular group of participants or employees in a Plan are
transferred to a new Plan.
Qualified Beneficiary: an individual (or dependent thereof) who
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either (a) experiences (or has experienced) a "qualifying event" (as that term
is defined in Code section 4980B(f)(3) and ERISA Section 603) while a
participant in any medical, dental or flexible spending account plan, or (b)
becomes (or previously became) a "qualified beneficiary" (as that term is
defined in Code section 4980B(g)(1) and ERISA Section 607(3)) under any medical,
dental or flexible spending account plan, and who is included in any one of the
following categories:
(i) LifePoint Qualified Beneficiary: any LifePoint Employee or
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LifePoint Terminee (or dependent thereof) who, on the Distribution Date, is
a Qualified Beneficiary under any Columbia/HCA medical, dental or flexible
spending account plan; or
(ii) Columbia/HCA Qualified Beneficiary: any Columbia/HCA Employee
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or Columbia/HCA Terminee (or dependent thereof) who, on the Distribution
Date, is a Qualified Beneficiary under any Columbia/HCA medical, dental or
flexible spending account plan; or
(iii) Triad Qualified Beneficiary: any Triad Employee or Triad
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Terminee (or dependent thereof) who, on the Distribution Date, is a Qualified
Beneficiary under any Columbia/HCA medical, dental or flexible spending account
plan.
Service Credit: the period taken into account under any Plan in
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determining length of service or plan participation for purposes of eligibility,
exercisability, vesting, benefit accrual or similar requirements under such
Plan.
Small Defined Contribution Plan: any Defined Contribution Plan, other
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than the HealthTrust Plan and the EPIC Plan, sponsored by a Subsidiary of
Columbia/HCA prior to the Distribution Date.
Small Welfare Benefit Plans: any Welfare Benefit Plan sponsored by a
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Subsidiary of Columbia/HCA prior to the Distribution Date.
Spinco: either of Triad or LifePoint.
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Spinco Employee: an individual who is an Employee of LifePoint or
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Triad on the Distribution Date.
Spinco Retirement Plan: the LifePoint Retirement Plan or the Triad
----------------------
Retirement Plan (collectively, the Spinco Retirement Plans).
Spinco Welfare Benefit Plans or Spinco Welfare Plans: the LifePoint
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Welfare Plans and the Triad Welfare Plans, collectively.
Subsidiary: With respect to any entity, (i) any corporation in which
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such entity, directly or indirectly, owns or controls, at the time of
determination, at least a majority in interest
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of the outstanding voting stock (having by the terms thereof voting power under
ordinary circumstances to elect a majority of the directors of such corporation,
irrespective of whether or not stock of any other class or classes of such
corporation shall have or might have voting power by reason of the occurrence of
a contingency); or (ii) any non-corporate entity in which such entity either (a)
directly or indirectly, at the time of determination, has at least a majority
ownership interest, or (b) on the date of determination, is a general partner or
an entity performing similar functions (for example, manager of a limited
liability company or a trustee of a trust).
Triad Business: any business conducted by Triad, or a Triad
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Subsidiary, on the Distribution Date.
Triad Employee: an Employee of Triad, or any direct or indirect
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Subsidiary of Triad that is an Affiliate thereof, on the Distribution Date.
Triad Retirement Plan: a Defined Contribution Plan to be established
---------------------
by Triad pursuant to Plan Spin-offs from the Columbia/HCA Retirement Plans, in
accordance with Section 2.2(a).
Triad Stock: the Common Stock, par value $.01 per share, of Triad.
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Triad Terminee: any individual who is no longer employed by
--------------
Columbia/HCA or any Affiliate thereof immediately prior to the Distribution Date
but was employed by a Triad Business immediately prior to his termination of
employment from Columbia/HCA and its Affiliates.
Triad Welfare Plans: the Welfare Benefit Plans to be established by
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Triad pursuant to Plan Spin-offs in accordance with Section 2.4(a).
Welfare Benefit Plan or Welfare Plan: an employee welfare benefit
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plan or welfare plan, as defined in ERISA Section 3(1).
Section 1.2 Other Terms. Any capitalized terms used herein but not
-----------
defined herein shall have the meaning set forth in the Distribution Agreement.
Section 1.3 Certain Constructions. References to the singular in this
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Agreement shall refer to the plural and vice-versa and references to the
masculine shall refer to the feminine and vice-versa.
Section 1.4 Sections. References to a "Section" are, unless otherwise
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specified, to one of the Sections of this Agreement.
Section 1.5 Survival. Obligations described in this Agreement shall
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remain in full force and effect and shall survive the Distribution Date.
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ARTICLE II.
EMPLOYEE BENEFITS
Section 2.1 General.
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(a) Allocation of Responsibilities on the Distribution Date. Except
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to the extent retained or assumed by Columbia/HCA, as the case may be, under
this Agreement, on the Distribution Date (i) Triad or a Subsidiary thereof shall
retain or assume responsibility as employer for the Triad Employees, and (ii)
LifePoint or a Subsidiary thereof shall retain or assume responsibility as
employer for the LifePoint Employees. On the Distribution Date, Columbia/HCA or
a Subsidiary thereof shall retain or assume responsibility as employer for the
Columbia/HCA Employees, except to the extent such responsibility is retained or
assumed by Triad or LifePoint, as the case may be, under this Agreement. Except
to the extent provided in this Agreement, Columbia/HCA or a Subsidiary thereof
shall retain or assume liability with respect to LifePoint Terminees and Triad
Terminees. The assumption or retention of responsibility as employer by
Columbia/HCA, Triad or LifePoint, as the case may be, described in this Section
2.1 shall not, in itself, constitute a severance or a termination of employment
under any Plan of severance maintained by Columbia/HCA, nor shall it constitute
a change of control of Columbia/HCA for purposes of any Plan.
(b) Service Credits. Except to the extent provided in this
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Agreement, for purposes of determining service credit under any Plan, the
Parties shall credit each of their respective Employees with such Employee's
Service Credit as reflected for comparable purposes in the Columbia/HCA payroll
system records as of the Distribution Date (regardless of whether, or the
capacity in which, the individual is employed by any of the Parties on the
Distribution Date), subject to generally applicable break-in-service rules under
the provisions of the Columbia/HCA Plans (as to periods the individual is not
employed by any of the Parties or their Affiliates). In addition, service credit
shall be granted for tax-qualified plan purposes as provided in Section 2.2(k),
and for Welfare Plan purposes as provided in Section 2.4(g), subject to
generally applicable break-in-service rules under the provisions of the
Columbia/HCA Plans (as to periods the individual is not employed by any of the
Parties or their Affiliates).
(c) Correction of Employee Classification. Notwithstanding anything
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elsewhere in the Agreement, if at any time the Parties determine that any one or
more individuals were identified as Columbia/HCA Terminees in error and should
have been identified as Triad Terminees or LifePoint Terminees, and the Parties
agree to correct such error, such individuals shall be considered Triad
Terminees or LifePoint Terminees, as appropriate, and the parties shall use
their reasonable best efforts to implement the terms of this Agreement as they
apply to such individuals as if such individuals had been correctly identified
as of the Distribution Date.
