EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
BY AND AMONG
MACNEAL HEALTH SERVICES CORPORATION,
THE MACNEAL MEMORIAL HOSPITAL ASSOCIATION,
MACNEAL HEALTH FOUNDATION,
VHS OF ILLINOIS, INC.
AND
VANGUARD HEALTH SYSTEMS, INC.
DATED AS OF OCTOBER 4, 1999
LIST OF SCHEDULES
Note: Certain of the Schedules have not been completed by the Parties as of the
Effective Date (i.e., those Schedules marked below with an asterisk) but shall
be appended hereto after the Effective Date in accordance with Section 11.01.
All Draft Schedules are to be initially prepared by Sellers, except Schedules
2.01(f), 2.04(k), 4.07, 5.03 and 7.13, which are to be prepared by Buyer.
*Schedule A.................................................Subsidiary Contracts
Schedule B....................................Subsidiary Intellectual Properties
Schedule 1.02...............................................Knowledge of Sellers
Schedule 2.01(a)....................................List of Seller Real Property
Schedule 2.01(b)................................List of Seller Personal Property
Schedule 2.01(d).............................................Other Seller Assets
*Schedule 2.01(f)..............................................Assumed Contracts
*Schedule 2.01(g)...................................List of Permits and Licenses
Schedule 2.01(h)..........................List of Seller Intellectual Properties
*Schedule 2.01(j).....................................List of Seller Investments
*Schedule 2.02(g)...........................Assets Contributed to the Foundation
Schedule 2.02(h)......................................Seller Retained Properties
*Schedule 2.03.......................................Certain Assumed Liabilities
*Schedule 2.04(k).............................................Excluded Contracts
Schedule 3.02.......................Powers; Consents; Absence of Conflicts, Etc.
Schedule 3.04(a)...............Subsidiaries, Investments and Third Party Options
*Schedule 3.04(b).....................Certain Information About the Subsidiaries
*Schedule 3.05...................................Legal and Regulatory Compliance
Schedule 3.06...............................................Financial Statements
*Schedule 3.07...........................................Undisclosed Liabilities
*Schedule 3.08.................................................Recent Activities
*Schedule 3.10..............................List of Subsidiary Personal Property
Schedule 3.11(i).................Permitted Seller Personal Property Encumbrances
*Schedule 3.11(ii)...........Permitted Subsidiary Personal Property Encumbrances
Schedule 3.12(a)(i)............................Certain Real Property Matters - 1
*Schedule 3.12(a)(ii)..........................Certain Real Property Matters - 2
*Schedule 3.12(a)(iii).........................Certain Real Property Matters - 3
Schedule 3.12(d)...............................Certain Real Property Matters - 4
*Schedule 3.12(i)..............................Certain Real Property Matters - 5
Schedule 3.13(a).......................................Environmental Matters - 1
Schedule 3.13(b).......................................Environmental Matters - 2
Schedule 3.13(c).......................................Environmental Matters - 3
Schedule 3.13(d).......................................Environmental Matters - 4
*Schedule 3.14...........Seller Intellectual Properties, Computer Software, Etc.
Schedule 3.15..........................................................Insurance
*Schedule 3.16..............................................Permits and Licenses
Schedule 3.17.........................Government Payment Programs; Accreditation
*Schedule 3.18............................................Terms of the Contracts
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Schedule 3.19........................................Certain Contractual Matters
Schedule 3.21...................................Employees and Employee Relations
Schedule 3.22.............................................Employee Benefit Plans
*Schedule 3.23........................................Litigation and Proceedings
*Schedule 3.24.............................................................Taxes
Schedule 3.25......................................................Medical Staff
Schedule 3.26......................................................Special Funds
Schedule 3.30...............................Operation of the Hospital Businesses
Schedule 4.07......................................Vanguard Financial Statements
Schedule 5.03.....................................Buyer's Employee Benefit Plans
Schedule 5.16....................................Sellers' Indigent Care Policies
Schedule 5.21...........................................Restricted Seller Assets
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, made and entered into effective as of
October 4, 1999, is by and among MACNEAL HEALTH SERVICES CORPORATION, an
Illinois not-for-profit corporation ("MHSC"), THE MACNEAL MEMORIAL HOSPITAL
ASSOCIATION, an Illinois not-for-profit corporation ("XxxXxxx Hospital") (each
individually a "Seller" and collectively the "Sellers"), MACNEAL HEALTH
FOUNDATION, an Illinois not-for-profit corporation (the "Foundation"), VHS OF
ILLINOIS, INC., a Delaware corporation ("Buyer"), and VANGUARD HEALTH SYSTEMS,
INC., a Delaware corporation ("Vanguard").
W I T N E S S E T H
As more particularly described herein, this Agreement provides for the
sale by Sellers to Buyer of substantially all of the assets, real, personal and
mixed, tangible and intangible, owned by Sellers, including the following
Hospital Businesses:
(1) XxxXxxx Hospital, a community hospital located in Berwyn, Illinois
with 427 licensed acute care beds and 40 licensed skilled nursing
beds;
(2) MacNeal Primary Care Network, a network of primary care physicians
and facilities;
(3) Genesis Clinical Laboratory, a clinical and anatomic pathology
laboratory; and
(4) MacNeal OccHealth Services, an occupational medicine provider.
In addition, this Agreement provides for the sale by Sellers to Buyer of all of
the ownership interests held by Sellers in the following Hospital Businesses:
(5) XxxXxxx Management Services, Inc., (and its partially or wholly-owned
subsidiaries XxxXxxx Health Providers, The 6300 Xxxx Xxxxxxxxx
Partnership (limited partnership interest), Primary Care Physician
Center, LLC, MacNeal Renal Lifeline Services and Midwest Claims
Processing, Inc.);
(6) Azron, Inc.;
(7) MacNeal/CCP Joint Venture;
(8) Berwyn Magnetic Resonance Center, LLC;
(9) BHS Digestive Disease Associates (a/k/a Gastro and Liver Specialists
Joint Venture);
(10) The 6300 Xxxx Xxxxxxxxx Partnership (general partnership interest);
and
(11) MacNeal/Xxxx/Xxxx Joint Venture.
NOW, THEREFORE, for and in consideration of the premises, and the
agreements, covenants, representations and warranties hereinafter set forth,
and other good and valuable consideration, the receipt and adequacy of which
are forever acknowledged and confessed, the Parties, intending to be legally
bound, agree as follows:
1. DEFINITIONS AND REFERENCES
1.01. Definitions: As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings given:
Accounts Receivable: all accounts receivable of Sellers,
accrued and unaccrued, including Government Payment Program
receivables, but excluding all Cost Report settlement receivables and
amounts due from Affiliates;
Adjusted EBITDA: Sellers' earnings before interest, income
Taxes, depreciation and amortization of the fiscal year ended
September 30, 1999, prepared in accordance with generally accepted
accounting principles consistently applied by Sellers, adjusted by
adding back the following non-recurring transaction-related expenses
in conjunction with the 1999 fiscal year end close: (i) legal,
accounting, investment banking and other expenses, (ii) appraisals,
surveys and other real estate matters, (iii) environmental reports,
(iv) bank fees, (v) expensed bonuses and related payroll taxes, (vi)
success and retention bonuses and related payroll Taxes, (vii) due
diligence costs, (viii) change of control payments and related payroll
Taxes under employment Contracts, and (ix) acceleration of
non-qualified deferred compensation expenses and related payroll
Taxes;
ADR: defined in Section 10.03;
Affiliate: any Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under
common control with another Person and includes the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of securities, election or appointment
of directors, by Contract or otherwise (excluding, in the case of
Sellers, the Foundation, RMHP Corporation, the RML Partnership and MH
Insurance Company);
Affiliated Group: any affiliated group within the meaning of
section 1504 of the Code or any similar group defined under a similar
provision of state, local or foreign law;
Agreement: this Asset Purchase Agreement and all Exhibits and
Schedules attached hereto, as amended, consolidated, supplemented,
novated or replaced by the Parties from time to time;
Alternative Proposal: defined in Section 5.07;
Articles: articles of the Agreement;
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Assets: the Seller Assets and the Subsidiary Assets;
Assumed Contracts: the Seller Contracts listed or described
on Schedule 2.01(g) and the Immaterial Contracts to which any Seller
is a party;
Assumed Liabilities: (i) current liabilities in Net Working
Capital, (ii) vacation, holiday and sick leave accumulations of the
Hired Employees, and related Taxes thereon, (iii) all obligations of
Sellers arising on or after the Closing Date with respect to any
period commencing on the Closing Date under the Assumed Contracts,
(iv) Affiliate Contracts described on Schedule A and Immaterial
Contracts to which any Subsidiary is a Party, but excluding the
Excluded Contracts, and (v) the other liabilities and obligations, if
any, described on Schedule 2.03;
Audited Financial Statements: the audited balance sheets of
XxxXxxx Hospital and MHP as of September 30, 1998 and 1997, and the
audited statements of operations, changes in net assets and cash flows
of XxxXxxx Hospital and MHP for the fiscal years then ended, together
with the notes thereto and the report thereon of Xxxxxx Xxxxxxxx LLP,
independent certified public accountants;
Authorized Individuals: defined in Section 10.02;
Buyer: VHS of Illinois, Inc., a Delaware corporation;
Buyer's Indemnified Persons: Buyer, Vanguard, and Buyer's and
Vanguard's stockholders, Affiliates, successors and assigns, and their
respective stockholders, partners, Affiliates, directors, trustees,
officers, employees, agents and representatives;
Cash Portion of the Purchase Price: defined in Section
2.05(d);
Claim Notice: written notification of a Third Party Claim by
an Indemnified Party to an Indemnifying Party under Article 9,
including a Revenue Agent's Report, Statutory Notice of Deficiency,
Notice of Proposed Assessment, or any other official written notice
from a Taxing authority that Taxes are due or that a Tax audit will be
conducted;
Closing: defined in Section 8.01;
Closing Balance Sheets: the unaudited combined balance sheets
of MHSC as of the close of business on the day immediately prior to
the Closing Date;
Closing Date: the date as of which the Closing occurs;
Closing Documents: all instruments, agreements, certificates
or other documents executed or delivered by any Party to another Party
at Closing;
Code: the Internal Revenue Code of 1986, as amended;
Common Shares: defined in Section 2.05(d);
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Common Stock: the common stock, $.01 par value, of Vanguard;
Contracts: the Seller Contracts and the Affiliate Contracts;
Controlled Group: with respect to any Seller, a group
consisting of each trade or business (whether or not incorporated)
which, together with such Seller, would be deemed a "single employer"
within the meaning of subsections (b), (c), (m) or (o) of section 414
of the Code;
Cost Reports: all cost and other reports filed pursuant to
the requirements of the Government Payment Programs for payment or
reimbursement of amounts due from them;
Defined Benefit Plan: defined in section 3(35) of ERISA;
Draft Schedules: defined in Section 11.01;
Effective Date: the date as of which this Agreement was
entered into by the Parties, as set forth on the first page of this
Agreement;
Employee Benefit Plan: any (1) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (2) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (3) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan), or (4) Employee Welfare
Benefit Plan or material fringe benefit plan or program;
Employee Pension Benefit Plan: defined in section 3(2) of
ERISA;
Employee Welfare Benefit Plan: defined in section 3(1) of
ERISA;
Encumbrances: liabilities, levies, claims, charges,
assessments, mortgages, security interests, liens, pledges,
conditional sales agreements, title retention contracts, leases,
subleases, rights of first refusal, options to purchase, restrictions
and other encumbrances, and agreements or commitments to create or
suffer any of the foregoing;
Environmental Claim: any written notice (or oral notice
reduced to writing by any Seller) alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
Governmental Authority response costs, natural resource damages,
property damages, personal injuries, or penalties) arising out of,
based on or resulting from the presence, or release into the
environment, of any Materials of Environmental Concern at any
location, whether or not owned by Sellers;
Environmental Laws: any and all Legal Requirements relating
to pollution or protection of human health or the environment
(including ground water, land surface or subsurface strata), including
Legal Requirements relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or
otherwise relating to the
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manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling, reporting or handling of Materials of
Environmental Concern;
ERISA: the Employee Retirement Income Security Act of 1974,
as amended;
ERISA Fiduciary: defined in section 3(21) of ERISA;
Escrow Agent: a financial institution acceptable to the
Parties;
Excluded Contracts: the Affiliate Contracts and the other
Contracts, if any, listed or described on Schedule 2.04(k);
Excluded Liabilities: any and all liabilities of any Seller
or Subsidiary other than the Assumed Liabilities, whether known or
unknown, fixed or contingent, recorded or unrecorded, and whether
arising prior to or after Closing;
Excluded Seller Assets: defined in Section 2.02;
Final Schedules: defined in Section 11.01;
Financial Statements: the Audited Financial Statements, MHSC
Financial Statements, Interim Financial Statements, Interim Closing
Balance Sheets, Closing Balance Sheets, and the financial statements
described in Section 5.04(b);
Foundation: MacNeal Health Foundation, an Illinois
not-for-profit corporation;
Governmental Authorities: all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures and
offices of any nature whatsoever of any federal, state, county,
district, municipal, city, foreign or other government or
quasi-government unit or political subdivision;
Government Payment Programs: federal and state Medicare,
Medicaid and CHAMPUS programs, and similar or successor programs with
or for the benefit of Governmental Authorities;
Xxxx-Xxxxxx Act: the Public Health Service Act, 42 U.S.C.
291, et. seq.;
Hired Employees: those employees of the Hospital Businesses
who accept Buyer's offer of employment as of the Closing Date and
those employees of the Hospital Businesses employed by Buyer under
written Assumed Contracts;
Hospital: XxxXxxx Hospital, a 467-bed hospital owned and
operated by XxxXxxx Hospital and located in Berwyn, Illinois;
Hospital Businesses: all businesses owned, leased, managed or
otherwise operated or conducted by Sellers and the Subsidiaries and
comprising or used in the operation or management of the business of
the Hospital, and all other businesses (including outpatient
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facilities, professional corporations, medical office buildings and
parking facilities) owned, managed or leased by Sellers or the
Subsidiaries, other than RMHP Corporation, the RML Partnership, and MH
Insurance Company;
HSR Act: the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended;
Immaterial Contracts: Contracts that (i) require the future
payment by any Seller or Subsidiary of $25,000 or less or the future
performance by any Seller or Subsidiary of services having a value of
$25,000 or less, or (ii) are terminable by any Seller or Subsidiary at
any time without cause upon notice of 90 days or less and that require
during the period prior to termination the payment of $25,000 or less
or the future performance of services having a value of $25,000 or
less, provided that, notwithstanding the foregoing, Immaterial
Contracts shall not include any Contracts described in paragraphs (a)
through (h) of Section 3.18;
Indemnified Party: any Person entitled to indemnification
under Article 9;
Indemnifying Party: any Person obligated to indemnify another
Person under Article 9;
Indemnity Notice: written notification of a claim for
indemnity under Article 9, other than a Third Party Claim, made by an
Indemnified Party to an Indemnifying Party pursuant to Section
9.05(b);
Initiating Party: defined in Section 10.02;
Intellectual Properties: Seller Intellectual Properties and
Subsidiary Intellectual Properties;
Interim Closing Balance Sheets: the unaudited individual and
combined balance sheets of the Hospital Businesses as of the most
recent month end available prior to the Closing Date;
Interim Financial Statements: the unaudited combined balance
sheets of MHSC as of June 30, 1999, and the unaudited combined
statements of revenue and expense, cash flow, funded depreciation
investments, loan compliance and operating statistics report for the
nine month period ended June 30, 1999;
Investments: Sellers' ownership interests in MacNeal/CCP
Joint Venture, an Illinois general partnership, Berwyn Magnetic
Resonance Center, LLC, an Illinois limited liability company, and
shares of capital stock of any corporation other than the
Subsidiaries, interests in other partnerships or limited liability
companies, other equity or debt instruments in any other Person, and
proceeds from the sale after June 30, 1999 of any of the foregoing;
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Legal Requirements: with respect to any Person, all statutes,
ordinances, by-laws, codes, rules, regulations, restrictions, orders,
judgments, orders, writs, injunctions, decrees, determinations or
awards of any Governmental Authority having jurisdiction over such
Person or any of such Person's assets or businesses;
Losses: any and all damages, claims, costs, losses (including
any diminution in value but excluding any diminution in value of the
investment of one Indemnified Person in another Indemnified Person),
liabilities, expenses or obligations (including Taxes, interest,
penalties, court costs, costs of preparation and investigation, and
attorneys', accountants' and other professional advisors' fees and
expenses);
XxxXxxx Hospital: The MacNeal Memorial Hospital Association,
an Illinois not-for-profit corporation;
Material Adverse Effect: whether individually or in the
aggregate, a material adverse effect on the business, assets,
liabilities, results of operations or financial condition of Sellers
and the Subsidiaries, taken as a whole;
Materials of Environmental Concern: chemicals, pollutants,
contaminants, wastes (including medical waste), toxic substances,
petroleum and petroleum products, including hazardous wastes under the
Resource, Conservation and Recovery Act, 42 U.S.C. ss. 6903 et seq.,
hazardous substances under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq.,
asbestos, polychlorinated biphenyls and urea formaldehyde, and
low-level nuclear materials, special nuclear materials or
nuclear-byproduct materials, all within the meaning of the Atomic
Energy Act of 1954 as amended, and any rules, regulations or policies
promulgated thereunder;
MHP: XxxXxxx Health Providers, an Illinois corporation;
MHSC: MacNeal Health Services Corporation, an Illinois
not-for-profit corporation;
MHSC Financial Statements: the unaudited combined balance
sheets of MHSC as of September 30, 1998 and 1997 and the unaudited
combined statements of revenue and expenses, cash flows, funded
depreciation investments, loan compliance and operating statistics
report;
Multiemployer Plan: defined in section 3(37) of ERISA or
section 4001(a)(3) of ERISA;
Multiple Employer Plan: an Employee Pension Benefit Plan
which is not a Multiemployer Plan and for which a Person who is not a
member of a Controlled Group that includes any Seller is or has been a
contributing sponsor;
Net Working Capital: the difference between (i) "cash" of MHP
only, "patient accounts receivable, net of allowances", "receivables
from affiliates - current portion", "other receivables", "inventories,
at cost" and usable "prepaid expenses", and (ii) "accounts
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payable" and "accrued liabilities", but excluding from such
calculation any Excluded Seller Assets and Excluded Liabilities;
Neutral: defined in Section 13.04;
Notice Period: defined in Section 9.05(a)(i);
Other Plan: any Contract, program or arrangement which
provides cash or non-cash benefits or perquisites to current or former
employees of any Seller, but which is not an Employee Benefit Plan;
Party: any party to this Agreement, its successors and
assigns;
Party in Interest: a "party in interest" as defined in
section 3(14) of ERISA, and a "disqualified person" as defined in the
Code;
PBGC: the Pension Benefit Guaranty Corporation;
Permitted Personal Property Encumbrances: those Encumbrances
described in Schedule 3.11 that Buyer elects to assume or take title
to the Assets subject to at Closing;
Permitted Real Property Encumbrances: those Encumbrances
described in Schedule 3.12 that Buyer elects to assume or take title
to the Real Property subject to at Closing, including utility
easements and other customary covenants and restrictions of record
that do not adversely affect the ownership of the Real Property or the
conduct of the Hospital Businesses;
Person: any individual, company, body corporate, association,
partnership, firm, joint venture, trust, trustee or Governmental
Authority;
Prohibited Transaction: defined in section 406 of ERISA and
section 4975 of the Code;
Purchase Price: defined in Section 2.05;
Purchase Price Adjustment: defined in Section 2.05;
Real Property: Seller Real Property and Subsidiary Real
Property;
Reportable Event: defined in section 4043 of ERISA;
Responding Party: defined in Section 10.02;
Restricted Area: defined in Section 5.08(a);
RML Partnership: RML Health Providers, L.P., an Illinois
limited partnership;
Sections: sections of the Agreement;
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Securities Act: the Securities Act of 1933, as amended from
time to time;
Seller Assets: all assets, real, personal and mixed, tangible
and intangible, owned or leased by any Seller and employed in the
operation of the Hospital Businesses of such Seller as of the
Effective Date, and arising or acquired between the Effective Date and
the Closing Date, excluding assets disposed of by Sellers pursuant to
Section 5.02(e);
Seller Contracts: all commitments, contracts, leases,
licenses, agreements and understandings, written or oral, relating to
the Seller Assets or the operation of the Hospital Businesses to which
any Seller is a party or by which it or any of the Seller Assets are
bound, including agreements with payers, physicians and other
providers, agreements with health maintenance organizations,
independent practice associations, preferred provider organizations
and other managed care plans and alternative delivery systems, joint
venture and partnership agreements, management, employment, retention
and severance agreements, vendor agreements, real and personal
property leases and schedules, maintenance agreements and schedules,
agreements with municipalities and labor organizations, and bonds,
mortgages and other loan agreements;
Seller Intellectual Properties: all marks, names, trademarks,
service marks, patents, patent rights, assumed names, logos,
copyrights, trade secrets and similar intangibles (including variants
of and applications for the foregoing) used in connection with the
ownership and operation of the Hospital Business by Sellers as of the
Effective Date, but not including the name "MacNeal Health
Foundation";
Seller Real Property: all real property owned (legally or
beneficially) by Sellers and used in the conduct of the Hospital
Businesses, as more particularly described on Schedule 2.01(a),
together with all buildings, improvements and fixtures thereon and all
appurtenances and rights thereto, but excluding the Seller Real
Property described on Schedule 2.02(h);
Sellers: MHSC and XxxXxxx Hospital;
Sellers' Indemnified Persons: Sellers and Sellers' members,
stockholders, Affiliates, successors and assigns, and their respective
members, directors, trustees, officers, employees, agents and
representatives;
Shareholders Agreement: the Shareholders Agreement dated as
of June 1, 1998 among Vanguard and all of its shareholders, which
includes, without limitation, provisions (i) restricting the sale or
other disposition of any currently outstanding Common Stock, (e.g.
rights of first refusal) and (ii) granting customary demand and
piggy-back registration rights to all current Vanguard shareholders.
