EXHIBIT 10.3
ASSET SALE AND PURCHASE AGREEMENT
Between
PERMANENTE MEDICAL ASSOCIATION OF TEXAS,
A TEXAS PROFESSIONAL ASSOCIATION
("SELLER")
AND
HMO TEXAS, L.C.
A TEXAS LIMITED LIABILITY COMPANY
("BUYER")
June 5, 1998
TABLE OF CONTENTS
1. SALE OF ASSETS...........................................................................................1
1.1. Sale and Purchase of Assets.....................................................................1
1.2. Excluded Assets.................................................................................2
1.3. Liabilities.....................................................................................2
1.3.1 Assumed Liabilities...........................................................2
1.3.2 Liabilities Not to be Assumed.................................................2
1.3.3 Property Taxes................................................................3
1.3.4 Transfer Taxes; Recording Fees................................................3
1.4. Purchase Price..................................................................................3
1.4.1 Purchase Price. ...............................................................3
1.4.2 Allocation....................................................................3
1.5. Closing.........................................................................................3
1.6. Actions to be Taken at Closing..................................................................3
1.6.1. Buyer's Deliveries............................................................4
1.6.2. Seller's Deliveries...........................................................4
1.6.3 Third Party Consents..........................................................6
2. REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................6
2.1. Representations and Warranties of Seller........................................................6
2.1.1. Organization and Good Standing................................................6
2.1.2. Seller's Authority and No Breach..............................................6
2.1.3. No Violations.................................................................7
2.1.4. Litigation....................................................................7
2.1.5. Seller's Financial Statements.................................................7
2.1.6. No Brokers or Finders.........................................................7
2.1.7. Compliance with Applicable Laws...............................................8
2.1.8. No Consents...................................................................8
2.1.9. Material Contracts............................................................8
2.1.10.Title to and Condition of Properties and Assets. ..............................8
▇.▇.▇▇.▇▇ Untrue Representation or Warranty............................................9
2.2. Representations and Warranties True and Correct at Closing; Breaches............................9
3. REPRESENTATIONS AND WARRANTIES OF BUYER..................................................................9
3.1. Representations and Warranties of Buyer.........................................................9
3.1.1. Organization and Good Standing................................................9
3.1.2. Buyer's Authority and No Breach...............................................9
3.1.3. No Brokers or Finders........................................................10
3.1.4. Buyer's Consents.............................................................10
3.1.5. No Untrue Representation or Warranty.........................................10
3.2. Representations and Warranties True and Correct at Closing; Breaches...........................10
4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................................10
5. BUYER'S CONDITIONS PRECEDENT TO CLOSING.................................................................11
5.1. Agreements.....................................................................................11
5.2. Corporate Resolutions..........................................................................11
5.3. Seller's Representations and Warranties........................................................11
5.4. Litigation.....................................................................................11
5.5. Certain Covenants..............................................................................11
6. SELLER'S CONDITIONS PRECEDENT TO CLOSING................................................................11
6.1. Agreements.....................................................................................12
6.2. Corporate Resolutions..........................................................................12
6.3. Litigation.....................................................................................12
6.4. Buyer's Representations and Warranties True and Correct........................................12
7. JOINT CONDITIONS PRECEDENT TO CLOSING...................................................................12
7.1. Governmental Consents, and Approvals, and Licenses.............................................12
7.2. Termination of PMAT/KFHPTx Contract............................................................12
7.3. Closing of Transactions Under Related Agreements...............................................13
8. ADDITIONAL AGREEMENTS OF SELLER.........................................................................13
8.1. Conduct of Business Pending Closing............................................................13
8.2. Access to Documents and Premises...............................................................13
8.2.1. Inspection of Books and Records..............................................14
8.2.2. Request for Access...........................................................14
8.3. Breach by Seller...............................................................................14
9. ADDITIONAL AGREEMENTS OF BUYER..........................................................................14
9.1. Formation of New P.A...........................................................................14
9.2. Maintenance of Records.........................................................................14
10. ADDITIONAL AGREEMENTS OF BUYER AND SELLER...............................................................15
10.1. Regulatory Milestones Prior to Closing.........................................................15
10.2. Employment Matters.............................................................................15
10.2.1. Severance Payments...........................................................15
10.2.2. WARN, COBRA and HIPAA Notices................................................16
10.2.3. Healthcare Coverage for Terminated Employees.................................16
10.3. Cooperation....................................................................................17
10.4. Health Care Coverage for Certain Unitholders...................................................17
11. INDEMNIFICATION.........................................................................................17
11.1. Indemnification by Seller......................................................................17
11.2. Indemnification by Buyer.......................................................................18
11.3. Limitations....................................................................................18
11.3.1. Minimum......................................................................18
11.3.2. Maximum......................................................................19
11.4. Notice and Right to Defend.....................................................................19
11.5. Exclusive Remedy...............................................................................19
11.6. Failure to Provide Records Cooperation.........................................................20
12. TERMINATION.............................................................................................20
12.1. Termination....................................................................................20
12.2. Liability for Termination.............................................................20
13. ARBITRATION.............................................................................................20
13.1. Conciliation and Mediation.....................................................................20
13.2. Arbitration....................................................................................21
13.3. Equitable Relief...............................................................................21
14. MISCELLANEOUS...........................................................................................22
14.1. Notices........................................................................................22
14.2. Confidentiality................................................................................22
14.3. Waiver.........................................................................................23
14.4. Counterparts...................................................................................23
14.5. Headings.......................................................................................23
14.6. Severability...................................................................................23
14.7. Entire Agreement...............................................................................24
14.8. Successors and Assigns.........................................................................24
14.9. Governing Law..................................................................................24
14.10. Cost of Transaction.............................................................................24
14.11. Further Assurances..............................................................................24
14.12. Construction....................................................................................25
14.13. Third Parties...................................................................................25
14.14. Time is of the Essence..........................................................................25
LIST OF EXHIBITS
Exhibit 1.1 Assets
Exhibit 1.2 Excluded Assets
Exhibit 1.6.1(b) ▇▇▇▇ of Sale, Assignment and Assumption Agreement
Exhibit 13.2 Exceptions to AAA Arbitration Rules
LIST OF DEFINITIONS
"Agreement" can be found on page 1 "Applicant" can be found in Section 10.2.1(c)
"Assets" can be found in Section 1.1 "Assumed Liabilities" can be found in
Section 1.3.1 "Board of Arbitration" can be found in Section 13.2 "Buyer" can be
found on page 1 "Closing" can be found in Section 1.5 "Closing Date" can be
found in Section 1.5 "COBRA" can be found in Section 10.2.2 "Code" can be found
in Section 1.4.2 "Confidential Information" can be found in Section 14.2
"Excluded Assets" can be found in Section 1.2 "Excluded Liabilities" can be
found in Section 1.3.2 "Execution Date" can be found on page 1 "Governmental
Entity" can be found in Section 2.1.6 "HIPAA" can be found in Section 10.2.2
"KFHPTx" can be found in Recital C "Loss" or "Losses" can be found Section 11.1
"Material Adverse Effect" re Buyer can be found in Section 3 "Material Adverse
Effect" re Seller can be found in Section 2 "Medical Services Contract" can be
found in Recital G "New P.A." can be found in Recital E "Property Taxes" can be
found in Section 1.3.3 "Purchase Agreement" can be found in Recital C "Purchase
Price" can be found in Section 1.4 "Related Agreements" can be found in Section
7.3 "Seller" can be found on page 1 "Severance Payments" can be found in Section
10.2.1(b) "Subsidy Agreement" can be found in Section 1.3.2(f) "Terminated
Employees" can be found in Section 10.2.1(a) "Violation" can be found in Section
2.1.3 "WARN" can be found in Section 10.2.2
ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT ("Agreement") is made and entered
into as of this ________ day of June, 1998 ("Execution Date"), by and between
HMO Texas, L.C., a Texas limited liability company ("Buyer"), and Permanente
Medical Association of Texas, a Texas professional association ("Seller").