(d) Employee Stock Purchase Plan. Columbia/HCA agrees to assist
----------------------------
Triad in developing an employee stock purchase plan that is similar to the
employee stock purchase plan provided by Columbia/HCA to its employees as has
been contemplated by Triad's benefits design parameters since the inception of
benefits planning for Triad by: (i) providing its plan document and supporting
written materials as models, (ii) assisting with designing enrollment
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procedures and (iii) consulting with Triad with respect to otherwise
establishing the employee stock purchase plan and its necessary relationships.
Section 2.2 Tax-Qualified Plans.
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(a) General. On or before the Distribution Date (as decided by
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Columbia/HCA in its sole discretion), each of Triad and LifePoint shall take, or
cause to be taken, all action specified by Columbia/HCA as necessary and
appropriate to establish a Triad Retirement Plan and a LifePoint Retirement Plan
and related trusts, respectively, that will accept plan-to-plan transfers,
following the Distribution Date, pursuant to Plan Spin-offs, as described in
Section 2.2(d), of participant account balances (and related assets) under the
Columbia/HCA Retirement Plans which are attributable to (1) Triad Employees and
Triad Terminees and (2) LifePoint Employees and LifePoint Terminees,
respectively, who are participants in the Columbia/HCA Retirement Plans
immediately prior to the Distribution Date. Such plans, being the Triad
Retirement Plan and the LifePoint Retirement Plan, respectively, may be combined
with the ESOPs described in Section 2.2(j).
(b) Columbia/HCA Retirement Plans. Except as provided in Section
-----------------------------
2.2(a), following the respective Plan Spin-offs, Columbia/HCA shall retain sole
responsibility for all liabilities and obligations under the Columbia/HCA
Retirement Plans, and Triad and LifePoint shall have no liability or obligation
with respect thereto.
(c) Spinco Retirement Plans. Subject to Section 2.6, Triad shall
-----------------------
provide benefits under the Triad Retirement Plan after the Plan Spin-offs
described in Section 2.2(a) for all Triad Employees and Triad Terminees (and
Employees of Triad admitted to participation in such Plan after the Plan Spin-
off), subject to the terms and provisions of such Plans as in effect from time
to time. Subject to Section 2.6, LifePoint shall provide benefits under the
LifePoint Retirement Plan after the Plan Spin-offs described in Section 2.2(a)
for all LifePoint Employees and LifePoint Terminees (and Employees of LifePoint
admitted to participation in such Plan after the Plan Spin-off), subject to the
terms and provisions of such Plans as in effect from time to time.
(d) Transfer of Account Balances. As soon as practicable following
----------------------------
the Distribution Date, Columbia/HCA shall cause the trustees of the Columbia/HCA
Retirement Plans to effect transfers, in kind, to the trustees of the Triad
Retirement Plan and the LifePoint Retirement Plan, respectively, of the assets
allocable to the accounts of (1) all Triad Employees and Triad Terminees and (2)
all LifePoint Employees and LifePoint Terminees, respectively, and appropriate
account balances for such individuals shall be established under the Triad
Retirement Plan and the LifePoint Retirement Plan, respectively. Each such
transfer shall comply with section 414(l) of the Code and the requirements of
ERISA and the regulations promulgated thereunder. Each of Triad and LifePoint
shall cause the trustees of the respective Spinco Retirement Plans to accept the
plan-to-plan transfers from the trustees of the respective Columbia/HCA
Retirement Plans, and to credit the accounts of such Triad Employees and Triad
Terminees, and LifePoint Employees and LifePoint Terminees, under the Triad
Retirement Plan and the LifePoint Retirement Plan, as appropriate, with the
assets transferred on their behalf. In addition, if any Columbia/HCA Employee
shall transfer employment to Triad or LifePoint
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within the Distribution Year, a transfer shall be made in the year 2000 from the
Columbia/HCA Retirement Plans to the appropriate Spinco Retirement Plan (in the
manner described in this Section 2.2(d)) of the assets allocable to the accounts
of such Columbia/HCA Employee. Upon the transfers of account balances in
accordance with this Section 2.2(d) to the appropriate Spinco Retirement Plan,
such Plan shall assume all liabilities with respect to the individuals for whom
accounts are transferred and the Columbia/HCA Retirement Plans shall have no
further liability with respect to such individuals. The potential buyback
liabilities of the Columbia/HCA Retirement Plans under Section 204(e) of ERISA
with respect to LifePoint Terminees and Triad Terminees whose non-vested accrued
benefits were forfeited upon an earlier distribution shall be transferred to the
LifePoint Retirement Plan and the Triad Retirement Plan, respectively. In
addition, accounts of Employees who work for both Columbia/HCA and a Spinco on
the Distribution Date may transfer to the respective Spinco Retirement Plan, as
provided in Section 2.2(k).
(e) Regulatory Filings. Columbia/HCA, Triad and LifePoint shall, in
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connection with the Plan Spin-offs described in Section 2.2(d), cooperate in
making any and all appropriate filings required by the Securities and Exchange
Commission or the IRS, or required under the Code or ERISA or any applicable
securities laws and the regulations thereunder, and take all such action as may
be necessary or appropriate to cause such plan-to-plan transfers to take place
as soon as practicable after the Distribution Date or as otherwise required by
law. Triad and LifePoint shall each seek (or Columbia/HCA shall seek, on their
behalf) a favorable IRS determination letter that the Triad Retirement Plan and
the LifePoint Retirement Plan, respectively, satisfy all qualification
requirements under section 401(a) of the Code. Notwithstanding the foregoing,
such plan-to-plan transfers shall take place pending issuance of such favorable
determination letters, but shall be subject to IRS approval. The Parties shall
each make any necessary amendments on a retroactive basis to the Triad
Retirement Plan, LifePoint Retirement Plan or Columbia/HCA Retirement Plans,
respectively, as required by the IRS to issue the favorable determination
letters described above.
(f) HealthTrust and EPIC Plans. The preceding provisions of this
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Section 2.2 shall also apply to the HealthTrust Plan and the EPIC Plan. However,
the assets which are disputed in the HealthTrust ▇. ▇▇▇▇▇ lawsuit shall not be
transferred to any Plans established by LifePoint or Triad, but rather shall
remain in the HealthTrust Plan (or any successor thereto), subject to its terms.
(g) Merger of Plans. Should any of the Columbia/HCA Retirement
---------------
Plans, the HealthTrust Plan or the EPIC Plan be merged together prior to the
Distribution Date, then the preceding provisions of this Section 2.2 shall apply
to such merged plan(s).
(h) Small Defined Contribution Plans. Spin-off Plans shall not be
--------------------------------
established with respect to any Small Defined Contribution Plans. Rather, the
Plan sponsor of each Small Defined Contribution Plan immediately before the
Distribution Date shall remain that respective Plan's sponsor immediately after
the Distribution Date. Thus, if a Small Defined Contribution Plan is maintained
by a Spinco or a Subsidiary thereof immediately before the Distribution Date,
then such Plan shall continue to be maintained by the Spinco or its Subsidiary
immediately after the Distribution Date.
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(i) Defined Benefit Plans. Spin-off Plans shall not be established
---------------------
with respect to any Columbia/HCA Defined Benefit Plan. Rather, the Plan sponsor
of each Columbia/HCA Defined Benefit Plan immediately before the Distribution
Date shall remain that respective Plan's sponsor immediately after the
Distribution Date. Thus, if a Defined Benefit Plan is maintained by a Spinco or
a Subsidiary thereof immediately before the Distribution Date, then such Plan
shall continue to be maintained by that Spinco or its Subsidiary immediately
after the Distribution Date.