Signing Schedules: defined in Section 11.01;
Submission Date: defined in Section 10.03;
Subsidiaries: XxxXxxx Management Services, Inc., an Illinois
corporation, Azron, Inc., a California corporation, The 6300 Xxxx
Xxxxxxxxx Partnership, an Illinois limited
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partnership, Primary Care Physicians Center LLC, an Illinois limited
liability company, Midwest Claims Processing, Inc., an Illinois
corporation, XxxXxxx Health Providers, Inc., an Illinois corporation,
MacNeal Renal Lifeline Services, an Illinois general partnership, BHS
Digestive Disease Associates, an Illinois general partnership, and
MacNeal/Xxxx/Xxxx Joint Venture, an Illinois general partnership; -
Subsidiary Assets: all assets, real, personal and mixed,
tangible and intangible, owned or leased by any Subsidiary and
employed in the operation of the Hospital Businesses of such
Subsidiaries as of the Effective Date, and arising or acquired between
the Effective Date and the Closing Date, excluding assets disposed of
by the Subsidiaries pursuant to Section 5.02(e);
Subsidiary Contracts: all commitments, contracts, leases,
licenses, agreements and understandings, written or oral, relating to
the Subsidiary Assets or the operation of the Hospital Businesses to
which any Subsidiary is a party or by which it or any of the
Subsidiary Assets are bound, including agreements with payers,
physicians and other providers, agreements with health maintenance
organizations, independent practice associations, preferred provider
organizations and other managed care plans and alternative delivery
systems, joint venture and partnership agreements, management,
employment, retention and severance agreements, vendor agreements,
real and personal property leases and schedules, maintenance
agreements and schedules, agreements with municipalities and labor
organizations, and bonds, mortgages and other loan agreements;
Subsidiary Intellectual Properties: all marks, names,
trademarks, service marks, patents, patent rights, assumed names,
logos, copyrights, trade secrets and similar intangibles (including
variants of and applications for the foregoing) used in connection
with the ownership and operation of the Hospital Business by the
Subsidiaries as of the Effective Date, but not including the name
"XxxXxxx Health Foundation", including those Intellectual Properties
listed or described on Schedule B;
Subsidiary Real Property: all real property owned (legally or
beneficially) by the Subsidiaries and used in the conduct of the
Hospital Businesses, as more particularly described on Schedule
2.01(a), together with all buildings, improvements and fixtures
thereon and all appurtenances and rights thereto;
Surviving Shareholders Agreement: the Surviving Shareholders
Agreement dated as of June 1, 1998 hereof among Vanguard and all of
Vanguard's shareholders which Agreement becomes effective upon
termination of the Shareholders Agreement and which includes, without
limitation, provisions (i) restricting the sale or other disposition
of certain Common Stock and (ii) granting customary demand and
piggy-back registration rights to all current Vanguard shareholders;
Tax: any income, unrelated business income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
privilege, premium, windfall profits,
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environmental (including taxes under section 59A of the Code), customs
duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property,
stamp, sales, use, transfer, registration, escheat, unclaimed
property, value added, alternative or add-on minimum, estimated or
other tax, assessment, charge, levy or fee of any kind whatsoever,
including payments or services in lieu of Taxes, interest or penalties
on and additions to all of the foregoing, which are due or alleged to
be due to any Governmental Authority, whether disputed or not;
Tax Return: any return, declaration, report, claim for
refund, information return or statement, including schedules and
attachments thereto and amendments, relating to Taxes;
Third Party Claim: defined in Section 9.05(a)(i);
Vanguard: Vanguard Health Systems, Inc., a Delaware
corporation;
Vanguard Audited Financial Statements: the audited
consolidated balance sheet of Vanguard and its subsidiaries as of June
30, 1999, the audited consolidated statement of operations, the
audited consolidated statement of stockholders' equity, and the
audited consolidated statement of cash flows for the fiscal year then
ended, together with the notes thereto and the report thereon of Ernst
& Young, LLP, independent certified public accountants;
Vanguard Financial Statements: the Vanguard Audited Financial
Statements and the Vanguard Interim Financial Statements; and
Vanguard Interim Financial Statements: the consolidated
balance sheet, consolidated statement of operations and consolidated
statement of cash flows of Vanguard and its subsidiaries as of and for
the one month ended July 31, 1999.
1.02. Certain References. As used in this Agreement, and unless the
context requires otherwise:
(a) references to "include" or "including" mean
including without limitation;
(b) references to "partners" include general and
limited partners of partnerships and members of limited
liability companies;
(c) references to "partnerships" include general and
limited partnerships, joint ventures and limited liability
companies;
(d) references to any document are references to
that document as amended, consolidated, supplemented, novated
or replaced by the parties thereto from time to time;
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(e) references to any law are references to that law
as amended, consolidated, supplemented or replaced from time
to time and all rules and regulations promulgated thereunder;
(f) references to time are references to central
time;
(g) references in this Agreement to the "knowledge"
of Sellers or variants thereof (including "best knowledge")
mean the actual knowledge of each of the Persons whose names
or titles are set forth in Schedule 1.02, after due inquiry
by Sellers of such Persons, but no further inquiry by such
Persons;
(h) the gender of all words includes the masculine,
feminine and neuter, and the number of all words includes the
singular and plural; and
(i) the Table of Contents, the division of this
Agreement into Articles and Sections, and the use of captions
and headings in connection therewith are solely for
convenience and shall have no legal effect in construing the
provisions of this Agreement.
2. SALE OF SELLER ASSETS AND RELATED MATTERS
2.01. Sale of Seller Assets. Subject to the terms and conditions of
this Agreement, at Closing Sellers shall sell, assign, convey, transfer and
deliver to Buyer, or cause to be sold, assigned, conveyed, transferred and
delivered to Buyer, and Buyer shall purchase the Seller Assets, free and clear
of all Encumbrances other than the Permitted Real Property Encumbrances and the
Permitted Personal Property Encumbrances, including the following:
(a) the Seller Real Property described in Schedule
2.01(a) and all claims to and interests in other real
property, recorded or unrecorded used or to be used in the
conduct of the Hospital Businesses;
(b) all major, minor or other equipment (including
medical and computer equipment, vehicles, furniture and
furnishings and other tangible personal properties owned by
Sellers and used in the conduct of the Hospital Businesses,
including those listed in Schedule 2.01(b);
(c) all current assets of Sellers included in Net
Working Capital;
(d) such other current assets of Sellers on the
Closing Balance Sheets, if any, as are identified on Schedule
2.01(d);
(e) all financial, patient, medical staff, personnel
and other records of Sellers (including equipment records,
medical/administrative libraries, medical records, documents,
catalogs, books, records, files and operating manuals);
12
(f) Seller's right, title and interest in the
Assumed Contracts listed or described on Schedule 2.01(f) and
the other Immaterial Contracts to which any Seller is a
party;
(g) all licenses, permits and other approvals
(including pending approvals) of Governmental Authorities, to
the extent assignable, relating to the ownership, development
and operation of the Hospital Businesses, including the
licenses and permits described on Schedule 2.01(g);
(h) all Seller Intellectual Properties and all
software, hardware, application programs and similar systems
licensed for use in the Hospital Businesses, including those
described in Schedule 2.01(h);
(i) all property, real, personal or mixed, tangible
or intangible, arising or acquired between the Effective Date
and the Closing Date owned or leased by Sellers, other than
the Excluded Seller Assets;
(j) Sellers' right, title and interest in and to the
Subsidiaries, and the other Investments relating to the
Hospital Businesses described on Schedule 2.01(j);
(k) all insurance proceeds (including applicable
deductibles, copayments or self insured requirements) arising
in connection with damage to the Assets occurring prior to
the Closing Date, to the extent not expended for the repair
or restoration of the Assets;
(l) general intangibles of the Hospital Businesses,
including goodwill of Sellers and the names "XxxXxxx",
"XxxXxxx Hospital", XxxXxxx Health Network" and "XxxXxxx
Health Providers";
(m) claims of Sellers against third parties relating
to the Seller Assets, xxxxxx or inchoate, known or unknown,
contingent or otherwise, but excluding such claims relating
to Excluded Liabilities; and
(n) all proceeds of the foregoing and all other
property of every kind, character or description, tangible
and intangible, known or unknown, owned or leased by Sellers,
wherever located and whether or not reflected on the
Financial Statements or similar to the properties described
above.
2.02. Excluded Seller Assets. Notwithstanding the generality of
Section 2.01, the following assets (the "Excluded Seller Assets") are not a
part of the sale and purchase contemplated by this Agreement and are excluded
from the Seller Assets:
(a) any records of the Hospital which by law Sellers
are required to retain in their possession;
13
(b) all cash, cash equivalents (other than the cash
and cash equivalents of MHP and cash described in Section
5.21), funds held by trustee (including funds held in
self-insurance trusts), and cost report settlements;
(c) inventory and supplies disposed of or exhausted
after the Effective Date and prior to the Closing Date in the
ordinary course of the Hospital Businesses, and Seller Assets
transferred or disposed of in accordance with Section
5.02(e);
(d) Cost Report settlement receivables, and all
appeals and appeal rights relating thereto;
(e) all funds held by trustees pursuant to bond
indentures of Sellers;
(f) all membership, ownership or investment
interests of any Seller in any other Seller, in the
Foundation and, subject to Section 2.05(h), in the RML
Partnership;
(g) all assets and properties to be contributed by
Sellers to the Foundation, which are listed or described on
Schedule 2.02(g);
(h) the real estate and improvements, if any,
described on Schedule 2.02(h);
(i) any asset that would revert to Seller or a
Subsidiary as employer upon the termination of any Employee
Benefit Plan, including assets representing a surplus or
overfunding of any Employee Benefit Plan;
(j) all claims, rights, interests and proceeds with
respect to refunds of Taxes (including property taxes) with
respect to periods ending on or prior to the Closing Date,
and the right to pursue appeals of same;
(k) all restricted assets listed on Schedule 5.21;
and
(l) any other assets identified in this Agreement as
Excluded Seller Assets or excluded by mutual written
agreement of the Parties.
2.03. Assumed Liabilities. As of the Closing Date, Buyer shall assume
the Assumed Liabilities.
2.04. Excluded Liabilities. The Parties acknowledge and agree that the
sale to Buyer of the Subsidiary Assets has been structured for the benefit of
Sellers as a sale of Sellers' direct or indirect ownership interests in the
Subsidiaries, that by operation of law as a result of such sale Buyer will
assume liabilities of the Subsidiaries which the Parties do not intend for
Buyer to assume or be responsible and that, as among the Parties, such
liabilities shall not constitute Assumed Liabilities but shall be Excluded
Liabilities. Under no circumstance shall Buyer assume or be obligated to pay,
and none of the Seller Assets or Subsidiary Assets shall be or become liable
for or
14
subject to any of the Excluded Liabilities, including the following, which
shall be, become and remain liabilities of Sellers:
(a) all liabilities accrued on the Closing Balance
Sheets other than those included in Net Working Capital;
(b) liabilities or obligations of Sellers or the
Subsidiaries for Taxes in respect of periods ending on or
prior to the Closing Date or resulting from the consummation
of the transactions contemplated herein;
(c) liabilities or obligations associated with any
Excluded Seller Assets arising with respect to or otherwise
attributable to any Excluded Seller Assets;
(d) the outstanding principal amount of, any accrued
but unpaid interest on, or expenses arising with respect to
any and all indebtedness of Sellers or the Subsidiaries for
borrowed money;
(e) liabilities or obligations arising under any
Assumed Contract before the Closing Date or resulting from
any breach or default by any Seller or Subsidiary prior to
the Closing Date of any Assumed Contracts or other Assumed
Liabilities, liabilities arising out of the assignment to
Buyer at Closing of any Assumed Contract, and liabilities
arising under any Contracts not assumed by Buyer;
(f) liabilities or obligations arising out of or in
connection with claims, litigation or proceedings described
in Schedule 3.23, and claims, litigation and proceedings
(whether instituted prior to or after Closing) for acts or
omissions which allegedly occurred prior to the Closing Date,
including litigation and other actions related to all peer
review activities at the Hospital Businesses prior to the
Closing Date;
(g) liabilities or obligations under the Xxxx-Xxxxxx
Act or other restricted grant or loan programs;
(h) except to the extent included in Net Working
Capital on the Closing Balance Sheets and assumed by Buyer
with a Purchase Price credit pursuant to Section 2.05(c),
liabilities or obligations to Sellers' employees, Employee
Benefit Plans, the Internal Revenue Service, PBGC or any
other Governmental Authority, arising from or relating to
periods prior to Closing (whether or not triggered by the
transactions contemplated by this Agreement), including
liabilities or obligations arising under any Employee Benefit
Plan, EEOC claim, unfair labor practice, and wage and hour
practice;
(i) Cost Report settlement payables relating to all
Cost Report periods ending on or before the Closing Date;
15
(j) penalties, fines, settlements, interest, costs
and expenses arising out of or incurred as a result of any
actual or alleged violation by any Seller of any Legal
Requirement; and
(k) the Excluded Contracts listed on Schedule
2.04(k).
2.05. Purchase Price; Purchase Price Adjustment.
(a) Subject to the terms and conditions of this
Agreement, in reliance upon the representations, warranties
and covenants of Sellers herein set forth, and as
consideration for the sale and purchase of the Assets, at
Closing, Buyer shall assume the Assumed Liabilities and shall
tender to Sellers as the purchase price (the "Purchase
Price") Two Hundred Nine Million, Nine Hundred Ninety Nine
Thousand, Five Hundred Thirty Six and Four/100 Dollars
($209,999,536.04), provided that if the Adjusted EBITDA for
the fiscal year ending September 30, 1999 is less than
$23,000,000, then Sellers and the Foundation shall pay Buyer
the amount determined as follows: (i) $23,000,000 minus the
Adjusted EBITDA for the fiscal year ending September 30,
1999, times (ii) seven.
(b) [Intentionally Omitted]
(c) No more than five business days prior to the
Closing Date, Buyer and Sellers shall agree on the value of
prepaid expenses and "other current assets" in Net Working
Capital in respect of which Buyer will receive an economic
benefit.
(d) Buyer shall pay to Sellers and the Foundation at
Closing an amount (the "Cash Portion of the Purchase Price")
equal to the Purchase Price minus (i) the net book value as
of the Closing Date of any long-term indebtedness or
capitalized lease obligations of Sellers (including the
current portions thereof) that Buyer may agree to assume at
Closing, and (ii) all vacation, holiday and sick leave
accumulations of the Hired Employees, and related Taxes
thereon to the extent not included in Net Working Capital
which liabilities will be assumed by Buyer at Closing and
(iii) $9,999,536.04, payable in shares of Common Stock of
Vanguard (valued by Buyer at the same price per share as is
paid by Vanguard's shareholders in connection with the
Closing) (the "Common Shares").
(e) The Purchase Price shall be calculated by Buyer
and Sellers at Closing from the relevant entries in the
Interim Closing Balance Sheets (as adjusted to reflect the
matters discussed in Section 2.05(c)) and estimates of fees,
expenses and other items as of the Closing Date. If the Net
Working Capital on the Interim Closing Balance Sheets is less
than $26,527,000, Sellers shall deliver to Buyer cash in an
amount equal to the difference between $26,527,000 and the
Net Working Capital on the Interim Closing Balance Sheets. If
the Net Working Capital on the Interim Closing Balance Sheets
is greater than $26,527,000, Buyer shall deliver to Sellers
cash in an amount equal to the difference between the Net
Working Capital on the Interim Closing Balance Sheets and
$26,527,000. Within 60 days after the Closing Date, Sellers
will deliver to Buyer the Closing Balance Sheets, prepared in
16
accordance with generally accepted accounting principles
consistently applied and including the balance sheets of the
Hospital Businesses owned by Sellers, and the Net Working
Capital shall be recalculated to reflect the difference
between the Net Working Capital on the Interim Closing
Balance Sheets and on the Closing Balance Sheets (the
"Purchase Price Adjustment"), provided that such
recalculation shall be dollar-for-dollar in the differences
between such balance sheets and no consideration in the
recalculations shall be given to the fact that under
generally accepted accounting principles consistently applied
a materiality standard applies to such Financial Statements.
If Buyer disputes any entry in the Closing Balance Sheets
relevant to the calculation of the Purchase Price Adjustment,
and/or disputes the value of the inventory and supplies, and
such dispute is not resolved to the mutual satisfaction of
Sellers and Buyer within 90 days after the Closing Date,
Sellers and Buyer each shall have the right to require that
such dispute be submitted to Ernst & Young, or to such other
certified public accounting firm as Sellers and Buyer may
then mutually agree upon in writing, in either case acting as
experts and not as arbitrators to resolve the computation or
verification of the disputed Closing Balance Sheets entries
in accordance with the provisions of this Agreement and
otherwise where applicable in accordance with generally
accepted accounting principles applied on a consistent basis.
The fees and expenses of any such submission to an accounting
firm shall be split 50/50 between Sellers and Buyer.
(f) The Common Shares issuable as part of the
Purchase Price shall be issued at Closing to the Foundation
and Buyer shall issue and deliver a stock certificate at
Closing to the Foundation evidencing its ownership of the
Common Shares, subject to the legends required by the
Shareholders Agreement and Surviving Shareholders Agreement.
The Cash Portion of the Purchase Price payment required by
this Section shall be paid as follows: (i) $100,000,000 shall
be paid to the Foundation by wire transfer of immediately
available funds; and (ii) the balance of the Purchase Price
shall be paid by wire transfer of immediately available funds
to an account or accounts designated by Sellers, and the
Parties shall execute such receipts or other acknowledgments
as are reasonably necessary to evidence payment of the
Purchase Price. Sellers shall pay Buyer, or Buyer shall pay
Sellers, as the case may be, the Purchase Price Adjustment,
if any, within five business days after its determination.
2.06. Prorations. At Closing, and to the extent not included in Net
Working Capital, Buyer and Sellers shall prorate real estate and personal
property lease payments, real estate and personal property Taxes and other
assessments, and all other income and expenses (including utilities) with
respect to the Hospital Businesses which are normally prorated upon a sale of
assets of a going concern, provided that if, as a result of the transactions
contemplated by this Agreement, Sellers become liable for real estate or
personal property Taxes for which Sellers otherwise would be exempt, such Taxes
shall not be prorated but shall be paid by Buyer. If any payment in lieu of
Taxes made by Sellers prior to Closing is credited against real estate Taxes
for which Buyer will be liable, the amount of such credit will be paid to
Sellers upon its receipt by Buyer.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
17
Each Seller makes the following representations and warranties to
Buyer and Vanguard on and as of the Effective Date, subject to the Schedules
attached hereto and incorporated by reference herein. Each Seller shall be
deemed to make such representations and warranties again at and as of the
Closing Date:
3.01. Organization. Each Seller is duly organized and validly existing
in good standing under the laws of the State in which it is incorporated. None
of the Sellers is licensed, qualified or admitted to do business in any
jurisdiction other than the State in which it is incorporated in which the
ownership, use or leasing of any of their respective assets or properties, or
the conduct or nature of their respective businesses, makes such licensing,
qualification or admission necessary.
3.02. Powers; Consents; Absence of Conflicts, Etc. Each of the Sellers
has the requisite power and authority to conduct its businesses as now being
conducted, to enter into this Agreement and to perform its obligations
hereunder (the board of directors of each of the Sellers having approved their
execution of this Agreement and the sale of the Seller Assets to Buyer
hereunder) and, except as described in Schedule 3.02, the execution, delivery
and performance by each of the Sellers of this Agreement and the Closing
Documents and the consummation of the transactions contemplated herein:
(a) are within such Seller's corporate powers, are not in
contravention of any material Legal Requirement or of the terms of its
articles of incorporation, bylaws and other governing documents, if
any, as amended to date, and have been duly authorized by all
appropriate corporate and member action;
(b) do not conflict with, result in any breach or
contravention of, or permit the acceleration of the maturity of, any
material liabilities of any Seller or Subsidiary (other than Excluded
Liabilities), and do not create or permit the creation of any
Encumbrance on or affecting any of the Assets;
(c) do not violate any Legal Requirement to which any of the
Sellers or the Assets may be subject (including any bulk transfer or
similar law); and
(d) do not conflict with or result in a material breach or
violation of any Contract to which any Seller or Subsidiary is a party
or by which it is bound (other than Excluded Liabilities).
3.03. Binding Agreement. This Agreement and each of the Closing
Documents to which each of the Sellers is or becomes a party are (or upon
execution will be), assuming due and valid execution by Buyer, valid and
legally binding obligations of such Seller, enforceable against such Seller in
accordance with the respective terms hereof or thereof, except as
enforceability may be restricted, limited or delayed by applicable bankruptcy
or other laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
3.04. Subsidiaries and Third Party Rights.
18
(a) Except as described in Schedules 3.04(a) and 3.04(b), no
Affiliate of any Seller conducts any Hospital Businesses, Sellers have
no subsidiaries or equity interests in any Persons that conduct any
Hospital Businesses, and none of the Foundation, RMHP Corporation and
the RML Partnership conduct, or own or control any assets used in the
conduct of, the Hospital Businesses. Except for the Investments and
the other instruments described on Schedule 2.01(j), Sellers hold no
Investments that are recorded as assets of the Hospital Businesses.
There are no Contracts with, or rights of, any Person to acquire,
directly or indirectly, any material Assets, or any interest therein.
(b) Each of the Subsidiaries that is a corporation is duly
organized, validly existing and in good standing under the laws of the
State of Illinois. Each of the Subsidiaries that is a limited
liability company is duly organized, validly existing and in good
standing under the laws of the State of Illinois. Each of the
Subsidiaries that is a general or limited partnership is duly
organized, validly existing and in good standing under the laws of the
State of Illinois. All shares of capital stock or other beneficial
interests of each of the Subsidiaries are owned beneficially and of
record by Sellers or another Subsidiary, as specified in Schedule
3.04(b). Each of the Subsidiaries is duly licensed, qualified or
admitted to do business and is in good standing in the jurisdictions
specified in Schedule 3.04(b) and such jurisdictions are the only
jurisdictions in which the ownership, use or leasing of such Person's
assets or properties, or the conduct or nature of its business, makes
such licensing, qualification or admission necessary. The information
concerning each Subsidiary set forth on Schedule 3.04(b) is complete
and accurate in all respects. Complete and genuine copies of the
articles or certificate of incorporation, bylaws and all other
agreements, instruments and documents relating to the creation and
governance of each of the Subsidiaries have been provided to Buyer.
(c) The minute books and other similar records each of the
Subsidiaries have been made available to Buyer prior to the Effective
Date and contain a true, correct and complete record of all action
taken at all meetings, and by all written consents in lieu of
meetings, of the stockholders, the board of directors and committees
of the board of directors of such Person. The stock transfer ledgers
and other similar records of each of the Subsidiaries have been made
available to Buyer, are true, correct and complete, and accurately
reflect all transactions in the capital stock of such Person.