RECITALS:
A. Each member of Seller is a doctor of medicine, osteopathy or podiatry
duly licensed under the laws of the State of Texas.
B. The purposes for which Seller was formed include the practice of
medicine and surgery and the provisions of medical services of all types within
the State of Texas.
C. Buyer has entered into an "Asset Sale and Purchase Agreement" with
▇▇▇▇▇▇ Foundation Health Plan of Texas ("KFHPTx") dated of even date with this
Agreement (the "Purchase Agreement") whereby Buyer will acquire assets from
KFHPTx as set forth in the Purchase Agreement for the purpose of operating the
"Business" as defined in the Purchase Agreement.
D. In connection with the consummation of the Purchase Agreement, Seller
desires to sell, assign, and deliver to Buyer, and Buyer desires to purchase
from Seller certain assets as set forth in this Agreement.
E. Buyer will cause the creation of a Texas professional association ("New
P.A.").
F. Some of the assets acquired by Buyer from KFHPTx under the Purchase
Agreement and from Seller under this Agreement will be contributed to New P.A.
effective the "Closing Date", as hereinafter defined.
G. Buyer and New P.A. will enter into a medical services agreement
substantially similar to the form attached as Exhibit 7.1 to the Purchase
Agreement (the "Medical Services Contract") effective the Closing Date.
NOW, THEREFORE, for and in consideration of the above recitals and the
representations, warranties, mutual covenants, and agreements herein expressed,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby expressly acknowledged, the parties hereby agree as follows:
1. SALE OF ASSETS.
1.1. Sale and Purchase of Assets.
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On the basis of the representations and warranties and subject to the terms
and conditions set forth in this Agreement, Seller hereby agrees to sell and
assign to Buyer, and Buyer hereby agrees to purchase, and to accept or to cause
acceptance of assignment of, for payment of the Purchase Price specified in
Section 1.4, on the Closing Date referred to in Section 1.5, all of the assets
of every kind and description that are owned and used by Seller in the operation
of its business ("ASSETS"), including without limitation the assets set forth
specifically on Exhibit 1.1 attached to this Agreement except as provided in
Section 1.2.
1.2. Excluded Assets.
The assets of Seller listed on Exhibit 1.2 are not included in the defined
term "Assets" and are not being transferred or assigned to Buyer under this
Agreement. All assets retained by Seller are referred to as "Excluded Assets".
1.3. Liabilities.
1.3.1 Assumed Liabilities.
As of the Closing Date, Buyer shall assume and agrees to pay, discharge,
and perform as appropriate, only those obligations of Seller relating to the
Assets accruing or arising with respect to periods on or after the Closing Date
and no others (collectively, the "Assumed Liabilities").
1.3.2 Liabilities Not to be Assumed.
Buyer shall not assume and shall not be obligated to pay, discharge or
perform any obligations and liabilities of Seller not assumed above, including,
without limitation, the following (collectively, "Excluded Liabilities"):
(a) Any and all liabilities of Seller, Seller's affiliates, or third
parties (including without limitation KFHPTx), whether currently known or
unknown, with respect to claims or potential claims for medical malpractice or
professional liability with respect to the business of Seller relating to
periods prior to the Closing in each case regardless of when the claim is
asserted;
(b) Any and all liabilities of Seller, Seller's affiliates, or third
parties (including without limitation KFHPTx), whether currently known or
unknown, relating to litigation or claims of any kind or nature with respect to
the business of Seller relating to periods prior to the Closing, in each case
regardless of when the claim is asserted;
(c) Liabilities relating to the Excluded Assets;
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(d) Liabilities which are not related to the Assets and Assumed
Liabilities;
(e) Seller's obligations relating to Seller's health and welfare benefit
plans, pension, and retirement plans with respect to the Terminated Employees
(as hereinafter defined) or any former employees of Seller; and
(f) Any liability of Seller relating to that certain Subsidy Agreement (the
"Subsidy Agreement") among Seller, Buyer, KFHPTx, and Sierra Health Services,
Inc., to be delivered at Closing.
1.3.3 Property Taxes.
All annual or periodic ad valorem fees, taxes, assessments, licensing fees,
vehicle use fees, and similar charges imposed by taxing authorities on the
Assets (collectively, "Property Taxes") shall be borne and paid (a) by Seller
for all full tax years or periods ending before the Closing and for that portion
of any tax year or period ending on or after the Closing from the date of
commencement of such year or period to the date immediately preceding the
Closing, and (b) by Buyer for all full tax years or periods beginning on or
after the Closing and for that portion of any tax year or period ending on or
after the Closing from and including the Closing to the final date of such year
or period, regardless of when or by which party such Property Taxes are actually
paid to the applicable taxing authority.
1.3.4 Transfer Taxes; Recording Fees.
The Buyer and Seller shall share equally any and all sales, use, transfer
of other similar taxes imposed as a result of the consummation of the
transactions between Buyer and Seller contemplated by this Agreement.
1.4. Purchase Price.
1.4.1 Purchase Price. The consideration for the transfer of the Assets from
Seller to Buyer shall be Seven Million Five Hundred Thousand and no/100 Dollars
($7,500,000) ("Purchase Price"). The Purchase Price shall be paid by Buyer to
Seller by Federal Reserve Bank wire transfer of good funds at Closing.
1.4.2 Allocation.
Prior to the Closing Date, the parties shall agree to an allocation of the
Purchase Price among the Assets in accordance with Section 1060 of the Internal
Revenue Code of 1986 (the "Code") provided, however, the parties' agreement on
such allocation shall not be a condition to Closing.
1.5. Closing.
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The actions contemplated to consummate the transactions under this
Agreement shall take place on the date ("Closing Date") which, unless otherwise
agreed by Buyer and Seller, is the "Closing Date" for the Purchase Agreement;
provided, however, that notwithstanding the actual time of the day on the
Closing Date at which the actions contemplated to consummate this Agreement
shall occur, and unless otherwise agreed to by the parties, the closing
("Closing") shall be deemed to be effective as of and to occur, and the risk of
loss shall pass Seller to Buyer, at 12:01:01a.m. (Central Time) on the Closing
Date. Closing shall commence on the Closing Date at the offices of the law firm
of Jenkens & ▇▇▇▇▇▇▇▇▇, A Professional Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. (Central Time) on the Closing Date.