(j) Spinco ESOPs. Prior to, contemporaneous with, or following the
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Distribution Date (as specified by Columbia/HCA), LifePoint and Triad shall each
adopt an ESOP. The terms of the respective ESOPs shall be subject to the review
and approval of Columbia/HCA. Subject to applicable law, LifePoint and Triad
shall take all steps necessary to cause the following to occur in connection
with their respective ESOPs:
(i) As promptly as practicable after the Distributions, the
LifePoint ESOP shall purchase, at fair market value, stock constituting
approximately 8.3% of the outstanding shares of LifePoint Stock; and as
promptly as practicable after the Distributions, the Triad ESOP shall
purchase, at fair market value, stock constituting approximately 9% of the
outstanding shares of Triad Stock.
(ii) Each purchase will be financed by (a) issuing a promissory note
to LifePoint in the case of the LifePoint ESOP or by issuing a promissory
note to Triad in the case of the Triad ESOP or (b) borrowing from a third
party lender (which loan will be guaranteed by LifePoint in the case of the
LifePoint ESOP or Triad in the case of the Triad ESOP). Such loans shall
provide for repayment in level annual (or more frequent) installments over
not more than a ten-year period. LifePoint and Triad shall make any
contribution commitments necessary in this connection.
Notwithstanding any provision of this agreement to the contrary and
consistent with Section 2.2(a), the ESOPs described in this Section may be part
of a tax-qualified plan which includes other features, including elective
deferrals and matching contributions.
(k) Pension Service Credit and 1999 Special Rules. The Parties shall
---------------------------------------------
amend their tax-qualified plans as provided in this Subsection, and shall
administer such Plans accordingly. Consistent with the terms of the Columbia/HCA
Plans, with respect to the accounts which transfer to the respective Spinco
Retirement Plans pursuant to Subsection (d) of this Section, Service Credit
shall be transferred for all years of service with Columbia/HCA and all
Columbia/HCA hours of service during 1999 performed prior to the transfer for
purposes of both participation and vesting. Subject to applicable law, each
Spinco shall grant compensation credit for compensation earned from Columbia/HCA
during 1999 prior to the Distribution Date. With respect to any individual who
is an Employee of any Party on the Distribution Date and who changes employers
to another Party during 1999 after the Distribution Date, Service Credit (i.e.,
----
hours of service) and compensation credit shall be granted by the new employer
under its tax-qualified retirement plans for purposes of eligibility, vesting
and benefit accrual for service performed for any prior employer Party during
1999. Any Spinco Employee who separates from service with Spinco during 1999
after the Distribution Date and is hired by Columbia/HCA during 1999 shall be
treated as a rehired Employee under the Columbia/HCA Plans, and all of
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his Service Credit under the Columbia/HCA Plans which is transferred to the
respective Spinco Retirement Plan pursuant to the second sentence of this
Subsection shall apply equally under the Columbia/HCA Plans. In addition, any
Spinco Employee who separates from service after the Distribution Date in 1999
and is hired by the other Spinco at any time during 1999 shall be treated as a
rehired Employee under the new employer's Spinco Retirement Plan, and all of his
Service Credit under the prior employer's tax-qualified plan shall apply equally
under the new employer's tax-qualified plan. With respect to any Employee who
works for both Columbia/HCA and a Spinco on the Distribution Date, the
Employee's accounts in the Columbia/HCA Plans shall be transferred only if the
Spinco is his primary employer (as determined by Columbia/HCA), and all Service
Credit under the Columbia/HCA Plans on the Distribution Date (including 1999
hours of service) and all compensation earned from Columbia/HCA in 1999 prior to
the Distribution Date shall apply equally to the Columbia/HCA Plans and the
Spinco Retirement Plan. Notwithstanding the foregoing provisions of this
Subsection, in no event shall any period of service (including hours of service)
or any compensation be counted more than once under any tax-qualified plan.
Section 2.3 Stock Option Plans.
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(a) Establishment of Spinco Option Plans.
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(i) Triad Option Plan. The Board of Directors of Columbia/HCA has
-----------------
taken all action necessary and appropriate to establish a new stock option
plan (the "Triad Option Plan") and the Compensation Committee has taken all
action necessary or appropriate to provide certain options on Triad Stock
("Triad Options") thereunder. Triad hereby assumes all liabilities and
obligations under the Triad Option Plan and under the Triad Options.
(ii) LifePoint Option Plan. The Board of Directors of Columbia/HCA
---------------------
has taken all action necessary and appropriate to establish a new stock
option plan (the "LifePoint Option Plan") and the Compensation Committee
has taken all action necessary or appropriate to provide certain options on
LifePoint Stock ("LifePoint Options") thereunder. LifePoint hereby assumes
all liabilities and obligations under the LifePoint Option Plan and under
the LifePoint Options.
(b) Columbia/HCA Option Plans. Effective as of the Distribution
-------------------------
Date, except with respect to stock options (or any portion thereof) replaced by
Triad Options or LifePoint Options as described in Section 2.3(c), Columbia/HCA
is to retain sole responsibility for all liabilities and obligations under the
Columbia/HCA Option Plans, and neither Triad nor LifePoint is to have any
liability or obligation with respect thereto.
(c) Adjustment and Replacement of Existing Columbia/HCA Options.
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(i) Vested Non-Qualified Options other than De Minimis Options.
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The treatment described in this paragraph (i) is to apply with respect to
each Columbia/HCA Non-Qualified Option that is a Vested Option that is not
De Minimis. Pursuant to action taken by the Compensation Committee, each
such option is to continue to cover the
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Original Number of Shares but the per share exercise price is to be
adjusted as described below. In addition, pursuant to action taken by the
Compensation Committee under the LifePoint Option Plan, each holder of such
an option is to be entitled to a LifePoint Option which covers a number of
shares of LifePoint Stock equal to the Original Number of Shares multiplied
by the LifePoint Share Multiple and which has a per share exercise price
calculated as described below. Pursuant to action taken by the Compensation
Committee under the Triad Option Plan, each such option holder is to also
be entitled to a Triad Option which covers a number of shares of Triad
Stock equal to the Original Number of Shares multiplied by the Triad Share
Multiple and which has a per share exercise price calculated as described
below. The per share exercise prices under the adjusted options described
above are to be equal to the per share exercise price of the original
Columbia/HCA Non-Qualified Option multiplied by (1) the LifePoint Ratio, in
the case of such LifePoint Option, (2) the Triad Ratio, in the case of such
Triad Option and (3) the Columbia/HCA Ratio, in the case of such Columbia
Option.
(ii) Vested Non-Qualified Options that are De Minimis Options.
--------------------------------------------------------
The treatment described in this paragraph (ii) is to apply with respect to
each Columbia/HCA Non-Qualified Option that is De Minimis. Pursuant to
action taken by the Compensation Committee, each such option shall be
adjusted so that (a) the per share exercise price shall equal the original
per share exercise price multiplied by the Columbia/HCA Ratio, and (b) the
number of shares of Columbia/HCA stock covered shall equal the Original
Number of Shares divided by the Columbia/HCA Ratio.