(d) All outstanding shares of capital stock of each of the
Subsidiaries that are corporations are duly authorized, validly
issued, outstanding, fully paid and non-assessable. Sellers own the
shares beneficially and of record, free and clear of all Encumbrances.
Sellers have full voting power over the shares, subject to no proxy,
shareholders' agreement, voting trust or other agreement relating to
the voting of any of the shares.
(e) Except as described on Schedule 2.01(g), there are no
outstanding securities, rights, subscriptions, warrants, calls,
options, "phantom" stock rights or (except for this Agreement) other
Contracts of any kind that give any Person (other than a Seller prior
to Closing) the right to (i) purchase or otherwise receive or be
issued any shares of capital stock of any Subsidiary or any security
or liability of any kind convertible into or exchangeable for any such
shares of any Subsidiary, (ii) receive any benefits or rights similar
to any rights
19
enjoyed by or accruing to the holder of shares of capital stock of any
Subsidiary, or (iii) participate in the equity, income or election of
directors or officers of any Subsidiary. Other than this Agreement and
except as described on Schedule 2.01(g), there is no Contract between
any Seller and any Person with respect to the disposition of the
shares of any Subsidiary.
3.05. Legal and Regulatory Compliance. Except as described in Schedule
3.05, each Seller and each Subsidiary is in compliance with all Legal
Requirements, and has timely filed all reports, data and other information
required to be filed with Governmental Authorities, except where a failure to
be in compliance or file timely would not have a Material Adverse Effect.
Except as described on Schedule 3.05, no Seller and no Subsidiary has received
notice from any Person of any proceeding or investigation by Governmental
Authorities alleging or based upon a violation of any Legal Requirements that
(i) is currently pending or (ii) if not currently pending, would not otherwise
have a Material Adverse Effect. To the knowledge of Sellers, no Seller and no
Subsidiary is threatened by any Person with, any proceeding or investigation by
Governmental Authorities alleging a violation of any Legal Requirements.
3.06. Financial Statements. Attached as Schedule 3.06 are copies of
the Audited Financial Statements, the MHSC Financial Statements, and the
Interim Financial Statements. The Financial Statements fairly present the
financial condition and results of operations of the Hospital Businesses as of
the respective dates thereof and for the periods therein referred to, all in
accordance with generally accepted accounting principles, subject, in the case
of the Interim Financial Statements and Closing Balance Sheets, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (which, if
presented, would not differ materially from those included in the Audited
Financial Statements); and the Financial Statements reflect the consistent
application of such accounting principles throughout the periods involved. All
Subsidiaries other than MMSI are accounted for by Sellers in the Financial
Statements using the equity method (as such term is defined by generally
accepted accounting principles).
3.07. Undisclosed Liabilities. To the knowledge of Sellers, Schedule
3.07 contains an accurate description of all material liabilities of Sellers
and the Subsidiaries not included in the Audited Financial Statements, whether
accrued, absolute, contingent or otherwise, except (i) liabilities incurred in
the ordinary course of business since the date of the Audited Financial
Statements and (ii) other liabilities disclosed in the Schedules.
3.08. Recent Activities. Except as described in Schedule 3.08 since
June 30, 1999:
(a) no material adverse change has occurred in the financial
condition, assets, liabilities (contingent or otherwise), working
capital reserves, income or prospects of the Hospital Businesses,
taken as a whole;
(b) no material damage, destruction or loss (whether or not
covered by insurance) has occurred affecting the Assets;
20
(c) except in the ordinary course of the Hospital Businesses
in accordance with existing Hospital personnel policies or otherwise
disclosed on Schedule 3.18, no Seller or Subsidiary has increased or
agreed to increase the compensation payable to any of the employees or
agents of the Hospital Businesses or made or agreed to make any bonus
or severance payment to any of the employees or agents of the Hospital
Businesses, and no Seller or Subsidiary has employed any additional
management personnel in respect of the Hospital Businesses;
(d) no labor dispute, enactment of state or local law,
promulgation of state or local regulation, or other event or condition
has occurred materially adversely affecting any of the Hospital
Businesses;
(e) no Seller or Subsidiary has sold, assigned, transferred,
distributed or otherwise disposed of any of the Assets, except in the
ordinary course of the Hospital Businesses;
(f) no Encumbrance has been imposed on any of the Assets;
(g) no Seller or Subsidiary has canceled or waived any rights
in respect of the Assets, except in the ordinary course of the
Hospital Businesses;
(h) there has been no change in any accounting method, policy
or practice of any Seller or Subsidiary with respect to the Hospital
Businesses;
(i) other than compensation paid in the ordinary course of
employment, no Seller or Subsidiary has paid any amount to, sold any
Assets to, or entered into any Contract with, any officer, director,
trustee, shareholder, partner or member of any Seller or Subsidiary,
or any Affiliate of any such Person or of any Seller or Subsidiary;
(j) no Seller or Subsidiary has paid or agreed to pay to any
Person damages, fines, penalties or other amounts in respect of actual
or alleged violation of any Legal Requirement;
(k) no Seller or Subsidiary has terminated, amended or
otherwise modified any Employee Benefit Plan or Other Plan, except for
amendments required to comply with applicable Legal Requirements; and
(l) no Seller or Subsidiary has entered into or agreed to
enter into any transaction outside the ordinary course of the Hospital
Businesses which may cause a liability or obligation in excess of
$10,000.
3.09. Accounts Receivable; Inventory.
21
(a) The Accounts Receivable, to the extent uncollected, are
valid and existing and represent monies due for goods sold and
delivered and services performed in bona fide commercial transactions
and are not subject to any Encumbrances; there are no refunds,
discounts or setoffs payable or assessable with respect to the
Accounts Receivable not reflected in the Financial Statements.
(b) All Assets consisting of inventory and supplies are
carried at cost on a first-in, first-out basis and are properly stated
in the Audited Financial Statements as of the dates thereof. All items
of inventory and supplies on hand consist of items of a quality usable
or saleable in the ordinary course of business, except for those items
which are obsolete, below standard quality or in the process of repair
and for which adequate reserves have been provided in the Financial
Statements. The quantities of all inventory and supplies are
reasonable and justified under the normal operations of the Hospital
Businesses.
3.10. Equipment. Schedule 2.01(b) is a depreciation schedule as of the
date set forth therein that, to Sellers' best knowledge, takes into
consideration all the equipment associated with, or constituting any part of,
the Seller Assets. Schedule 3.10 is a depreciation schedule as of the date set
forth therein that, to Sellers' best knowledge, takes into consideration all
the equipment associated with, or constituting any part of, the Subsidiary
Assets. Since June 30, 1999, no Seller or Subsidiary has sold or otherwise
disposed of any equipment of the Hospital Businesses having an original cost in
excess of $5,000 except with a comparable replacement thereof. To Sellers'
knowledge, all equipment used in the operations of the Hospital Businesses,
whether reflected in the Financial Statements or otherwise, is well maintained
and in good operating condition, except for reasonable wear and tear. All
medical and leased equipment has been maintained in accordance with
manufacturer and lessor requirements, and maintenance logs or journals have
been maintained in the ordinary course of business at all times.
3.11. Title to Personal Property. Sellers own and hold good and valid
title or leasehold title to all Seller Assets other than the Seller Real
Property, free and clear of any Encumbrances other than the Encumbrances
described in Schedule 3.11(i) and the Subsidiaries own and hold, and at Closing
will own and hold, good and valid title or leasehold title to all Subsidiary
Assets other than the Subsidiary Real Property, free and clear of any
Encumbrances other than the Encumbrances described in Schedule 3.11(ii). At
Closing Sellers will convey to Buyer good and valid title to all Seller Assets
other than the Seller Real Property, free and clear of any Encumbrances other
than the Permitted Personal Property Encumbrances.
3.12. Real Property.
(a) Sellers own fee simple or leasehold title (as the case
may be) to the Real Property described in Schedule 2.01(a), together
with all buildings, improvements and fixtures thereon and all
appurtenances and rights thereto, free and clear of any Encumbrances
other than the Encumbrances described in Schedule 3.12(a)(i).
Subsidiaries own fee simple or leasehold title (as the case may be) to
the Real Property described in Schedule 3.12(a)(ii), together with all
buildings, improvements and fixtures thereon and all appurtenances and
rights thereto, free and
22
clear of any Encumbrances other than the Encumbrances described in
Schedule 3.12(a)(iii).
(b) The Real Property comprises all of the real property
owned or leased by Sellers and the Subsidiaries which is associated
with or employed in the operation of the Hospital Businesses.
(c) At Closing Sellers will convey to Buyer good and
marketable fee simple or leasehold title (as the case may be) to the
Seller Real Property, free and clear of any Encumbrances other than
the Permitted Real Property Encumbrances.
(d) Except as described on Schedule 3.12(d), to Sellers'
knowledge, the buildings standing on the Real Property are in a state
of good condition and repair, are structurally sound, and in need of
no maintenance or repairs except for ordinary, routine maintenance.
(e) No Seller or Subsidiary has received notice of
condemnation or similar proceeding relating to the Real Property or
any part thereof.
(f) To Sellers' knowledge, no part of the Real Property
contains, is located within or abuts any flood plain, navigable water
or other body of water, tideland, wetland, marshland or any other area
which is subject to special State, federal or municipal regulation,
control or protection.
(g) Except for those tenants in possession of the Real
Property under Contracts described in Schedule 3.18, there are no
Persons in possession of, or claiming any possession, adverse or not,
to or other interest in, any portion of the Real Property other than
Sellers or the Subsidiaries, whether as lessees, tenants at
sufferance, trespassers or otherwise.
(h) No tenant is entitled to any rebate, concession, or free
rent, other than as reflected in the Contract with such tenant; no
commitments have been made to any Tenant for repairs or improvements
other than for normal repairs and maintenance in the future or
improvements required under Contracts with tenants; and no rents due
under any of the Contracts with tenants have been assigned or
hypothecated to, or encumbered by, any Person.
(i) Except as set forth on Schedule 3.12(i), all painting,
repairs, alterations and other work required to be performed by
Sellers and the Subsidiaries as landlord under each of the Contracts
with tenants, and all other material obligations of Sellers and the
Subsidiaries as landlord required to be performed thereunder, have
been performed in all material respects.
(j) To Sellers' knowledge, all essential utilities (including
water, sewer, gas, electricity and telephone service) are available to
the Real Property, as currently developed by Sellers and the
Subsidiaries, and, to Sellers' knowledge, there are no
23
conditions existing which could result in the termination or reduction
of the current access from the Real Property to existing roadways.
3.13. Environmental Matters.
(a) To Sellers' knowledge and except as described on Schedule
3.13(a), the Hospital Businesses are in compliance in all material
respects with Environmental Laws. Except as described on Schedule
3.13(a), no Seller or Subsidiary has received any written
communication (or reduced to writing any oral communication) from any
Person alleging that, with respect to the conduct of the Hospital
Businesses, any Seller or Subsidiary is not in material compliance
with Environmental Laws. Each Seller and Subsidiary has all material
permits, licenses and approvals required under applicable
Environmental Laws to own the properties of the Hospital Businesses
and to conduct the Hospital Businesses thereon. All licenses, permits
and other authorizations of Governmental Authorities currently held by
Sellers and the Subsidiaries related to the Hospital Businesses
pursuant to the Environmental Laws are identified in Schedule 2.01(g).
(b) With respect to the Hospital Businesses and except as
described on Schedule 3.13(b), there is no Environmental Claim pending
or to Sellers' knowledge threatened against any Person with respect to
the Hospital Businesses, which liability has been retained or assumed
by any Seller or Subsidiary either contractually or by operation of
law.
(c) To Sellers' knowledge and except as described on Schedule
3.13(c), no actions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge or disposal of
any Materials of Environmental Concern, have occurred at the Hospital
Businesses that could form the basis of any Environmental Claim
against any Person whose liability for any Environmental Claim any
Seller or Subsidiary has or may have retained or assumed either
contractually or by operation of law.
(d) Without in any way limiting the generality of the
foregoing, (i) all on-site and off-site locations where Sellers store,
dispose or arrange for the disposal of Materials of Environmental
Concern for the Hospital Businesses are identified in Schedule
3.13(d), (ii) all Contracts dealing with the removal, storage,
disposal and handling of Materials of Environmental Concern of the
Hospital Businesses are listed in Schedule 3.18, and (iii) all
underground storage tanks, and the capacity and contents of such
tanks, located on the Real Property are identified in Schedule
3.13(d).
3.14. Intellectual Properties, Computer Software, etc.
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(a) Except as described in Schedule 3.14 and except for
customary licensing and maintenance fees payable under the Contracts,
Sellers and the Subsidiaries have the right to use, free and clear of
any royalty or other payment obligations, claims of infringement or
other liens, (i) all Intellectual Properties used or needed by Sellers
and/or the Subsidiaries in the conduct of the Hospital Businesses, and
(ii) all software, hardware application programs and similar systems
owned by or licensed under Contracts to Sellers and/or the
Subsidiaries and used in the conduct of the Hospital Businesses; and
no Seller or Subsidiary is in conflict with or in violation or
infringement of, nor has any Seller or Subsidiary received a notice
alleging any conflict with or violation or infringement of, any rights
of any other Person with respect to any such Intellectual Properties
or software, hardware, application programs or similar systems. To
Sellers' knowledge, no other Person is in conflict with or in
violation or infringement of any Seller's or Subsidiary's rights in
such Intellectual Properties or software, hardware, application
programs or similar systems. Except as set forth in Schedule 3.14 and
except for customary licensing and maintenance fees payable under the
Contracts, subsequent to the Closing and without further action or the
payment of additional fees, royalties or other compensation to any
Person, Buyer will be entitled to unrestricted use of all Intellectual
Properties, software, hardware, application programs and similar
systems currently used in the Hospital Businesses.
(b) Sellers make no representation or warranty, whether
implied or express, regarding the year 2000 compliance of any
software, hardware, application programs or similar systems used in
the conduct of the Hospital Businesses. Sellers have developed a plan
to determine whether and the extent to which Sellers' and the
Subsidiaries' software, hardware, application programs and similar
systems used in the conduct of the Hospital Businesses are year 2000
compliant and, pursuant to such plan, have conducted an assessment and
inventory of all material year 2000 compliant and non-compliant
software, hardware, application programs and similar systems
(including clinical and non-clinical applications of Sellers and the
Subsidiaries and programs, applications and systems of third party
vendors with which Sellers' and the Subsidiaries' systems are
interfaced). Action plans to implement year 2000 compliant software,
hardware, application programs and similar systems have been prepared,
and Sellers have budgeted for implementation of such recommendations
and action plans in such a manner that will resolve all critical
non-compliant applications in a timely manner so as not to disrupt
patient care and financial and business office accounting. Sellers
have delivered to Buyer complete and genuine copies of Sellers' plan,
recommendation of the information steering committee and action plans
relating to year 2000 compliance.
3.15. Insurance. Schedule 3.15 lists all insurance arrangements,
including self-insurance, in place for the benefit of the Assets and the
conduct of the Hospital Businesses. With respect to third party insurance,
Schedule 3.15 sets forth the name of each insurer, whether such insurer is an
Affiliate of any Seller, and the number, coverage, limits, term and premium for
each policy of insurance purchased or held by Sellers and the Subsidiaries
covering the ownership and operation of the Assets and the Hospital Businesses.
All of such policies are now and until Closing
25
will remain valid, outstanding, in full force and effect, and enforceable with
no premium arrearages. No insurance carrier has canceled or reduced, or given
notice of its intention to cancel or reduce, any insurance coverage with
respect to the Hospital Businesses, and, to Sellers' knowledge, there exist no
grounds to cancel or avoid any such policies or the coverage provided thereby.
True and correct copies of all such policies and any endorsements thereto have
been delivered to Buyer.
3.16. Permits and Licenses. Schedule 2.01(g) contains an accurate list
and summary description of all material licenses, permits, franchises and
certificates of need (including applications therefor) owned or held by Sellers
and the Subsidiaries relating to the ownership, development or operations of
the Hospital Businesses and the Assets, all of which, to Sellers' knowledge,
are in good standing and not subject to meritorious challenge. The Hospital is
duly licensed as an acute care hospital by the appropriate state agencies, and
all ancillary departments operated by the Hospital that are required to be
separately licensed are duly licensed by the appropriate state agencies. Except
as described Schedule 3.16, the Hospital Businesses are in compliance with such
licensing requirements, except to the extent noncompliance would not have a
Material Adverse Effect. There are no provisions in or Contracts relating to
any such licenses, permits and certificates of need (including applications
therefor) which would preclude or limit Buyer from operating the Hospital
Businesses as currently operated and using all the beds of the Hospital as they
are currently classified. Sellers have delivered to Buyer complete and genuine
copies of the latest licensure, survey and/or fire marshal reports of the
Hospital Businesses and plans of correction or responses thereto. All material
violations set forth in such reports, if any, have been or by Closing will be
corrected by such Seller at its expense. Sellers and the Subsidiaries have
complied in all material respects with the requirements and conditions of all
certificates of need (including applications therefor, non-review letters and
implemented and unimplemented CONs if not lapsed and unexpired). To Sellers'
knowledge, each unimplemented Certificate of Need (which is designated as such
in Schedule 2.01(h)) is valid and in good standing and is not subject to
meritorious challenge, and all related progress and similar reports required to
be filed have been filed. To Sellers' knowledge, each implemented Certificate
of Need has been implemented in accordance with its terms.
3.17. Government Payment Programs; Accreditation. The Hospital is
qualified for participation in, and has current and valid provider Contracts
with, the Government Payment Programs and/or their fiscal intermediaries or
paying agents and comply in all material respects with the conditions of
participation therein. The Hospital is entitled to payment under the Government
Payment Programs for services rendered to qualified beneficiaries and has
received all approvals or qualifications necessary for capital reimbursement on
its Seller Assets. The Cost Reports were filed when due for all Cost Report
periods through September 30, 1998. The Cost Reports have been audited and
Notices of Program Reimbursement issued for all Cost Report periods through
September 30, 1996. All amounts shown as due from Sellers in the Cost Reports
were remitted with such reports and all amounts shown in the Notices of Program
Reimbursement as due have been paid. Except to the extent liabilities and
contractual adjustments of the Hospital under the Government Payment Programs
have been properly reflected and adequately reserved in the Financial
Statements, to the knowledge of Sellers, the Hospital Businesses have not
received or intentionally or recklessly submitted any claim for payment in
excess of the amount provided by law or applicable Seller Contract and no
Seller or Subsidiary has received notice of any dispute or claim by any
Governmental Authority, fiscal intermediary or other Person regarding the
Government
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Payment Programs or Sellers' participation therein relating to the
Hospital. The Hospital is duly accredited with no contingencies by the
accrediting organizations named on Schedule 3.17 for the periods specified
thereon. Sellers have delivered to Buyer complete and genuine copies of the
most recent accreditation survey reports, deficiency lists, statements of
deficiency, plans of correction and similar materials. Sellers have taken or
are taking all reasonable steps to correct all material deficiencies noted
therein.
3.18. Agreements and Commitments. Schedule A and Schedule 3.18 sets
forth certain information regarding the Contracts, including the Contracts
described below that relate to the Hospital Businesses. Sellers have made
available for review or have delivered to Buyer complete and genuine copies of
the Contracts. Except for Contracts described on Schedule A and Schedule 3.18:
(a) there are no Contracts affecting the ownership or use of,
title to or interest in any Real Property;
(b) there are no Contracts with referral sources to any of
the Hospital Businesses and no Contracts between any Seller or
Subsidiary and any physician or physician group who is (or whose
members are) employees of Sellers or any Subsidiary or members of the
medical staff of any of the Hospital Businesses;
(c) there are no Contracts relating to information and data
processing systems, hardware and software utilized in connection with
the Hospital Businesses;
(d) there are no collective bargaining agreements or other
Contracts with Hospital labor unions or other employee representatives
or groups;
(e) there are no Contracts with directors, trustees,
shareholders, partners, Affiliates, officers or other individual
employees of any Seller or Subsidiary relating to the Hospital
Businesses;
(f) there are no requirements or exclusive Contracts or
Contracts prohibiting or limiting competition or the conduct of any
lawful business by the Hospital Businesses between any Seller or
Subsidiary and any Person;
(g) there are no Contracts providing for payments based in
any manner on the revenues, purchases or profits of the Hospital
Businesses or any part thereof; and
(h) there are no Contracts other than Immaterial Contracts.
3.19. The Assumed Contracts. Except as described in Schedule 3.19:
(a) the Assumed Contracts constitute lawful, valid and
legally binding obligations of the parties thereto and are enforceable
in accordance with their terms, except as would not have a Material
Adverse Effect;
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(b) each Assumed Contract is in full force and effect and
constitutes the entire agreement by and between the parties thereto,
except as would not have a Material Adverse Effect;
(c) in all material respects, all obligations required to be
performed under the Assumed Contracts by the parties thereto on or
prior to the Effective Date have been performed, and no event has
occurred or failed to occur which constitutes, or with the giving of
notice, the lapse of time or both would constitute, a default by any
Seller under the Assumed Contracts, except as would not have a
Material Adverse Effect;
(d) no Assumed Contract prohibits or requires the consent of
any Person to the assignment to and assumption by Buyer of the Assumed
Contract;
(e) no Assumed Contract will prohibit competition or restrict
the ability of Buyer to engage in any lawful business after Closing
(including ambulatory surgery centers and home health services); and
(f) the assignment of any Assumed Contract to and assumption
of such Assumed Contract by Buyer will not give a third party the
right to terminate such Assumed Contract, or result in any penalty or
premium to, or adverse change in the rights, remedies, benefits and
obligations of, any Seller or Subsidiary.
3.20. [Intentionally Omitted]
3.21. Employees and Employee Relations.
(a) Schedule 3.21 sets forth (i) a complete list (as of the
date set forth therein) of names and positions of all full-time and
part-time non-physician employees of Sellers and the Subsidiaries
employed in the operation of the Hospital Businesses, and (ii) a
separate complete list (as of the date set forth therein) of names of
all full-time and part-time physician employees of Sellers and the
Subsidiaries (indicating in both lists whether each employee is
part-time or full-time, whether such employee is employed under
written Contract, and, if such employee is not actively at work, the
reason therefor). Schedule 3.21 also sets forth the name of each
employee whose employment was terminated during the 90 day period
ending on the Effective Date and the reason for such termination.