1.6. Actions to be Taken at Closing.
Subject to the terms and conditions set forth in this Agreement, at the
Closing:
1.6.1. Buyer's Deliveries.
Buyer shall deliver to Seller:
(a) The Purchase Price by Federal Reserve Bank wire transfer of good funds;
(b) A ▇▇▇▇ of Sale, Assignment and Assumption Agreement, substantially in
the form of Exhibit 1.6.1(b) relating to the Assets conveyed to the Buyer
hereunder, and such other instruments and agreements as may be reasonably
necessary to effect Buyer's assumption of the Assumed Liabilities;
(c) All necessary consents, approvals or authorizations of third parties
required to be obtained by Buyer under the terms of this Agreement, it being
expressly agreed by the parties that failure by Buyer to obtain or provide such
consents, estoppels, approvals or authorizations shall not be a condition to
Seller's obligations to close the transactions contemplated hereby;
(d) Good standing certificates for Buyer, dated no earlier than 30 days
before the Closing Date, from its state of incorporation;
(e) Copies of the resolutions duly adopted by the Board of Directors or
Executive Committee of Buyer authorizing Buyer's execution, delivery and
performance of this Agreement and of all documents related hereto or
contemplated herein;
(f) Certificate of Buyer, dated as of the Closing Date, signed by an
authorized representative of Buyer and certifying that the covenants and
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agreements to be performed and complied with by Buyer have been performed
and complied with in all material respects;
(g) Certificate of Buyer, dated as of the Closing Date, signed by
authorized representatives of Buyer and certifying that each of the respective
representations and warranties of Buyer set forth in this Agreement shall be
true and correct at and as of the Closing Date; and
(h) Subsidy Agreement executed by Buyer in the form attached to the
Purchase Agreement.
1.6.2. Seller's Deliveries.
Seller shall deliver to Buyer:
(a) Possession of the Assets to be conveyed to Buyer hereunder;
(b) A ▇▇▇▇ of Sale, Assignment and Assumption Agreement, substantially in
the form of Exhibit 1.6.1(b), conveying all Assets to be conveyed to Buyer
hereunder, and such other instruments and agreements as may be reasonably
necessary to effect Seller's assignment of the Assumed Liabilities;
(c) All consents, estoppels, approvals, authorizations or other documents
from third parties in a form reasonably satisfactory to Buyer obtained by Seller
hereunder, it being expressly agreed by the parties that failure by Seller to
obtain all such consents, estoppels, approvals or authorizations shall not be a
condition to Buyer's obligation to close the transactions contemplated hereby;
(d) Good standing certificate for Seller dated no earlier than 30 days
before the Closing Date, from its state of incorporation;
(e) Copies of the resolutions duly adopted by the Board of Directors or
Executive Committee of Seller and any requisite Unitholder approvals authorizing
Seller's execution, delivery and performance of this Agreement and of all
documents related hereto or contemplated herein;
(f) Certificate of Seller, dated as of the Closing Date, signed by
authorized representatives of Seller and certifying that the covenants and
agreements to be performed and complied with by Seller have been performed and
complied with in all material respects or have been waived by Buyer; it being
expressly agreed by the parties that, except as expressly provided in Section
5.3 and Section 5.5, Seller's compliance with the covenants and agreements
contained in this Agreement shall not be a condition to
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Buyer's obligation to close the transactions contemplated hereby.
Notwithstanding the above, if such covenants and agreements have not been
complied with in all material respects, Seller shall provide a list describing
in reasonable detail the extent of the non-compliance;
(g) Certificate of Seller, dated as of the Closing Date, signed by
authorized representatives of Seller and certifying that each of the respective
representations and warranties of Seller set forth in this Agreement shall be
true and correct at and as of the Closing Date or has been waived by Buyer, as
contemplated by Section 2.2, it being expressly agreed by the parties that
except as expressly provided in Section 5.3 and 5.5, Seller's representations
and warranties being accurate at Closing (other than the representations in
Section 2.1.1, 2.1.2, 2.1.5, and 2.1.10) is not a condition to Buyer's
obligation to close the transactions contemplated hereby. Notwithstanding the
above, if such representations and warranties are not true and correct on the
Closing Date, Seller shall provide a list describing in reasonable detail the
extent of the discrepancies;
(h) Subsidy Agreement executed by Seller in the form attached to the
Purchase Agreement; and
(i) Such other documents reasonably required by Buyer to transfer fully the
Assets to Buyer or to complete the transactions contemplated hereunder.
1.6.3 Third Party Consents.
To the extent that Seller's rights under any contracts to be transferred
pursuant to this Agreement may not be assigned without the consent of a third
party, which consent has not been obtained prior to Closing, this Agreement
shall not constitute an agreement to assign the same if an attempted assignment
would constitute a breach thereof or be unlawful. Seller, at its expense, shall
use its commercially reasonable efforts to obtain any such required consents as
promptly as possible after Closing.
2. REPRESENTATIONS AND WARRANTIES OF SELLER.
"Material Adverse Effect" means, with respect to Seller, an adverse effect
on the Assets or the Assumed Liabilities which would materially impair the
ability of Seller to operate its business in substantially the manner it has
been heretofore conducted.
2.1. Representations and Warranties of Seller.
As of the Execution Date, Seller represents and warrants to Buyer as
follows:
2.1.1. Organization and Good Standing.
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Seller is a professional association duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite corporate power and corporate authority to own lease and operate its
properties and to carry on its business, as now being conducted, and is duly
qualified and in good standing to do business under the corporate laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except when the failure to be
so qualified would not have a Material Adverse Effect.
2.1.2. Seller's Authority and No Breach.
Seller has all requisite corporate power and corporate authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Seller other than the approval of Seller's Unitholders,
which approval shall be obtained prior to Closing. This Agreement constitutes a
valid and binding obligation of Seller, enforceable against Seller in all
material respects in accordance with its terms except insofar as enforcement may
be limited by insolvency or similar laws affecting the enforcement of creditors'
rights in general, and except as enforceability may be limited by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2.1.3. No Violations
Except for consents of third parties required under contracts set forth on
Part A of Exhibit 1.1, the execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not, (i)
conflict with, or result in any material violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or the loss
of a material benefit under, or the creation of a material lien, security
interest or other encumbrance with respect to, any material portion of the
Assets or Assumed Liabilities (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation"),
pursuant to any provision of the Articles of Association or By- laws of Seller,
(ii) result in any Violation of any material agreement which constitutes part of
the Assets or Assumed Liabilities, (iii) result in any Violation of any
judgment, order or decree entered with respect to Seller or to which the Assets
or the Assumed Liabilities are subject, or, (iv) to Seller's knowledge, result
in any Violation of any statute, law, ordinance, rule or regulation applicable
to the Assets or the Assumed Liabilities, except, in each of subparagraphs (i)
through (iv), where such Violations, individually or in the aggregate, would not
have a Material Adverse Effect.
2.1.4. Litigation.
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To Seller's knowledge, there are no actions, suits, proceedings or
investigations of any kind now pending or threatened in writing and involving
Seller, the Assets or the Assumed Liabilities, which may have a Material Adverse
Effect.
2.1.5. Seller's Financial Statements.
Seller has delivered to Buyer complete and correct copies of (i) the
audited balance sheet of Seller as at December 31, 1996 and the related audited
statements of income and cash flows for the fiscal year then ended, together
with all footnotes, and (ii) a draft copy of the audited balance sheet of Seller
as at December 31, 1997 and the related draft audited statements of income and
cash flows for the fiscal year then ended, together with drafts of all
footnotes, which financial statements and draft financial statements fairly
present in all material respects, as at and for the periods then ended the
financial position and results of operations of Seller in conformity with
generally accepted accounting principles prevailing in the United States, in
each case applied on a basis consistent throughout the reported periods. Seller
has also delivered to Buyer an unaudited interim balance sheet and statement of
income of Seller for the fiscal period ended on March 31, 1998, which have been
prepared in a manner consistent with prior practices for Seller's unaudited
statements and on which all transactions that are material are recorded in a
manner that is consistent with the recordation of such transactions in the past.