(iii) ISOs. The treatment described in this paragraph (iii) is to
----
apply to each Columbia/HCA ISO. Pursuant to action taken by the Compensation
Committee under the LifePoint Option Plan, each such Columbia/HCA Option that is
held by a LifePoint Employee, or by a LifePoint Terminee (or his estate), is to
be replaced by a LifePoint Option which (1) covers a number of shares of
LifePoint Stock equal to the Original Number of Shares divided by the LifePoint
Ratio and (2) has a per share exercise price equal to the original per share
exercise price multiplied by the LifePoint Ratio. Pursuant to action taken by
the Compensation Committee under the Triad Option Plan, each such option that is
held by a Triad Employee, or by a Triad Terminee (or his estate), is to be
replaced by a Triad Option which (1) covers a number of shares of Triad Stock
equal to the Original Number of Shares divided by the Triad Ratio and (2) has a
per share exercise price equal to the original per share exercise price
multiplied by the Triad Ratio. Pursuant to action taken by the Compensation
Committee, each such option that is not covered by the foregoing is to continue
as a Columbia/HCA Option but is to be adjusted so that (1) the per share
exercise price shall equal the original per share exercise price multiplied by
the Columbia/HCA Ratio and (2) the number of shares of Columbia/HCA Stock
covered shall equal the Original Number of Shares divided by the Columbia/HCA
Ratio. The substitution or adjustment provided for herein is to be made in
accordance with section 424 of the Code, so as not to result in a modification
of the option.
(iv) Rounding. In making the adjustments described in paragraphs
--------
(i), (ii) and (iii) above, any resulting per share exercise price which is
not equal to a whole multiple of a cent is to be rounded up to the next
whole cent and any resulting number of shares
11
covered by an option which is not equal to a whole multiple of a share is
to be rounded down to the next whole share.
(v) General Terms and Conditions. The terms and conditions of each
----------------------------
adjusted Columbia/HCA Option and/or substituted Triad Option or LifePoint
Option described in paragraphs (i), (ii) and (iii) hereof in respect of a
Columbia/HCA Option are to be substantially the same as those of the
applicable Columbia/HCA Option prior to such adjustment and/or
substitution, except as otherwise specifically described in this Section
2.3 and except that:
(1) Pursuant to action taken by the Compensation Committee, in the
case of any Triad Option or LifePoint Option described in
paragraphs (i), (ii) or (iii) hereof, any period of prior
employment with Columbia/HCA or a Subsidiary thereof is to be
credited as covered employment for purposes of determining the
vesting and exercisability of such option (to the same extent
such period was credited for such purposes under the related
original Columbia/HCA Option).
(2) Pursuant to action taken by the Compensation Committee, in the
case of any Triad Option or LifePoint Option that is described in
paragraph (i) or (ii) hereof, the optionee is to be considered to
be employed by the issuer of the option so long as he is employed
by Columbia/HCA, Triad or LifePoint (or a Subsidiary thereof),
for purposes of determining when the option will cease to be
exercisable on account of termination of employment. At such time
as the optionee ceases to be employed by Columbia/HCA, Triad or
LifePoint (or a Subsidiary thereof), such cessation of employment
shall be treated as though it were a cessation of employment with
the issuer under comparable circumstances .
(3) Pursuant to action taken by the Compensation Committee, in the
case of any Columbia/HCA Option that is described in paragraph
(i) or (ii) hereof, the optionee is to be considered to be
employed by Columbia/HCA so long as he is employed by Triad or
LifePoint (or a Subsidiary thereof), for purposes of determining
when the option will cease to be exercisable on account of
termination of employment, if he is employed by LifePoint or
Triad on the Distribution Date or transfers, at the request of
Columbia/HCA, to employment with LifePoint or Triad (or a
Subsidiary thereof) by the first anniversary of the Distribution
Date. At such time as the optionee ceases to be employed by Triad
or LifePoint (or a Subsidiary thereof), such cessation of
employment shall be treated as though it were a cessation of
employment with Columbia/HCA under comparable circumstances.
(vi) Directors' Options. The foregoing provisions of this
------------------
Section 2.3(c), as applied to Columbia/HCA Employees, are to be applied in
a comparable manner with respect to any Columbia/HCA Options held by a
member (or former member) of the Board of Directors of Columbia/HCA, except
that any reference to employment shall be deemed to mean service as a
member of such Board.
12
(vii) Discretionary LifePoint Options and Triad Options to
----------------------------------------------------
Columbia/HCA Executives. Pursuant to action taken by the Compensation
-----------------------
Committee, certain executives of Columbia/HCA have been granted
discretionary LifePoint Options and Triad Options. Under such options, the
optionee is to be considered to be employed by the issuer of the option for
all purposes so long as he is employed by Columbia/HCA, Triad or LifePoint
(or a Subsidiary thereof). At such time as the optionee ceases to be
employed by Columbia/HCA, Triad or LifePoint (or a Subsidiary thereof),
such cessation of employment shall be treated as though it were a cessation
of employment with the issuer under comparable circumstances.
(d) Definitions. For purposes hereof, the following definitions
-----------
shall apply:
(i) "Columbia/HCA ISO" shall mean any option outstanding under a
Columbia/HCA Option Plan on the Distribution Date that is intended to
qualify as an "Incentive Stock Option" under section 422 of the Code.
(ii) "Columbia/HCA Non-Qualified Option" shall mean any stock option
outstanding under a Columbia/HCA Option Plan on the Distribution Date that
is not a Columbia/HCA ISO. Any such option shall be considered a "Vested
Option" to the extent that it is exercisable on the date in question and
shall be considered a "Non-Vested Option" to the extent that it is not yet
exercisable on such date.
(iii) "Columbia/HCA Option" shall mean a Columbia/HCA ISO or
Columbia/HCA Non-Qualified Option, as the context shall indicate.
(iv) "Columbia/HCA Option Plan" shall mean any Plan maintained by
Columbia/HCA under which there are stock options outstanding on the
Distribution Date.
(v) "Columbia/HCA Ratio" shall mean a fraction whose numerator is
an amount equal to (1) the closing price of the Columbia/HCA Stock on the
trading date immediately preceding the Ex-Dividend Date minus (2) the
closing price of the LifePoint Stock on such trading date immediately
preceding the Ex-Dividend Date multiplied by the number of shares of
LifePoint Stock to be distributed per share of Columbia/HCA Stock on the
Distribution Date and minus (3) the closing price of the Triad Stock on
such trading date immediately preceding the Ex-Dividend Date multiplied by
the number of shares of Triad Stock to be distributed per share of
Columbia/HCA Stock on the Distribution Date, and whose denominator is the
closing price of the Columbia/HCA Stock on such trading date immediately
preceding the Ex-Dividend Date.
(vi) "Compensation Committee" shall mean the Compensation Committee
of the Board of Directors of Columbia/HCA, including the 162(m)
Compensation Sub-Committee.
(vii) "De Minimis" shall mean, as to any Columbia/HCA Option, an
option covering 1000 or fewer shares of Columbia/HCA Stock.
13
(viii) "Ex-Dividend Date" shall mean the first trading date on which
the Columbia/HCA stock shall trade on an ex-dividend basis with respect to
the distribution of the LifePoint and Triad stock.