(b) To Sellers' knowledge, Sellers' and the Subsidiaries'
relations with their employees are good. There is no pending or, to
Sellers' knowledge, threatened employee strike, work stoppage or
slowdown, labor dispute or unfair labor practices at the Hospital
Businesses. No employees of any Seller are represented by, or have
made demand for recognition of, a labor union or employee
organization, and to Sellers' knowledge no other union organizing or
collective bargaining activities by or with respect to any employees
of any Seller are taking place.
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(c) Except to the extent included in Net Working Capital or
as otherwise described in Schedule 3.18 or Schedule 3.21, no present
or former employee of the Hospital or the Hospital Businesses has or
will have as a result of the consummation of the transactions
contemplated by this Agreement any claim against Buyer on the account
of or for (i) overtime pay, (ii) wages, salary, bonuses or amounts due
under any Employee Benefit Plan or Other Plan, or (iii) sick pay,
severance pay, claim for unlawful discharge, holiday or vacation pay
or paid or personal time off.
3.22. Employee Benefit Plans.
(a) Schedule 3.22 contains a summary description of each
Employee Benefit Plan and Other Plan that any Seller or any member of
the Controlled Group that includes any Seller maintains or to which it
contributes (including employee elective deferrals). Since January 1,
1999 and except as described in Schedule 3.18 and Schedule 3.22, no
Seller or Subsidiary has instituted any new Employee Benefit Plan or
Other Plan for the benefit of any of their respective employees.
(b) Each Employee Benefit Plan (and related trust, insurance
contract or fund) complies in all material respects with applicable
Legal Requirements, and has been administered in all material respects
in accordance with applicable Legal Requirements. All required reports
and descriptions (including Form 5500 Annual Reports, Summary Annual
Reports, and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit Plan. Sellers have
made available or delivered to Buyer complete and genuine copies of
the plan documents and summary plan descriptions, most recent
determination letters received from the Internal Revenue Service, most
recent Form 5500 Annual Report, and all related trust, insurance and
funding Contracts which implement each Employee Benefit Plan. Since
January 1, 1993, no Employee Benefit Plan has been audited by any
Governmental Authority and no notice that such an audit will or may be
conducted has been received by any Seller or Subsidiary.
(c) Each Employee Pension Benefit Plan intended to satisfy
the requirements of a qualified plan under section 401(a) of the Code
has received a favorable determination letter from the Internal
Revenue Service reflecting compliance at least through the
requirements imposed by the Tax Reform Act of 1986. All contributions
(including employer contributions and employee salary reduction
contributions) to each Employee Pension Benefit Plan that are required
to be paid have been paid, and all Seller contributions in respect of
periods ending the day prior to the Closing Date will be accrued on
the Closing Balance Sheets. The market value of all assets under each
Employee Pension Benefit Plan and the present value of all vested and
unvested liabilities thereunder have been determined as of a date not
less than six months prior to the Effective Date and, with respect to
each such Employee Pension Benefit Plan, as of such date of
determination the market value of such assets equals the present value
of all vested and unvested liabilities thereunder.
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(d) To Sellers' knowledge, the requirements of Part 6 of
Subtitle B to Title I of ERISA and of section 4980B of the Code have
been met with respect to each Employee Welfare Benefit Plan; all
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each Employee Welfare
Benefit Plan.
(e) To Sellers' knowledge, there have been no Prohibited
Transactions with respect to any Employee Benefit Plan that would
subject any Seller or any member of the Controlled Group that includes
any Seller to any liability; no ERISA Fiduciary has any material
liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any Employee Benefit Plan; no action, suit, proceeding,
hearing or investigation with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than
routine claims for benefits) is pending or to Sellers' knowledge
threatened; and to Sellers' knowledge there exists no basis for any
such action, suit, proceeding, hearing or investigation.
(f) No Employee Benefit Plan is a Defined Benefit Plan.
(g) No Seller, and no member of the Controlled Group that
includes any Seller, contributes to, ever has contributed to, or ever
has been required to contribute to any Multiple Employer Plan or any
Multiemployer Plan or has any liability (including withdrawal
liability) under any Multiple Employer Plan or any Multiemployer Plan.
No Seller, and no member of the Controlled Group that includes any
Seller, maintains or contributes, ever has maintained or contributed,
or ever has been required to maintain or contribute to any Employee
Welfare Benefit Plan providing medical, health or life insurance or
other welfare-type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with section 4980B of the Code).
3.23. Litigation and Proceedings. Schedule 3.23 contains an accurate
list and summary description of all claims, actions, suits, litigation,
arbitration, mediations, investigations and other proceedings pending against
or otherwise affecting any Seller or Subsidiary with respect to the Hospital
Businesses or the Assets and, in the case of uninsured matters, Schedule 3.23
also sets forth the reserves therefor included in the Financial Statements.
Except as described in Schedule 3.23, all such litigation, arbitration,
mediations and other proceedings are fully insured (except for applicable
deductibles) and no insurer has issued a "reservation of rights" letter or
otherwise qualified its obligation to insure and defend Sellers or any
Subsidiary against losses arising therefrom. Except as described in Schedule
3.23, (i) there are no claims, actions, suits, litigation, arbitration,
mediations, investigations or other proceedings pending, affecting or to
Sellers' knowledge threatened against any Seller or Subsidiary with respect to
the Hospital Businesses or the Assets, (ii) there are no claims, actions,
suits, litigation, arbitration, mediations, investigations or other proceedings
pending, affecting or to Sellers' knowledge threatened against any Seller or
Subsidiary which might have an adverse effect on the Hospital Businesses or the
Assets, and (iii) to Sellers' knowledge, there exist no facts that might form
the basis of any such claim, action, suit, litigation, arbitration, mediation,
investigation or other proceeding.
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3.24. Taxes.
(a) Each Seller and each Subsidiary has filed all Tax Returns
required to be filed by or on behalf of such entity, all such Tax
Returns are correct and complete in all material respects, and Sellers
or the Subsidiaries, as applicable, have duly paid or made provision
in the Financial Statements for the payment of all Taxes; no claim has
ever been made by a Governmental Authority in a jurisdiction where any
Seller or Subsidiary does not file Tax Returns that it is or may be
subject to Tax by that jurisdiction; and there are no Encumbrances on
any Assets that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Except as described on Schedule 3.24, each Seller and
Subsidiary has withheld proper and accurate amounts from its
employees' compensation in full and complete compliance with all
withholding and similar provisions of the Code and any and all other
applicable Legal Requirements, and has withheld and paid, or caused to
be withheld and paid, all Taxes on monies paid by Sellers and the
Subsidiaries to independent contractors, creditors and other Persons
for which withholding or payment is required by law.
(c) To Sellers' knowledge, no Governmental Authority intends
to assess any additional Taxes for any period for which Tax Returns
have been filed. Except as set forth on Schedule 3.24, there is no
dispute or claim concerning any Tax liability of Sellers or the
Subsidiaries either claimed or raised by any Governmental Authority in
writing, or as to which any Seller or Subsidiary has notice or
knowledge based upon personal contact with any agent of such
authority; Schedule 3.24 lists all federal, state, local and foreign
income Tax Returns filed with respect to Sellers and the Subsidiaries
for the last three complete fiscal years and for the current
year-to-date, and indicates those Tax Returns that have been audited
and those that currently are the subject of audit or that have not
been audited.
(d) There is not currently in effect any waiver of a statute
of limitations in respect of Taxes by any Seller or Subsidiary or any
Contract to extend the time with respect to a Tax assessment or
deficiency.
(e) No Seller or Subsidiary is a party to any Tax allocation
or sharing Contract; no Seller or Subsidiary is or has been a member
of an Affiliated Group filing a consolidated federal income Tax
Return.
(f) MHSC and XxxXxxx Hospital are corporations exempt from
federal and state income taxation, and each has received favorable
letters of determination from the Internal Revenue Service and the
State of Illinois regarding such Tax status.
(g) Except as described on Schedule 3.24, no Seller or
Subsidiary has or may have any liability for the Taxes of any Person
other than Sellers and the Subsidiaries under Internal Revenue Service
regulation 1.1502-6 (or any similar
31
provision of state, local, or foreign law), as a transferee or
successor, by Contract or otherwise.
3.25. Medical Staff; Physician Relations. Sellers have delivered to
Buyer complete and genuine copies of the bylaws, policies, rules and
regulations of the medical staff and medical executive committees of the
Hospitals and the other Hospital Businesses. Schedule 3.25 sets forth (a) the
name and age of each member of the medical staff of the Hospital Businesses
(active, associate, consulting, courtesy or other); (b) the degree (M.D., D.O.,
etc), title, specialty and Board Certification, if any, of each Hospital
medical staff member, (c) the names of Hospital medical staff members (current
and former) in respect of whom any Seller has made a report to the National
Practitioners Data Bank during the last three years, and (d) the number of
current medical staff members of the Hospital in respect of whom any committee
of the medical staff has recommended adverse action which is not yet final.
Except as set forth on Schedule 3.25, there are no pending or to Sellers'
knowledge threatened disputes with Hospital medical staff members or applicants
or allied health professionals and all appeal periods in respect of any medical
staff member or applicant against whom an adverse action has been taken have
expired. Except as set forth on Schedule 3.25, to Sellers' knowledge, no member
of the medical staff of the Hospital has been excluded from participation in
any Government Payment Program. Sellers and the Subsidiaries have made no
request for payment from any Government Payment Program in respect of
healthcare services furnished by or directed or proscribed by a physician who
at such time was excluded from participation in such Government Payment
Program.
3.26. Special Funds. Except as described in Schedule 3.26, none of the
Assets are subject to any Encumbrance in respect of funds received by any
Person for the purchase, improvement or use of any of the Assets or the conduct
of the Hospital Businesses under restricted or conditioned grants or donations,
including monies received under the Xxxx-Xxxxxx Act.
3.27. Brokers and Finders. No Seller nor any Subsidiary has engaged
any finder or broker in connection with the transactions contemplated
hereunder, except that MHSC has engaged Xxxx Brothers & Company, LLC to act as
MHSC's independent financial advisor in connection with the transactions
contemplated by this Agreement.
3.28. Payments. No Seller or Subsidiary has, directly or indirectly,
paid or delivered or agreed to pay or deliver any fee, commission or other sum
of money or item of property, however characterized, to any Person which is in
any manner related to the Assets or the Hospital Businesses in violation of any
Legal Requirement. No Seller or Subsidiary, nor any officer, director or
trustee of any Seller or Subsidiary has received or, as a result of the
consummation of the transaction contemplated by this Agreement, will receive
any rebate, kickback or other improper or illegal payment from any Person with
whom Sellers or the Subsidiaries conduct or have conducted any of the Hospital
Businesses.
3.29. Solvency. No Seller immediately after Closing will be rendered
insolvent or otherwise unable to pay its debts as they become due; no Seller
has any intention of filing in any court pursuant to any statute either of the
United States or of any state a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or any
portion of such Seller's property; and, to Sellers' knowledge, no other Person
has filed or threatened to file such
32
a petition against any Seller. No Subsidiary is insolvent or otherwise unable
to pay its debts as they become due; no Subsidiary has any intention of filing
in any court pursuant to any statute either of the United States or of any
state a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or any portion of such Subsidiary's
property; and, to Sellers' knowledge, no other Person has filed or threatened
to file such a petition against any Subsidiary.
3.30. Operation of the Hospital Businesses. The Assets constitute all
assets, properties, goodwill and businesses necessary to operate the Hospital
Businesses in all material respects in the manner in which they have been
operated since June 30, 1999. Schedule 3.30 sets forth a list of the 20 largest
non-governmental payors of the Hospital Businesses, determined on the basis of
revenues from services provided for the fiscal year ended September 30, 1999.
Except as set forth in Schedule 3.30, none of the non-governmental payors in
Schedule 3.30 has terminated or materially curtailed its business relationship
with or materially reduced reimbursement rates to the Hospital and no Seller
has received any notice to the effect that any such non-governmental payor
intends to terminate or materially curtail its business relationship with or
materially reduce reimbursement rates to the Hospital. There is no
non-governmental payor the loss of which would have a Material Adverse Effect,
other than those set forth on Schedule 3.30.
3.31. Full Disclosure. This Agreement and the Schedules and other
documents and information described in this Agreement as having been delivered
or otherwise made available to Buyer do not and will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made therein not misleading.
3.32. Private Placement.
(a) The Foundation understands that (i) the offering and sale
of the Common Shares is intended to be exempt from registration under
the Securities Act pursuant to Section 4(2) of the Securities Act and
(ii) there is no existing public or other market for the Common Shares
and there can be no assurance that the Foundation will be able to sell
or dispose of the Common Shares.
(b) The Foundation represents that the Common Shares to be
acquired by the Foundation at the Closing are being acquired for its
own account and without a current view to the public distribution of
such Common Shares or any interest therein.
(c) The Foundation are or at Closing will be each an
"Accredited Investor" as such term is defined in Regulation D under
the Securities Act. The Foundation has sufficient knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Common Shares
and the Foundation is capable of bearing the economic risks of such
investment, including a complete loss of the investment in the Common
Shares.
33
(d) The Foundation has been furnished with and carefully read
a copy of this Agreement and has been given the opportunity to ask
questions of, and receive answers from, Vanguard concerning the terms
and conditions of the Common Shares and other related matters. The
Foundation further represents and warrants to Vanguard that Vanguard
has made available to the Foundation or its agents all documents and
information relating to an investment in the Common Shares requested
by or on behalf of the Foundation.
(e) The office of the Foundation in which the investment
decision was made is located in Berwyn, Illinois.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND VANGUARD
Buyer and Vanguard make the following representations and warranties
to Sellers and the Foundation on and as of the Effective Date and shall be
deemed to make them again at and as of the Closing Date. Buyer and Vanguard
represent and warrant to Sellers and the Foundation as follows:
4.01. Organization. Buyer is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and by
Closing will be qualified to do business in the State of Illinois. Vanguard is
a corporation duly organized and validly existing in good standing under the
laws of the State of Delaware.
4.02. Corporate Powers; Consents; Absence of Conflicts, Etc. Each of
Buyer and Vanguard has the requisite power and authority to conduct its
business as now being conducted, to enter into this Agreement, and to perform
its obligations hereunder (the board of directors of each of Vanguard and the
Buyer having approved their execution of this Agreement and the purchase of the
Seller Assets by Buyer). The execution, delivery and performance by Buyer and
Vanguard of this Agreement and the consummation of the transactions
contemplated herein by each of them:
(a) are within their corporate powers and are not in
contravention of the terms of their articles or certificates of
incorporation and bylaws, as amended to date, and have been approved
by all requisite corporate action;
(b) do not conflict with or result in any breach or
contravention of, any material agreement to which either Buyer or
Vanguard is a party or by which it is bound, except that consummation
of the transactions contemplated by this Agreement requires the
consent of Vanguard's lenders under the terms of its principal credit
agreement and the consent of Xxxxxx Xxxxxxx Capital Partners III, L.P.
and Xxxxxx Xxxxxxx Xxxx Xxxxxx Capital Partners IV, L.P. pursuant to
section 4.02(a) of the Shareholders Agreement; and
(c) do not violate any Legal Requirement to which Buyer or
Vanguard may be subject.
4.03. Binding Agreement. This Agreement and each of the Closing
Documents to which Buyer or Vanguard is or becomes a party are (or upon
execution will be), assuming due and
34
valid execution by Sellers and the Foundation, valid and legally binding
obligations of Buyer and Vanguard, respectively, enforceable against each of
them in accordance with the respective terms hereof and thereof, except as
enforceability against them may be restricted, limited or delayed by applicable
bankruptcy or other laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity.
4.04. Brokers and Finders. Neither Buyer, nor any Affiliate of Buyer
(including Vanguard), has engaged any finder or broker in connection with the
transactions contemplated hereunder.
4.05. Common Shares. The Common Shares issued to the Sellers, when
issued and delivered in accordance with the terms of this Agreement and
transferred to the Foundation, will be duly authorized, validly issued, fully
paid, and nonassessable and free of all preemptive rights, liens, voting or
transfer restrictions and encumbrances, except as may be provided under federal
or state securities laws, the Shareholders Agreement and the Surviving
Shareholders Agreement.
4.06. Offering Valid. The offer, sale and issuance of the Common
Shares will be exempt from the registration requirements of the Securities Act,
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
4.07. Vanguard Financial Statements. Attached as Schedule 4.07 are
copies of the Vanguard Audited Financial Statements and the Vanguard Interim
Financial Statements. The Vanguard Financial Statements are true, complete and
accurate and fairly present the financial condition and results of operations
of Vanguard and its subsidiaries as of the respective dates thereof and for the
periods therein referred to, all in accordance with generally accepted
accounting principles, subject in the case of the Vanguard Interim Financial
Statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse) and the absence
of notes (which, if presented, would not differ materially from those included
in the Vanguard Audited Financial Statements); and the Vanguard Financial
Statements reflect the consistent application of such accounting principles
throughout the periods involved.
4.08. Capitalization. As of the date hereof, the authorized capital
stock of Vanguard consists of 350,000 shares of Common Stock and 100,000 shares
of preferred stock, par value $0.01 per share. As of the date hereof, 71,252
shares of Common Stock are outstanding and no shares of preferred stock are
outstanding, and warrants or options exercisable for 29,410 shares of Common
Stock are outstanding.
4.09. Vanguard's Management Experience. Vanguard's management has
substantial experience in the management and operation of hospital businesses.
Vanguard has delivered to Sellers indications of interest from institutional
investors regarding Vanguard's ability to finance the consummation of the
transactions described in this Agreement. As of the Effective Date, Vanguard
has no reason to believe that such financing will not be forthcoming at Closing
in sufficient amounts to finance the Purchase Price.
5. COVENANTS AND AGREEMENTS OF THE PARTIES
35
5.01. Operations. From the Effective Date until the Closing Date and
except as otherwise expressly provided in this Agreement or agreed to in
writing by Buyer, Sellers will and will cause the Subsidiaries to:
(a) carry on the Hospital Businesses in substantially the
same manner as they have heretofore and not make any material change
in personnel, operations, finances, accounting policies, or real or
personal property of the Hospital Businesses;
(b) maintain all material Assets in as good working order and
condition as at present, ordinary wear and tear excepted and make all
normal and planned capital expenditures related to the Assets and/or
the Hospital Businesses;
(c) use commercially reasonable efforts to perform when due
all Legal Requirements and obligations under Contracts relating to or
affecting the Hospital Businesses, except where the failure to perform
such Legal Requirements and Contract obligations shall not have a
Material Adverse Effect;
(d) take all commercially reasonable actions necessary and
appropriate to deliver to Buyer title to the Seller Assets free and
clear of all Encumbrances (except for the Permitted Real Property
Encumbrances and the Permitted Personal Property Encumbrances), to
ensure that title to the Subsidiary Assets is free and clear of all
Encumbrances (except for the Permitted Real Property Encumbrances and
the Permitted Personal Property Encumbrances) at Closing, and to
obtain appropriate releases, consents, estoppels, certificates,
opinions and other instruments as Buyer may reasonably request;
(e) use commercially reasonable efforts to keep in full force
and effect present insurance policies or other comparable insurance
benefiting the Assets and the conduct of the Hospital Businesses and
maintain sufficient liquid reserves reasonably estimated to be
sufficient to meet all deductible, self-insurance and copayment
requirements of such policies;
(f) use commercially reasonable efforts to maintain and
preserve their business organizations and operations intact; retain
the present employees at the Hospital Businesses (subject to the right
of Sellers and the Subsidiaries to discharge any employee in the
ordinary course of the Hospital Businesses); maintain their
relationships with physicians, suppliers, patients and other Persons
doing business with Sellers at the Hospital Businesses; and take such
actions as are reasonably necessary and achievable to cause the
smooth, efficient and successful transition to Buyer of the Hospital
Businesses at Closing;
(g) permit and allow reasonable access by Buyer to discuss
and make offers of post-Closing employment with any of Sellers'
personnel working at any of the Hospital Businesses, to advertise for
post-Closing employment at the Hospital Businesses after consultation
with Sellers, and to establish relationships with physicians, payors
and other Persons having business relations with Sellers and the
36
Subsidiaries in respect of the Hospital Businesses, provided that any
Contract offered or entered into by Buyer or its Affiliates with any
such Person shall be contingent upon the Closing.
5.02. Negative Covenants. From the Effective Date until the Closing
Date and except as otherwise expressly provided in this Agreement or agreed to
by Buyer in writing, Sellers will not and will cause the Subsidiaries not to:
(a) amend or terminate any Assumed Contract, or enter into
any Contract except Immaterial Contracts entered into, terminated or
amended in the ordinary course of the Hospital Businesses consistent
with past practices;
(b) make offers to any employees of the Hospital Businesses
for employment with any Person after Closing;
(c) increase compensation payable or to become payable to,
make a bonus or severance payment to, or otherwise enter into one or
more bonus or severance Contracts with, any employee or agent of any
of the Hospital Businesses except in the ordinary course of the
Hospital Businesses consistent with past practices in accordance with
existing personnel policies;
(d) create, assume or permit to exist any new Encumbrance
upon any of the Assets other than in the ordinary course of the
Hospital Businesses consistent with past practices;
(e) sell, assign, transfer, distribute or otherwise transfer
or dispose of any item of property, plant or equipment of any Seller
or Subsidiary having an original cost in excess of $5,000 except in
the ordinary course of the Hospital Businesses consistent with past
practices with comparable replacement thereof;
(f) take any action outside the ordinary course of the
Hospital Businesses, other than to make a cash donation of up to
$1,000,000 to the Foundation;
(g) create, incur, assume, guarantee or otherwise become
liable for any liability, or agree to do any of the foregoing, except
in the ordinary course of the Hospital Businesses consistent with past
practices;
(h) cancel, forgive, release, discharge or waive any
receivable or any similar Asset or right with respect to the Hospital
Businesses, or agree to do any of the foregoing, except in the
ordinary course of the Hospital Businesses consistent with past
practices;
(i) change any accounting method, policy or practice or
reduce any reserves in the Financial Statements;
37
(j) terminate, amend or otherwise modify any Employee Benefit
Plan or Other Plan, except for amendments required to comply with this
Agreement or applicable Legal Requirements; or
(k) amend or agree to amend the articles or certificate of
incorporation or bylaws of any Seller or Subsidiary or otherwise take
any action relating to any liquidation or dissolution of any Seller or
Subsidiary.