Such financial statements (i) do not contain any item of extraordinary or
non-recurring income or expense (except as specified therein) and (ii) do not
reflect any write- off or revaluation of assets (except as specified therein),
other than year-end adjustments which individually, or in the aggregate, would
not be material.
2.1.6. No Brokers or Finders.
No broker or finder is involved on behalf of Seller in connection with the
sale of the Assets, nor may any broker or finder involved on behalf of Seller
claim any commission on account of the sale of the Assets. The parties
acknowledge that ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. has been engaged by Seller as a
financial advisor to Seller, and the fees of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. shall be
paid for by Seller.
2.1.7. Compliance with Applicable Laws.
Except to the extent that non-compliance would not have a Material Adverse
Effect, the business of Seller is being conducted in compliance with all
applicable laws, rules, ordinances, regulations, licenses, or judgments, or
orders, rules, regulations, licenses, judgments, or decrees of Governmental
Entities. Seller has not, and, to Seller's knowledge, none of its executive
officers, directors or employees (in their respective capacities as such), has
engaged in any activity constituting fraud or abuse under the laws relating to
health care or insurance.
2.1.8. No Consents.
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No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to Seller in connection
with the execution and delivery of this Agreement by Seller, or the consummation
by Seller of the transactions contemplated hereby, except for such filings,
authorizations, orders and approvals as may be required by federal, state and
local Governmental Entities.
2.1.9. Material Contracts.
Each material contract constituting part of the Assets or the Assumed
Liabilities is in full force and effect and is valid and enforceable by Seller
in accordance with its terms, except insofar as enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights in general, and except as enforceability may be limited by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Seller is not in material default in the
observance or the performance of any term or obligation to be performed by it
under any such agreement to the extent that such default would cause a Material
Adverse Effect. To the knowledge of Seller, no other person is in material
default in the observance or the performance of any term or obligation to be
performed by it under any such contract to the extent that such a default would
cause a Material Adverse Effect. Seller has provided, or will provide before 60
days after the Execution Date, originals or true and correct copies of all
contracts constituting part of the Assets or Assumed Liabilities which are not
terminable on 90 days notice or less.
2.1.10. Title to and Condition of Properties and Assets.
Seller has good title to the Assets set forth on Parts B, D, and E of
Exhibit 1.1, whether owned or leased, in each case subject to no mortgage,
pledge, conditional sales contract, lien, security interest, right of possession
in favor of any third party, claim or other encumbrance (collectively "Liens"),
and except with respect to leased property, the provisions of such leases. No
representation or warranty is being made with respect to the physical condition
of the Assets. Seller makes no representation or warranty with respect to title
to the intellectual property set forth in Part C of Exhibit 1.1.
2.1.11. No Untrue Representation or Warranty.
To Seller's Knowledge, no representation or warranty by Seller in this
Agreement, nor any statement or certificate furnished or to be furnished to
Buyer pursuant hereto or in connection with the transactions contemplated hereby
by Seller contains or will contain any untrue statement of a material fact.
2.2. Representations and Warranties True and Correct at Closing; Breaches.
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Each of the representations and warranties of Seller set forth in this
Agreement shall be true and correct in all respects on the Closing Date as
though made on the Closing Date; and Seller shall have executed and delivered to
Buyer a certificate signed by an authorized representative of Seller and dated
as of the Closing Date to such effect. With the exception of Sections 2.1.1,
2.1.2, 2.1.5, and 2.1.10, if any of the representations and warranties of Seller
are not true and correct in all respects as of the Closing Date, then Buyer
shall be entitled to indemnification for any and all losses as provided in
Section 11 hereof, but shall nevertheless be obligated to conclude the
transactions contemplated hereby. The consummation of the transactions under
this Agreement by Buyer shall not constitute a waiver of Buyer's rights to
indemnification for a breach of a representation or warranty provided for in
this Section.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
"Material Adverse Effect" means, with respect to Buyer, a material adverse
effect on Buyer's ability to consummate the transactions set forth herein.
3.1. Representations and Warranties of Buyer.
As of the Execution Date, Buyer represents and warrants to Seller as
follows:
3.1.1. Organization and Good Standing.
Buyer is a limited liability company duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite corporate power and corporate authority to own, lease and operate its
properties and to carry on its business, as it is now being conducted, and is
duly qualified and in good standing to do business under the corporate laws of
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect.
3.1.2. Buyer's Authority and No Breach.
Buyer has all requisite corporate power and corporate authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in all material respects
in accordance with its terms, except insofar as enforcement may be limited by
insolvency, or similar laws affected the enforcement of creditors' rights in
general, and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in proceeding in
equity or at law).
3.1.3. No Brokers or Finders.
HLTHDAL:19130.4 40072-00002
No broker or finder is involved on behalf of Buyer in connection with the
sale of the Assets, nor may any broker or finder involved on behalf of Buyer
claim any commission on account of the sale of the Assets. The parties
acknowledge that Bear ▇▇▇▇▇▇▇ has been engaged by Buyer as a financial advisor
to Buyer, and the fees of Bear ▇▇▇▇▇▇▇ shall be paid for by Buyer.
3.1.4. Buyer's Consents.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Buyer in connection with the execution and delivery of this Agreement
by Buyer, or the consummation by Buyer of the transactions contemplated hereby,
except for such filings, authorizations, orders and approvals as may be required
by state and local Governmental Entities, including those in connection with
Buyer's insurance business.
3.1.5. No Untrue Representation or Warranty.
To Buyer's knowledge, no representation or warranty by Buyer in this
Agreement, nor any statement or certificate furnished or to be furnished to
Seller pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact.
3.2. Representations and Warranties True and Correct at Closing; Breaches.
Buyer shall execute and deliver to Seller a certificate signed by an
authorized representative of Buyer, dated as of the Closing Date, stating that
each of the representations and warranties of Buyer made herein are true and
correct in all respects, or describing the manner in which such representations
and warranties are not true and correct. If any of the representations and
warranties of Buyer are not true and correct as of the Closing Date, then Seller
shall be entitled to indemnification for any and all losses as provided in
Section 11. The consummation of the transactions under this Agreement by Seller
shall not constitute a waiver of Seller's rights to indemnification for a breach
of a representation or warranty provided for in this Section.
4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Buyer and Seller contained in
Sections 2 and 3 of this Agreement shall survive for a period of eighteen (18)
months following the Closing.
5. BUYER'S CONDITIONS PRECEDENT TO CLOSING.
Buyer's agreement to purchase and to pay for the Assets hereunder is
subject to compliance with and the occurrence of each of the following
conditions on or before Closing, except as any thereof may be waived in writing
by Buyer:
HLTHDAL:19130.4 40072-00002
5.1. Agreements.
Seller shall have executed and delivered to Buyer all agreements,
instruments, certificates and other documents to be delivered by Seller, except
that Buyer shall be obligated to consummate this transaction, provided that
Seller has substantially performed and is proceeding in good faith and with due
diligence to obtain any remaining documents not delivered at Closing.
5.2. Corporate Resolutions.
Seller shall provide Buyer with the resolutions described in Section
1.6.2(e).
5.3. Seller's Representations and Warranties.
The representations and warranties of Seller set forth in Sections 2.1.1,
2.1.2, 2.1.5, and 2.1.10 shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date. Buyer shall have received a certificate signed on behalf
of Seller by an authorized officer of Seller to the effect that the
representations and warranties of Seller set forth in those Sections (as amended
through disclosure submitted to Buyer on or before the Closing regarding events
arising since the Execution Date) shall be true and correct in all material
respects as of the Execution Date and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.