(ix) "LifePoint Ratio" shall mean a fraction whose numerator is the
closing price of the LifePoint Stock on the trading date immediately
preceding the Ex-Dividend Date and whose denominator is the closing price
of the Columbia/HCA Stock on the trading date immediately preceding the Ex-
Dividend Date.
(x) "LifePoint Share Multiple" shall mean the number of shares of
LifePoint Stock to be distributed per share of Columbia/HCA Stock on the
Distribution Date.
(xi) "Original Number of Shares" shall mean, as to any Columbia/HCA
Option, the number of shares of Columbia/HCA Stock covered by such Option
immediately prior to the application of Section 2.3(c).
(xii) "Triad Ratio" shall mean a fraction whose numerator is the
closing price of the Triad Stock on the trading date immediately preceding
the Ex-Dividend Date and whose denominator is the closing price of the
Columbia/HCA Stock on the trading date immediately preceding the Ex-
Dividend Date.
(xiii) "Triad Share Multiple" shall mean the number of shares of Triad
Stock to be distributed per share of Columbia/HCA Stock on the Distribution
Date.
Section 2.4 Welfare Benefit Plans.
---------------------
(a) Spinco Welfare Benefit Plans. Prior to the Distribution Date
----------------------------
(in a time and manner specified by Columbia/HCA), LifePoint and Triad shall each
establish welfare benefit plans that mirror (i.e., are identical to) the
----
Columbia/HCA Welfare Plans. Pursuant to Plan Spin-offs, effective on the
Distribution Date, all LifePoint Employees and Triad Employees then
participating in the Columbia/HCA Welfare Plans shall cease to be participants
in such Plans, effective immediately prior to the Distributions, and shall
thereupon become participants in the LifePoint Welfare Plans and Triad Welfare
Plans, respectively. All claims experience (e.g., with respect to deductibles
----
and stop-loss limitations) under the Columbia/HCA Welfare Plans for the
Distribution Year shall be carried over to the appropriate Spinco Welfare
Benefit Plans, as if such claims experience had occurred under such Spinco
Welfare Benefit Plans for such year.
(b) Liability for Claims. Columbia/HCA shall be responsible for,
--------------------
or cause its applicable insurance carriers or HMOs to be responsible for, all
liabilities and obligations related to claims incurred or premiums owed or due
under any Columbia/HCA Welfare Plans with respect to periods prior to the
Distribution Date. Beginning on the Distribution Date, Triad and LifePoint shall
be responsible for, or cause their applicable insurance carriers or HMOs to be
responsible for, all liabilities and obligations related to claims incurred or
premiums owed or due under the Triad Welfare Plans and the LifePoint Welfare
Plans, respectively, for periods thereafter and Columbia/HCA shall have no
liability with respect thereto. For these purposes, (1) medical and dental
claims shall be considered to be incurred at the time the services are
performed; (2) death and dismemberment claims shall be deemed to be incurred on
the date that
14
death or dismemberment (as the case may be) occurs; and (3) disability claims
shall be considered to be incurred on the date the disability occurs.
(c) Continuation Coverage Administration. Columbia/HCA shall
------------------------------------
continue to be responsible after the Distribution Date for providing and
administering the continuation coverage required by COBRA as it relates to any
Columbia/HCA Qualified Beneficiary. On and after the Distribution Date,
LifePoint shall be responsible for providing and administering the continuation
coverage required by COBRA to any LifePoint Qualified Beneficiary, and Triad
shall be responsible for providing and administering the continuation coverage
required by COBRA to any Triad Qualified Beneficiary.
(d) Small Welfare Benefit Plans. The Plan sponsor of each Small
---------------------------
Welfare Benefit Plan shall remain that Plan's sponsor after the Distribution
Date. If a Small Welfare Benefit Plan is maintained by a Spinco or a Subsidiary
thereof before the Distribution Date, then such Plan shall continue to be
maintained by that Spinco or its Subsidiary after the Distribution Date.
(e) FSA Plan Coordination. The flexible spending account ("FSA")
---------------------
plans which are established by LifePoint and Triad pursuant to the Welfare
Benefit Plans that they establish under Section 2.4(a) and the cafeteria plans
established pursuant to Section 2.4(a) shall carry over all elections made under
the Columbia/HCA FSA Plan for the year of the Distributions. The remaining FSA
benefit amounts available to the respective participants for such year shall be
available under the FSA Plans established by LifePoint and Triad, respectively.
LifePoint and Triad shall each establish voluntary employee benefits
associations (VEBAs) to collect FSA premiums, pay FSA claims and pay medical and
dental self-insured benefits. The portions of any Columbia/HCA VEBA surplus in
existence on December 31, 1998 (adjusted to reflect investment returns,
administrative expenses and claims payment experience) attributable to LifePoint
Employees and Triad Employees, respectively, shall be transferred to the
LifePoint VEBA and the Triad VEBA, respectively, in 1999 or 2000. In addition,
any 1999 FSA premiums collected which exceed claims expenditures and
administrative expenses for benefits for 1999 claims prior to the Distribution
Date attributable to LifePoint Employees and Triad Employees, respectively,
shall be transferred to the respective LifePoint and Triad VEBAs in 1999 or
2000.
(f) HealthTrust Premium Holiday. Pursuant to an agreement with the
---------------------------
U.S. Department of Labor ("DOL"), a premium holiday was created in 1997 for
certain former HealthTrust employees. In the event that such holiday has not
expired prior to the Distribution Date, LifePoint and Triad each agree to
establish an identical holiday to that agreed upon by Columbia/HCA and the DOL
for the benefit of their respective former HealthTrust employees. Columbia/HCA
shall determine the portion of any remaining holiday amount as of the
Distribution Date attributable to LifePoint and Triad, respectively (and the
amount of any related funds, which shall be made available to LifePoint and
Triad for this purpose). However, in the event that the surplus in existence as
of the Distribution Date is de minimis, as agreed upon by the parties, then no
such holiday shall be created by Triad or LifePoint. In such case, the remaining
surplus shall be utilized by Columbia/HCA to benefit former HealthTrust
employees in accordance with the settlement agreement with the DOL.
15
(g) Special Rules for 1999. The Parties shall administer their
----------------------
Welfare Plans pursuant to this Subsection (g). With respect to any Employee who
separates from service with one Party after the Distribution Date in 1999, and
begins service with another Party on or prior to the earlier of ninety (90) days
after separation or December 31, 1999, all service with the prior Party shall
carry over for purposes of eligibility under the new employer's Welfare Plan(s).
Regardless of whether service carries over pursuant to the preceding sentence,
if the new employer is LifePoint or Triad, new elections will need to be made
with respect to all Welfare Plans of the new employer. However, if the new
employer is Columbia/HCA, then the elections made in 1998 (to apply to 1999)
shall apply. These rules shall also apply to any other fringe benefits which do
not qualify as Welfare Plan benefits such as vacation pay, extended illness
banks, etc.
Section 2.5 Services to be Provided by Columbia/HCA and Mutuality.
-----------------------------------------------------
(a) Services to be Rendered to Triad.
--------------------------------
(1) Pension. No administrative or investment services, whether
-------
ministerial or fiduciary in nature, shall be provided to Triad by Columbia/HCA
with respect to any pension plans of Triad on and after the Distribution Date.