5.03. Employee Matters.
(a) Subject to the exclusions set forth in this Section, and
in reliance upon the representations and warranties of Sellers in
Sections 3.21 and 3.22, Buyer will offer, or cause its Affiliates to
offer, to employ as of the Closing Date all active employees of
Sellers employed at the Hospital Businesses immediately prior to
Closing, including employees on approved or legally required
short-term leaves of absence but not including employees on long term
leaves of absence, on substantially the same terms and conditions
(i.e., salaries, wages, job duties, titles and responsibilities)
applicable to such employees on the Effective Date. In addition, the
Employee Benefit Plans offered to the Hired Employees by Buyer will be
the same as those generally provided to employees at other hospitals
operated by Vanguard's Affiliates. A summary description of Buyer's
Employee Benefit Plan is attached hereto as Schedule 5.03. Sellers
acknowledge that all employment offers are subject to the satisfactory
completion by Buyer of its customary employee background checks.
Employees employed under written Contracts will not be offered
employment pursuant to this Section, but employment of such employees
shall be governed by the terms of the Assumed Contracts, if any,
relating to such employees.
(b) Nothing contained in this Section or elsewhere in this
Agreement shall be deemed to limit or otherwise affect in any manner
the right of Buyer or any Affiliate of Buyer to terminate at will the
employment of any Hired Employee (except as otherwise provided in
Assumed Contracts with such employees), or to change individual
features or plans in the employment compensation and benefits package
of the Hired Employees.
(c) At Closing, Sellers shall deliver to Buyer a list as of
Closing setting forth the name of each employee of the Hospital
Businesses whose employment was terminated during the 90 day period
ending on the Closing Date and the reason for such termination. In
reliance upon this list and in reliance upon the representations and
warranties of Sellers in Section 3.21, Buyer shall indemnify, defend
and hold harmless Sellers and the Foundation from any liability under
the WARN Act arising from Buyer's termination after Closing of any
Hired Employee or arising from Buyer's failure to offer employment to
the employees of the Hospital Businesses in accordance with Section
5.03(a).
(d) With respect to the Hired Employees and their eligible
dependents, Buyer will waive, or cause to be waived, the "pre-existing
condition" exclusions
38
under Buyer's applicable Employee Welfare Benefit Plan for the Hired
Employees, subject to the pre-existing coverage limitations provided
by Sellers' Employee Welfare Benefit Plan as of the Closing Date.
Buyer shall give all Hired Employees credit for their vacation,
holiday and sick pay to the extent the same constitute Assumed
Liabilities. Buyer shall give all Hired Employees credit after Closing
for their years of service with Sellers for the purpose of determining
how much vacation, holiday and sick pay the Hired Employees are
entitled to under the applicable Employee Welfare Benefit Plan of
Buyer and for purposes of determining eligibility to participate and
vesting percentages in Buyer's Employee Pension Benefit Plans, subject
to the limitations provided under the Employee Pension Benefit Plans
of Sellers as of the Closing Date. Buyer will not assume or otherwise
become liable for (i) the Employee Welfare Plans of Sellers or any
Subsidiary, (ii) obligations of Sellers under the Consolidated Omnibus
Budget Reconciliation Act, (iii) payment of health care expenses of
Hired Employees and their beneficiaries who are in a continuum of care
on the Closing Date, or (iv) other obligations to former or currently
retired employees, and Buyer will not make any contributions to the
pension plans of Sellers or any Subsidiary.
(e) As of the Closing Date, Sellers shall terminate the
participation of all Hired Employees and all employees of the
Subsidiaries in any Employee Pension Benefit Plan of Sellers, and
provide for distributions consistent with the terms of the applicable
plans, ERISA and the Code. As soon as practicable after Closing (but
in any event prior to December 31 of the year in which the Closing
occurs), Sellers shall provide Buyer with all necessary payroll
records for the calendar year in which the Closing occurs so that
Buyer may furnish a Form W-2 to all Hired Employees disclosing all
wages and other compensation paid to them (and amounts withheld
therefrom) by Sellers and Buyer in the calendar year.
(f) Between the Effective Date and Closing and after
consultation with Sellers, Buyer may run newspaper advertisements in
the name of any of the Hospital Businesses to recruit employees for
and in the name of any of the Hospital Businesses, such employment to
commence as of the Closing or any time thereafter.
5.04. Access to and Provision of Additional Information.
(a) From the Effective Date until the Closing Date, Sellers
shall, and shall cause the Subsidiaries to, (i) provide to Buyer full
and complete access to and the right to inspect the Assets, books and
records of Sellers and the Subsidiaries relating to the Hospital
Businesses, (ii) provide to Buyer full and complete access to any of
the employees and medical staff members providing services at or for
the Hospital Businesses, (iii) advise Buyer of material developments
concerning the Hospital Businesses, and (iv) furnish to Buyer such
additional financial, operating and other data and information
(including auditors' workpapers) regarding the Hospital Businesses as
Buyer may from time to time reasonably request, without regard to
where such information may be located.
39
(b) Sellers will deliver to Buyer complete and genuine copies
of:
(i) within 20 days following the end of each
calendar month prior to the Closing Date, the unaudited
balance sheet and the related unaudited statements of income
and cash flows of the Hospital Businesses for each such month
then ended and for the year-to-date then ended, consolidating
and consolidated financial statements of the Hospital
Businesses,
(ii) promptly after prepared, any other financial
statements or reports prepared by or for management relating
to the Hospital Businesses, together with any notes thereto,
(iii) promptly after prepared and no later than ten
days before the Closing Date, the audited balance sheets of
MHSC as of September 30, 1999, and the audited consolidated
statements of operations, changes in net assets and cash
flows of MHSC for the fiscal years ended September 30, 1999
and 1998, together with the notes thereto and the report
thereon of Xxxxxx Xxxxxxxx LLP, independent certified public
accountants, and
(iv) promptly after prepared and no later than
October 14, 1999, the audited balance sheets of MHSC as of
September 30, 1998, and the audited consolidated statements
of operations, changes in net assets and cash flows of MHSC
for the fiscal year ended September 30, 1998, together with
the notes thereto and the report thereon of Xxxxxx Xxxxxxxx
LLP, independent certified public accountants.
(c) From the Effective Date until the Closing Date, Sellers
shall cause their and the Subsidiaries' respective officers and
employees and medical staff members to confer with one or more
representatives of Buyer and to answer Buyer's questions regarding
matters relating to the conduct of the Hospital Businesses and the
status of transactions contemplated by this Agreement. Sellers shall
notify Buyer in writing of any material changes in the operations,
financial condition or prospects of the Hospital Businesses and of any
investigations, hearings or adjudicatory proceedings (or
communications indicating that the same may be contemplated) of any
Person and shall keep Buyer reasonably informed of such matters.
5.05. Post-Closing Maintenance of and Access to Information.
(a) The Parties acknowledge that after Closing each Party may
need access to information or documents in the control or possession
of another Party for the purposes of concluding the transactions
herein contemplated, preparing Tax Returns or conducting Tax audits,
complying with the Government Payment Programs and other Legal
Requirements, and prosecuting or defending third party claims.
Accordingly, each Party shall keep, preserve and maintain in the
ordinary
40
course of business, and as required by Legal Requirements and relevant
insurance carriers, all books, records (including patient medical
records), documents and other information in the possession or control
of such Party and relevant to the foregoing purposes at least until
the expiration of any applicable statute of limitations or extensions
thereof.
(b) Each Party shall cooperate fully with, and make available
for inspection and copying by, the other Party, its employees, agents,
counsel and accountants and/or Governmental Authorities, upon written
request and at the expense of the requesting Party, such books,
records documents and other information to the extent reasonably
necessary to facilitate the foregoing purposes. In addition, each
Party shall cooperate with, and shall permit and use its best efforts
to cause its respective former and present directors, officers and
employees to cooperate with, the other Party on and after Closing in
furnishing information, evidence, testimony and other assistance in
connection with any action, proceeding, arrangement or dispute of any
nature with respect to the subject matters of this Agreement.
(c) Sellers shall be entitled to remove from the Hospital
Businesses, at Sellers' sole risk and expense, any patient or other
records that relate to events or periods prior to Closing for purposes
of pending litigation involving matters to which such records refer,
as certified in writing prior to removal by counsel retained by
Sellers in connection with such litigation. Any records so removed
from the Hospital shall be promptly returned to Buyer following their
use by Sellers. Sellers shall be responsible for obtaining consents or
approvals, if any, required to remove and gain access to such records.
(d) The exercise by any Party of any right of access granted
herein shall not materially interfere with the business operations of
the other Party.
5.06. Governmental Authority Approvals; Consents to Assignment.
(a) From the Effective Date until the Closing Date, each
Seller and Buyer shall (i) promptly apply for and use its reasonable
best efforts to obtain prior to Closing all consents, approvals,
authorizations and clearances of Governmental Authorities required of
it to consummate the transactions contemplated hereby, (ii) provide
such information and communications to Governmental Authorities as the
other Party or such Persons may reasonably request, and (iii) assist
and cooperate with other Parties to obtain all consents, licenses,
permits, approvals, authorizations and clearances of Governmental
Authorities that the other Parties reasonably deem necessary or
appropriate, and to prepare any document or other information
reasonably required of it by any such Persons to consummate the
transactions contemplated herein, provided that, notwithstanding the
foregoing, no Party shall have any obligation under such provisions
(x) to pay any cash amounts to Governmental Authorities other than
filing fees, or (y) to agree to divest assets or limit the operations
of its businesses.
41
(b) From the Effective Date until the Closing Date, each of
the Parties shall file, if and to the extent required by law, all
reports or other documents required or requested by Governmental
Authorities under the HSR Act concerning the transactions contemplated
hereby, and comply promptly with any requests by the Governmental
Authorities for additional information concerning such transactions,
so that the waiting period specified in the HSR Act will expire as
soon as reasonably possible after the Effective Date. Each of the
Parties shall furnish to the other Parties such information as the
other Parties reasonably require to perform their obligations under
the HSR Act and shall exchange drafts of the relevant portions of each
other's report forms prior to filing.
(c) From the Effective Date until the Closing Date, each of
the Parties shall file all reports or other documents reasonably
requested by the Attorney General of the State of Illinois concerning
the transactions contemplated by this Agreement, and shall cooperate
with any and all requests by the Attorney General for additional
information concerning such transactions.
(d) From the Effective Date, each Seller shall promptly apply
for and use its commercially reasonable efforts to obtain prior to
Closing all consents required to assign at Closing the Assumed
Contracts to Buyer and the Excluded Contract to Sellers.
5.07. Alternative Proposals. From the Effective Date until the Closing
of the transactions contemplated by, or termination of, this Agreement, Sellers
agree (a) that none of them shall, and they shall direct and use their best
efforts to cause the Subsidiaries and the officers, directors, employees,
agents and representatives of Sellers and the Subsidiaries (including, without
limitation, any investment banker, attorney or accountant retained by any
Seller) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its board of directors) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
equity or membership interests of, Sellers or any of the Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Alternative Proposal")
or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Alternative Proposal, or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal; (b) that Sellers will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any of the foregoing, and
it will take the necessary steps to inform the individuals or entities referred
to above of the obligations undertaken in this Section; and (c) that Sellers
will notify Buyer immediately if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, any Seller; provided
that nothing contained in this Section shall prohibit the board of directors or
trustees of any Seller from (i) furnishing information to or entering into
discussions or negotiations with, any Person that makes an unsolicited bona
fide proposal to acquire Sellers or the Subsidiaries pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of assets,
business combination or other similar transactions, if, and only to the extent
that, (A) the relevant board of directors or trustees determines in good faith
that such action is required for the
42
board to comply with its fiduciary duties imposed by law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such Person, Sellers provide written notice to Buyer and Vanguard to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such Person, and (C) subject to any confidentiality
agreement with such Person (which Sellers determined in good faith was required
to be executed in order for its board to comply with fiduciary duties imposed
by law), Sellers keep Buyer and Vanguard informed of the status (not the terms)
of any discussions or negotiations. Nothing in this Section shall (x) permit
Sellers to terminate this Agreement (except as specifically provided in Article
8), (y) permit Sellers to enter into any agreement with respect to an
Alternative Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, Sellers shall not enter into any agreement
with any Person that provides for or in any way facilitates, an Alternative
Proposal (other than a confidentiality agreement in customary form), or (z)
affect any other obligation of Sellers under this Agreement.
5.08. Noncompetition.
(a) For a period of five years from and after the Closing
Date, no Seller nor any Affiliate of Sellers shall, directly or
indirectly (including by affiliation or "virtual merger" with another
Person), in any capacity:
(i) own, lease, manage, operate, control,
participate in the management or control of, be employed by,
or maintain or continue any interest whatsoever in any
enterprise engaged in the business of providing any
healthcare goods or services offered by the Hospital
Businesses immediately prior to Closing, including hospitals
and outpatient or diagnostic procedures, within a 25-mile
radius of the Hospital (the "Restricted Area"); or
(ii) employ or solicit the employment of any Hired
Employee other than through public of general advertisements
or solicitations unless (X) such employee resigns voluntarily
(without any solicitation from any Seller or any of its
Affiliates), (Y) Buyer consents in writing to such employment
or solicitation, or (Z) such employee is terminated by Buyer
after the Closing Date; or
(iii) induce, cause or attempt to induce or cause
any Person (including any physician employee or medical staff
member) to replace or terminate any Contract for the
provision or arrangement of health care services from the
Hospital with products or services of any other Person at any
time after the Closing Date.
Notwithstanding the foregoing, XxxXxxx Hospital shall not be
prohibited from owning its interests in the RML Partnership (provided
that the RML Partnership does not engage in any business in violation
of this Section beyond that business engaged in by the Partnership as
of the Effective Date), and Foundation shall not be prohibited from
(i) owning and operating any Excluded Seller Assets, (ii) owning the
Common Shares and any other equity ownership interest in Vanguard or
any sucessor thereto,
43
(iii) owning up to three percent of any equity interest in any
publicly traded company, (iv) providing charitable gifts and grants
that, in the Foundation's sole discretion, are consistent with its
charitable purposes and mission, or (v) owning, operating or otherwise
sponsoring free care health clinics or clinics to provide health care
services to indigent or underserved populations in the community,
provided that, for five years from and after the Closing Date, Buyer
shall have a 30 day right of first refusal to provide any such health
care service, and any professional or technical personnel, ancillary
services and other necessary resources for any health care service
that the Foundation wishes to own, operate or sponsor within the
Restricted Area on terms and conditions that are qualitatively and
quantitatively no less favorable to the Foundation than those
available from other Persons.
(c) Sellers acknowledge that any remedy at law for any breach
of this Section would be inadequate and consent to the granting by any
court of an injunction or other equitable relief, without the
necessity of actual monetary loss being proved, in order that a breach
or threatened breach of this Section may be effectively enjoined.
5.09. Use of Names. From and after Closing, Sellers shall not use the
names "XxxXxxx", "XxxXxxx Hospital", "XxxXxxx Health Network", and "XxxXxxx
Health Providers", or any variation of the foregoing in the conduct of their
businesses, except as may be necessary to wind up their corporate affairs and
except that the Foundation may continue to conduct its business under its
current name after Closing. Within 30 days after Closing, Sellers shall change
their corporate names to names not including "XxxXxxx" or variations thereof.
5.10. Allocation of Purchase Price. Sellers and Buyer agree that the
Purchase Price shall be allocated among the Seller Assets as the Parties may
mutually determine consistent with section 1060 of the Code in accordance with
their fair market values as determined by Real Estate Valuation Corporation (or
other mutually acceptable firm) pursuant to an appraisal to be conducted within
30 days following the Closing Date, and such allocation shall be binding upon
the Parties for all applicable federal, state, local and foreign Tax purposes.
Sellers and Buyer covenant to report gain or loss or cost basis, as the case
may be, in a manner consistent with such allocation on all Tax Returns filed by
any of them after Closing and not to voluntarily take any inconsistent position
therewith in any administrative or judicial proceeding relating to such
returns. Sellers and Buyer shall exchange mutually acceptable and completed
Internal Revenue Service Forms 8594 (including supplemental forms, if
required), which they shall use to report the transaction contemplated
hereunder to the Internal Revenue Service in accordance with such allocation.
Buyer and Seller shall bear one-half of the cost of Real Estate Valuation
Corporation's appraisal.
5.11. Further Acts and Assurances. At any time and from time to time
at and after the Closing, upon request of Buyer, each Seller shall do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, confirmations and assurances as Buyer may reasonably
request to more effectively convey, assign and transfer to and vest in Buyer,
its successors and assigns, full legal right, title and interest in and actual
possession of the Seller Assets and the Hospital Businesses, to confirm such
Seller's capacity and ability to perform its post-Closing covenants and
44
agreements under this Agreement and the Closing Documents, and to generally
carry out the purposes and intent of this Agreement. Each Seller shall also
furnish Buyer with such information and documents in its possession or under
its control, or which Seller can execute or cause to be executed, as will
enable Buyer to prosecute any and all petitions, applications, claims and
demands relating to or constituting a part of the Seller Assets and Hospital
Businesses.
5.12. Casualty. If prior to the Closing Date any part of one or more
of the Hospital Businesses is destroyed or damaged by fire, theft, vandalism or
other cause or casualty and, as a result thereof, any material part of the
Hospital is rendered prior to the Closing Date unsuitable for its primary
intended use, Buyer may terminate this Agreement in its entirety without
penalty. Otherwise, Buyer may elect at its option to (i) reduce the Purchase
Price by the fair market value of the Seller Assets destroyed or damaged
(determined as of the date immediately prior to the destruction or damage) or,
if greater, by the estimated cost to restore, repair or replace such Seller
Assets, in which event Sellers shall retain all right, title and interest in
and to insurance proceeds payable on account of such destruction or damage, or
(ii) agree to consummate the transaction notwithstanding such destruction or
damage, in which event Sellers shall pay, transfer and assign to Buyer at
Closing the proceeds (or the right to receive the proceeds) of, plus any
deductibles or copayments required under, the applicable insurance policy. In
the absence of an agreement among the Parties, any reduction in Purchase Price
pursuant to this Section shall be determined by an MAI appraiser mutually
selected and paid equally by Sellers, on the one hand, and Buyer, on the other
hand.
5.13. Transition Services and Patients. If Buyer receives any cost
report settlement amounts from the Government Payment Programs for discharges
occurring prior to the Closing Date, Buyer shall promptly tender same to
Sellers. If Sellers receive any cost report settlement amounts from the
Government Payment Programs for discharges occurring on or after the Closing
Date, Sellers shall promptly tender same to Buyer. Each Party shall be entitled
to receive from the Government Payment Programs cost reimbursement settlements
(including capital costs, indirect medical education and disproportionate
share) for those patients discharged by a Party at the time such Party owned
the Hospital based upon the Cost Report filed by such Party.
5.14. Sellers' Cost Reports. Sellers will prepare and timely file all
Cost Reports required to be filed after Closing for periods ending on or prior
to the Closing Date, including any terminating Cost Report required as a result
of the consummation of the transactions described herein. If a terminating Cost
Report is required to be filed by Sellers, the Purchase Price shall be
allocated for such purposes consistent with the allocation for Tax purposes
described in Section 5.10. Buyer will forward to Sellers any and all
correspondence, remittances and demands relating to Sellers' Cost Reports
within five business days after receipt by Buyer. Sellers shall retain all
rights to Sellers' Cost Reports, including any payables resulting from or
reserves relating to the Cost Reports and the right to appeal any Medicare
determinations relating to the Cost Reports.
5.15. Hospital Board of Trustees. Following the Closing Buyer will
appoint a Board of Trustees for the Hospital composed of the Hospital's Chief
Executive Officer and equal numbers of physicians on the Hospital's medical
staff and community representatives, all in accordance with Buyer's standard
policy. Subject to applicable Legal Requirements, the Board of Trustees will be
responsible for medical staff credentialing, quality assurance and
accreditation of the
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Hospital, in accordance with Buyer's model Board of Trustee Bylaws. The Board
of Trustees will be comprised of between five and 15 members appointed for
terms of three years on a staggered basis to provide continuity of leadership.
Prior to Closing, the Parties shall agree on the Persons who will be named by
Buyer as the initial Board of Trustees of the Hospital.
5.16. Indigent Care. Buyer accepts the responsibility to treat
indigent patients in the service area of the Hospital and will comply with all
applicable federal and state laws and regulations governing such matters. To
this end, Buyer shall maintain for not less than five years after Closing
Sellers' policies for the treatment of indigent patients at the Hospital as
described on Schedule 5.16, subject to changes in governmental policy, such as
implementation of universal healthcare insurance or similar governmental
programs. Buyer shall use commercially reasonable efforts to become and remain
a provider to the federal Medicare/Medicaid programs and similar state
programs.
5.17. Costs and Expenses.
(a) Except as otherwise expressly set forth in this
Agreement, all expenses of the preparation of this Agreement and of
the purchase of the Assets set forth herein, including counsel,
accounting, brokerage and investment advisor fees and disbursements,
shall be borne by the respective Party incurring such expenses,
whether or not such transactions are consummated. Sellers shall be
responsible for paying all fees and expenses of Xxxx Brothers &
Company LLC as MHSC's independent financial advisor, in connection
with the transactions contemplated by this Agreement.
(b) Sellers shall pay all sales and use Taxes arising out of
the transfer of the Seller Assets, the cost of Buyer's owner's title
insurance policies described in Section 7.07, the cost of removing
Encumbrances that are not Permitted Real Property Encumbrances or
Permitted Personal Property Encumbrances, and documentary or other
Taxes or fees on the transfer of Sellers' interests in the
Subsidiaries. Buyer shall pay the HSR Act filing fee, the Certificate
of Exemption filing fee, and the cost of Buyer's land title surveys of
the Real Property, and the cost of all environmental, engineering and
other professional studies undertaken by Buyer. Real estate transfer
Taxes in respect of the Seller Real Property shall be paid one-half by
Sellers and one-half by Buyer.
(c) In the event either Party elects to incur legal fees or
expenses to enforce or interpret any provision of this Agreement, the
prevailing Party will be entitled to recover such legal fees and
expenses, including attorney's fees, costs and necessary
disbursements, in addition to any other relief to which such Party
shall be entitled.
5.18. Insurance Ratings. From the Effective Date until the Closing
Date, Sellers will take all actions reasonably requested by Buyer to enable
Buyer to succeed to the Workers' Compensation and Unemployment Insurance
ratings, insurance policies, deposits and other interests of Sellers and the
Hospital Businesses for insurance or other purposes. Buyer shall not be
obligated
46
to succeed to any such rating, insurance policy, deposit or other interest,
except as it may elect to do so.