5.4. Litigation.
No order has been issued in any action, suit or proceeding before any court
or administrative authority in any domestic or foreign jurisdiction of any kind,
that enjoins the consummation of this Agreement or any related agreements.
5.5. Certain Covenants.
Seller shall have complied with its obligations in Sections 8.1(a) and
8.1(b) and Section 8.2 in all material respects.
6. SELLER'S CONDITIONS PRECEDENT TO CLOSING.
Seller's agreement to sell and to deliver the Assets to be sold hereunder
is subject to the payment at Closing of the Purchase Price and compliance with
and the occurrence of each of the following conditions on or before Closing,
except as any thereof may be waived in writing by Seller:
6.1. Agreements.
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Buyer shall have executed and delivered to Seller all agreements,
instruments, certificates and other documents to be delivered by Buyer.
6.2. Corporate Resolutions.
Buyer shall provide Seller with the resolutions described in Section
1.6.1(e).
6.3. Litigation.
No order has been issued in any action, suit or proceeding before any court
or administrative authority in any domestic or foreign jurisdiction of any kind,
that enjoins the consummation of this Agreement or related agreements.
6.4. Buyer's Representations and Warranties True and Correct.
The representations and warranties of Buyer set forth in Section 3.1.1 and
3.1.2 shall be true and correct in all material respects as of the Execution
Date and as of the Closing Date as though made on and as of the Closing Date.
Seller shall have received a certificate signed on behalf of Buyer by the chief
executive officer and the chief financial officer of Buyer to the effect that
the representations and warranties of Buyer set forth in those Sections (as
amended through disclosure submitted to Seller on or before the Closing
regarding events arising since the Execution Date) shall be true and correct in
all material respects as of the Execution Date and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement.
7. JOINT CONDITIONS PRECEDENT TO CLOSING.
In addition to the matters set forth in Sections 5 and 6, Seller's and
Buyer's agreement hereunder are subject to the occurrence of the following
conditions on or before the Closing, except as any thereof may be waived by both
Seller and Buyer:
7.1. Governmental Consents, and Approvals, and Licenses.
Buyer and Seller shall have obtained all appropriate and necessary
approvals, consents, licenses, certifications, or exemptions required to effect
this Agreement from any and all state, local, and federal Governmental Entities
for which approval is required; provided, however, that each of the parties
shall have used its best efforts to obtain such approvals, consents, or
exemptions.
7.2. Termination of PMAT/KFHPTx Contract.
Seller shall have terminated the Medical Service Agreement between Seller
and ▇▇▇▇▇▇ Foundation Health Plan of Texas, effective January 1, 1990, as
amended, as of Closing.
HLTHDAL:19130.4 40072-00002
7.3. Closing of Transactions Under Related Agreements.
The transactions contemplated by the Purchase Agreement, the Master
Purchase and Sale Agreement (as defined in the Purchase Agreement) and the
Reinsurance Agreements (as defined in the Purchase Agreement) shall have closed
concurrently with the transactions contemplated by this Agreement. The Medical
Services Agreement, the Transition Agreement described in Section 10.5.2 of the
Purchase Agreement, and the agreements described in this Section, together with
their schedules and exhibits, shall be known as the "Related Agreements."
8. ADDITIONAL AGREEMENTS OF SELLER.
8.1. Conduct of Business Pending Closing.
From the Execution Date until the Closing, Seller agrees that except as
otherwise consented to by Buyer in writing, Seller will:
(a) Conduct the business of Seller in a commercially prudent manner, as a
going concern and in the ordinary course, and consistent with such operation,
comply in all material respects with applicable legal and contractual
obligations, consistent with past practice;
(b) Use commercially reasonable efforts, consistent with past practice, to
preserve the goodwill of its patients and its employees;
(c) Not intentionally take any action outside of the ordinary course of
business which would tend to cause suppliers or patients to cease their
respective affiliations with Seller;
(d) Not enter into or materially amend any contract requiring payment, on
an annualized basis, of more than $100,000.00 which contract is not terminable
without cause on 90 days notice or less;
(e) Not permit any lien, charge or encumbrance on the Assets, to the extent
such lien, charge or encumbrance would have a Material Adverse Effect; or
(f) Not take any action (or omit to take any action), which action or
omission would cause any representation or warranty contained herein to be
untrue in any material respect at any time through the Closing Date, as if such
representation or warranty were made at and as of such time.
8.2. Access to Documents and Premises.
8.2.1. Inspection of Books and Records.
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From the Execution Date through the Closing Date, Buyer, its counsel,
accountants, and other representatives shall, subject to confidentiality
covenants made by Seller to third parties and state and federal antitrust laws,
have the right to inspect the books and records of Seller relating to Seller's
business and the Assets, including inspections (without copying) by Buyer's
counsel to the extent possible without waiving any privilege with respect to
information regarding all actions, suits, proceedings or investigations of any
kind, now pending or threatened in writing, involving Seller with respect to
Seller's business. Any such inspection shall occur during normal business hours
and shall be scheduled by Buyer and Seller following request for inspection made
to Seller. All inspections shall be conducted by Buyer and Seller in such a
manner as to maximize all applicable privileges. Buyer and its representatives
shall use their best efforts to conduct their inspection in such a manner as not
to be disruptive to Seller's employees or business operations. Buyer shall
reimburse Seller for any damage, whether to the Assets or otherwise, caused by
Buyer or Buyer's representatives during the inspection process.
8.2.2. Request for Access.
All requests of Buyer, its counsel and such other representatives for
books, records or interviews with Seller's officers, directors, or employees
shall be coordinated through ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Medical Group Administration of
Seller, or her designee.
8.3. Breach by Seller.
Except as provided in Section 5.5, Seller's compliance with the covenants
of Section 8.1 and 8.2 shall not be a condition to Closing, but, rather, breach
of such covenants shall entitle Buyer to recover its actual damages resulting
therefrom in accordance with Section 11.
9. ADDITIONAL AGREEMENTS OF BUYER.
9.1. Formation of New P.A..
Prior to the Closing, Buyer shall cause New P.A. to be formed and at the
Closing New P.A. shall be duly organized, validly existing, and in good
standing.
9.2. Maintenance of Records.
Buyer shall retain all business and other records and documents relating to
the Assets in accordance with Buyer's own record retention policies for the
longer of six years or the time required by applicable law. Buyer shall make
such records as are retained by Buyer pursuant hereto available for Seller's
review and copying upon request of Seller or its agents, in a prompt manner, at
a reasonable time and place, and Buyer shall be entitled to the actual costs of
such cooperation; provided, however, that Seller shall agree
HLTHDAL:19130.4 40072-00002
to hold all such information confidential as required by law. Buyer shall
be responsible for obtaining any and all consents required to release records to
Seller. Buyer shall provide the records requested by Seller in the format
requested by Seller, including, without limitation, on paper, on computer disk,
or by direct electronic transmission in a form compatible with Buyer's then
existing systems. Buyer shall permit Seller to have access and to copy to such
records during normal business hours with prior notice to Buyer of the time that
such access shall be needed. Seller's employees, representatives, and agents
shall conduct themselves in such a manner that Buyer's normal business
activities shall not be unduly or unnecessarily disrupted. The provisions of
this Section 9.2 shall survive the Closing for a period of six years after the
Closing Date or longer if required by applicable law.