All such services performed by Columbia/HCA shall cease on the Distribution
Date, and Triad shall supply all such services on and after the Distribution
Date, other than as provided herein. Notwithstanding the two preceding
sentences, in the event that services are performed or costs are incurred for
the MCA 401(k) Plan that are chargeable to the plan sponsor, and Triad Employees
participate in such Plan, then Triad shall pay its pro rata share of such costs,
with proration based on relative participant numbers. In the event any other
pension services are performed for Triad by Columbia/HCA at the request of
Triad, Triad shall pay Columbia/HCA $30.00 for each hour worked by any Employee
of Columbia/HCA. All charges not paid within thirty (30) days of written
request shall bear simple interest, at a rate of ten percent (10%) per annum.
Triad shall also reimburse any direct costs of vendors.
(2) Welfare. For the remainder of the Distribution Year (i.e., services
------- ----
to cease on December 31, 1999), Columbia/HCA and possibly its agents, as chosen
by Columbia/HCA, shall provide ministerial administrative services, but no
fiduciary services, to Triad with respect to the Triad Welfare Plans. For this
purpose, ministerial administrative services shall include all ministerial
services incident to administering, satisfying all reporting requirements with
respect to, and maintaining the Triad Welfare Plans. Triad shall provide
specific guidelines for Columbia/HCA to follow in performing ministerial
functions. Triad shall perform the fiduciary administrative and all investment
services incident to the Triad Welfare Plans. Triad shall indemnify and hold
harmless Columbia/HCA, its Employees, directors, officers and its agents with
respect to any and all liability, losses, claims, damages and expenses
(including, but not limited to, attorneys' fees) incurred in connection with
providing such services, even if functions which were designated ministerial are
determined to be fiduciary in nature, provided that Columbia/HCA and its agents
have acted, or failed to act, in good faith. Triad shall fully cooperate with
Columbia/HCA in its fulfillment of the provisions of this Section 2.5(a). All
services of Columbia/HCA shall cease on the last day of the Distribution Year.
In consideration for the services to be performed by Columbia/HCA, Triad shall
compensate Columbia/HCA beginning on the Distribution Date at a rate of $30.00
per hour worked by an employee of
16
Columbia/HCA. All charges not paid within thirty (30) days of written request
shall bear simple interest, at a rate of ten percent (10%) per annum. Triad
shall also reimburse any direct costs of vendors.
(3) General Indemnification. In the event of a finding that Welfare Plan
-----------------------
services have been performed for Triad after the last day of the Distribution
Year, or pension services have been performed for Triad after the Distribution
Date, and Columbia/HCA or any Employee, officer, director or agent thereof
incurs any liability or costs incident thereto, Triad shall indemnify and hold
harmless Columbia/HCA and any of its Employees, officers, directors or agents
with respect to any liabilities or costs incurred attributable to services
relating to Triad's plans, provided that Columbia/HCA and its Employees,
officers, directors or agents acted, or omitted to act, in good faith.
(b) Services to be Rendered to LifePoint.
------------------------------------
(1) Pension. No administrative or investment services, whether
-------
ministerial or fiduciary in nature, shall be provided to LifePoint by
Columbia/HCA with respect to any pension plans of LifePoint on and after the
Distribution Date. All such services performed by Columbia/HCA shall cease on
the Distribution Date, and LifePoint shall supply all such services on and after
the Distribution Date, other than as provided herein. Notwithstanding the two
preceding sentences, in the event that services are performed or costs are
incurred for the MCA 401(k) Plan that are chargeable to the plan sponsor, and
LifePoint Employees participate in such Plan, then LifePoint shall pay its pro
---
rata share of such costs, with proration based on relative participant numbers.
----
In the event any other pension services are performed for LifePoint by
Columbia/HCA at the request of LifePoint, LifePoint shall pay Columbia/HCA
$30.00 for each hour worked by any employee of Columbia/HCA. All charges not
paid within thirty (30) days of written request shall bear simple interest at a
rate of ten percent (10%) per annum. LifePoint shall also reimburse any direct
costs of vendors.
(2) Welfare. Subject to the following provisions of this paragraph,
-------
Columbia/HCA shall perform Welfare Benefit Plan services for LifePoint through
May 31, 1999 which are identical to the services to be performed for Triad
through the remainder of the Distribution Year pursuant to the provisions of
Section 2.5(a)(2). All terms and conditions relating to Triad with respect to
its Welfare Plan under Section 2.5(a)(2), including compensation (at the rate of
$30 per hour for any Columbia/HCA Employee providing services), shall apply to
LifePoint with respect to such services. In the event that such services shall
extend beyond May 31, 1999 or end prior thereto pursuant to a written agreement
between Columbia/HCA and LifePoint, then such Triad terms and conditions shall
apply for such longer or shorter period, as the case may be.
(3) General Indemnification. In the event of a finding that Welfare Plan
-----------------------
services have been performed for LifePoint beyond the time specified in Section
2.5(b)(2), or that pension services have been performed for LifePoint after the
Distribution Date, and Columbia/HCA or any Employee, officer, director or agent
thereof incurs any liability or costs incident thereto, LifePoint shall
indemnify and hold harmless Columbia/HCA and any of its Employees, officers,
directors or agents with respect to any liabilities or costs incurred
attributable to services relating to LifePoint's plans, provided that
Columbia/HCA and its Employees, officers, directors or agents acted, or omitted
to act, in good faith.
17
(c) Insurance and HMO Shopping. For the remainder of the Distribution
--------------------------
Year, LifePoint and Triad specifically agree that Columbia/HCA may negotiate
contracts with insurance companies, HMOs, third-party administrators and other
service providers that consider the employees of LifePoint and Triad, in
addition to the employees of Columbia/HCA, for purposes of negotiating to
receive the lowest rates or costs possible. LifePoint and Triad agree to fully
cooperate with Columbia/HCA in this regard. LifePoint and Triad agree to
utilize whatever providers are chosen by Columbia/HCA for the Distribution Year,
regardless of whether Columbia/HCA is or is not successful in achieving group
rates that consider Columbia/HCA, Triad and/or LifePoint Employees.
Notwithstanding the preceding sentence, LifePoint or Triad may terminate any
provider with the prior written consent of Columbia/HCA.
(d) Preferred Provider Mutuality. For the remainder of the
----------------------------
Distribution Year, Columbia/HCA, LifePoint and Triad shall treat each facility
maintained by Columbia/HCA, LifePoint or Triad as their own facility for the
entire Distribution Year for purposes of managed care discounts, preferred
provider discounts and any similar discounts or cost reductions available to
participants under their respective welfare benefit plans.
(e) Spinco Welfare Plans for the Distribution Year. As a condition
----------------------------------------------
of the arrangement, Triad and LifePoint agree that the Spinco Welfare Plans
shall continue to be maintained by Triad and LifePoint, respectively, for the
remainder of the Distribution Year. Triad and LifePoint agree that they shall
not amend the Spinco Welfare plans without the prior written consent of
Columbia/HCA for the remainder of such year. At the request of Columbia/HCA,
Triad and LifePoint shall amend such Spinco Welfare Plans as necessary for such
Plans to be identical to the Columbia/HCA Welfare Plans with respect to the
Distribution Year. In the event of a failure of LifePoint and/or Triad to
comply with any of the preceding sentences of this subsection, Columbia/HCA
shall be authorized to take whatever action it deems appropriate under the
circumstances, including cessation of services, and the party failing to comply
shall pay Columbia/HCA all costs it or its agents incurs as a result of such
failure to comply.