5.19. Fulfillment of Conditions. Each Party will execute and deliver
at Closing each Closing Document that such Party is required by this Agreement
to execute and deliver as a condition to Closing, and will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other condition to the obligations of the Parties
contained in this Agreement, to the extent that satisfaction of such condition
is within the control of such Party.
5.20. Release of Encumbrances. Sellers shall cause all Encumbrances
other than the Permitted Real Property Encumbrances and the Permitted Personal
Property Encumbrances to be released and discharged at or prior to Closing,
including Encumbrances of Sellers' tax-exempt bond indebtedness, if any, and in
connection therewith may direct Buyer to pay to the bond trustee or such other
Person as the Parties may agree at Closing all or any part of the Cash Portion
of the Purchase Price sufficient in amount to release or discharge such
Encumbrances.
5.21. Restricted Assets. Buyer acknowledges that Sellers are retaining
as Excluded Seller Assets certain monies or other restricted assets that are
required by the donors thereof to be spent at the Hospital Businesses. Schedule
5.21 sets forth a description of the restricted assets and the Hospital uses to
which they must be applied. Buyer will take such actions after Closing
reasonably necessary to comply with the conditions of such grants upon payment
by Sellers of the funds therefor. Possession and/or control of any cash held by
Sellers in trust for or for the benefit of other Persons (e.g., tenant security
deposits and medical staff dues) shall not be retained by Sellers but shall be
delivered to Buyer.
5.22. Tail Insurance. From the Closing Date or except as otherwise
agreed by Buyer at Closing, Sellers will maintain self-insurance in amounts
that provide substantially the same liability protections to the Parties as
would arise under occurrence-based insurance policies purchased by Sellers to
cover acts and omissions prior to Closing of Sellers and each physician
employee of Sellers (or for which Sellers otherwise have an obligation to
provide such insurance), provided that Sellers may, at their option, engage in
a loss portfolio transfer for some or all of such risks with one or more
insurers licensed to conduct business in the State, in which event Sellers
shall require such insurers to expressly name Buyer's Indemnified Persons as
beneficiaries thereof.
5.23. Teaching Mission of the Hospital. For not less than five years
after Closing, Buyer shall use commercially reasonable efforts to continue the
teaching mission of the Hospital in substantially the same manner as had been
conducted by Sellers immediately prior to Closing, and to that end will use
commercially reasonable efforts to continue the residency teaching programs
currently operated at the Hospital.
5.24. Hospital Services and Programs. For not less than five years
after Closing, Buyer will use commercially reasonable efforts to continue and
maintain the healthcare programs and services provided by the Hospital as of
the Effective Date.
5.25. RML Partnership.
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(a) The management agreement dated June 1, 1997 between MMSI
and the RML Partnership is and at Closing will be an Assumed Contract.
Between the Effective Date and Closing, Sellers shall use their
respective best efforts to cause the RML Partnership to amend the RMP
Partnership management agreement at or prior to Closing to extend the
term of such Contract to a term ending not less than five years after
Closing. If the term of such Contract is not extended at or prior to
Closing, Buyer and Sellers shall continue to use commercially
reasonable efforts after Closing to extend the term of the Contract.
Sellers shall cooperate in all reasonable efforts to solicit and
obtain the consent of the RML Partnership and its partners to the
extension of the Contract, shall execute such consents, approvals or
other instruments reasonably necessary to evidence the amendment of
the Contract and Sellers' support and approval thereof, and, subject
to MMSI's fiduciary duties, shall vote for extension of the management
agreement and generally support and be an advocate of Buyer in its
capacity as manager.
(b) XxxXxxx Hospital owns and shall retain a limited
partnership interest in the Partnership and an equity interest in RMHP
Corporation, the general partner of the Partnership. Upon each event
of (i) a distribution of cash or other properties in respect of
Sellers' interest in the RML Partnership made to Sellers by the
Partnership after June 30, 1999, or a payment of dividends or return
of capital made by the Partnership to Sellers, including
distributions, dividends or returns of capital following or in
connection with the sale of all or substantially all of the assets of
the Partnership or (ii) a sale of Sellers' interest in the Partnership
and in the general partner of the Partnership, Sellers shall pay to
Buyer an amount equal to the amount distributed, paid or otherwise
received by Sellers from each such event. Such payment shall be made
within two business days after receipt of such property.
5.26. Medical Staff Membership. Promptly after Closing, Buyer shall
grant to each member of the Hospital's medical staff immediately prior to
Closing medical staff privileges and medical staff status identical to the
privileges and status held by such physician prior to Closing.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder are subject to the satisfaction
on or prior to the Closing Date of the following conditions unless waived in
writing by Sellers:
6.01. Representations and Warranties; Covenants.
(a) Each of the representations and warranties of Buyer and
Vanguard contained in this Agreement shall be true and correct on and
as of the Effective Date; each of the representations and warranties
of Buyer and Vanguard contained in this Agreement that are qualified
as to materiality shall be true and correct on and as of the Closing
Date; and each of the other representations and warranties of Buyer
and Vanguard contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date.
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(b) Each and all of the terms, covenants and agreements to be
complied with or performed by Buyer or Vanguard on or before the
Closing Date shall have been complied with and performed, including
the obligations of Buyer in Section 8.03.
6.02. Adverse Action or Proceeding. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions herein contemplated, and no Governmental Authority
shall have taken any other action or made any request of Sellers or Buyer as a
result of which Sellers reasonably and in good xxxxx xxxx it inadvisable to
proceed with the transactions hereunder; and there shall not be in effect any
order restraining, enjoining or otherwise preventing consummation of the sale
of the Assets and other transactions contemplated hereunder.
6.03. Pre-Closing Confirmations. Sellers shall have obtained
documentation or other evidence reasonably satisfactory to Sellers that Sellers
have received or will receive all consents, approvals, authorizations and
clearances of Governmental Authorities required of it to consummate the
transactions contemplated hereby, and that all applicable waiting periods under
the HSR Act have expired.
6.04. Extraordinary Events. Neither Buyer nor Vanguard shall (a) be in
receivership or dissolution, (b) have made any assignment for the benefit of
creditors, (c) have admitted in writing its inability to pay its debts as they
mature, (d) have been adjudicated a bankrupt, (e) have filed a petition in
voluntary bankruptcy, a petition or answer seeking reorganization, or an
arrangement with creditors under the federal bankruptcy law or any other
similar law or statute of the United States or any state, nor shall any such
petition have been filed against Buyer or Vanguard, or (f) have entered into
any Contract to do or permit the doing of any of the foregoing on or after the
Closing Date.
6.05. Opinion of Buyer's Counsel. Sellers shall have received an
opinion from counsel to Buyer (who may be in-house counsel) dated as of the
Closing Date and addressed to Sellers, in form and substance reasonably
satisfactory to Sellers, to substantially the following effect:
(a) Each of Buyer and Vanguard is a corporation duly
incorporated and validly existing in good standing under the laws of
the State of its incorporation with full corporate power to carry on
its business as it is now being conducted. Each of Buyer and Vanguard
has full power and authority to execute and deliver this Agreement and
each of the Closing Documents to which it is a party and to perform
its obligations therein. All corporate proceedings required to be
taken by Buyer or Vanguard to authorize the execution and delivery of
this Agreement and each of the Closing Documents to which it is a
party and to authorize the performance of its obligations therein,
have all been duly and properly taken.
(b) The execution, delivery and performance by Buyer and
Vanguard of this Agreement and each of the Closing Documents to which
it is a party does not violate any provision of its articles of
incorporation, bylaws, or of any indenture or other material Contract
to which Buyer or Vanguard is a party and of which counsel has
knowledge.
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(c) This Agreement and each of the Closing Documents to which
it is a party constitutes a valid and binding obligation of Buyer and
Vanguard, enforceable against Buyer and Vanguard in accordance with
its terms, subject, as to enforcement of remedies, to (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect,
(ii) limitations on the enforcement of equitable remedies, and (iii)
such other qualifications as counsel to the Parties may mutually agree
upon.
(d) To such counsel's knowledge, the consummation of the
transactions described in this Agreement will not result in a
violation, breach or default by Buyer or Vanguard under any material
Legal Requirements.
(e) The Common Shares issued and delivered to the Foundation
at Closing were duly authorized and issued and represent fully-paid,
nonassessable shares of Common Stock free of all transfer restrictions
except those imposed by applicable Legal Requirements and under the
Shareholders Agreement and Surviving Shareholders Agreement.
(f) Assuming due and valid execution by the Foundation of the
Shareholders Agreement and the Surviving Shareholders Agreement, the
Foundation shall be entitled to all of the rights and privileges (but
subject to the limitations and conditions) of a "Holder" (as defined
therein) under each such agreement.
In rendering such opinion, such counsel may rely upon certificates of
governmental officials and may place reasonable reliance upon certificates of
officers of Buyer or Vanguard.
6.06. Delivery of Closing Documents. Buyer shall have delivered at
Closing (to the Person or Persons designated therein) the Closing Documents
required by, and otherwise have fully complied with, the provisions of Section
8.03.
6.07. Leases. MHSC and Buyer shall have entered into one or more
master leases of the real property and improvements described on Schedule
2.02(h) for a term of 20 years and an annual rent during the first year of the
lease term of $1,207,000 (subject to adjustment during the lease term based on
changes in the consumer price index) and otherwise on terms and conditions
acceptable to MHSC. The master lease shall be assignable by MHSC. All current
leases in such properties shall be assigned to Buyer as subleases and
subordinated to the master lease(s) and Buyer shall have a right of first
refusal to purchase the properties during the term of the master lease.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder are subject to the satisfaction on
or prior to the Closing Date of the following conditions, unless waived in
writing by Buyer:
7.01. Representations and Warranties; Covenants.
(a) Each of the representations and warranties of Sellers
contained in this Agreement shall be true and correct on and as of the
Effective Date; each of the
50
representations and warranties of Sellers contained in this Agreement
that are qualified as to materiality shall be true and correct on and
as of the Closing Date; and each of the other representations and
warranties of Sellers contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date.
(b) Each and all of the terms, covenants and agreements to be
complied with or performed by Sellers on or before the Closing Date
shall have been complied with and performed, including the obligations
of Sellers and the Foundation in Section 8.02.
7.02. Adverse Action or Proceeding. No action or proceeding before any
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions herein contemplated, and no Governmental Authority
shall have taken any other action or made any request of Sellers or Buyer as a
result of which Buyer reasonably and in good xxxxx xxxxx it inadvisable to
proceed with the transactions hereunder; and there shall not be in effect any
order restraining, enjoining or otherwise preventing consummation of the sale
of the Assets and other transactions contemplated hereunder.
7.03. Pre-Closing Confirmations and Contractual Consents. Buyer shall
have obtained documentation or other evidence reasonably satisfactory to Buyer
that:
(a) Sellers and Buyer have received all consents, permits,
approvals, authorizations and clearances of Governmental Authorities
required to consummate the transactions herein contemplated;
(b) Buyer has received confirmation from the Illinois
Department of Health and other applicable licensure agencies that upon
Closing all licenses required by law to operate the Hospital
Businesses will be transferred to or issued in the name of Buyer;
(c) Buyer has obtained reasonable assurances that
certification of the operation by Buyer of the Hospital Businesses by
all Government Payment Programs as to which reimbursement has been
historically a part of the Hospital Businesses will be effective as of
the Closing Date and that Buyer may participate in and receive
reimbursement from such programs effective as of the Closing Date;
(d) subject to Section 7.13, Sellers have obtained consents
to assignment of substantially all Assumed Contracts (other than
Immaterial Contracts) for which such consents are required; and
(e) Sellers or the Subsidiaries have obtained such consents
and approvals as may be legally or contractually required for Buyer to
succeed to the ownership interests of Sellers in the Subsidiaries; and
(f) all applicable waiting periods under the HSR Act have
expired.
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7.04. No Material Adverse Change. Since June 30, 1999, no material
adverse change in the Assets or results of operations, financial condition or
prospects for future operations of the Hospital Businesses, taken as a whole,
shall have occurred. Accrual of non-recurring transaction-related expenses (as
described in the definition of Adjusted EBITDA) shall not constitute a material
adverse change within the meaning of this Section.
7.05 Extraordinary Events. No Seller or Subsidiary shall (a) be in receivership
or dissolution, (b) have made any assignment for the benefit of creditors, (c)
have admitted in writing its inability to pay its debts as they mature, (d)
have been adjudicated a bankrupt, (e) have filed a petition in voluntary
bankruptcy, a petition or answer seeking reorganization, or an arrangement with
creditors under the federal bankruptcy law or any other similar law or statute
of the United States or any state, nor shall any such petition have been filed
against any of them, or (f) have entered into any Contract to do or permit the
doing of any of the foregoing on or after the Closing Date.
7.06 Environmental and Structural Reports. Buyer shall have received
environmental and structural reports with respect to the Hospital Businesses
prepared by Persons acceptable to Buyer and the scope, findings and conclusions
of such reports shall be reasonably satisfactory to Buyer.
7.07 Title Insurance Policies and Surveys. Buyer shall have received:
(a) commitments from a title insurance company or companies
designated by Buyer to issue as of the Closing Date one or more ALTA
extended coverage owner's title insurance policies for the Seller Real
Property, in amounts acceptable to Buyer, in form reasonably
satisfactory to Buyer and with such endorsements as Buyer may
reasonably require; and
(b) evidence that the Subsidiaries have title insurance for
the Subsidiary Real Property in amounts and forms reasonably
satisfactory to Buyer, with such endorsements as Buyer may reasonably
require to evidence the release of any Encumbrances that are not
Permitted Real Property Encumbrances;
(c) ALTA surveys of the Real Property and improvements
thereon, in form satisfactory to Buyer and the title insurance
company, from an engineering firm designated by Buyer and certified to
Buyer, the title insurance company and such other Persons as Buyer may
designate.
7.08 Opinion of Sellers' Counsel. Buyer shall have received an opinion
from counsel to Sellers (who may be in-house counsel) dated as of the Closing
Date and addressed to Buyer, in form and substance reasonably satisfactory to
Buyer, to substantially the following effect;
(a) Each Seller is a not-for-profit corporation duly
incorporated and validly existing in good standing under the laws of
the State of Illinois with full corporate power to carry on its
business as it is now being conducted. Each Seller has full power and
authority to execute and deliver this Agreement and each of the
52
Closing Documents to which it is a party and to perform its
obligations therein. All corporate proceedings required to be taken by
each Seller to authorize the execution and delivery of this Agreement
and each of the Closing Documents to which it is a party and to
authorize the performance of its obligations therein, have all been
duly and properly taken.
(b) Each Subsidiary that is a corporation is duly
incorporated and validly existing in good standing under the laws of
the State of Illinois with full corporate power to carry on its
business as it is now being conducted. Each Subsidiary that is a
limited liability company is duly organized and validly existing in
good standing under the laws of the State of Illinois with full
company power to carry on its business as it is now being conducted.
Each Subsidiary that is a general partnership, limited partnership or
joint venture is duly organized and validly existing in good standing
under the laws of the State of Illinois with full partnership power to
carry on its business as it is now being conducted.
(c) The execution, delivery and performance of this Agreement
and each of the Closing Documents to which it is a party does not
violate any provision of its articles of incorporation or bylaws, or
of any indenture or other Contract to which such Seller is a party and
of which such counsel has knowledge.
(d) This Agreement and each of the Closing Documents to which
it is a party constitutes a valid and binding obligation of such
Person, enforceable against such Seller in accordance with its terms,
subject, as to enforcement of remedies, to (a) applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect, (b)
limitations on the enforcement of equitable remedies and (c) such
other qualifcations as counsel to the Parties may mutually agree upon.
(e) To such counsel's knowledge, the consummation of the
transactions described in the Agreement will not result in a
violation, breach or default by any Seller under any material Legal
Requirements.
In rendering such opinion, such counsel may rely upon certificates of
governmental officials and may place reasonable reliance upon certificates of
officers of Sellers.
7.09 Lien Searches. Sellers shall have delivered to Buyer UCC lien,
litigation and tax searches showing all Encumbrances on the Assets, accompanied
by fully executed UCC or other releases or conveyances relating to all
Encumbrances that are not Permitted Real Property Encumbrances or Permitted
Personal Property Encumbrances.
7.10 Xxxx-Xxxxxx Facilities. There shall be no Encumbrance on or
affecting any of the Assets or Hospital Businesses relating to or arising out
of the Xxxx-Xxxxxx Act.
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7.11 Delivery of Closing Documents. Sellers shall have delivered at
Closing (to the Person or Persons designated therein) the Closing Documents
required by, and otherwise have fully complied with, the provisions of Section
8.02.
7.12 [Intentionally Omitted]
7.13 Managed Care Contracts. Buyer shall have determined that:
(a) The managed care Contracts between Sellers and the payors
listed on Schedule 3.30 will either be assigned to Buyer or
re-executed with Buyer on terms and conditions that neither result in
decreased reimbursement to Buyer nor have other material provisions
unreasonable as to Buyer; and
(b) None of the managed care Contracts to be assigned to or
re-executed with Buyer shall have restrictive covenants prohibiting
Buyer from negotiating with existing or future health plans for any
products or services.
7.15. Shareholders Agreements. The Foundation shall have become a
party to the existing Shareholders Agreement and Surviving Shareholders
Agreement.
7.16. Leases. MHSC and Buyer shall have entered into one or more
master leases of the real property and improvements described on Schedule
2.02(h) for a term of 20 years and an annual rent during the first year of the
lease term of $1,207,000 (subject to adjustment during the lease term based on
changes in the consumer price index) and otherwise on terms and conditions
acceptable to Buyer. All current leases in such properties shall be assigned to
Buyer as subleases and subordinated to the master lease(s) and Buyer shall have
a right of first refusal to purchase the properties during the term of the
master lease.
8. CLOSING; TERMINATION OF AGREEMENT
8.01. Closing.
(a) Consummation of the sale and purchase of the Hospital
Businesses and the other transactions contemplated by and described in
this Agreement (the "Closing") shall take place at the office of
XxXxxxxxx, Will & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx, at 10:00 a.m. on the later of (i) the first business day
following satisfaction or waiver of the conditions set forth in
Articles 6 and 7, and (ii) January 3, 2000, or at such time or place
as the Parties may mutually agree. Unless otherwise agreed in writing
by the Parties at Closing, the Closing shall be effective for
accounting purposes as of 12:01 a.m. on January 1, 2000 if the
transaction closes on or before January 15, 2000.
(b) At the Closing, Buyer may designate one or more
Affiliates to take title to the Seller Assets for regulatory or other
reasons and references to instruments or agreements to be executed and
delivered to or by Buyer in this Agreement at Closing shall apply to
each such designee with respect to the Assets acquired by it. Buyer
shall notify Sellers prior to Closing of the names of such designees
and, from
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and after Closing, the rights, privileges and benefits of this
Agreement applicable to Buyer shall benefit each such designee,
subject to the terms, covenants and conditions of this Agreement, with
respect to the Seller Assets acquired by it.
8.02. Action of Sellers and the Foundation at Closing. At the Closing
and unless otherwise waived in writing by Buyer, Sellers and the Foundation
shall deliver:
(a) to Buyer deeds containing special warranties of title,
fully executed by Sellers in recordable form, conveying to Buyer good
and marketable fee title to the Seller Real Property, free and clear
of all Encumbrances other than the Permitted Real Property
Encumbrances;
(b) to Buyer bills of sale and assignment, fully executed by
Sellers, in form and substance acceptable to Buyer, conveying to Buyer
good and valid title to all Seller Assets other than the Real
Property, free and clear of all Encumbrances other than the Permitted
Personal Property Encumbrances;
(c) to Buyer assignments, fully executed by Sellers, in form
and substance acceptable to Buyer, conveying to Buyer Sellers'
interests in the Assumed Contracts;
(d) to Buyer a liability assumption and indemnification
agreement, fully executed by Sellers, in form and substance acceptable
to Buyer, pursuant to which Sellers shall assume and agree to pay and
be responsible for, the Excluded Contracts and all liabilities of the
Subsidiaries except the Assumed Liabilities;
(e) to Buyer stock certificates, duly endorsed for transfer
to Buyer and with all stamps or evidence of other documentary and
transfer taxes affixed, and certificates or other appropriate
instruments of transfer of the ownership interests in the
Subsidiaries, duly endorsed for transfer to Buyer, as appropriate;
(f) to Vanguard the certificate evidencing the Shares issued
by Vanguard to XxxXxxx Hospital at Closing, duly endorsed for transfer
to the Foundation and with all stamps or evidence of other documentary
and transfer taxes affixed;
(g) to Vanguard a joinder to (or amended and restated
versions of) the Shareholders Agreement and the Surviving Shareholders
Agreement, duly executed by the Foundation;
(h) the original minute books and transfer ledgers of the
Subsidiaries;
(i) written resignations of the directors and officers of (or
persons holding comparable positions in) the Subsidiaries effective on
and as of the Closing;
(j) to Buyer copies of resolutions duly adopted by the board
of directors or trustees of each Seller and the Foundation and, if
required, the Subsidiaries and members of each Seller, authorizing and
approving the execution and delivery of this Agreement and the Closing
Documents and the consummation of the transactions
55
contemplated hereby, certified as true and in full force and effect as
of the Closing Date by the appropriate officers of such Seller;
(k) to Buyer certificates of the duly authorized President or
Vice President of each Seller and the Foundation certifying
respectively that each of the representations and warranties of such
Seller and the Foundation contained in this Agreement that is
qualified as to materiality is true and correct on and as of the
Closing Date, that each of the other representations and warranties of
each Seller and the Foundation contained in this Agreement is true and
correct in all material respects on and as of the Closing Date, and
that each and all of the terms, covenants and agreements to be
complied with or performed by such Seller and the Foundation on or
before the Closing Date have been complied with and performed;
(l) to Buyer certificates of incumbency for the respective
officers of each Seller and the Foundation executing the Agreement and
the Closing Documents, dated as of the Closing Date;
(m) to Buyer certificates of existence and good standing from
the state or states in which each Seller, the Foundation and each
Subsidiary is incorporated or organized, each dated the most recent
practical date prior to Closing; and
(n) to Buyer such other Closing Documents as Buyer reasonably
deems necessary to effect the transactions contemplated hereby.