10. ADDITIONAL AGREEMENTS OF BUYER AND SELLER.
10.1. Regulatory Milestones Prior to Closing.
Seller and Buyer shall prepare and file the applications as may be required
with respect to the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby. Buyer and Seller agree
to take all reasonable actions required or requested by such authorities for the
expeditious consideration and rendering of all appropriate approvals, consents
and authorizations. Seller and Buyer shall diligently and timely cooperate with
each other and with all other parties in the submission of applications and of
any and all such additional information or documentation requested by any such
regulatory authorities.
10.2. Employment Matters.
10.2.1. Severance Payments.
(a) Seller shall terminate all of Seller's employees relating to the
Business, whether such employees are at-will or are subject to employment
agreements, as of the Closing (collectively, "Terminated Employees").
(b) Buyer shall reimburse Seller for all severance payments arising under
Seller's severance policy in effect on the date of execution of this Agreement
due to those Terminated Employees to whom Buyer does not offer comparable
employment with comparable pay following their termination from their employment
with Seller ("Severance Payments"). Buyer shall also assume the obligation to
provide or pay for all accrued but unused vacation to Terminated Employees, but
only to the extent such benefits would be owed under Seller's policies. Seller
shall retain the responsibility to pay any transition bonuses to the Terminated
Employees pursuant to Seller's policies. If any Terminated Employee is hired by
Buyer pursuant to this Section 10.2.1 and such Terminated Employee's employment
is severed by Buyer within 60 days of the Closing without
HLTHDAL:19130.4 40072-00002
cause, Buyer shall reimburse Seller for such Terminated Employee severance
in an amount which would have been due the Terminated Employee under Seller's
severance policies in effect on the date of execution of this Agreement as if
Buyer had not offered comparable employment at comparable pay.
(c) Promptly following the Execution Date, Buyer (i) will provide
information regarding its employment application process to the Terminated
Employees, and (ii) will actively begin to interview and consider for
employment, to be effective as of the Closing, any Terminated Employee who
submits an application for employment in accordance with Buyer's customary
application process requirements and who are qualified for employment with Buyer
(each individually, an "Applicant," or collectively, "Applicants").
(d) On or before July 15, 1998, Buyer shall provide Seller with a list of
the Terminated Employees that Buyer has elected to hire effective as of the
Closing Date, as provided in Section 10.2.2. Seller shall provide WARN notices
to all employees on or before 60 days prior to Closing. Buyer shall provide
Seller, at the same time Buyer provides Seller with a list of Terminated
Employees that Buyer has elected to hire, with an offer of employment for each
such employee so that Seller may enclose such offer in the WARN notice.
(e) All Terminated Employees who are hired by Buyer shall be given credit
for the time that they were employed by Seller for purposes of calculating such
Terminated Employees' rights under each of Buyer's employee benefits plans,
including without limitation, vacation pay, sick pay, and vesting for purposes
of deferred compensation and retirement plans.
(f) After the Execution Date, Seller agrees to cooperate with Buyer and to
release information to Buyer regarding Terminated Employees who Buyer is
considering for employment prior to Closing. All information regarding the
Terminated Employees shall be provided subject to (i) all applicable laws and
regulations regarding protection of the confidentiality of employment
information, (ii) Buyer's obtaining the written consent of such employees, and
(iii) Buyer's adherence to any policies of Seller with respect to the protection
of the confidentiality of employee information, as if such policies were Buyer's
own. Buyer shall respect and protect the confidentiality of all such employee
information. Information to be released hereunder does not include quality
management and peer review documents, including but not limited to any and all
credentialing files, utilization review information, peer evaluations, medical
record reviews, and member complaints, except as may be permitted by law so as
not to waive the privilege with respect to such documents.
HLTHDAL:19130.4 40072-00002
10.2.2. WARN, COBRA and HIPAA Notices.
To the extent required of Seller by law, Seller shall provide all notices
relating to the termination of the Terminated Employees, including, without
limitation, the notice obligations arising under the Workers Adjustment and
Retraining Notification Act ("WARN"), the Consolidated Omnibus Budget and
Reconciliation Act of 1985 ("COBRA"), or the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). WARN- related liabilities to the
Terminated Employees which result from any delay in providing WARN notices to
the Terminated Employees shall be paid by the party causing the delay.
10.2.3. Healthcare Coverage for Terminated Employees.
Buyer shall offer healthcare coverage to all Terminated Employees, which
shall be at least substantially equivalent to the healthcare coverage they would
be entitled to receive under COBRA if Seller remained in existence after the
Closing, effective as of the date of Closing, for a period of up to 36 months
after the Closing Date or such shorter period as permitted by law. To the extent
that any Terminated Employee becomes employed by Buyer, and the Terminated
Employee does not meet the eligibility requirements for Buyer's own COBRA
healthcare coverage prior to the Buyer's termination of the Terminated Employee,
Buyer agrees to offer the healthcare coverage set forth in this Section to such
Terminated Employee, effective as of his date of termination from Buyer, until
the expiration of the thirty-sixth month after the Closing Date. Each Terminated
Employee shall be responsible for payment of his own premiums relating to
healthcare coverage provided pursuant to this Section.
10.3. Cooperation.
Buyer and Seller agree to cooperate reasonably with each other, from the
Execution Date up through and following the Closing Date, in good faith, in an
effort to satisfy all conditions, undertakings and agreements contained in this
Agreement.
10.4. Health Care Coverage for Certain Unitholders.
Seller shall prepay through December 31, 1999 the premiums for whatever
health care coverage certain Unitholders of Seller maintain under KFHPTx's
Subscriber Agreements, as defined in the Purchase Agreement (be it individual,
spouse, family, or other health coverage) provided Buyer accepts the assignment,
reinsurance, or other transfer of such Subscriber Agreements under this
Agreement and provided further the Unitholders pay such premiums to Seller.
11. INDEMNIFICATION.
11.1. Indemnification by Seller.
HLTHDAL:19130.4 40072-00002
Subject to the limitations of Section 11.3, Seller shall indemnify and hold
harmless Buyer and its respective officers, directors, unitholders, employees,
agents and affiliates against any and all actual damages resulting from claims,
losses, costs, expenses, fees, liabilities and damages, including interest,
penalties and reasonable attorneys' fees and disbursements (each individually a
"LOSS," and collectively, "LOSSES"), arising out of, in connection with or
otherwise relating to:
(a) The Excluded Assets;
(b) The Excluded Liabilities;
(c) The material breach by Seller of any representation, warranty, covenant
or agreement made by Seller in this Agreement, or in any other agreement
executed in connection herewith;
(d) Any claim, obligation or other liability arising from the business of
Seller with respect to any period prior to the Closing Date other than to the
extent such claims, obligations or liabilities constitute part of the Assumed
Liabilities; and
(e) Any action or litigation which challenges, seeks damages arising from
or seeks to enjoin any of the transactions contemplated by this Agreement, other
than any actions commenced by shareholders of Buyer or Buyer's Affiliates or
primarily involving the operations of Buyer's or Buyer's Affiliates' businesses.
11.2. Indemnification by Buyer.
Subject to the limitations of Section 11.3, Buyer shall indemnify and hold
harmless Seller and its respective officers, directors, employees, agents and
affiliates, against any and all Losses, arising out of, in connection with or
otherwise relating to:
(a) The Assets;
(b) The Assumed Liabilities;
(c) The material breach by Buyer of any representation, warranty, covenant
or agreement made by Buyer in this Agreement, or in any other agreement executed
in connection herewith;
(d) Any claim, obligation or other liability arising from Buyer's operation
of the Assets or the Assumed Liabilities as part of an HMO in Texas with respect
to any period after the Closing Date;
HLTHDAL:19130.4 40072-00002
(e) Any action or litigation commenced by members or shareholders (as the
case may be) of Buyer or Buyer's Affiliates or primarily involving the
operations of Buyer's or Buyer's Affiliates' businesses which challenges, seeks
damages arising from or seeks to enjoin any of the transactions contemplated by
this Agreement or Related Agreements.