Section 2.6 Preservation of Right To Amend or Terminate Plans. Except
-------------------------------------------------
as otherwise expressly provided herein, no provisions of this Agreement shall be
construed as a limitation on the right of Columbia/HCA, Triad or LifePoint to
amend any Plan or terminate its participation therein which Columbia/HCA, Triad
or LifePoint would otherwise have under the terms of such Plan or otherwise;
provided, however, that no Party shall amend any Plan to the extent that such
-------- -------
amendment would have the effect of increasing the liabilities of any other Party
under any Plan of such other Party, without such Party's written consent. No
provision of this Agreement shall be construed to create a right in any Employee
or former Employee of Columbia/HCA, Triad or LifePoint or dependent or
beneficiary of such Employee or former Employee under a Plan which such person
would not otherwise have under the terms of the Plan itself.
Section 2.7 Reimbursement. The Parties acknowledge that any Party may
-------------
mistakenly incur costs and expenses directly related to benefits, including, but
not limited to, contributions to Plans and the payment of insurance premiums
arising from or related to any of the Plans which are, under this Agreement, the
responsibility of another Party hereto.
18
Accordingly, each Party shall reimburse any applicable other Party, as soon as
practicable, but in any event within thirty (30) days of receipt of appropriate
verification, for all such costs and expenses. However, there will be no
reimbursement by Columbia/HCA to either Spinco with respect to contributions for
1999 under the Spinco Retirement Plans. Subject to Section 2.5, beginning on the
Distribution Date, all parties shall bear and be responsible for their
respective plan establishment and administrative expenses.
Section 2.8 Payroll Reporting and Withholding.
---------------------------------
(a) Form W-2 Reporting. The Parties hereby agree, to the extent
------------------
applicable, to each adopt the "alternative procedure" for preparing and filing
IRS Forms W-2 (Wage and Tax Statements), as described in section 5 of Revenue
Procedure 96-60, 1996-2 IRS Cumulative Bulletin 399 ("Rev. Proc. 96-60"). Under
this procedure, each of Triad and LifePoint, as a successor employer, shall
provide all required forms W-2 to Triad Employees and LifePoint Employees,
respectively, reflecting all wages paid and taxes withheld by both Columbia/HCA
as the predecessor employer and Triad or LifePoint (as applicable) as the
successor employer for the entire year during which the Distribution takes
place. Columbia/HCA shall provide all required Forms W-2 to all Columbia/HCA
Employees reflecting all wages and taxes paid and withheld by Columbia/HCA.
In connection with the aforesaid agreement under Rev. Proc. 96-60,
each business unit or business operation of Columbia/HCA shall be assigned to
either Columbia/HCA, Triad or LifePoint, depending upon whether it is a business
retained by Columbia/HCA following the Distributions, a Triad Business or a
LifePoint Business, and each Columbia/HCA Employee, Triad Employee or LifePoint
Employee associated with such business unit or business operation shall be
assigned for payroll reporting purposes to Columbia/HCA, Triad or LifePoint, as
the case may be. Each of Columbia/HCA, Triad or LifePoint shall be responsible
for filing IRS Forms 941 and all other payroll returns for their respective
Employees.
(b) Forms W-4 and W-5. The Parties agree, to the extent applicable,
-----------------
to each adopt the alternative procedure of Rev. Proc. 96-60 with respect to IRS
Forms W-4 (Employee's Withholding Allowance Certificate) and W-5 (Earned Income
Credit Advance Payment Certificate). Under this procedure, Columbia/HCA shall
provide to Triad or LifePoint, as the respective successor employers, all IRS
Forms W-4 and W-5 on file with respect to each Triad Employee or LifePoint
Employee, and each of Triad and LifePoint will honor these forms until such
time, if any, as any such Triad Employee or LifePoint Employee, as the case may
be, submits a revised form.
(c) Garnishments, Tax Levies, Child Support Orders, and Wage
--------------------------------------------------------
Assignments. With respect to Employees with garnishments, tax levies, child
-----------
support orders, and wage assignments in effect with Columbia/HCA on the
Distribution Date, each of Triad and LifePoint as the successor employers with
respect to Triad Employees or LifePoint Employees, respectively, shall honor
such payroll deduction authorizations and shall continue to make payroll
deductions and payments to the authorized payee, as specified by the court or
governmental order which was filed with Columbia/HCA.
19
(d) Authorizations for Payroll Deductions. Unless otherwise
-------------------------------------
prohibited by this or another agreement entered into in connection with the
Distributions, or by a Plan document, with respect to Triad Employees or
LifePoint Employees with authorizations for payroll deductions in effect with
Columbia/HCA on the Distribution Date, Triad and LifePoint as the respective
successor employers will honor such payroll deduction authorizations relating to
each such Triad Employee or LifePoint Employee, respectively, and shall not
require that such Triad Employee or LifePoint Employee, as the case may be,
submit a new authorization to the extent that the type of deduction by Triad and
LifePoint does not differ from that made by Columbia/HCA. The Triad Retirement
Plan and the LifePoint Retirement Plan shall, respectively, provide that any
elective deferral or other elections under the Columbia/HCA Retirement Plans in
existence immediately prior to the Distribution Date shall carry over to the
Spinco Retirement Plans upon the Distribution Date. All elections under any
Columbia/HCA Welfare Plans shall similarly carry over to the Spinco Welfare
Benefit Plans.
(e) Subsidiaries. With respect to individuals who are employed after
------------
the Distribution Date by a Subsidiary of Triad or LifePoint, all references in
this Section 2.8 to Triad or LifePoint shall be deemed to refer to the
appropriate Subsidiaries thereof, and Triad and LifePoint, respectively, shall
take such actions as are necessary to assure that the appropriate Subsidiary
thereof takes any actions required hereunder.
ARTICLE III.
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
Agreement between Columbia/HCA and Triad or LifePoint to the contrary,
Columbia/HCA, Triad and LifePoint understand and agree to the matters provided
for in this Article:
Section 3.1 Independent Employers. On and after the Distribution Date,
----------------------
each of Columbia/HCA, Triad and LifePoint will be separate and independent
employers.
Section 3.2 Employment Policies and Practices. Except as limited by
---------------------------------
applicable law (including, without limitation, ERISA) or as otherwise provided
in this Agreement, each of Columbia/HCA, Triad and LifePoint may adopt,
continue, modify or terminate such employment policies, compensation practices,
retirement plans, welfare benefit plans, and other employee benefit plans of any
kind or description, as each may determine, in its sole discretion, are
necessary and/or appropriate.
Section 3.3 Notice of Claims. Each Party will notify in writing and
----------------
consult with any other applicable Party prior to making any settlement of an
employee claim which may reasonably result in liability to such other Party.