8.03. Action of Buyer at Closing. At the Closing and unless otherwise
waived in writing by Sellers, Buyer shall deliver:
(a) to Sellers that part of the Cash Portion of the Purchase
Price payable to Sellers in accordance with Section 2.05(f) and a
certificate evidencing the Common Shares issued in the name of XxxXxxx
Hospital;
(b) to the Foundation that part of the Cash Portion of the
Purchase Price payable to the Foundation in accordance with Section
2.05(f) and a certificate evidencing the Common Shares issued in the
name of the Foundation;
(c) to Sellers an assumption agreement, fully executed by
Buyer, in form and substance acceptable to Sellers, pursuant to which
Buyer shall assume the future payment and performance of the Assumed
Liabilities;
(d) to the Foundation a joinder to (or amended and restated
versions of) the Shareholders Agreement and the Surviving Shareholders
Agreement, duly executed by Vanguard and all necessary Holders (as
defined therein);
(e) to Sellers and the Foundation copies of resolutions duly
adopted by the boards of directors of Buyer and Vanguard authorizing
and approving the execution and delivery of this Agreement by Buyer
and Vanguard and the Closing Documents and the consummation of the
transactions contemplated hereby, certified
56
as true and in full force and effect as of the Closing Date by
appropriate officers of Buyer and Vanguard:
(f) to Sellers and the Foundation certificates of the duly
authorized President or a Vice President of Buyer certifying that each
of the representations and warranties of Buyer contained in this
Agreement that is qualified as to materiality is true and correct on
and as of the Closing Date, that each of the other representations and
warranties of Buyer contained in this Agreement is true and correct in
all material respects on and as of the Closing Date, and that each and
all of the terms, covenants and agreements to be complied with or
performed by Buyer on or before the Closing Date have been complied
with and performed;
(g) to Sellers and the Foundation certificates of incumbency
for the officers of Buyer and Vanguard executing this Agreement and
the Closing Documents, dated as of the Closing Date;
(h) to Sellers and the Foundation certificates of existence
and good standing of Buyer from the state in which it is incorporated,
dated the most recent practical date prior to Closing; and
(i) to Sellers and the Foundation such other Closing
Documents as Sellers reasonably deem necessary to effect the
transactions contemplated hereby.
8.04. Termination Prior to Closing.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated, and the transactions contemplated by this
Agreement abandoned, upon notice by the terminating Party to the other
Parties:
(i) at any time before the Closing, by mutual
consent of Buyer and Sellers;
(ii) by Buyer in accordance with Section 5.12;
(iii) at any time before the Closing, by Buyer on
the one hand, or Sellers on the other hand, in the event of a
breach of this Agreement by the non-terminating Party which
is not cured by such breaching Party by the earlier of 30
days after receipt of written notice specifying the alleged
breach and June 30, 2000, or if the satisfaction of any
condition to such Party's obligations under this Agreement
becomes impossible or impracticable with the use of
commercially reasonable efforts and the failure of such
condition to be satisfied is not caused by a breach by the
terminating Party;
(iv) by Sellers or Buyer, if Buyer does not have
sufficient funds available to pay the Purchase Price on the
date set for Closing pursuant to Section 8.01(a);
57
(v) by Sellers if, as a result of an Alternative
Proposal received by any Seller from a Person other than
Buyer or any of its Affiliates, the board of directors or
trustees of any Seller determines in good faith that its
fiduciary obligations under applicable law require that such
Alternative Proposal be accepted; provided that (i) the board
of directors or trustees of such Seller shall have determined
in good faith, after considering applicable provisions of
state law and after giving effect to all concessions, if any,
which have been offered by the Buyer pursuant to clause (ii)
of this paragraph, on the basis of oral or written advice of
outside counsel, that such action is required by its
fiduciary obligations under applicable law, and (ii) prior to
any such termination, such Seller shall, and shall cause its
financial and legal advisors to, negotiate with Buyer to make
such adjustments in the terms and conditions of this
Agreement as would enable Buyer to proceed with the
transactions contemplated hereby;
(vi) at any time prior to the close of business on
October 20, 1999 by Buyer if Buyer has not obtained by such
time the written consent of Xxxxxx Xxxxxxx Capital Partners
III, L.P. and Xxxxxx Xxxxxxx Xxxx Xxxxxx Capital Partners IV,
L.P. pursuant to section 4.02(a) of the Shareholders
Agreement to the transactions contemplated by this Agreement;
(vii) at any time after June 30, 2000 by Sellers if
the transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to
consummate is not caused by a breach of this Agreement by
Sellers;
(viii) at any time after June 30, 2000 by Buyer if
the transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to
consummate is not caused by a breach of this Agreement by
Buyer;
(ix) by Buyer if, since June 30, 1999, a material
adverse change in the Assets or results of operations,
financial condition or prospects for future operations of the
Hospital Businesses, taken as a whole, has occurred; or
(x) by Sellers or Buyer in accordance with Section
11.01(c).
(b) If this Agreement is validly terminated pursuant to this
Section, this Agreement will be null and void, and there will be no
liability on the part of any Party (or any of their respective
officers, directors, trustees, employees, agents, consultants or other
representatives) except as expressly provided otherwise in Section
8.05 and except that, upon termination of this Agreement pursuant to
subparagraphs (iii), (vii) or (viii) above, Sellers will remain liable
to Buyer and Buyer will remain liable to Sellers for any breach of
their respective obligations under Section 5.19 existing at the time
of such termination, and each Party may seek such remedies or damages
against the other with respect to any such breach as are
58
provided in this Agreement or as are otherwise available at law or in
equity. No termination shall be effective pursuant to Section
8.04(a)(iv) or 8.04(a)(v) unless concurrently with such termination,
the termination fee is paid in full by the applicable party in
accordance with the provisions of Section 8.05.
8.05. Effect of Termination.
(a) If this Agreement is terminated by Sellers or Buyer
pursuant to Section 8.04(a)(iv), then Buyer shall pay to Sellers a
termination fee of $10 million. If this Agreement is terminated by --
Sellers pursuant to Section 8.04(a)(v), Sellers shall pay to Buyer a
termination fee of $10 million. Each termination fee payable under
this Section shall be payable in cash.
(b) The Parties acknowledge and agree that the agreements
contained in this Section are an integral part of the transaction
contemplated by the Agreement and constitute liquidated damages and
not a penalty. If one Party fails to promptly pay to the other any fee
due under Section 8.05(a), the defaulting Party shall pay the costs
and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest as provided in
Section 11.16 from the date such fee was required to be paid.
9. INDEMNIFICATION
9.01. Indemnification by Sellers. Subject to and to the extent
provided in this Article, from and after the Closing, Sellers shall jointly and
severally indemnify, defend and hold harmless Buyer's Indemnified Persons, and
each of them, from and against any Losses incurred or suffered by Buyer's
Indemnified Persons, directly or indirectly, as a result of or arising from:
(a) any inaccuracy of any representation or warranty of any
Seller, whether or not Buyer's Indemnified Persons relied thereon or
had knowledge thereof, provided that in determining whether there has
been any such inaccuracy, any qualification as to materiality included
in any representation or warranty shall not be taken into account;
(b) the nonfulfillment of any covenant, agreement or other
obligation of any Seller set forth in this Agreement or in any other
agreement or instrument delivered by any Seller pursuant to this
Agreement; and
(c) the Excluded Liabilities.
9.02. Sellers' Limitations. Sellers shall have no liability under
Section 9.01 and no claim under Section 9.01 shall:
(a) accrue to any of Buyer's Indemnified Persons against
Sellers under Section 9.01(a) unless and until the total liability of
Sellers in respect of claims arising under Section 9.01(a) exceeds
$500,000 in the aggregate, provided that (i) in
59
no event shall Sellers' indemnification obligations under Section
9.01(a) exceed $100,000,000, and (ii) there shall be no minimum Loss
requirement, and liability of Sellers shall arise from and after $1.00
of Losses, in respect of Losses resulting from any Seller's
intentional misrepresentation or fraud; and
(b) be made unless notice thereof shall have been given by or
on behalf of any of Buyer's Indemnified Persons to Sellers in the
manner provided in Section 9.05.
9.03. Indemnification by Buyer. Subject to and to the extent provided
in this Article, from and after the Closing Date, Buyer shall indemnify, defend
and hold harmless Sellers' Indemnified Persons, and each of them, from and
against any Losses incurred or suffered by Sellers' Indemnified Persons,
directly or indirectly, as a result of or arising from:
(a) the inaccuracy in any representation or warranty of
Buyer, whether or not Seller's Indemnified Persons relied thereon or
had knowledge thereof, provided that in determining whether there has
been any such inaccuracy, any qualification as to materiality included
in any representation or warranty shall not be taken into account;
(b) the nonfulfillment of any covenant, agreement or other
obligation of Buyer set forth in this Agreement or in any other
agreement or instrument delivered by Buyer pursuant to this Agreement;
and
(c) the Assumed Liabilities.
9.04. Buyer's Limitations. Buyer shall have no liability under Section
9.03 and no claim under Section 9.03 shall:
(a) accrue to any of Sellers' Indemnified Persons against
Buyer under Section 9.03(a) unless and until the total liability of
Buyer in respect of claims arising under Section 9.03(a) exceeds
$500,000 in the aggregate, provided that (i) in no event shall Buyer's
indemnification obligations under Section 9.03(a) exceed $100,000,000,
and (ii) there shall be no minimum Loss requirement, and liability of
Buyer shall arise from and after $1.00 of Losses, in respect of Losses
resulting from Buyer's intentional misrepresentation or fraud; and
(b) be made unless notice thereof shall have been given by or
on behalf of any of Sellers' Indemnified Persons to Buyer in the
manner provided in Section 9.05.
9.05. Notice and Procedure. All claims for indemnification by any
Indemnified Party against an Indemnifying Party under this Article shall be
asserted and resolved as follows:
(a)(i) If any claim or demand for which an Indemnifying Party
would be liable for Losses to an Indemnified Party is alleged or
asserted by a Person other than any Buyer's Indemnified Person or any
Sellers' Indemnified Person (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice with reasonable
60
promptness to the Indemnifying Party, together with a copy of all
papers served, if any, and specifying the nature of and alleged basis
for the Third Party Claim and, to the extent then feasible, the
alleged amount or the estimated amount of the Third Party Claim. If
the Indemnified Party fails to deliver the Claim Notice to the
Indemnifying Party within 30 days after the Indemnified Party receives
notice of such Third Party Claim, or within 15 days after receipt by
the Indemnified Party of a complaint, petition, arbitration demand or
other written notice of the institution of formal legal action, the
Indemnifying Party will not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim if and only to the extent
that the Indemnifying Party's ability to defend the Third Party Claim
has been materially prejudiced by such failure. The Indemnifying Party
will notify the Indemnified Party within 20 days after receipt of the
Claim Notice, or within five days in the case of a Claim Notice
describing or including a complaint, petition, arbitration demand or
other written notice of the institution of formal legal action, (in
either case, the "Notice Period") whether the Indemnifying Party
intends, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against the Third Party Claim. The
assumption by the Indemnifying Party of the defense of the Third Party
Claim constitutes an admission by the Indemnifying Party that the
claim is one for which the Indemnifying Party is ultimately liable
under this Article.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party intends to defend
the Indemnified Party against the Third Party Claim, then the
Indemnifying Party will have the right to defend, at its sole cost and
expense, the Third Party Claim by all appropriate proceedings, which
proceedings will be diligently prosecuted by the Indemnifying Party to
a final conclusion or settled at the discretion of the Indemnifying
Party (with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld). The Indemnifying Party will have full
control of such defense and proceedings; provided that the Indemnified
Party may file during the pendency of such Third Party Claim, at the
sole cost and expense of the Indemnified Party, any motion, answer or
other pleading that the Indemnified Party may deem necessary or
appropriate to protect its interests and not irrevocably prejudicial
to the Indemnifying Party (it being understood and agreed that, except
as provided in Section 9.05(a)(iii), if an Indemnified Party takes any
such action that is irrevocably prejudicial and conclusively causes a
final adjudication that is materially adverse to the Indemnifying
Party, the Indemnifying Party will be relieved of its obligations
hereunder with respect to that portion of the Third Party Claim
prejudiced by the Indemnified Party's action); and provided further
that, if requested by the Indemnifying Party, the Indemnified Party
shall cooperate, at the sole cost and expense of the Indemnifying
Party, with the Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to contest or, if
appropriate in the judgment of the Indemnified Party and related to
the Third Party Claim, in making any counterclaim or cross-claim
against any Person (other than the Indemnified Party). The Indemnified
Party may participate in, but not control, any defense or settlement
of any Third Party Claim assumed by the Indemnifying Party pursuant to
this Section
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9.05(a)(ii) and, except as provided in the preceding sentence, the
Indemnified Party will bear its own costs and expenses with respect to
such participation. Notwithstanding the foregoing, the Indemnifying
Party may not assume the defense of the Third Party Claim on behalf of
the Indemnified Party if (1) the Persons against whom the claim is
made, or any impleaded Persons, include both the Indemnifying Party
and any Indemnified Party, and (2) representation of both such Persons
by the same counsel would be inappropriate due to actual or potential
differing interests between them, in which case any Indemnified Party
shall have the right to defend the Third Party Claim on its own behalf
and to employ counsel at the expense of the Indemnifying Party.
(iii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the Indemnifying Party
intends to defend the Indemnified Party against the Third Party Claim,
or if the Indemnifying Party gives such notice but fails to diligently
prosecute or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Notice Period,
then the Indemnified Party will have the right (but not the
obligation) to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be diligently prosecuted by the
Indemnified Party to a final conclusion or settled at the discretion
of the Indemnified Party. The Indemnified Party will have full control
of such defense and proceedings, including any compromise or
settlement thereof; provided that, if requested by the Indemnified
Party, the Indemnifying Party shall cooperate, at the sole cost and
expense of the Indemnifying Party, with the Indemnified Party and its
counsel in contesting the Third Party Claim which the Indemnified
Party is contesting, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim or cross claim against
any Person (other than the Indemnifying Party).
(iv) Notwithstanding the foregoing provisions of Section
9.05(a)(iii), if the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party disputes its
obligation to indemnify the Indemnified Party against the Third Party
Claim, and if such dispute is resolved pursuant to Section 9.05(c) or
Article 10 in favor of the Indemnifying Party, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to Section 9.05(a)(iii) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying
Party in full for all such costs and expenses. Except as otherwise
specifically provided in Section 9.05(a)(iii), the Indemnifying Party
may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to Section 9.05(a)(iii),
but the Indemnifying Party will bear its own costs and expenses with
respect thereto if such participation is not at the request of the
Indemnified Party.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party that is not a Third Party Claim, the
Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party
62
specifying the nature of and specific basis for the claim and, to the
extent then feasible, the amount or the estimated amount of the claim.
The failure by any Indemnified Party to give timely notice referred to
in the preceding sentence shall not impair such Person's rights
hereunder except to the extent that an Indemnifying Party demonstrates
that it has been materially prejudiced thereby. If the Indemnifying
Party does not notify the Indemnified Party within ten days following
its receipt of the Indemnity Notice that the Indemnifying Party
disputes its obligation to indemnify the Indemnified Party hereunder,
the claim will be conclusively deemed a liability of the Indemnifying
Party hereunder.
(c) If the Indemnifying Party timely disputes its liability
with respect to a claim described in a Claim Notice or an Indemnity
Notice, the Indemnifying Party and the Indemnified Party shall proceed
promptly and in good faith to negotiate a resolution of such dispute
within 60 days following receipt of the Claim Notice or Indemnity
Notice and, if such dispute is not resolved through negotiations
during such 60-day period, it shall be resolved pursuant to the
provisions of Article 10.
(d) The Indemnifying Party shall pay the amount of any
liability to the Indemnified Party within 30 days following its
receipt of a Claim Notice or an Indemnity Notice, or on such later
date (i) in the case of a Third Party Claim, as the Indemnified Party
suffers Losses in respect of the Third Party Claim, (ii) in the case
of an Indemnity Notice in which the amount of the claim is estimated,
promptly after any Losses in respect of such claim are actually
incurred by the Indemnified Party, provided that, if the Indemnifying
Party notifies the Indemnified Party within the Notice Period that the
Indemnifying Party disputes its obligation to indemnify hereunder and
such dispute is resolved in favor of the Indemnified Party, the
Indemnifying Party shall pay the amount of any liability to the
Indemnified Party upon resolution of such dispute. In the event the
Indemnified Party is not paid in full for its claim in a timely manner
after the Indemnifying Party's obligation to indemnify and the amount
thereof has been determined, the amount due shall bear interest from
the date that the indemnification amount has been determined until
paid at the interest rate provided in Section 11.16, and in addition
to any other rights it may have against the Indemnifying Party, the
Indemnified Party shall have the right to set-off the unpaid amount of
such claim against any amounts owed by it to the Indemnifying Party.
(e) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive of the final
amount of such claim, and the giving of a Claim Notice when an
Indemnity Notice is properly due, or the giving of an Indemnity Notice
when a Claim Notice is properly due, shall not impair such Indemnified
Party's rights hereunder except to the extent that an Indemnifying
Party demonstrates that it has been materially prejudiced thereby.
Notice of any claim comprised in part of Third Party Claims and claims
that are not Third Party Claims may be given pursuant to either
Section 9.05(a) or 9.05(b).
63
(f) Each Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its counsel in any matter for
which a defense is provided hereunder. In the event that an
Indemnified Party does not so cooperate, which failure to cooperate
has a material adverse effect on the defense or settlement thereof or
the enforcement of any rights of contribution that the Indemnifying
Party has against any Person, the Indemnifying Party shall have no
further obligation hereunder with respect to such matter.
(g) Following indemnification of any Indemnified Party as
provided for hereunder and payment of any and all indemnifiable Losses
hereunder, the Indemnifying Party shall be subrogated to all of the
rights of the Indemnified Party with respect to Persons (other than
another Indemnified Person) relating to the matter for which
indemnification has been made.
9.06. Survival of Representations; Indemnity Periods. Notwithstanding
any right of Buyer (whether or not exercised) to investigate the Hospital
Businesses or any right of any Party (whether or not exercised) to investigate
the accuracy of the representations and warranties of the other Party contained
in this Agreement, Sellers have, on the one hand, and Buyer and Vanguard have,
on the other hand, the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements in this Agreement
made by Sellers and Buyer respectively will survive the Closing (a)
indefinitely with respect to matters covered by Sections 2.03, 2.04, 3.01,
4.01, 9.01(c) and 9.03(c), (b) until 60 days after the expiration of all
applicable statutes of limitations (including all periods of extension, whether
automatic or permissive) with respect to matters covered by Sections 3.05,
3.07, 3.13, 3.17, 3.22, 3.23, 3.24, 3.26, 3.27, 3.28 and 3.29, and (c) until
the second anniversary of the Closing Date in the case of all other
representations, warranties, covenants and agreements, except that
(i) any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with
clause (b) or (c) above shall survive if a Claim Notice or an
Indemnity Notice shall have been given on or prior to such
termination date, until the related claim for indemnification
has been satisfied or otherwise resolved as provided in this
Article,
(ii) in the event of intentional misrepresentation
or fraud in the making of any representation or warranty, or
intentional, willful or reckless nonfulfillment or breach of
any covenant in this Agreement, all representations,
warranties, covenants and agreements that are the subject of
the intentional misrepresentation, fraud, willful or reckless
nonfulfillment or breach, shall survive until 60 days after
the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or
permissive) with respect to matters covered thereby,
(iii) covenants and agreements to be performed after
the Closing Date will survive the Closing for the term
specified therein, or, if no term is specified, indefinitely,
and
64
(iv) rights to indemnification under this Article
will survive until any claims brought hereunder shall have
been satisfied or otherwise resolved as provided herein.
10. ALTERNATE DISPUTE RESOLUTION
10.01. Agreement to Use the Procedure. In the event of a dispute
between the Parties arising out of or related to this Agreement and upon mutual
agreement of the Parties to resolve such dispute pursuant to the procedures set
forth in this Article, the Parties shall utilize the procedures specified in
this Article except (i) when otherwise modified by written agreement of the
Parties at the time the dispute arises, (ii) in connection with disputes
relating to the Purchase Price Adjustment, in which event the provisions of
Section 2.05 shall be utilized, (iii) when otherwise expressly provided
elsewhere in this Agreement.
10.02. Initiation of the Procedure. A Party seeking to utilize these
procedures (the "Initiating Party") shall give written notice to the other
Party or Parties, describing briefly the nature of the dispute and its claim
and identifying an individual with authority to settle the dispute on its
behalf. The Party receiving such notice (the "Responding Party") shall have ten
days within which to designate, in a written notice given to the Initiating
Party, an individual with authority to settle the dispute on its behalf. The
individuals so designated shall be known as the "Authorized Individuals."
10.03. Unassisted Settlement. The Authorized Individuals shall make
such investigations as they deem appropriate and promptly thereafter (but in no
event later than 15 days from the date the Initiating Party's notice is given)
shall commence discussions concerning resolution of the dispute. If the dispute
has not been resolved within 30 days from the commencement of discussions (such
30th day being the "Submission Date"), it shall be submitted to alternative
dispute resolution (the "ADR") as provided below.
10.04. Selection of the Neutral. The Parties shall have ten days from
the Submission Date to select a mutually acceptable Person who is not an
Affiliate or employee of any Party to resolve the dispute (the "Neutral"). If
no Neutral has been selected within such time, any Party to the dispute may
request that the American Arbitration Association, the Center for Public
Resources, or another mutually agreed-upon provider of neutral dispute
resolution services, supply within ten days a list of potential Neutrals with
qualifications specified by the Parties. Within five days after receipt of the
list, the Parties shall independently rank the proposed candidates,
simultaneously exchange rankings and select as the Neutral the individual
receiving the highest combined ranking who is available to serve.
10.05. Time and Place for the ADR. In consultation with the Neutral,
the Parties shall promptly designate a mutually convenient time and place for
the ADR (and unless circumstances require otherwise, such time shall be no
later than 60 days after selection of the Neutral).
10.06. Exchange of Information. In the event any Party has a
substantial need for information in the possession of the other Party in order
to prepare for the ADR, the Parties shall
65
attempt in good faith to agree on procedures for the expeditious exchange of
such information, with the help of the Neutral if necessary.
10.07. Summary of Views. One week prior to the first scheduled session
of the ADR, each Party shall deliver to the Neutral and to the other Party a
concise written summary of its views on the matter in dispute, such summary not
to exceed ten pages in length.
10.08. Staffing the ADR. In the ADR, each Party shall be represented
by the Authorized Individual and by up to two counsel (who may be in house
counsel). In addition, each Party may bring such other Persons (the maximum
number of which shall be agreed upon by the Parties in advance) as may be
needed to respond to questions, contribute information and participate in the
negotiations, with the assistance of the Neutral, if necessary.