11.3. Limitations.
The indemnification rights and obligations set forth in this Section 11
shall survive the Closing and shall expire 18 months after Closing; provided,
however, that (i) with respect to claims notified in good faith to the
indemnifying party prior to the expiration of the indemnity rights, the parties'
obligations with respect to its indemnity rights and obligations shall continue
in effect until payment or other resolution of such claims; and (ii) with
respect to liabilities under Section 1.3.2, the indemnification rights and
obligations shall continue until the expiration of the statute of limitations
applicable thereto. Each party's liability hereunder shall be limited to actual
damages and no party shall be liable to any other party hereunder for special,
consequential, incidental, punitive or other damages.
11.3.1. Minimum.
No party to this Agreement shall have any liability, whether pursuant to
Section 11 or otherwise, for breach of any covenant or warranty, for
misrepresentation, or otherwise, unless the aggregate amount of all claims for
which such party would, but for this Section 11, be liable, exceeds $350,000 on
a cumulative basis. Each claim making up the $350,000 cumulative amount must be
a claim of $5,000 or more. If such party's aggregate liability for such claims
exceeds $350,000 on a cumulative basis, then such party shall be liable for all
such claims in excess of $350,000. Excluded Liabilities are not subject to and
do not count towards these minimum limitations.
11.3.2. Maximum.
In no event shall the aggregate liability of any party to this Agreement
(whether for breach of covenant or warranty, misrepresentation, pursuant to
Section 11 or otherwise) exceed 50% of the Purchase Price. Excluded Liabilities
are not subject to and do not count towards these maximum limitations.
HLTHDAL:19130.4 40072-00002
11.4. Notice and Right to Defend.
(a) Should any claim or action by a third party arise after the Closing for
which Buyer or Seller may be liable to the other under the indemnity provisions
of this Agreement, the indemnitee shall notify the indemnitor in writing and in
reasonable detail as soon as practicable after the indemnitee receives notice of
such claim or action in the manner provided for the giving of notices under this
Agreement. The expenses of all proceedings, contests, lawsuits, or
investigations of claims with respect to such claims or actions, shall be borne
by the indemnitor. If an indemnitor wishes to assume the defense of such claim
or action, it shall give written notice to the indemnitee within ten (10) days
after notice from the indemnitee of such claim or action of its intention to
assume the defense, and the indemnitor shall thereafter assume the defense of
any such claim or liability through counsel reasonably satisfactory to the
indemnitee, provided that the indemnitee may also participate in such defense at
its own expense.
(b) If the indemnitor shall not assume the defense of, or if after so
assuming it shall fail to defend, any such claim or action, the indemnitee may
defend against any such claim or action in such manner as it may reasonably deem
appropriate and the indemnitee may settle such claim or litigation on such terms
as it may reasonably deem appropriate, and the indemnitor shall promptly
reimburse the indemnitee for the amount of all reasonable expenses, legal and
otherwise, incurred by the indemnitee in connection with the defense and/or
settlement of such claim or action. If no settlement of such claim or action is
made, the indemnitor shall satisfy any judgment rendered with respect to such
claim or in such action before indemnitee is required to do so, and pay all
expenses, legal or otherwise, incurred by the indemnitee in the defense against
such claim or litigation.
11.5. Exclusive Remedy.
If a party is entitled to indemnification under this Agreement with respect
to a particular claim, then such indemnification shall be such party's sole and
exclusive remedy.
11.6. Failure to Provide Records Cooperation.
If Buyer materially breaches its obligations under Section 9.2 that Seller
can establish were actually transferred by Seller to Buyer under this Agreement,
and Seller establishes that such breach resulted in the loss or destruction of
documents material to the defense of Buyer by Seller of an action or claim by a
third party pursuant to Seller's indemnification obligations under this
Agreement, Seller shall be entitled to recover from Buyer its actual losses
incurred in the matter directly resulting from Buyer's breach. The
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amount of the losses recoverable from Buyer shall in no event exceed the
amount of the third party claim, and shall not include special, consequential,
incidental, punitive or other damages.
12. TERMINATION.
12.1. Termination.
This Agreement and the transactions contemplated hereby may be terminated or
abandoned at any time prior to the Closing Date:
(a) By the mutual consent of Buyer and Seller;
(b) By Seller or Buyer if the Closing shall not have occurred on or before
October 31, 1998 (or such later date as may be mutually agreed to by Buyer and
Seller);
Termination of this Agreement shall terminate the Related Agreements. Where
a Related Agreement is only between Buyer and Seller, no further action or
notice shall be required for such termination to take effect. Where an affiliate
or a third party is involved in a Related Agreement, Buyer and Seller (as may be
the case) shall cause termination of such Related Agreement.
12.2. Liability for Termination.
If this Agreement is terminated pursuant to this Section 12, all further
obligations of the parties under this Agreement shall be terminated without
further liability of any party to the other, provided that nothing shall relieve
either party from any liability it may have for any breach hereof.
13. ARBITRATION.
13.1. Conciliation and Mediation.
If a dispute between Buyer and Seller relating to this Agreement or under
any other agreement executed and delivered in connection with this Agreement is
not resolved within fifteen (15) days from the date that either party has
notified the other that such dispute exists, then such dispute shall be
submitted jointly for conciliation to the President or his designee of each
party. If such senior executive officers are unable to resolve the dispute
within thirty (30) days from the date that it is first presented to them, either
party may give notice to the other party that the dispute shall be submitted to
non- binding mediation with a mediator acceptable to both parties, and the
parties shall, for a sixty (60) day period from the receipt of such notice, seek
in good faith to resolve such dispute in mediation. If the parties are not able
to resolve the dispute in mediation, then such dispute shall be referred to
binding arbitration, except to the extent that injunctive relief is available to
a party hereto.
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13.2. Arbitration.
Any dispute submitted to arbitration pursuant to this Section shall be
determined by the decision of a board of arbitration consisting of three (3)
members (ABoard of Arbitration") selected as hereinafter provided. Buyer shall
select an arbitrator and Seller shall select an arbitrator, each of whom shall
be a member of the Board of Arbitration who is independent of the parties. A
third Board of Arbitration member, independent of the parties, shall be selected
by mutual agreement of the other two Board of Arbitration members. If the other
two Board of Arbitration members fail to reach agreement on such third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the American Arbitration Association upon application
made to it for such purpose by any party to the arbitration. The Board of
Arbitration shall meet in Dallas, Texas, or such other place as a majority of
the members of the Board of Arbitration determines more appropriate, and shall
reach and render a decision in writing (which shall state the reasons for its
decisions in writing and shall make such decisions entirely on the basis of the
substantive law governing the Agreement and which shall be concurred in by a
majority of the members of the Board of Arbitration) with respect to the items
in dispute. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the Commercial Rules of Arbitration of the American
Arbitration Association, except as provided in Exhibit 13.2. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to Buyer and Seller. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on Buyer and Seller and each
party to the arbitration shall be entitled to enforce such decision to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. The fees and expenses of the Board of Arbitration and the
reasonable fees and expenses of legal counsel and consultants of the parties
shall be allocated among the parties in the same proportion that the aggregate
amount of the disputed items so submitted to the Board of Arbitration that is
unsuccessfully submitted by each of them (as finally determined by the Board of
Arbitration) bears to the total amount of items so submitted.