Section 3.4 Assumption of Unemployment Tax Rates. Changes in state
------------------------------------
unemployment tax experience from that of Columbia/HCA as of the Distribution
Date shall be handled as follows. In the event an option exists to allocate
state unemployment tax experience of Columbia/HCA, the Columbia/HCA experience
shall be transferred to Triad or LifePoint, if this results in the lowest
aggregate unemployment tax costs for each of Columbia/HCA and
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Triad or LifePoint, as the case may be, combined, and the Columbia/HCA
experience shall be retained by Columbia/HCA if this results in the lowest
aggregate unemployment tax costs for each of Columbia/HCA and Triad or
LifePoint, as the case may be, combined.
Section 3.5 No Third-Party Beneficiary Rights.
---------------------------------
(a) This Agreement is not intended to, nor does it, create any third-
party contractual or other common law rights. No person (including any Employee,
any beneficiary or dependent thereof) shall be deemed a third-party beneficiary
of this Agreement.
(b) Nothing contained in this Agreement shall confer upon any
Employee any right with respect to continuance of employment by any Party, nor
shall anything herein interfere with the right of any Party to terminate the
employment of any Employee at any time, with or without cause, or restrict any
Party in the exercise of its independent business judgment in modifying any of
the terms and conditions of the employment of an Employee, except as provided by
applicable law.
ARTICLE IV.
DEFAULT
Section 4.1 Default. If any Party or Parties defaults hereunder, the
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non-defaulting Party or Parties shall be entitled to all remedies provided by
law or equity (including reasonable attorneys' fees and costs of suit incurred),
and shall be entitled to recover all legal and other costs incurred in pursuing
the defaulting Party at law or otherwise .
Section 4.2 Force Majeure. Columbia/HCA shall not be liable to
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LifePoint or Triad, as appropriate, for a delay or failure to comply with the
terms of this Agreement if such delay or failure results from causes beyond its
reasonable control. Such causes may include, without limitation, acts of God,
fires or other catastrophes, telecommunication failures, equipment failures,
power failures, labor disputes, strikes, delays in transportation, riots, war,
governmental regulations, non-performance by Columbia/HCA suppliers and vendors,
or problems experienced by Columbia/HCA as a result of its own or any third
party's computer software or hardware not being Year 2000 compliant (an "Event
of Force Majeure"). Columbia/HCA shall give LifePoint or Triad, as appropriate,
prompt notice of any Event of Force Majeure that may cause delay or non-
performance hereunder. For so long as such Event of Force Majeure shall
continue, LifePoint or Triad, as appropriate, may elect to have the services
affected by the Event of Force Majeure performed by other means without such
election being deemed to be a termination or breach of this Agreement, provided
--------
that LifePoint or Triad, as appropriate, provides prompt notice of such election
to Columbia/HCA after having received notice of the Event of Force Majeure.
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ARTICLE V.
MISCELLANEOUS
Section 5.1 Access Information; Cooperation. LifePoint and Triad shall
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maintain all Employee and participant records and data (including records and
data relating to any Plans of Columbia/HCA) for a period of ten (10) years
following the Closing Date. The Parties and their authorized agents shall be
given reasonable access to and may take copies of all information relating to
the subjects of this Agreement or any other employment or employee benefit
matters (to the extent permitted by federal and state confidentiality laws) in
the custody of any other Party, including any agent, contractor, subcontractor,
or any other person or entity under the contract of such Party. The Parties
shall provide one another with such information as is reasonably necessary to
administer each Party's Plans. The Parties shall cooperate with each other to
minimize the disruption caused by any such access and providing of information.
The Parties shall cooperate with each other with respect to Plan administrative
matters for 1999 and thereafter.
Section 5.2 Assignment. No Party shall, without the prior written
----------
consent of the other, have the right to assign any rights or delegate any
obligations under this Agreement.
Section 5.3 Headings. The section headings contained in this Agreement
--------
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
Section 5.4 Attorney-Client Privilege. Any provisions herein requiring
-------------------------
the Parties to this Agreement to cooperate shall not be deemed to be a waiver of
the attorney-client privilege for any Party nor shall it require any Party to
waive its attorney-client privilege.
Section 5.5 Severability. In the event that any provision hereof is
------------
prohibited or unenforceable in any jurisdiction, such provision shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 5.6 Parties Bound. This Agreement shall inure to the benefit of
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and be binding upon the Parties hereto and their respective successors and
permitted assigns. Nothing herein, expressed or implied, shall be construed to
give any other person any legal or equitable rights hereunder.
Section 5.7 Notices. All notices or other communications required or
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permitted under this Agreement shall be in writing and sufficient if sent by
registered or certified mail, postage prepaid, addressed as provided below; or
delivered personally, by private courier or fax, and followed by such mailing:
22
If to Columbia/HCA, to
Columbia/HCA Healthcare Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Senior Vice President and General Counsel
If to LifePoint, to
LifePoint Hospitals, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. Mercy
Chairman and Chief Executive Officer
If to Triad, to
Triad Hospitals, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
In each case, with a copy to
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Any Party may change the person and address to which notices or other
communications are to be sent to it by giving written notice of any such change
in the manner provided herein.
Section 5.8 Further Action. The Parties shall cooperate in good faith
--------------
and take such steps and execute such papers as may be reasonably requested by
another Party to implement the terms and provisions of this Agreement
Section 5.9 Waiver. The Parties agree that the waiver of any default
------
under any term or condition of this Agreement shall not constitute a waiver of
any subsequent default or nullify the effectiveness of that term or condition.
23
Section 5.10 Governing Law. This Agreement shall be deemed to be made
-------------
in and in all respects shall be interpreted, construed and governed by and in
accordance with the law of the State of Tennessee without regard to the conflict
of law principles thereof.
Section 5.11 Consent to Jurisdiction. Columbia/HCA, LifePoint and Triad
-----------------------
each hereby expressly (a) submits and consents in advance to the jurisdiction of
any Tennessee State Court sitting in Nashville, Tennessee or in the United
States District Court for the Middle District of Tennessee with respect to any
actions or proceedings arising out of or relating to this Agreement, (b) waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens, (c) agrees that all claims with respect
to such actions or proceedings may be heard and determined in any Tennessee
State Court sitting in Nashville, Tennessee or the United States District Court
for the Middle District of Tennessee, (d) agrees not to commence any action or
proceeding relating to this Agreement other than in a Tennessee State Court
sitting in Nashville, Tennessee or in the United States District Court for the
Middle District of Tennessee and (e) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Section 5.12 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND
--------------------
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) EACH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 5.12.
Section 5.13 Entire Agreement. This Agreement and the Distribution
----------------
Agreement constitute the entire understanding between the Parties hereto with
respect to the subject matter hereof, and supersede all prior written or oral
communications relating to such subject matter. No amendment, modification,
extension or failure to enforce any condition of this Agreement by any Party
shall be deemed a waiver of any of its rights herein. This Agreement shall not
be amended except by a writing executed by the Parties. In the event a matter
arises relating to employee benefits which is not covered by this Agreement, the
parties shall act in good faith to resolve such matter to correspond to the
intents and purposes of this Agreement to the fullest extent possible.
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Section 5.14 Counterparts. This Agreement may be executed in any number
------------
of separate counterparts, each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇.
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇.
Title: Vice President of Tax
TRIAD HOSPITALS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Title: Executive Vice President, General
Counsel and Secretary
LIFEPOINT HOSPITALS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ III
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ III
Title: Senior Vice President, General
Counsel and Secretary
26