10.09. Conduct of the ADR. The Parties, in consultation with the
Neutral, will agree upon a format for the meetings designed to assure that the
Neutral and the Authorized Individuals have an opportunity to hear an oral
presentation of each Party's views on the matter in dispute, and that the
Authorized Individuals attempt to negotiate a resolution of the matter in
dispute, with or without the assistance of counsel or others, but with the
assistance of the Neutral. To this end, the Neutral is authorized to conduct
both joint meetings and separate private caucuses with the Parties. The Neutral
will keep confidential all information learned in private caucus with either
Party unless specifically authorized by such Party to make disclosure of the
information to the other Party.
10.10. The Neutral's Views. The Neutral shall (a) unless requested not
to do so by the Parties, provide his opinion to the Parties on the probable
outcome should the matter be litigated, and (b) if requested to do so by the
Parties, make one or more recommendations as to the terms of a possible
settlement, upon any conditions imposed by the Parties (including a minimum and
maximum amount). The Neutral shall base his opinions and recommendations on
information then available to the Parties, excluding only such information
disclosed by any Party to the Neutral in confidence but not disclosed to the
other Party or Parties. The opinions and recommendations of the Neutral shall
not be binding on the Parties.
10.11. Termination of the Procedure. The Parties shall participate in
the ADR to its conclusion (as designated by the Neutral) and not terminate
negotiations concerning resolution of the matters in dispute until at least ten
days thereafter. No Party shall commence a lawsuit or seek other remedies prior
to the conclusion of the 10-day post-ADR negotiation period; provided that
either Party may commence litigation within five days prior to the date after
which the commencement of litigation could be barred by an applicable statute
of limitations or doctrine of laches, or in order to request a temporary
restraining order or preliminary injunction to prevent irreparable harm, in
which event the Parties shall continue nevertheless (unless prohibited by court
order) to participate in the ADR to its conclusion.
10.12. Fees of the Neutral; Disqualification. The fees of the Neutral
shall be shared equally by the Parties. The Neutral shall be disqualified as a
witness, consultant, expert or counsel for either Party with respect to the
matters in dispute and any litigation or other matters relating thereto.
66
10.13. Confidentiality. The procedures described above are intended to
constitute a compromise negotiation for purposes of the Federal Rules of
Evidence and state rules of evidence. The entire Procedure is confidential, and
no stenographic, visual or audio record shall be made. All conduct, statements,
promises, offers, views and opinions, whether oral or written, made in the
course of the Procedure by any Party, its agents, employees, representatives or
other invitees, and by the Neutral (who will be the Parties' joint agent for
purposes of the Procedure) are confidential and, where appropriate, shall be
deemed to be work product and privileged. Such conduct, statements, promises,
offers, views and opinions shall not be discoverable or admissible for any
purposes, including impeachment, in any litigation or other proceeding
involving the Parties, and shall not be disclosed to anyone not an agent,
employee, expert, witness or representative of any Party; provided that
evidence otherwise discoverable or admissible is not excluded from discovery or
admission as a result of its use in the Procedure.
11. GENERAL
11.01. Schedules.
(a) The Schedules and all exhibits and documents referred to
in or attached to this Agreement are integral parts of this Agreement
as if fully set forth herein and all statements appearing therein
shall be deemed to be representations. Nothing in the Schedules shall
be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Schedule identifies the exception with
reasonable particularity and, without limiting the generality of the
foregoing, the mere listing of a document as an exception to any
representation or warranty shall not be deemed to disclose the
contents of such document as an exception to any representation or
warranty, provided that a reference to the contents of one or more
particular documents in a Schedule as an exception to a representation
or warranty shall be sufficient to disclose the contents of the
referenced document for purposes of that representation or warranty
only. Subject only to the preceding sentence, however, the disclosure
of information by Sellers in any Schedule shall be incorporated by
this reference into each other Schedule, where applicable.
(b) The parties acknowledge that not all of the Schedules
anticipated to have been completed by Sellers (the "Signing
Schedules") as of the Effective Date have been completed by the
Parties, and no Party shall be in breach of any representation,
warranty or covenant made in this Agreement by reason of the fact that
all of the Signing Schedules are not in fact attached to this
Agreement on the Effective Date. Each Schedule on the List of
Schedules which is not marked with an asterisk on said List is a
"Final Schedule", may not change without agreement of the Parties and
shall not be governed by the provisions of this Section 11.01(b). With
respect to each missing Signing Schedule:
(i) Sellers will prepare or complete a draft of all
of Signing Schedules (the "Draft Schedules") to be prepared
by Seller and deliver the Draft Schedules to Buyer as soon as
possible after the Effective Date, but in any event no later
than October 15, 1999, and Buyer will prepare or complete
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a draft of all of Signing Schedules (the "Draft Schedules")
to be prepared by Buyer and deliver the Draft Schedules to
Sellers as soon as possible after receipt of the Draft
Schedules prepared by Sellers, but in any event no later than
October 18, 1999;
(ii) If any Draft Schedule is acceptable to the
other Parties, it will thereupon be a "Final Schedule"; and
(iii) If Buyer notifies Sellers that a Draft
Schedule prepared by Seller is not acceptable, or if Sellers
notify Buyer that a Draft Schedule prepared by Buyer is not
acceptable, the Parties will attempt promptly to resolve
their differences with respect to the Draft Schedule, and if
the parties reach a written agreement with respect to the
Draft Schedule, the Draft Schedule will be a "Final
Schedule".
(c) Each Final Schedule shall be deemed to be the
corresponding Schedule referred to in this Agreement and shall be part
of this Agreement as fully as if it had been appended hereto on, and
shall speak as of, the Effective Date. Notwithstanding any other
provision of this Agreement, if any Draft Schedule is not for any
reason whatsoever delivered by Sellers to Buyer on or before October
15, 1999, or delivered by Buyer to Sellers on or before October 18,
1999, or any Draft Schedule does not for any reason whatsoever become
a Final Schedule pursuant to the provisions of this Section 11.01 on
or before the close of business on October 20, 1999, then Buyer (if
the missing Final Schedule is to be prepared by Sellers) or Seller (if
the missing Final Schedule is to be prepared by Buyer) shall have the
absolute right to terminate this Agreement on any date subsequent to
October 20, 1999. Buyer and Seller shall be under no obligation
whatsoever to accept any Draft Schedule in the form provided or to
resolve differences with respect thereto.
11.02. CON Disclaimer. This Agreement shall not be deemed to be an
acquisition or obligation of a capital expenditure or of funds within the
meaning of the certificate of need laws of the State, until the appropriate
Governmental Authorities shall have granted a certificate of need or other
appropriate approval or determined that no certificate of need or exemption or
other approval is required.
11.03. Tax and Government Payment Program Effect. None of the Parties
(nor such Parties' counsel or accountants) has made or is making in this
Agreement any representation to any other Party (or such Party's counsel or
accountants) concerning any of the Tax or Government Payment Program effects or
consequences on the other Party of the transactions provided for in this
Agreement. Each Party represents that it has obtained, or may obtain,
independent Tax and Government Payment Program advice with respect thereto and
upon which it, if so obtained, has solely relied.
11.04. Reproduction of Documents. This Agreement and all documents
relating hereto, including consents, waivers and modifications which may
hereafter be executed, the Closing Documents, financial statements,
certificates and other information previously or hereafter furnished
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to any Party, may be reproduced by any Party by any photographic, microfilm,
electronic or similar process and the Parties may destroy any original
documents so reproduced. The Parties stipulate that any such reproduction shall
be admissible in evidence as the original itself in any judicial, arbitral or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the ordinary course of business)
and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
11.05. Consented Assignment. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Assumed Contract, claim or other right if the assignment or attempted
assignment thereof without the consent of another Person would (i) constitute a
breach thereof or in any material way affect the rights of any Seller
thereunder, (ii) be ineffective or render the Contract void or voidable, or
(iii) materially affect any Seller's rights thereunder so that Buyer would not
in fact receive all such rights. In any such event, Sellers shall cooperate in
any reasonable arrangement designed to provide for Buyer the benefits under any
such Contract, claim or right, including enforcement of any and all rights of
any Seller against the other Person arising out of the breach or cancellation
by such other Person or otherwise. After Closing, the Parties shall continue to
use commercially reasonable efforts to obtain the consent of the assignment of
such Contract, claim or right.
11.06. Time of Essence. Time is of the essence in the performance of
this Agreement, provided that, if the day on or by which a notice must or may
be given, or the performance of any Party's obligation is due, is a Saturday,
Sunday or holiday for banks in Chicago, Illinois, then the day on or by which
such notice must or may be given, or that such performance is due, shall
automatically be extended to the first business day thereafter. This Section
may be waived only in a writing expressly referring hereto.
11.07. Consents, Approvals and Discretion. Except as herein expressly
provided to the contrary, whenever this Agreement requires any consent or
approval to be given by any Party or any Party must or may exercise discretion,
such consent or approval shall not be unreasonably withheld or delayed and such
discretion shall be reasonably exercised.
11.08. Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without regard
to such State's conflicts of laws rules.
11.09. Benefit; Assignment. This Agreement shall inure to the benefit
of and be binding upon the Parties and their respective legal representatives,
successors and assigns. No Party may assign this Agreement without the prior
written consent of the other Parties, provided that Buyer may assign this
Agreement, in whole or in part, to any Affiliate of Buyer, and to any other
Person who takes title to all or any portion of the Seller Assets in connection
with Buyer's financing (including a sale/leaseback) of the transactions
described herein so long as Vanguard guarantees the performance of all duties
and obligations of such assignee hereunder in the same manner and to the same
extent provided in Section 12.01.
11.10. Third Party Beneficiary. The terms and provisions of this
Agreement (including provisions regarding employee and employee benefit
matters) are intended solely for the benefit of the Parties, Buyer's
Indemnified Persons, Sellers' Indemnified Persons, and their
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respective successors and permitted assigns, and are not intended to confer
third-party beneficiary rights upon any other Person. Any reference in this
Agreement to one or more Employee Benefit Plans of Buyer includes provisions,
if any, in such plans permitting their termination or amendment and any
covenant in this Agreement to provide any Employee Benefit Plan shall not be
deemed or construed to limit Buyer's right to terminate or amend such plan of
Buyer in accordance with its terms.
11.11. Waiver of Breach, Right or Remedy. The waiver by any Party of
any breach or violation by another Party of any provision this Agreement or of
any right or remedy permitted the waiving Party in this Agreement (i) shall not
waive or be construed to waive any subsequent breach or violation of the same
provision (ii) shall not waive or be construed to waive a breach or violation
of any other provision, and (iii) shall be in writing and may not be presumed
or inferred from any Party's conduct. Except as expressly provided otherwise in
this Agreement and except for the obligation of the Parties to first utilize
the ADR procedure in Article 10, no remedy conferred by this Agreement is
intended to be exclusive of any other remedy, and each and every remedy shall
be in addition to every other remedy granted in this Agreement or now or
hereafter existing at law or in equity, by statute or otherwise. The election
of any one or more remedies by a Party shall not constitute a waiver of the
right to pursue other available remedies. In addition to any other rights and
remedies any Party may have at law or in equity for breach of this Agreement,
each Party shall be entitled to seek an injunction to enforce the provisions of
this Agreement.
11.12. Notices. Any notice, demand or communication required,
permitted or desired to be given hereunder shall be deemed effectively given if
given in writing (i) on the date tendered by personal delivery, (ii) on the
date received by facsimile or other electronic means, (iii) on the date
tendered for delivery by nationally recognized overnight courier, or (iv) on
the date tendered for delivery by United States mail, with postage prepaid
thereon, certified or registered mail, return receipt requested, in any event
addressed as follows:
If to Buyer or Vanguard: Vanguard Health Systems, Inc.
00 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
If to Sellers: MacNeal Health Services Corporation
0000 Xxxxx Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to: XxXxxxxxx, Will & Xxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
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or to such other address or number, and to the attention of such other Person,
as any Party may designate at any time in writing in conformity with this
Section.
11.13. Misdirected Payments. Sellers shall remit to Buyer with
reasonable promptness any monies received by Sellers constituting or in respect
of the Assets and Assumed Liabilities. Buyer shall remit to Sellers with
reasonable promptness any monies received by Buyer constituting or in respect
of the Excluded Seller Assets and Excluded Liabilities. If any Person
determines that funds previously paid or credited to any Seller or the Hospital
Businesses in respect of services rendered prior to the Closing Date have
resulted in an overpayment or must be repaid, Sellers shall be responsible for
the repayment of said monies (and the defense of such actions). If Buyer
suffers any deduction to or offset or withhold against amounts due Buyer of
funds previously paid or credited to any Seller or the Hospital Businesses in
respect of services rendered prior to the Closing Date, Sellers shall
immediately pay to Buyer the amounts so billed or offset upon demand. Any
amounts due Buyer by Sellers or one of their Affiliates, or due Sellers by
Buyer or its Affiliate, may be offset against monies or other funds held by the
Party entitled to payment.
11.14. Severability. If any provision of this Agreement is held or
determined to be illegal, invalid or unenforceable under any present or future
law, and if the rights or obligations of any Party under this Agreement will
not be materially and adversely affected thereby: (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement; (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement; and (d) in
lieu of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
11.15. Entire Agreement; Amendment. This Agreement supersedes all
previous contracts, agreements and understandings and constitutes the entire
agreement of whatsoever kind or nature existing between or among the Parties
representing the within subject matter and no Party shall be entitled to
benefits other than those specified herein. As between or among the Parties,
any oral or written representation, agreement or statement not expressly
incorporated herein, whether given prior to or on the Effective Date, shall be
of no force and effect unless and until made in writing and signed by the
Parties on or after the Effective Date. The representations and warranties set
forth in this Agreement shall survive the Closing and remain in full force and
effect as provided in Article 9, and shall survive the execution and delivery
of all other agreements, instruments or other documents described, referenced
or contemplated herein and shall not be merged herewith or therewith. Each
representation, warranty and covenant contained in this Agreement has
independent significance and if any Party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same
subject matter (regardless of the relative level of specificity) that such
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant. This
Agreement may be executed in two or more counterparts, each and all of which
shall be deemed an original and all of which together shall constitute but one
and the same
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instrument. This Agreement may not be amended except in a written instrument
executed the Parties.
11.16. Interest. Unless otherwise provided herein to the contrary, any
monies required to be paid by any Party to another Party pursuant to this
Agreement shall be due two business days after demand therefor and if not paid
when due shall accrue interest from and after the due date to and including the
date full payment is made at an annual rate equal to the average prime rate of
Citibank, N.A.
11.17. Drafting. No provision of this Agreement shall be interpreted
for or against any Person on the basis that such Person was the draftsman of
such provision, and no presumption or burden of proof shall arise favoring or
disfavoring any Person by virtue of the authorship of any provision of this
Agreement.
11.18. Confidentiality; Public Announcements.
(a) Except as required by Legal Requirements, Sellers, on the
one hand, and Buyer and Vanguard, on the other hand, shall keep this
Agreement and its contents confidential and not disclose the same to
any Person (except the Parties' attorneys, accountants or other
professional advisors and except to the applicable Governmental
Authorities in connection with any required notification or
application for approval or a license or exemption therefrom) without
the prior written consent of the other Party. With respect to
information provided by Sellers to Buyer or Vanguard in connection
with and relative to this proposed transaction, the executed
Confidentiality Agreement dated August 13, 1999 in respect of
confidentiality between Vanguard and Xxxx Brothers & Company, LLC
shall remain in effect until Closing.
(b) At all times before the Closing, Sellers, on the one
hand, and Buyer, on the other hand, will consult with the other before
issuing or making any reports, statements or releases to the public
with respect to this Agreement or the transactions contemplated hereby
and will use good faith efforts to obtain the other Party's approval
of the text of any public report, statement or release to be made on
behalf of such Party. If either Party is unable to obtain the approval
of its public report, statement or release from the other Party and
such report, statement or release is, in the opinion of legal counsel
to such Party, necessary to discharge such Party's disclosure
obligations under law, then such Party may make or issue the legally
required report, statement or release and promptly furnish the other
Party a copy thereof. Nothing herein shall prohibit any Party from
responding to questions presented by the press or media without first
obtaining prior written consent of the other Party.
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12. GUARANTEES
12.01. Guarantee of Buyer's Obligations. Vanguard, as principal
obligor and not merely as a surety, hereby unconditionally guarantees full,
punctual and complete performance by Buyer of all of Buyer's obligations under
this Agreement and each of the Closing Documents subject to the terms hereof
and thereof and so undertakes to Sellers that, if and whenever Buyer is in
default, Vanguard will on demand duly and promptly perform or procure the
performance of Buyer's obligations. The foregoing guarantee is a continuing
guarantee and will remain in full force and effect until the obligations of
Buyer under this Agreement have been duly performed or discharged and will
continue to be effective or will be reinstated, as the case may be, if at any
time any sum paid to Sellers must be restored by Sellers upon the bankruptcy,
liquidation or reorganization of Buyer. Vanguard's obligations under this
Section shall not be affected or discharged in any way by any proceeding with
respect to Buyer under any federal or state bankruptcy, insolvency or debtor
relief laws.
12.02. Guarantee of Sellers' Obligations. The Foundation, as principal
obligor and not merely as a surety, hereby unconditionally guarantees full,
punctual and complete performance by Sellers of each Seller's obligations under
this Agreement and each of the Closing Documents subject to the terms hereof
and thereof and so undertakes to Buyer and Vanguard that, if and whenever any
Seller is in default, the Foundation will on demand duly and promptly perform
or procure the performance of each Seller's obligations. The foregoing
guarantee is a continuing guarantee and will remain in full force and effect
until the obligations of each Seller under this Agreement have been duly
performed or discharged and will continue to be effective or will be
reinstated, as the case may be, if at any time any sum paid to Buyer or
Vanguard must be restored by Buyer or Vanguard upon the bankruptcy, liquidation
or reorganization of any Seller. The Foundation's obligations under this
Section shall not be affected or discharged in any way by any proceeding with
respect to any Seller under any federal or state bankruptcy, insolvency or
debtor relief laws. The Foundation's board of directors has approved the
Foundation's execution of this Agreement and the performance of its obligations
hereunder.
13. REPRESENTATIONS AND WARRANTIES OF FOUNDATION
The Foundation hereby represents and warrants to Vanguard as of the
date hereof and on the Closing Date that:
13.01 Existence and Power. The Foundation is duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
all powers (corporate or otherwise) and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
13.02 Authorization. The execution, delivery and performance of this
Agreement and the Closing Documents to which it is a party are within the
powers of the Foundation and this Agreement and the Closing Documents to which
it is a party have been duly authorized by all requisite action on its part.
This Agreement and the Closing Documents to which it is a party have been duly
executed and delivered by the Foundation. This Agreement constitutes and, when
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executed and delivered, the Closing Documents to which it is a party will
constitute, the valid and binding agreements of the Foundation.
13.03 Governmental Authorization. The execution, delivery and
performance by the Foundation of this Agreement and the Closing Documents to
which it is a party requires no action by or in respect of, or filing with any
governmental body, agency or official, other than compliance with any
applicable requirements of the HSR Act, if the HSR Act is applicable.
13.04 Non-contravention. The execution, delivery, and performance by
the Foundation of this Agreement and the Closing Documents to which it is a
party does not and will not (i) violate the certificate of incorporation,
bylaws or other constituent documents, if any, of the Foundation as currently
in effect, (ii) assuming compliance with the matters referred to in Section
13.03, violate any applicable law, rule, regulation, judgment, injunction,
order or decree, or (iii) require any consent or other action by any Person
under, or constitute a default under, any material agreement or other
instrument binding upon the Foundation.
14. RIGHT OF FIRST REFUSAL
14.01 Sale of Hospital. In the event Buyer receives an offer to
acquire the Hospital within three years after Closing and Buyer wishes to
accept such offer, it shall first provide the Foundation with written notice of
such offer, which shall include the name of the proposed buyer and other
material terms of the offer. The Foundation shall have 30 days from receipt of
such notice in which to elect to match the terms of the offer and to so notify
Buyer in writing; provided that, in the event the offer does not include a
definitive purchase price or if the offeror increases the proposed purchase
price, the 30-day election period shall be extended, if necessary, ten business
days after receipt of the definitive purchase price or any increase from the
offeror in the proposed purchase price, as the case may be. If the offer
includes any non-cash consideration, the Foundation shall be entitled to
substitute cash in an amount equal to the fair market value of such non-cash
consideration. During the election period, Buyer shall be free to negotiate
with one or both of the Foundation and the offeror. Notwithstanding anything to
the contrary herein, Buyer may reject any offer without providing the
Foundation a notice relating to such offer. In the event the Foundation elects
to match the offer, the Foundation shall acquire the Hospital at a Closing to
be held within five business days following the date upon which the last
material regulatory approval required in connection with the sale of the
Hospital is obtained, but in no event more than 120 days after the date the
Foundation elects to purchase the Hospital, subject to reasonable extensions
mutually acceptable to Buyer and the Foundation. In connection with the
purchase, the parties shall execute a definitive agreement to be executed by
the Buyer and the Foundation containing the principal terms set forth in the
offer, but otherwise containing substantially the same terms and conditions as
this Agreement, provided that any representations and warranties of Buyer about
the Hospital shall relate to Buyer's period of ownership only. In the event the
Foundation does not elect to acquire the Hospital, Buyer shall be free to sell
the Hospital to the offeror upon the material terms and conditions set forth in
the offer. If the Hospital has not been sold, transferred or assigned to the
offeror upon the material terms and conditions set forth in the offer within
180 days after the expiration of the Foundation's 30-period to elect to
purchase the Hospital, then the restrictions provided in this Section shall
again become effective with respect to the Hospital.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in multiple originals by their duly authorized officers as of the
Effective Date.
XXXXXXX HEALTH SERVICES CORPORATION THE XXXXXXX MEMORIAL HOSPITAL
ASSOCIATION
By: /s/ Xxxx XxXxxxxxxx By: /s/ Xxxxx X. Xxxxx
---------------------------- ---------------------------------
Xxxx XxXxxxxxxx Xxxxx X. Xxxxx
President & CEO President & CEO
XXXXXXX HEALTH FOUNDATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Treasurer and Director
VHS OF ILLINOIS, INC. VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
---------------------------- --------------------------------
Xxxxx X. Xxxxx Xxxxx X. Xxxxx
Executive Vice President Executive Vice President
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