13.3. Equitable Relief.
Notwithstanding any other provision of this Agreement, any party shall have
the right to seek equitable relief, in a court of competent jurisdiction, to the
extent that equitable relief is available to a party hereto. If a party chooses
to pursue equitable relief, such conduct shall not constitute a waiver of or be
deemed inconsistent with the arbitration provisions set forth in this Section
13. The Board of Arbitration may consider the findings of, rulings of, and any
evidence submitted in every legal proceeding for equitable relief as the Board
of Arbitration deems proper; however, any such findings, rulings and evidence
shall not necessarily be binding on the Board of Arbitration in connection with
any arbitration proceedings conducted by such Board of Arbitration.
14. MISCELLANEOUS.
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14.1. Notices.
All notices and other communications hereunder shall be in writing and
shall be either (i) deposited in first class United States mail, certified, with
postage prepaid, (ii) delivered by messenger, (iii) sent by overnight courier,
or (iv) sent by fully completed and confirmed facsimile transmission (with a
written confirmation simultaneously sent in first class United States mail), as
follows:
If to the Seller: Copy to:
Permanente Medical Association of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, A Professional
Texas Limited Liability Company
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D. Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
If to the Buyer: Copy to:
HMO Texas, ▇.▇. ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
c/o Sierra Health Services, Inc. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Vice Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
President and CFO Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or fax number as any party may request by notice
given as aforesaid. Notices sent as provided herein shall be deemed given on the
date received by the recipient. If a recipient rejects or refuses to accept a
notice given pursuant to this Section, or if a notice is not deliverable because
of a changed address or fax number of which no notice was given in accordance
with the provisions hereof, such notice shall be deemed to be received two (2)
days after such notice was mailed (whether as the actual notice or the
confirmation of a faxed notice) in accordance with the terms hereof. The
foregoing shall not preclude the effectiveness of actual written notice given to
a party at any address or by any means.
14.2. Confidentiality.
All information, instruments, documents and details concerning or with
respect to the business operations of Buyer and Seller ("Confidential
Information") are strictly confidential, and Seller and Buyer expressly covenant
and agree with each other that they
HLTHDAL:19130.4 40072-00002
will not nor will they or any of them allow any of their respective
officers, directors, employees or agents to disclose the Confidential
Information or any matters relating to the business of the other or to this
Agreement, its negotiation, terms, provisions or conditions, including, but not
limited to, the Purchase Price, except as may be reasonably necessary to
effectuate the transactions contemplated hereby; provided, however, (i) neither
party shall be prohibited from disclosing any such information, without the
other party's consent, if such disclosure is required, in the reasonable opinion
of its legal counsel, by order of a court of competent jurisdiction or under
applicable law or regulatory action and the disclosing party has given notice of
such requirement to the other party promptly upon learning that such disclosure
may be required and (ii) Buyer shall not be prohibited from disclosing any
confidential information to its insurers, reinsurers, public and private
auditors, investors and bankers or otherwise to comply with applicable
securities laws and other governmental regulations.
If the transactions contemplated hereby are not completed for any reason,
upon the written request of the other party, each party shall destroy all
materials received from the other party hereto including, without limitation,
deletion of information in computer storage, along with any copies and any
worksheets or abstracts compiled or derived from such information, and provide
an officer's certification that such destruction has occurred. Notwithstanding
anything in this Agreement to the contrary, (i) the covenants of the parties
contained in this Section shall survive Closing or any termination of this
Agreement, (ii) Buyer and Seller each shall have the right to seek injunctive
relief to enjoin the other party from violating this Section, and (iii) Buyer
and Seller each shall have the right to seek specific performance of the other
party with respect to the obligations set forth in this Section.
14.3. Waiver.
No waiver by either Buyer or Seller hereto of its rights under any
provision of this Agreement shall constitute a waiver of such party's rights
under such provision at any other time or a waiver of such party's rights under
any other provision of this Agreement.
14.4. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. An executed faxed copy of this agreement shall be deemed an
original executed copy of this Agreement.
14.5. Headings.
The headings contained in this Agreement have been inserted for convenience
of reference only and shall in no way restrict or modify any of the terms or
provisions hereof.
14.6. Severability.
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If any provision of this Agreement is held by final judgment of a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalid,
illegal or unenforceable provision shall be severed from the remainder of this
Agreement, and the remainder of this Agreement shall be enforced. In addition,
the invalid, illegal or unenforceable provision shall be deemed to be
automatically modified, and, as so modified, to be included in this Agreement,
such modification being made to the minimum extent necessary to render the
provision valid, legal and enforceable. Notwithstanding the foregoing, however,
if the severed or modified provision concerns all or a portion of the essential
consideration to be delivered under this Agreement by one party to the other,
the remaining provisions of this Agreement shall also be modified to the extent
necessary to adjust equitably the parties' respective rights and obligations
hereunder.
14.7. Entire Agreement.
This Agreement (including the Exhibits and Schedules) and the other
agreements, certificates and documents of Seller and Buyer contemplated herein
constitute the entire agreement between the parties hereto with respect to the
matter hereof, superseding all prior agreements or understandings. No amendment,
alteration, or modification of this Agreement shall be valid unless in each
instance such amendment, alteration, or modification is expressed in a written
instrument duly executed by the parties hereto.
14.8. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
Notwithstanding the foregoing, this Agreement shall not be assignable by any
party without the prior written consent of the other, and any attempt at an
assignment in violation of this Section shall be void ab initio.
14.9. Governing Law.
This Agreement is to be governed by and interpreted under the laws of the
State of Texas, without resort to choice of law or conflict of law principles
which direct the application of the laws of a different state.
14.10. Cost of Transaction.
Whether or not the transactions contemplated hereby are consummated:
(a) Buyer shall pay the fees, expenses, and disbursements of Buyer and its
agents, representatives, accountants, and counsel; and
(b) Seller shall pay the fees, expenses and disbursements of Seller and its
agents, representatives, accountants and counsel.
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14.11. Further Assurances.
Each party hereto agrees for the benefit of the other parties hereto to
execute and deliver any necessary documents, instruments or agreements, and to
take any and all necessary actions, in order to (i) fully vest in Buyer all
right, title and interest to the Assets, and (ii) carry out the terms of this
Agreement and the transactions contemplated by this Agreement.
14.12. Construction.
Whenever the context of this Agreement requires, the gender of all words
herein shall include the masculine, feminine, and neuter, and the number of all
words herein shall include the singular and plural. All parties to this
Agreement have been represented by counsel and, accordingly, this Agreement
shall not be construed strictly for or against any party hereto. The Schedules
and Exhibits attached hereto are incorporated herein for all purposes and made a
part of this Agreement as if set out in full in this Agreement. All references
to section numbers in this Agreement shall be references to sections in this
Agreement unless otherwise specifically indicated.
14.13. Third Parties.
None of the provisions of this Agreement shall confer rights or benefits as
third party beneficiaries or otherwise upon any third party that is not
expressly a party to this Agreement including, without limitation, the
Terminated Employees, and the provisions of this Agreement shall not be
enforceable by any such third party.
14.14. Time is of the Essence.
Time is of the essence with regard to all of the provisions of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Execution Date.
BUYER:
HMO TEXAS, L.C.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
SELLER:
PERMANENTE MEDICAL ASSOCIATION OF TEXAS
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
Title: President
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